Pricing your rental house correctly is extremely important but sometimes no easy task.
Rental comps can be all over the place at times which makes it difficult to price.
So where do you find rental comps? You want to look at the rental sites online and the MLS to get an idea of what the home should rent for. And I do mean “just an idea”.
Just because a house that rented at a certain price does not make it market rent. It should just give you “an idea” or a range of what the market rent is. That’s because rental comps are not like sales comps.
A house that sold is a reliable sales comp, but a house that rented may not be a reliable rental comp. Why? Simply because you do not know who rented the house. You don’t know if it was a qualified long-term tenant who rented the property or a marginal tenant.
With a sales comp you don’t care who bought the house. You don’t care what their credit was like, what pets they had, what their income was, or what their residence history was like. All you care about is if they have the money or the financing to close. That’s it.
When there’s a rental comp, you don’t know anything about the tenant who rented it. Maybe it was rented to a marginal tenant who would not meet your qualifications. Maybe it was overpriced and the person who rented it paid too much because no one else would rent to them. Or maybe they paid an overpriced rent because they were not long-term tenants and were not planning to stay.
I hear quite frequently, the house down the street rented for such & such so I know my house is worth at least that. I say, okay tell me about the tenant that rented it. What was their credit like? Did they have good rental references? Did they have any evictions? Here’s one, how much security deposit did the landlord get? Of course, these things are never known and they’re critical.
So when I see a rental comp, I get an idea of what the market rent may be, but not an absolute. I think it’s best to use a range of rent when pricing a rental. Not this home will rent for $2,748.98. You see my point.
You want to price your rental so that it will rent quickly. Speed is the name of the game in getting a vacant home rented. Every day your property sits empty is rent lost forever.
Pricing your property too high can cause your property to remain on the market which can lead to a stale listing. When the home is on the market longer than it should be, prospects start to wonder if something’s wrong with the home.
Letting a property sit vacant because it is priced too high puts it at risk for vandalism. A vacant house is a target! Anyone can spot a vacant house from a mile away. Thieves, vandals, and squatters prey on this type of property. Also, insurance policies may not cover certain damage to a house that has been vacant for more than 30 days.
The higher the home is priced, the longer it takes to rent and the lesser the chance the tenant will renew their lease. This causes an expensive vacancy.
And when you price a home on the high side, it’s unlikely that you’ll get a higher security deposit. You want a higher security deposit because the higher the security deposit that you have, the better the house is going to look when a tenant vacates.
So price your rentals attractively, with a higher security deposit, so that the home will rent quickly, and the resident will stay a long time.
Here is what ChatGPT says on how to price rental property:
Pricing a rental property effectively is one of the most important tasks a landlord or real estate investor faces. The rent a property commands directly affects profitability, tenant quality, vacancy rates, and the long-term value of the investment. Determining the appropriate rental price involves balancing market forces with property-specific factors and financial considerations. Although the rental market can vary substantially across regions and economic conditions, a systematic approach ensures landlords set a rental price that is both competitive and sustainable.
The first step in pricing a rental property is understanding the local rental market. Real estate is inherently local, meaning that rental rates depend heavily on neighborhood characteristics such as safety, school quality, employment opportunities, and access to transportation. To gain insight, landlords typically begin by examining comparable properties—commonly referred to as “comps.” Comps are listings or recently rented units that are similar in size, layout, age, condition, and location. By analyzing multiple comparable properties, a landlord can determine the prevailing market rate and identify where their own property fits within that range. This comparative analysis helps set a competitive baseline price that reflects real demand.
Once the market baseline is established, the next step is to account for the property’s unique attributes. Not all properties with the same number of bedrooms and square footage command equal rent. Upgrades such as modern kitchens, renovated bathrooms, new flooring, or energy-efficient appliances can increase a property’s attractiveness and justify a higher rental price. Amenities such as off-street parking, in-unit laundry, outdoor space, or access to community facilities also affect value. Conversely, a property that is dated, poorly maintained, or located near noise or congestion may warrant a lower rent than comparable units. Evaluating these qualitative factors allows landlords to position their property accurately within the local market.
In addition to understanding market conditions and property characteristics, landlords must consider their own financial obligations. A rental price must ideally cover the property’s operating costs, which may include mortgage payments, property taxes, insurance, maintenance, and potential property management fees. Some investors also set aside reserves for vacancy periods or unexpected repairs. While it is not always possible—especially in expensive markets—to set rent high enough to cover every cost, knowing the minimum financial threshold helps landlords make informed decisions. Charging rent significantly below cost can strain finances, while charging well above the market rate can result in extended vacancies, ultimately harming the investment’s performance.
Beyond covering costs, investors often use financial metrics to evaluate whether their rental price supports long-term profitability. One commonly referenced heuristic is the “1% rule,” which suggests that the monthly rent should be roughly 1% of the property’s value. Although this rule is not universally applicable—particularly in high-cost urban areas—it serves as a quick gauge of whether the rental income is likely to produce acceptable returns. More sophisticated investors may calculate cash-on-cash return or capitalization rate to refine their pricing strategy. These calculations help clarify how rental income aligns with broader investment goals.
Finally, pricing a rental property should be viewed as a dynamic process rather than a one-time decision. Even after setting an initial price, landlords must monitor how the market responds. A lack of inquiries or applications may signal that the price is too high, while an overwhelming number of interested tenants may indicate it is set too low. Adjusting the price by small increments and observing tenant response is a practical way to fine-tune rental pricing. Seasonal patterns also matter; demand often rises in spring and summer and softens in winter, so adjusting rent accordingly can reduce vacancy time.
In conclusion, pricing a rental property requires a blend of market research, property assessment, financial analysis, and strategic adjustment. By examining comparable rentals, evaluating unique features, calculating costs, and responding to tenant demand, landlords can identify a rental price that is competitive, financially sustainable, and reflective of the property’s true value. A thoughtful approach not only attracts reliable tenants but also enhances long-term investment performance.
