How Much to Charge for Rent: A Helpful Guide for Property Owners

Renting out your property can be a rewarding investment, but setting the right price for your rental property is crucial. Charge too much and your property may sit vacant. Charge too little and you might not cover your costs or make a profit. And while many large property management companies typically have access to large data sets and dynamic pricing tools, most smaller landlords do not, which can make setting rental rates even more challenging.

In this guide, we outline the five most important factors to consider when determining how much to charge for rent.

First and foremost, familiarize yourself with any rent control laws in your area – these can be at the state or city level depending on your location. Rent control regulations can limit the amount you can charge and how much you can increase rent annually.

If you are unclear on how to stay compliant with current laws in your specific jurisdiction, check with a local attorney or housing authority. You’ll also find additional information on rent control on the National Multifamily Housing Council website.

A common rule of thumb in multifamily real estate investing is the 1% rule, which dictates a monthly rent of 1% of the property value. For instance, if your unit is worth $300,000, you would charge around $3,000 per month.

The 1% rule can be helpful starting point as you determine your rental asking price. However, it doesn’t take into account other important factors such as local market trends, comparable prices, or your operating costs, all of which are also important to consider when determining how much to charge for rent.

Market conditions fluctuate based on economic factors, seasonal demand, and local developments. Understanding and staying informed about the dynamics at play in your location is important. There are many online resources available to track local rent price trends, including ApartmentAdvisor’s National Rent Report and our Metro Reports, which include data at the neighborhood level.

It is helpful to also follow news coverage of local economic and business trends in your city – if your city has a local business news outlet this is usually a good source of economic and real estate news. Is a new corporate headquarters opening nearby, or worse, is a major company leaving the area? Did a public transit line recently expand to your neighborhood? Developments like this can impact rental demand, which typically correlates with price.

Learn about seasonal patterns in your market. In cities with a high student population, like Boston, demand spikes in the summer, with prices correlating. Understanding seasonality will help you determine your price and listing strategy.

To set a competitive rent price, you need to understand the market value of similar properties in your area. One way to do this is to research available listings for similar rentals on sites like ApartmentAdvisor. Filter your search by exact neighborhood location, number of bedrooms and bathrooms, and important amenities such as parking or in-unit laundry. Look at the photos to compare how the building exterior and unit interior compares to your rental unit. Then use these asking prices to help guide your own prices.

If you are looking for an easier way to price your unit, ApartmentAdvisor offers a free, proprietary Rental Pricing Tool that does this competitive research for you. We'll ask for a few details from you including your property's address, bedroom count, and amenities. Then, our algorithm will factor in current market trends, comparable properties, and local demand to provide you with pricing recommendations to attract quality renters, maximize profits, and reduce vacancy loss.

To ensure profitability, consider all your expenses, including:

Budgeting for these expenses will help you determine a rental income that covers costs and provides a return on your investment.

While it’s important to be competitive, make sure your rent covers your expenses and provides a reasonable return. A vacant property generates no income, so finding the right balance is key. Consider offering introductory rates or concessions, like the first month free, to attract tenants quickly without discounting your ongoing monthly rent.

Setting the right rent is both an art and a science. By understanding local laws, researching the local rental market, analyzing trends, and considering your expenses, you can set a competitive and profitable rent for your property. Regularly revisit and adjust your pricing strategy to reflect changing market conditions and ensure your investment remains lucrative.

To use ApartmentAdvisor's proprietary Rental Pricing Tool, click here.