How To Determine What Rent to Charge

By E-Renter Tenant Screening
Posted on February 12, 2011 under Landlord Tips | icon: commentBe the First to Comment

tenantscreeningblog.comAs vacancy rates drop in many areas, landlords are increasingly phasing out incentives and enticements to attract tenants. It was not too long ago when you’d see banners for “One Month Free Rent” or “Free DVD With 1-year Lease” on apartment buildings.

Now, not only are those signs coming down, but rents are starting to climb as rental inventory drops and demand rises. How does a rental property owner determine what rent to charge? How do the changing conditions in your area affect the rent you can charge?

The obvious answer is to look at what the market will bear. Many landlords begin their research by checking the Fair Market Rent (FMR) for their area. FMR is the amount of money a property will lease for, based on variable factors like economic conditions, location, and local vacancy rates.

The U.S. Department of Housing and Urban Development (HUD) uses Fair Market Rent values to determine the eligibility of rental housing units for housing assistance, known as Section 8 payments. The values are designed to be high enough to ensure an adequate supply of rental units, but low enough to serve as many families as possible.

Once you’ve established the FMR for your area, compare it to what is being charged for similar unites. Check, local advertising, and sites like,, and any local sites that cater to your city.

Don’t be tempted to set rent too high or too low for your properties. You are in business to make a profit—and while lower rents may keep your units full, if you’re not making money, you will not survive in the investment property business.

On the other hand, setting rents too high will almost guarantee that good tenants will pass up your property for similar amenities at a lower price. Still, when vacancies are low, you can away with charging a premium rent. Setting rent is a balancing act: keep an eye on the rental market at all times, and adjust your rents accordingly.


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