What Factors Affect the Price?

Major Factors

1. Location

Throughout Baltimore City, there is a tremendous difference in property value and rental income

According to an online search:

Near the Baltimore Harbor: $2,400 for a 3 Bedroom Apartment

Ten miles north of the Baltimore National Aquarium: $1,300 for a 3 Bedroom Rowhome

Ten miles south of the Baltimore National Aquarium: $1,500 for a 3 Bedroom 3 full bath Rowhome

2. Size

Similar to determining Market Value from the eyes of an appraiser, Above Grade (above the ground) and Below Grade (below the ground) Square Footage and lot size are considered.

3. Bath / Bath Count

There are ranges in rental value between a 1 bed, 2 bed, 3 bed, and 4 bed. While they may overlap due to other factors and amenities, you’ll find that with each bedroom and bathroom added, the rental price will increase

4. Area Residents’ Median Income

Determining your target audience will assist in the area you’re looking to acquire a rental property. Should the rental income be higher than the median income of the area, it will be very difficult to find a tenant as the prospective tenant may not reach the minimum income requirement to be considered

5. Rental Market Trends

Home Owner vs Renter population changes, changes in employers, interest rates, development, etc. All this plays a role in the price you can set for rents.

6. Tenant Demand

Review local demand for comparables (similar properties).

• How long is each property vacant or staying on the market?
• Are lots of people looking to move to the neighborhood?
• Is it an up-and-coming area?

If you notice the demand is not high, consider a lowering the rental income to create more interest.

If the demand is high, consider maintaining the rental income at market value to generate a large pool of qualified candidates.

7. Air Conditioning

Tons of home in Baltimore City, MD do not have Air Conditioning. Per our Property Management Company, the rental income may drop up to $200 from fair market value.

As a landlord, consider the additional expense of providing the window units to each bedroom and potentially at every tenant turn over.

Minor Factors

1. Lease Term

Our property management company advertises two rental prices.  One option is for a one-year lease and the other for a two-year lease.  The advertised price online is the two-year lease.

This is a smart option as it will decrease in turnover costs.

2. Furnished?

If the property is furnished you’ll have an opportunity to increase your rental income.

Our properties are primarily vacant and distressed.  Once rehabbed we leave it unfurnished.  Renters primarily bring their own items.

3. Landscape/Exterior

Is there a large yard?  How about a private fenced?  How does it compare to the neighbor’s landscape/exterior?

If there’s more to offer then you know your rental amount might.  However if it is the same as every other property on the block then expect there to be no change here.

4. Garage or Private Parking

There is great demand for private parking or an enclosed garage as if there will be primarily street parking throughout the city.

Please Note: This will also affect your appraised value! Learn how to Estimate your After Repair Value here

5. Pet Allowance

Renters tend to have pets

Did you know that 68% of U.S. households have a pet?

Pro Tip:

Check out this article found on Humane Society.org (https://www.humanesociety.org/resources/information-renters-pets). The article discusses information for renters with pets.

While the article is aimed to assist renters with pets, landlords could leverage these same strategies and potentially create a win-win situation.  The last thing you want as a landlord is to have a tenant’s pet damage the property.

6. Separate or Private Entrance

Primarily for small multifamily units, private entrances into your home or unit provides pleasant and safe experience for the renter.

A walkout basement is an additional touch that offers convenience and improved safety.

7. Additional Storage

In my opinion, I’ve noticed renters tend to come with more belongings than fit well in the house, often requiring additional storage.

If you can provide that you’ll be more memorable and desirable than the next option, saving them the hassle of renting a storage unit.

8. Floors & Appliances

Review the below options and compare them to the properties in your local area!

1. Floors
   1. Hardwood
   2. Laminate

• Tile

1. Appliances
   1. White
   2. Black

• Stainless Steel

9. Utilities Included

Things to consider:

• Pros

  1. Budget billing allows you to plan for the same cost every month. This makes budgeting and forecasting your expenses that much easier
  2. You may have the option to pay with a credit card. Credit card payments grow your points and/or cash back for you to reinvest in the business or for pleasure
  3. You’ll know your bills are paid on time. The water bill for example must stay in your name.  Therefore if the tenant is late and does not pay the water bill it could legally be traced back to you.

• Cons

  1. 1. If utilities are included then the tenants searching for properties will search for the price range in their budget not the price range with utilities included.
        
  For example: A perspective tenant searches for $1,000
  You’ll notice the below screenshot from zumper.com, the price search does not mention whether utilities are included or not. You may miss out on potential candidates.

Same with Trulia (https://www.trulia.com/for_rent/Baltimore,MD/0-1200_price/)

2. If a tenant does not need to pay for water or electricity, what incentive does he or she have to not waste / take it easy (??)

How to determine Based upon all the rental income factors?

Focus on keeping it simple.

Thing you want to think about is what are your rental compareables renting for and based upon the above what do they include?

If all of the rental comps in your market area have white appliances than you know if you provide stainless Steel Appliances there will be a direct correlation to slightly higher rent (suggesting everything else is identical) or higher quality tenants.

Similar to when you are selling a property, creating bidding wars and high demand for the one property may drive an increase in price or a multiple application situation where then you are able to decide from the best of the best

Ways Kat and Nat find out how much rent you can charge

• Leverage members of your Dream Team

  • Property Manager (PM) can provide insight on the following:

    • The best areas to buy rentals
    • Similar rentals (rent, tenants, finishes, etc.) currently managed by the company
    • Options of finishes that provide the most bang for your buck
    • Trends of renter demand and population
    • Rental evaluation reports

  • Real Estate Agent can offer:

    • Insight on local market knowledge
    • Residential Leases (rental comparables) found on the MLS

  • Locals

    • Local Investors: These are investors that are engaging in the exact same opportunities. Leverage their knowledge and expertise!
  • Neighbors: Yes, downright ask the neighbors. They don’t mind telling you! Even if they don’t feel comfortable sharing, then ask a different neighbor.

• Online Resources

  • http://myrentrates.com/
    Check out my review of My Rent Rates.

• • • https://brhp.org/search/
    • https://www.rentometer.com/

• • • https://www.zillow.com/rental-manager/price-my-rental/
      Receive a rent Zestimate to give you a starting price point

Summary

Keep it simple. While there are many avenues to find how much you can charge for rent, consider the fastest and most efficient method that works for you!

There are many ways to find the information yourself in a quick and easy manner.

Find the information yourself in the first stage of due diligence

Then either before you submit the offer (for the new investors) or when you have the property under contract (investors more confident in the local area), then connect with the Property Manager to confirm the rent estimate.

The factors mentioned above play a role, some bigger than others. When starting out, action is the most important thing to focus on. In time, you’ll build a better understanding of how to analyze each factor to manage the accuracy of your rental estimate.