Engel & Völkers Licence Partner Puerto de la Cruz > Blog > How do private landlords calculate the correct rental cost?

How do private landlords calculate the correct rental cost?

Becoming a private landlord can be lucrative in the long term if you’re savvy with rental income in the short term. Calculating the right rent is the first step to achieving your goals. Whatever the aim for your property is, the minimum your rental income should provide you with is enough to cover your mortgage and all property expenses. To set your rent correctly, there are a few things to do:

 Puerto de la Cruz
- How do private landlords calculate the correct rental cost?

Check the competition first

Check online, in newspapers and even in local private landlords’ groups as to what other properties in the area are being let for. If you notice landlords in your area offering incentives to encourage renters, such as free internet or a TV included, this may indicate the area is oversaturated, and so rental costs could be lower. Private landlords should always consider asking local real estate agents ‘how much can I rent my house for?’ before creating guide prices for themselves.

Assess the location

The district or part of town in which your property is located will affect the desirability and thus the rent you're able to collect. Take note of how close to amenities and transport links your property is. The view also plays a part in determining rental cost. Not surprisingly, higher floors are more sought after; some estimations suggest that an extra $10 per month for a second floor apartment, compared with a ground floor apartment, is a reasonable increase that renters will expect. Do consider first, however, whether your building has an elevator as people often don’t like to walk past the third floor.

Know your package

As a private landlord, your rental property should be considered a package. If your property comes furnished, or includes white goods, this should definitely be reflected in the rental costs. Balconies and parking come with a certain premium anywhere, but especially in city centres. Any services that come with the building, such as concierge, gardening or window cleaning, should also be covered by the rent and not out of your own pocket. Don’t forget to call out these special features of the property when you’re advertising too, so potential renters are aware and appreciate how much they’re getting for their money.

Reassess often

Your property doesn’t have just one fixed rental price forever. After you’ve decided on a fair rent expense for your house or apartment, remember to reassess it as the market changes. Take note of the market at the end of the financial year and then factor this into your rent calculations when you have a change of tenant. If having a loyal, long-term tenant is your goal – as it is for many astute private landlords – then make sure there is a clause in the contract for rental changes over time, otherwise you could find your property isn’t bringing in the profit you’d hope. You may decide you’d like to add a little extra, usually up to 6% of the total rent, as pure profit. If you do this, be aware that any profit made, just like your regular income, will be liable for tax in many countries. Partially for this reason, many private landlords don’t realise the full profit until they eventually sell their property. Read more about purchasing property or begin your search for the ideal capital investment.

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