One of the most pressing questions a property owner, landlord or property manager must answer is, “How much rent should I be charging?” And it’s not just a one-time question, either. The rental market can be very volatile and, as such, can fluctuate based on a number of factors. Even if you’ve already set an amount, you may need to revisit your decision from time to time.

Here’s how to set an amount that is competitive enough to attract and retain quality tenants while also providing you with the best possible return on your investment.

Do a Comparison

The best way to get a basis for your rental rate is to determine what other comparable properties in your geographical area have set theirs at. Obviously, if every other apartment in the area is charging around $1,000 – $1,200, you’re not likely to get many bites on a comparable unit that’s set at $2k. Of course, you don’t want to set your rate too low, either. Do some competitive research to determine what the going rate is and use that to help determine what would be fair for you to charge.

Assess Your Offering

There are certainly instances when a landlord can get away with charging a higher rent than others in the area. This usually requires the presence of certain amenities and other features that tenants would be willing to pay a premium to have. For instance, if your property offers off-street parking or is pet friendly, you may be able to bump up your rates accordingly. Likewise, the location of your property may also play a role, with safety as well as proximity to things like shops, restaurants and public transportation all being attractive features to prospective tenants.

Consider Length of Tenancy

Another factor that can play into what potential tenants might be willing to pay for rent is the length of tenancy you are offering. In some areas for instance, such as big cities or college towns, not being locked into a long-term lease can be an attractive perk to an applicant, which means they might be willing to pay a premium rate. In other areas, the stability of a longer-term agreement might make your properties more appealing.

Use a Tool

Thanks to the internet, there are no shortage of tools available to help landlords and property managers calculate (or at least verify) the most competitive rates for their rental properties. If you’re uncertain about doing your own calculations, you might consider leveraging one of these tools. At the very least, you can use these resources to validate whether the number you’ve come up with is in line with what the recommended rate might be.

Stay on Top of Market Trends

While you may be bound by a particular lease period, rent isn’t necessarily set in stone forever. Be sure to keep close tabs on things like rental market fluctuations, economic shifts and housing demands. All of these things may influence your rental rates. Likewise, tracking internal metrics, such as vacancy rates, can help you determine when an increase (or potential decrease) might make sense. For long-term leases, this should be revisited prior to each renewal. Month to month tenancies offer more flexibility.

Determining how to price your investment property is an essential component of ensuring that you’re generating the most passive income while still maintaining a level of fairness to your tenants. Done correctly, the rates you set will attract the best tenants, keep occupancy high and maximize your profitability.