7 Proven Ways for Calculating House Rental Prices
Do you own a vacant property? Perhaps it is time for us to dive into the property rental business. Check out how to price your space here!
The property rental business, which is said to be profitable and reliable, is presently in high demand because it is said to be safer than investing in stocks and gold. As a first-timer landlord, deciding on a rental price is the first and most important stage before getting into this business. Although it is not a simple task, there is a proven method for determining the correct house rental price so that you can make a profit right away. Check out the following method!
- Know Your Competition
When we’re trying to figure out how much a house rent should cost, the first thing we should do is look at the current market rates in the area where the house is located. Start the research by seeking information from our closest neighbors or reliable property pages online.
- Setting the price with Cap Rate
Cap rate is often referred to as the property capitalization rate. Divide the net operating income by the acquisition price for a simple solution, or you can take a look at the short guide below:
Vacant land: 0.5%-2%
Shophouses and Shophouses: 6%-9%
Kiosks and shops: 5%-10%
Apartments and condominiums: 7%-12%
From the cap rate guide, we can determine the property rental rate per year with the following formula:
For example, a house with a price of IDR 600 million with a capitalization rate of 5%, can be subject to a rental price of IDR 30 million/year or around IDR 2,5 million/month. (5% x Rp600 million = 30 million) If the economic situation is stable and there are not many vacant houses in the area, the rent price can be increased up to 15% per year.
- Customize Facilities
It is crucial to look at what the property has to offer. If the house has a parking lot, reliable security system, and an outdoor area, it can be used as considerations to determine the price. Well maintained and complete facilities will also be used as a reference for price differences by tenants.
- Calculate the expense of in-home care
The cost of house rental upkeep will rise with the number of existing amenities. Price changes can also be added if the property requires painting, adding interior functions, as well as upgrading the exterior of the house. No need to worry, this calculation will prevent us as landlords from big losses in the future.
- Consider the House Location and Environment
A strategic location can be an important factor when determining the price of renting a house. The completeness of public facilities to a conducive environment can be used as a factor to increase the rental house price.
- Know Who Your Potential Tenants Are
It’s critical to do an assessment of potential tenants to avoid property damage caused by their reckless behavior. Considerations can be taken from the rental period, marital status, number of family members that will live there to the personality type of our prospective tenant.
- According to the type of house
It is necessary to identify whether our home is of a vast scale or more of a simple minimalist design. With this categorization, it will be easier for us to provide price quotation to prospective tenants.
The thorough calculation of house prices not only provides fair prices for tenants, but also allows for healthy market competition. The correct price will also make it easier for us as landlords to generate profits straight away. In addition, we must also be willing to discuss with tenants to decide the desired pricing.
So, Locals, are you ready to become a landlord?