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The advantage of competitive rental rates and strategy

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In general, people prefer a good community from where they can set out for work in the morning and return home after a long day at work without any problem. A community where they will have comfort and security thus be able to spend time with their kids, family and friends. This same community should have all the necessary social amenities that will enhance a good quality of life within convenient reach.

In the developing world, rental rates are determined by the location, demand, condition of the apartment, size (outdoor space, living space and numbers of bedrooms and bathrooms) ,social amenities (like good roads, drainage, schools, playgrounds, shopping destinations, health services, entertainment venues and convenient access to transportation and regular electricity). Note that the finishing fixtures used in the house may or may not add value. For example, a house located in a beautiful estate in a community with excellent social amenities and good proximity to corporate areas, may attract more rental value as compared to same house in another community with no social amenities. The amount of money spent on the finishing fixtures in the latter house will likely not increase the rental rate to a value comparable to the former.

The total value of your house or apartments has a lot to do with how much you can rent out the house or apartments. You have to know what your house is worth in the open market and then use that value to calculate the annual or monthly rental rates. You should target to get your investment (or house worth) back in 10 to 13 years; this means you have to charge 7.5% to 10% of the cost of the house as your yearly rental rate. Although you may increase the house rent as years goes by to cover for inflation, but focus on the immediate rental rate as at the time you first rent it out. Don’t forget to also put into consideration taxes, repair cost, insurance and mortgage bills where applicable. Remember, if it is not possible for you to get your investment back in 10 to 13 years or at worse case 14 years, then you should not have gone into the rental property investment.

If you have a house with so many apartments, then use the sum total of the rent for your calculation. Note, if your rent is very unreasonable as compared to what everyone else in the area is charging, you might suffer rent void for a long time. So, pricing your house or apartment should be handled carefully and compared to similar rental properties within the area. If you feel your house has an edge over the others due to size and finishing fixtures, then your rate can be slightly more especially if housing demand is high.


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Comments

  1. UnknownJuly 16, 2019 at 7:46 AM

    I wish I knew this before investing. Nice information

    ReplyDelete
  2. UnknownJuly 16, 2019 at 7:49 AM

    Thanks for the good tips!

    ReplyDelete
  3. Kalinga Keshari RathDecember 13, 2019 at 10:24 PM

    Very Interesting Post. I like it. Thank you so much for sharing such amazing information. I would like to share with my website Kalinga Keshari Rath

    ReplyDelete

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