LANDLORD BRIEFS // SETTING RENT AMOUNTS 

Let’s talk about right-sizing rent amounts

Setting rent amounts is in part an art form, partly driven by data, and partly informed by prudence. 

There are two competing forces. One is the rising cost of doing business, putting added pressure on housing providers to command the most rent possible. The other factor is softening rents in the Bay Area and there is friction between the two, so our question is, “What is your sweet spot?”.

We want to advertise a rent amount that makes a profit for the landlord, but we don’t want to price a rental unit so high that it doesn’t attract good tenants. Do the math. Let’s say the unit can be quickly rented at $2,500. Instead, the unit is priced at $3,000 and quality rental applicants shy away from the overpriced rental. The landlord loses $500 the first month, but then the unit remains vacant for several months, with thousands of dollars in losses.

It will take a long time for the landlord to recoup that lost revenue.

Another point to impart is that even if the keys are handed to a tenant willing to pay an inflated rent amount, there is no guarantee that he or she can pay it.

Some tenants will take anything and promise to pay the exorbitant rent as long as they can get in the door. What we mean by that unqualified rental applicant cannot find another place to live because of an eviction history, marred credit, criminal history, or any number of other reasons.

In this event, the landlord is thrilled to welcome into their property, only to find out later on that the tenant does not have the means to pay the rent. Act two: after making a poor selection of a tenant, the landlord is depleted of more months of lost rental income as they go through the eviction process, not to mention attorneys’ fees.

Let’s think smartly and strategically about rents and while several websites like rentometer.com can spew out market comparables, there are several intangibles to consider.

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