Although the average rent for a single-family home in the Richmond VA area is about $1,473 per month, there’s a lot of wiggle room, and figuring out the best rental rate for your listing takes some careful research. When done correctly, the right rental price can make the difference between being in the red or black. It also helps attract new renters—as well as keep them renting longer.
The key to setting the best rate for your investment property in Richmond is carefully conducting a thorough market analysis. Here are some of the questions that need to be answered before you can set the best price when renting a home in Richmond.
1. How Many Rental Homes Exist in Your Market?
The number of rental homes in your market will help determine a few critical factors:
- The popularity of renting in your area vs. buying
- The amount of competition you face in your area
- The growth of the local rental market—particularly when you compare stats from previous years.
This information helps you size up your competitors as well as begin to understand how hot the market is. If there are relatively few rentals in your target area, you will need to figure out why. By the same token, if the market seems saturated, you will have to determine how your property can fit into the picture before you jump into the game.
2. How Many Single-Family vs. Multi-Family Homes Are There?
The proportion of single-family vs. multi-family homes varies in the Richmond area, and it is one of the most crucial factors in selecting a target neighborhood to invest in. In some areas of Richmond, single-family rentals are more popular than multi-family homes—and vice versa. Knowing how many there are of each—as well as where they are located—will give you a better idea as to which direction you should go. When checking these stats, be sure to pay attention to new construction, because new single or multi-family units may be indicative of healthy growth for either style of housing.
3. How Many of the Local Rental Homes Are Vacant vs. Occupied?
Occupancy rates tell you a lot about an area. However, determining the occupancy rate using data from just one month may be insufficient. Seasonal occupancy rates often provide a complete picture, because they help determine whether there are seasonal variations—as well as when they happen. Here are some things you can learn from studying occupancy rates:
- The likelihood that a similar property, when rented at about the same price, is going to attract tenants
- How occupancy rates fluctuate from area to area
- If you have historical data, how occupancy rates have changed from one year to the next
- How much you need to charge to remain profitable, assuming your properties will have a similar occupancy rate
- Correlations between occupancy rates and monthly rental prices.
With this information, you can make an informed decision about how much to charge—and how the amount you charge may affect your rates of occupancy.
4. What Is the Average Rent Amount per Square Foot in Your Market?
In Richmond, while a lot of homes of different sizes may rent for similar amounts, there is often a correlation between square footage and the rental rate. People like to get their money's worth, and for many—especially those with families—they are usually willing to pay more for a bigger space.
If you're deciding between purchasing or expanding an existing property, figuring out the average rent per square foot can help you determine your approximate return on investment (ROI). For example, if the average price per square foot is $0.96, and you're adding 200 square feet to a home—and including an extra bedroom and half bath—you may be able to expect a boost of around $192 per month.
5. What Is the Average Application Fee in Your Market?
Knowledge about application fees is critical because it helps determine the amount you should charge for processing an application as well as the overall costs of the rental process for the renter.
- Depending on the size of the fee, you may choose to waive it as a way of attracting renters.
- You may also offer to reimburse the application fee at the lease signing.
- You also have the choice of essentially "financing" the application fee as you decide how to set the rental rate.
The bigger the average application fee, the more you can use it to your benefit by either collecting it or leveraging it as an incentive.
6. What Is the Average Number of Days a Property Is on the Market?
In the supply vs. demand conversation, the occupancy rate is going to be your most important "demand" statistic. Properties that sit on the market for an inordinate amount of time should be a warning sign—especially if you see a pattern emerging in your target area. It may indicate that the area is less desirable than it appears on the outside, and you may opt to drop your rental rate accordingly. On the other end of the spectrum, if the occupancy rate is high, you may have the freedom to set the rate a little higher than you were thinking.
Sound like Too Much Work? Hire a Richmond Property Manager!
A property management company in Richmond can help answer all of the above questions—and a lot more! One of the best pay-offs of hiring expert property management is the information they can provide regarding how to set the best rental rates. The right price is not just a powerful draw for potential renters; it also can help determine your ROI and the future value of your investment.
A property management company like Mission Realty Property Management can help you set the "Goldilocks rate" for your investment property: not too high or low—right in the middle. Our seasoned professionals have years of experience managing all aspects of the rental process. We look forward to helping you set the perfect price when you get in touch with us.