How to calculate the rental price of my apartment?

If you have an apartment to rent, this article is special for you. We are going to tell you what is analyzed when establishing the rental price or the monthly amount that you want to receive for renting your property. And make it the most convenient for you. We at nphp.com.pk are here to help. Keep reading!

Rental price: influencing factors

Area

The characteristics of the property have a great influence on the price to be defined. Since the income that we will obtain will depend on the area where it is located. The center of a city is not the same as residential areas on the outskirts of them. In addition, we have to take into account accessibility. That is, if it is easy to get there by car, if there are nearby public transport, if there are services in the area such as shops, leisure areas, etc. Read more about kingdom valley islamabad approval.

State of the building and its extras

The state of the building and the state of the property are also characteristics to take into account since the better aesthetic conditions you will receive, the higher the income. In addition, other services of the building, for example, elevator, pool, video intercom, garage, storage etc. . They represent an added value to the house, so the rental price increases.

Main characteristics of the property

Finally, there are the characteristics of the property itself. If it is furnished or not , the square meters it has, the number of bedrooms , the number of bathrooms , if it has a garage or not. That is, it is not the same if the property has more or less capacity and more or less extras. All of these details are required when it comes to renting a property in Blue World City.

It should also be borne in mind that exterior homes are usually more valued than interior ones. The same goes for the floors that are on the upper floors. It is not the same to rent a house on the ground floor, than on the second floor or an attic. Generally, the higher it is, the higher the price.

If you have additionally renovated the house, it should be reflected in the rental price. Since tenants can enjoy a property in better condition compared to what the competition offers.

Other factors to consider

Furnished or unfurnished?

There is a high percentage of rental properties that are rented furnished. For this reason, the conditions of the furniture must be optimal and attractive to attract better tenants.

A small investment in furniture will make us pay for it quickly since it will make our property more attractive and it will be less time without renting.

What valuation method to use to calculate the rental price of your apartment?

There are two methods to calculate the value of a property:

Relative valuation
Cash flow discount

The most used method to value real estate is relative valuation. To calculate the value of a property based on this method, the price of other nearby homes and similar characteristics is used as a scale. Applying at the end different value correctors, relative to the differences that may exist with the floors that have been compared.

The method of discounted cash flow cash is best suited to calculate the value of a property. It is based on capitalizing the expected profitability of the property according to the required profitability. To do this, we must take into account both the income and the future expenses that the property will generate.

The discount rate that we are going to apply will be the required return that we hope to obtain from our investment. The discount rate will be subjective, and will depend mainly on 2 factors:

The investment alternatives that we have
The intrinsic risk of investing in real estate

We will demand a higher return on our real estate investments when the return on investment alternatives is higher, and vice versa. In the same way, we will demand a higher profitability from houses whose income is less stable or are exposed to greater risks (legal, tax, natural, etc.).

What does the rental price include?

The rental price is the owner’s remuneration for transferring his property. The community expenses also are paid to the owner. However, the Urban Leasing Law allows this expense to be passed on to the tenant, as long as it is agreed in the contract. The costs of services associated with the property, such as the consumption of electricity, water, gas and Internet, will be borne by the tenant, so you should not include them in the amount of the rent. Depending on the case, sometimes, expenses such as water are already included in the rent, so the tenant would not have to pay it.

How the rental price is regulated

After several years of rising rental prices and the lack of housing supply in the real estate market, the Pakistani government has been working to define rules. In order to control the long-term rental housing sector. Specifically, a housing rental decree has been published.

Although there are no rules to regulate the final rental price, according to this decree, annual variations may be made according to the variation of the CPI from one year to the next. In this way, the tenant is more protected, thus avoiding unilateral and arbitrary increases within the same contract.

Efforts are also being made to create reliable and official statistics on rental prices for each area (by INE). As well as the state price benchmark index. However, they are ongoing projects and this data is not yet available. These measures are not intended to regulate the rental price, but to provide information to the Communities so that they can set and establish fiscal policies within the margins established by law.

Rental price evolution

In 2014 the rental price of housing has reached minimums. Several years have passed since the year of the economic crisis in 2007 to reach the lowest levels. For reference, the average rental price in Country per m2 in 2007 was close to Rs. 10. However, in 2014 this price has dropped to around Rs. 7.

Since then, rental prices have risen year after year and there are a mixture of causes for this. The labor market is more active, which has caused displacement of the middle classes in search of new employment, especially in the main cities of Country. But at Capital Smart City there are a ton of opportunities to find rental properties. Lack of growth in wages, changes in the habits of the new generations and, above all, lack of access to financing for the purchase of a new home. In addition, the increase in housing for tourist rental. All this has caused an increase in demand and lack of supply of long-term rental homes.

Reference prices

There are several national companies and portals that offer regular surveys of home rental prices. There you can find the evolution of the reference prices in each area of the Country.

Rental profitability

So that we get the accounts: to calculate the profitability of the rental, the monthly income of this should cover, at least, the expenses that said property causes us. This means that the mortgage payment (if we have it), the payment of taxes, the payment of community fees, etc. This would be the ideal case. Keep in mind that this may not always be the case. Because everything depends on the purchase price of the home and its corresponding mortgage, the state of the real estate market (supply and demand), our personal situation and the urgency we have to rent it.

The final decision, obviously, will be yours and yours alone. But you have to bear in mind that to be competitive, the price you set must be within the price range of the area where our home is located.

You can always consult a professional in the real estate sector to help you establish the price range that you should set. The Realtor team is at your disposal to help you in this decision. Do not hesitate to contact us!