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5 Common Ways to Calculate the Best Rental Price for Your Investment Property

Setting an appropriate price for your rental property is both highly important, and difficult. Many landlords set a rate too low for market conditions, missing out on thousands in potential profits, while others price themselves out of the market. To assist, the team at inStyle Property Management have compiled 5 common methods to help you calculate the right price.

1. A Percentage of Your Property Value

One of the most common and simplest ways to calculate the best rental price for your investment property is by using a percentage of your property value as a baseline. The common rate is approximately 0.05% of your property value for the monthly rent. For example, should you have a home worth $450,000, you can typically ask for $2,250 a month. This will naturally be influenced by the competitiveness in the wider real estate market, so we recommend that you utilise this method to only build an introductory idea of your property’s potential.

2. Conduct Market Research on Similar Properties

To refine the estimations found above, property owners should conduct market research on similar properties in the area to get an idea of what other landlords are charging. Look for options that match, or are close to matching, the size of your block, your floorplan, the number of bedrooms and bathrooms you have, garage space, the year the property was constructed, as well as any defining features, such as air-conditioning, swimming pools, and scenic views.

What’s more, take note of the availability in not only your suburb or city, but in those surrounding, too. By following simple supply and demand, if there is a low number of vacancies, the competition exists amongst potential tenants, meaning you might be able to increase your rent. Conversely, if vacancies are high, the pressure is on landlords to offer competitive rates.

3. Promote Your Unique Selling Points

If you have a unique selling point or feature in your investment property, such as a great location or high-quality amenities, you may want to consider promoting this in your rental pricing. This can help to attract more tenants and make your property stand out from the competition. After all, tenants are far happier to meet higher rent prices when they believe they are receiving greater value for their money.

4. Cover Your Expenses

To calculate the best rental price for your investment property, it is also important to take into account all of the associated costs you incur as a landlord, such as maintenance costs, management fees and utility bills. This will give you a more accurate picture of your overall profitability and ensure that you are charging a fair rate for your property with a positive cash flow.

5. Undertake a Rental Appraisal

Finally, if you are still unsure about what the best rental price for your investment property should be, it may be worth seeking a rental appraisal from a professional property management firm. This can help you to identify any potential issues with your property and ensure that it is priced appropriately for the local market.

Contact our team at inStyle Property Management to learn more about our services by calling (08) 8233 5958 to assist in maximising the investment in your property.

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