Gauging The Market: How to Determine The Best Rental Rate For Your Investment Property

As an investor— with a couple of properties under your belt— you have probably debated on what the ideal rental price is for the market. The law of diminishing returns is alive and present in real estate investing! If rental rates are set too high, you will most likely notice more frequent vacancy. If you undercharge, you will lose out on profits. Deciding what the right property rent rates are can be difficult, so I put together a few tidbits of advice that have helped me with setting the most favorable rental rate, with the least amount of turnover. Hopefully, this short guide will resolve any questions that you may have. Feel free to drop me a line if you have anything that you would like clarified or just want to say hi.

The most valuable starting point (for determining the best rental rate)

The most important information you need to determine what the best rental price for your investment property is learning all about ‘market rent.’ Market rent refers to the point that landlords in the area are pricing their properties. What are the current values for a neighborhood or city’s rental properties? The window of acceptable values is affected by various criteria, so keep that in mind when you are gauging the most effective rate for your property. As an owner, it’s a good idea to consider the following items:

  1. How many bathrooms, bedrooms, etc.?
  2. Special amenities?
  3. Garages, storage space, etc.?
  4. Are pets allowed? Will there be a pet rental fee?'
  5. Tenant Ready? Completely furnished, full amenities, etc.?
  6. What conveniences (coffee, restaurants, bars, etc.) are nearby?

The Methods & Madness Of Gauging Market Rent

The most utilized way to discover what other landlords are renting properties at is to look at available residences or apartments. Call the respective owners and inquire as to how much he or she is charging. To find open properties— those homes and apartments available for rent— you can drive around, look at local newspapers, or browse Craigslist.

It’s also possible to contact a local property management company and search for comparison rental properties. By using this process, it will give you a rough indication of how much the market can support for rental rates. Research and ‘neighborhood exploration’ is an excellent way to learn insider info.

If you happen to be driving the area where your property is, you can speak with locals to learn what they are paying in the area. They will tell you what they’re paying and (possibly) whether or not it’s too much for the area. For example, if the rent they are shelling out every month is $800, and they have lived in the property six years, then the property is either reasonably priced or under market value. Using these types of research methods will help you to know if tenants feel like their rental is ‘a steal,’ or if they are unhappy— feeling overcharged.

Take advantage of property rent determination tools

There are so many awesome comparison rent tools available online, and these become extremely handy in assisting you in finding out what the best property rental rates are for an investment property. Take a look at the following FREE websites. And yes, I did say ‘FREE!’

  1. Trulia

  2. RentBits

  3. Rentometer

  4. Zillow


I’ve found that’s rent ‘Zestimate’ is pretty on-point; give or take. So, out of the free tools, it’s the one that I like and recommend. It’s not as great for property values, though (that’s another story).

By utilizing the tools in this blog, your life as a future landlord will be much more simple. Use the websites, your interpersonal skills, and business savvy to maximize profit; while not chasing away every potential renter by pricing too high.

Rental Markets Real Estate Investing