Becoming a landlord in Chicago is serious business. The question that weighs heavily on a landlord or prospective landlord’s mind is, “How much rent should I charge for my apartment?”
Let’s say that you’re ready to rent out your home or another property you own. You’ll need to consider things like seasonality of the rental market (i.e. when renters prefer to move), repair costs, market trends and advertising your apartment listing. And all that consideration needs to take place before anyone comes to tour the place, let alone sign the apartment lease.
The road to becoming a successful landlord in Chicago may not be simple, but Domu is here to help. In this post, we will shed light on the important question of pricing the apartment for rent.
Pricing Your Apartment Listing: The Basics
The first thing a landlord should do to prepare the apartment or home for rent is determine their goals for renting out the property. Is the goal to simply cover the costs of a mortgage? Or to earn enough income with the rent collected to finance future investments? Many landlords start by figuring out how much they need to charge so they can cover their mortgage and take it from there.
If a landlord is charging enough in rent to cover at least the monthly mortgage payment, that’s a fine start. But they shouldn’t forget about additional expenses like maintenance, repairs, taxes and insurance.
Doing Research to Find Fair Market Value for Rental Apartments
Next, landlords should research comparable units on the market and take note of how much they’re charging in rent. Savvy renters will stay away from listings that they perceive as charging too much.
How much is too much? It obviously varies. Landlords who are considering a dollar amount they want to charge should ask if that’s overvaluing the space, location or amenities provided.
Instead of merely playing the guessing game about pricing the apartment for rent, turn to the detailed neighborhood pages on Domu. There, landlords will see a range of rental prices for places that are currently active. This snapshot of what other landlords are charging will be more informative than a gut feeling about how much rent you should be charging.
Avoid Overcharging for Rent and Giving Renters Cold Feet
Landlords should view their rental apartments as an investment, no doubt. But following a tack that favors quick return on that investment over treating it as a sustainable operation can wind up backfiring for landlords. What does a sustainable operation look like? Landlords should get in the mindset of finding good tenants as opposed to finding the maximum dollar amount they can charge for the apartment.
If rents are set at maximum value to make the most return on an investment, landlords might end up losing money as the apartment sits empty. Find a comfortable medium by using Domu’s Rent Calculator. This calculator returns a rental price range based on annual income. This can also act as a guidepost during the tenant pre-qualification process for Chicago apartments when landlords assess a potential renter’s finances.
Landlords may also find that more square footage doesn’t automatically equal higher dollar value for their apartment rent. Renters are willing to pay more in rent for a place with amenities that make their lives more convenient. In-unit laundry is a prime example. In fact, a survey of Domu’s users revealed that renters are OK with paying a little extra rent to have this convenient feature. So, it makes sense that a renter might balk at the prospect of paying a higher rent for a place that’s simply bigger but doesn’t have the convenience of in-unit laundry.
The same logic applies to other cosmetic upgrades, such as hardwood flooring, newer kitchen and bath fixtures, a dishwasher, and so on. Upgrading the apartment wherever possible will translate to a more premium rental price.
And, last but certainly not least, landlords should never underestimate the value of quality photos when it comes to marketing an apartment listing. At any price point, the photos on the listing do some serious legwork to entice renters to come visit the apartment, condo or house for rent. Landlords should make sure the photos are up to the level that they’re anticipating charging in rent.