How to Price Rental Property

23 Dec How to Price Rental Property

I’ve mentioned Scott Taylor, a longtime mentor of mine, and his 15-Minute Landlord program and today, I’d like to share some of his insight about pricing rental property. To learn more about the 15-Minute Landlord or Scott Taylor, visit

rental property

Real estate investors have many decisions to make as part of their daily tasks. One very important decision is determining the price of their rental property. You might find yourself in this exact position and be wondering how the rental property pricing is decided so I’ve decided to share some insight in today’s post.

One way some real estate investors approach the issue of pricing rental property is to consider how much the property costs to hold. With this method, the cost of the mortgage loan, property taxes and maintenance are all added together. The only issue that might arise with this method is that the resulting asking rent could end up being far under or considerably above the market value.

The investor might price to market conditions, adjusting for many factors, but not necessarily consider the “operating costs”  to be one of them.

At Metro Property Services, we compile a professional Comparative Market Analysis showing what price similar properties in the area have rented for or are currently being listed at. The market rent is like the CPI in that it is the result of a “bundle” of factors, all of which change on a daily basis. Pricing to market rate will help rent the property in the shortest time frame, thereby reducing the vacancy factor cost.

One common strategy is to take the market rent and offer it at 3-5% below that figure. One benefit of this method, as opposed to employing market rate or slightly overpriced property, is it may lead to renting the property more quickly. Another plus side to going this route is the tenants will be more likely to continue occupancy for multiple terms as opposed to bailing out at the first chance to get out of an overpriced lease.

Psychologically speaking, the tenant who discovers he has overpaid (as they all can) may become a lot more needy and end up becoming a thorn in the investors side. Conversely, a tenant paying slightly below current market rent will not bring minor issues to the investor’s attention and instead rely on fixing it himself.

Setting the market rent is an art, not cold science and MPS can help. We offer years of experience and expertise and are committed to providing you with top-notch professional property management services. Contact us for details at 310-220-4495 or visit us online.