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5 Factors to determine the rental price of your property

Collecting rental income from your property could be a challenging task. Income from the investment-related property is historically high as it’s an increasing source of revenue and a steady way to make money. But, the rental market is constantly changing and several components affect the pricing of a rental property or asset. Understanding the factors which affect them can help you succeed in the real estate rental game. Further, read on the 5 Factors to determine the rental price of your property for better property management decisions…

What are rental yields?

Rental yields are calculated by dividing the total rent for a property by the property’s value. 

Gross yield = Yearly rental income/property value X 100

Net yield = Annual rental income less annual expenses and costs/property value X 100

A rental yield of a residential property varies between 2.5% and 3.5% of the market value of the property. For eg, if the market value of your asset is Rs 30 Lakh, its rental value ranges between Rs. 7,5000 and Rs. 10,5000 and monthly values will differ from 6250/- to 8750/-

Check here 5 Factors to determine the rental price of your property

Location Of Property

The location of property establishes a baseline rental rate and overall demand for your property. Thus, it is considered an important factor affecting the rental rates for investment property and real estate in common. Popular areas, such as those that are roadside or located near the inner city, schools or colleges can attract higher rents due to greater demand in the market. 

Interest rates

Rising interest rates can increase the demand for quality rental properties. This means that rents can be raised and there are typically more investors, including first time home buyers in the market. 

Infrastructure

Each rental marker will have baseline tenant expectations for what is generally included with rent or what the tenant preferences are for the market. Large infrastructure projects like hospitals or new transportation services tend to drive property price growth. This, in turn, affects the rental yields in the area. 

Prevailing rental rate

You must consider the amount charged by other landlords in your area. Make sure, the rental charged is per the rental rate of other similar properties in the locality. Too much difference between the prevailing rental value in the area and your rental ask may deter tenants and divert them to other options available at a lower rate. Also, be considerate of the monthly mortgage cost and other related costs of repair and taxes which you have to pay. 

Jobs

Generally, people wish to live close to work. The economy of a city or suburb where a property is located adds much to the property value. For eg, if a major business or industry is emerging or leaving the area, it can drive property prices up and down. 

List of other overlooked factors while determining the rental value of a property?

Other general factors, which play an important role in determining the rental income, are additional expenses incurred to make the property suitable for letting out. Those include fixtures and fitting. Equally, additional facilities like a swimming pool, car parking, gymnasium, spas can also fetch a higher rent. 

Besides amenities also shares a significant impact on the rental value of a property. A property with fans, kitchen appliances, wall cupboards, storage space or an additional balcony will indisputably command a slightly higher rent as compared to a property of similar market value (located in the same micro-market). 

In conclusion

Being a landlord is tough, especially if you are new to the game. So, if you are interested in making things easier know your consumer and their expectations to maximize the rental rate on your property…


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