February 02, 2019
How To Evaluate and Estimate Rent For Your Apartment Or House In 2019
Either you are listing your property to rent for the first time or you are going to re rent your property to a new tenant, the rent review is important.
There are many factors you will need to consider and we have discussed them in detail to help you evaluate the best price for your rental. Setting the right price will make your property more attractive for prospective tenants and will help you rent it quickly with maximum returns.
Table Of Contents
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How much can I rent my house for?
The three main factors to determine the rent for a property are
- Value of your property
- Location of your property
- Demand for your property
One of the top questions asked by property owners, interesting in renting, across the country is, how much should I charge for rent?
Equally important is this for tenants. How much should I pay for rent?
Perhaps more important thing should be: How much should be the rental "value" of the property?
If you look at both statements, they might look similar but they have completely different meanings.
The difference is the value vs price.
The right thing to do is to figure out not how much should you charge for rent but what is the rental value of your property.
We are going to go through all the variables of the equation to help you understand the factors and how to evaluate the correct rental value for your property.
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Why setting the correct rent price is Important?
Setting the correct rent price is crucial for the following reasons.
Returns for investment
Your property is an investment. For your investment to work, you need your property in constant use without any gaps in rental periods. You also need a fair price in terms of rent. Right price can attract customers and you can avoid long term listings and short term lettings which could save you time and money in fees and other costs. Your goal is to keep your property occupied, all the time, in long term rental contracts.
You need to make sure that the rent you charge, provides value for money, for the investment you have made, after taking out your running costs.
Realistic price attracts renters
Your price needs to be realistic and reflect the value of your property.
You need to clear about your rental goals. Are you renting for the long term to earn a living from your rental property?
Are you renting out to utilize your resource to make some extra cash while you are away?
Are you interested in making some extra cash while your area is hot for tourists in a particular season?
Are you interested in renting out a spare room to make some extra cash, year-round, by renting through Airbnb?
Being realistic about the purpose can help you come up with a realistic price tag.
Higher price will add gaps to renting period
If you set your rental price higher than value, you are likely to put off potential tenants. Tenants know the value as there are a number of sources they can utilize to figure out the correct rental value in your area. This would make your property vacant with continued running costs like councils tax bill going out from your pocket.
Lower price equals losing money
Lower price, on the other hand, can bring in a lot of unsuitable applicants which will consume your time while you go through the letting process.
How To Estimate Rent | Compare the average rents in the area
The average rental prices in Greater London in the United Kingdom was an average of 1615 British pounds as of July 2018.
The average rental prices in North East of England was an average of 525 British pounds as of July 2018.
We can see rental values vary widely across the country. One of the starting points to calculate your rent price could be to learn about average rents in your area.
A very good tool to help you calculate the average price and rent bracket in the United Kingdom is Rent Calculator by openrent.co.uk
OpenRent Rent Calculator is an instant way to find the rental value of a property online. In a few steps process, you can calculate an accurate rental price for a property.
You will need the following details:
- House / flat number
- Property type
- Number of bedrooms
- Number of bathrooms
It will not only give you an estimated rental value based on millions of data points but also an estimated range.
It also provides links to the two most papular online property portals, Zoopla and Rightmove, with listing in the similar area you are working on.
How To Estimate Rent | Should I ask a local real estate agent or a property manager?
Another traditional way to learn about the average rents in an area is to ask a local real estate agent or a property manager for a quotation.
Most real estate agents provide a no-obligation quote. They have the best knowledge of rental prices as this is what they do for a living.
Try engaging an estate agent(s), you feel comfortable with while dealing with. You should consult a minimum of three professionals.
A good state agent will show you both sides of a picture. Not advising you to review down your rent price by standing on the side of the tenant or not giving you false hopes or estimates for higher rents. It would help if you have done your homework about average rental rice yourself.
You should ask your agent for the following information:
- How your property compares with similar properties.
- Ask to see examples of their success in selling properties like yours.
- Ask for the period of time it could take to rent your property.
- Ask about reason in detail for lower or higher quotation.
How To Estimate Rent | Where can I find local estate agents or property managers?
To find some local real estate agents in an area or you can use the power of the internet.
GETANAGENT can help you find the best agents in an area, based on their past performance. Getagent lists agents based on sales performance, but as we all know, most sales agents carry out lettings as well. When you have a list of agents, you can speak to them about your requirements and they would be able to guide you to the right department.
Rightmove.co.uk has one the biggest database in the country with most letting agents on their file. They provide information about agents dealing on sales as well as lettings.
Zoopla provides a comprehensive online database of most letting and sales agents across the country. You can use their directory in two ways
Find estate agents and letting agents in an area
By name or alphabetical order
3. Details about an agent:
You can see information about agent like:
- Total listings for sale
- Total listings for rent
- Average asking property price
- Average asking rent
- Average sale listing age
- Average rental listing age
This information can give you an idea of how papular an agent is due to more clients relying on them.
Another thing to look at is their average rental listing age. Shorter the age, more efficient and expert an agent might be.
Ask letting agents in the neighborhood
Take a drive or walk through your neighborhood and look for To let or sales signs on the properties and note there number.
First, call them individually and inquire about rental prices as a tenant.
Second, ask them about services for landlords by making separate phone calls and visit them for more information and evaluation.
Ask your social circle for letting agent feedback
Ask your friends, neighbors, colleagues, and relatives if they know of any good estate agents. Everyone comes across estate agents at one time or another. An agent with good feedback can help you out in all matters regarding property nevertheless the rent estimation.
How To Estimate Rent | What factors do I need to look when comparing properties?
To start with, take three properties which are similar to your property as samples. The characteristics to look for while sampling is:
- Size of the property
- Number of bedrooms
- Number of bathrooms
- The condition of the property
- Age of the property
- Price range
- Property type
- Council tax band
It is very important that you choose the right properties for comparison as you might end up calculating the wrong rental price.
What factors I need to look when evaluating my rental property?
When you have a few, similar properties to your own property, shortlisted, you can go on to check for extras and calculate the impact these might have on the rent.
See for following factors when calculating rental costs of added extras.
- Residential area in square feet
- Parking space
- Off road parking
- Approximate to markets
- Approximate to motorways
- Approximate to the fitness center
- Hospitals in your area
- Schools in your area
- Security features like manned premises or 24/7 CCTV
- Elevator (in case of the apartment)
- Car insurance area band (safer neighborhood attract lower premiums)
Whether you’re looking to move into a rental or rent out your own property, it’s a good idea to analyze the rents in the area. Understanding what the market is like before getting too excited over a price will save you a lot of time and anguish.”
— Chris Molinari, Digital Content Coordinator, Rentometer.com
How to conduct a rental market Analysis for your property?
A rental market analysis could be useful for you if you have more than one property, a property with a high value or you looking to plan for long term.
It is time consuming and requires some skills set that is why it is mostly done by real estate investors. It helps them learn about the market situation, shortlist properties to invest for later sale or rent (buy to let).
However, it is one of the best methods to understand the rental market situation.
If you want to employ this method, this is how it works:
Transportation links: school rating attractions crime rate and safety
Comparable properties: size square feet, condition and location
Price pr sq foot: rental price/number of square feet
Amenities: parking, gym, swimming pool, flat or house, shopping center etc
How much can I charge for a vacation rental?
An owner is not required to spend a fortune to create a memorable and appealing ambiance within his/her vacation home. Guests' satisfaction lies within the small details. bricrental.com
Short-term rentals are becoming ever more popular with property owners due to the emergence of online portals like AirBnb and Booking.com
If you think this is the mode for renting you prefer, have a thorough homework by checking out sharing rental sites like Airbnb Booking.com, and VRBO.
Search as a renter yourself and browse listing in your area with similar features. Compare the features and price on offer for these places to have a starting point for rent evaluation.
Start with shortlisting at least four properties and calculate the average rent by adding the price for all rentals and dividing by four.
Property 1: £ 100/ night
Property 2: £ 120/ night
Property 3: £ 150/ night
Property 4: £ 110/ night
Average = 100 + 120 + 150 + 110 / 4 = 120 / night
So you have a number to start with.
Now look for what those properties don't have on offer what your property has like:
- Amenities: Hot tub, swimming pool, bigger lounge, attached bath
- Local attractions: Beach, mountains, lakes, popular tourist sites
- Cleanliness: Well maintained and clean place
- Convenience: Shopping and groceries
- Transport option: (A very important factor)
- Cleaning charges exemption: For long-term booking
- Mods and cons: Large Screen TV, Netflix,
- Cancellation options: You can charge more per night by adding flexible cancellation policy
- Commercial or personal letting: A room in a personal house is more expensive and desirable
- Instant booking: Do you accept short notice booking? Can add a price for that
- Wifi: Wel, It is a must
- Heating or air conditioning: Make it pleasant and comfortable for your guest and charge accordingly
- Washer, Electric cooker, Toaster, Iron etc: Again, convenience has a price
- Number of bathrooms: More bathrooms means less inconvenience
- Free parking: Parking is one of the decisive factors for guests for cars. If you have free parking, you will be high in demand. You can make some extra money.
- Disabled access: Gain, very few can provide that and if you can, you can serve a niche
- 24/7 access: It is convenience. Those returning late or leaving early would love the flexibility.
- Outdoor space: Not everyone will rent to sleep. Many would like to just spend some time at home in peace so it is an added value perk
- Property condition:
- Property and room size: Larger size property and rooms can charger higher price.
More facilitative your property is, better the price you can get. Another way to look at it is to put yourself into the shoes of a renter and imagine what would a desirable property look like if you would be renting it. Many of the things we mentioned do not cost that much.
From personal experience, while my stay at a property in London, a malfunctioning toaster cost me three breakfast at a local cafe. An added cost. No rebooking for that place by me again.
Proximity to locations popular with visitors like Wrigley Field in Chicago or the Met in New York City will certainly help keep rates high.”
Ryan Coon, CEO & Co-Founder, Avail
How much should I charge for a room?
This depends on a few factors:
Are you letting for a long term? If so, do your homework and evaluate at what price other rooms in your area are being let for.
Are you letting for the season? If you are looking to rent your room to make money during a busy season, you can ask for higher than usual prices as demand will be generally high during the tourist season.
Are you letting your room to make cash year round? You can also make reasonable money by renting through online portals like Airbnb and Booking.com.
If your price is right, you can attract plenty of customers year round and maximize return for your resource but you need to remember that quality standards for renting through these portals are quite high and you will constantly need to meet the customer expectations.
Should I use a letting agent or should I do it myself?
You are not required by law, neither is it necessary. If you know the trade, process, legal requirements and obligations, and have enough time on your hand, doing it yourself might be a better approach.
There are many property owners, with a small to a large property portfolio, who manage the letting process themselves, from start to finish.
You need to consider a few things before you try to do it on your own:
Your proximity to the property:
How close do you reside to your rental property? If you live in Birmingham and your property is in London, It might be a better idea to hand over the complete management to a letting agent. Would you be able to attend if a boiler or shower breaks down or your tenant gives the evacuation notice?
Do you have enough time?
Lettings process is very time-consuming. Viewings, credit checks, contract, payments chase, maintenance... you name it. If you think your first job will not spare you enough time then consider leaving it with a professional letting agent.
Do you understand the letting game?
Practice makes you perfect. If you had been doing this for some time and you know all the tricks of the trade then it will not be that difficult for you. Just like any other first timer, letting for the first time is many times difficult than letting it for the fifth time. When you are comfortable enough, just do it yourself.
Try partial services
You can try and do the bits you are comfortable with and hire someone to do the other bits. Like you may screen tenants, let the property and collect the rent yourself but opt to outsource the maintenance work to a third party.
Letting agent fees
How much are letting agents’ fees for let-only service?
For a let-only service, letting agents tend to charge landlords around three or four weeks’ rent.
The very basic service simply involves
- Arranging tenants
- Referencing process
- Credit checks
- Deposit and first rent collection
- Tenancy agreement
This fee varies across the country. Letting agent fees in London are often higher.
How much are letting agents’ fees for rent collection service?
Fees for rent collection service are normally set as a percentage of the rent. On average, it is five percent of the monthly rent.
How much are letting agents’ fees for full property management for rentals?
If you opt for full property management, you can expect to pay around 10-15 percent of your rental amount as fees. On the other hand, you can avoid a one-time let-only service fee.
What is Guaranteed Rent Income?
Guaranteed Rent Income is a scheme to rent, where a property owner signs over the property to someone for guaranteed income for a specified period of time.
Many letting agents now offer a long, fixed-term contract from 1-5 years to landlords.
It is also sometimes called a "rent-to-rent" scheme.
Guaranteed Rent Income Advantages:
- Guaranteed rent paid every month
- No rental gaps
- No tenants to deal with
- Properties maintenance included
This might sound a fascinating option to go for every landlord but there is one catch. The average monthly guaranteed rent is lower than you will make if you were letting out yourself with the help of an agent on the tenant by tenant basis.
What is the average rent across the regions in the UK?
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