How to Determine Rental Prices that Get Units Filled and Still Make a Profit

rentals • May 7, 2025

The price of almost everything has risen dramatically in recent years, and rent is no exception. In fact, the price of rent has been increasing faster than the price of buying a home. According to the Census Bureau’s 2023 American Community Survey (ACS), the cost of rent plus the average monthly cost of utilities and fuels grew by 3.8% annually, while median home values increased 1.8%.

These recent rental price increases, along with current financial burdens on the average renter, might leave some landlords uncertain about how much to actually charge for rent. After all, landlords are experiencing increased financial burdens, too. So, how can a landlord maximize their profit while still pricing rental property fairly in today’s market?

What to Charge for Rent: Too Much vs. Too Little

There is a delicate balance to consider when pricing a rental property. Determining an appropriate amount to charge requires knowing how much people in the area can afford and how much will actually turn a profit.

Charging too much for rent will lead to the majority of potential renters scoffing at the listing and moving on to other reasonably priced properties. This ultimately leads to prolonged vacancies and less money in the landlord’s pocket.

However, while charging a lower than average rent for the area can bring in plenty of potential tenants, it could cause financial problems for the landlord. If the income from rent does not cover (or barely covers) the expenses of owning the property, then owning the property becomes pointless. On top of this, some renters looking for the lowest rents may have trouble paying rent, leaving the landlord struggling to collect what is owed.

It is best to carefully consider all of the factors to determine a fair, but profitable, rental price. Luckily, there are ways to determine this ideal amount.

Determining What a Rental Property is Worth

Typically, the first step to determining what to charge for rent is adding up what the property is worth. Property owners that bought their property very recently may already have a good idea of the value, but those that have owned their property for a while and are looking to increase rental prices to better match the market have a few ways to help determine their property value.

Calculating Property Expenses

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Assessing the Local Market

Rent prices for similar properties can vary wildly across the area. A one-bedroom apartment in a modern building with average amenities might be priced at $800 a month in a smaller town and $2500 a month in a busy city. St. Louis, for example, is somewhere in the middle and had an average effective rent of $1244 in the last quarter of 2024, according to the MMG 2025 St. Louis Forecast report. However, rent prices are affected by many factors such as the exact neighborhood and the amenities the property offers. So, it’s important to check out the prices of similar rentals where the property is located.

Many sources are available online that allow users to browse through listings and filter results by rental type (apartment, house, condo, etc.), number of bedrooms and bathrooms, and amenities. Other rentals with similar criteria will give an idea of what potential renters are willing to pay.

Special Features

Looking at similar listings can also give landlords a better idea of what features are common in similar apartments and what features are more unique. If a rental has desirable features, like gym access, proximity to parks, balconies, etc., this can allow for a slightly higher than average rent. Certain renovations, like updated kitchens, can also warrant a higher-than-average rent.

Pricing a Rental Property Fairly

After a property owner has a better idea of property’s value and their own expenses, it is easier to pin down an appropriate rent price. That said, there are a few other things to consider:

1% Rule

According to the 1% rule, a rental property’s income should be at least 1% of the property's purchase price. Of course, this is not a hard rule that all landlords must abide by, but it can give a rough estimate of a fair price.

For example, a landlord renting out a house purchased for $250,000 would charge:

$250,000 x .01 = $2,500 for rent.

However, if the house was purchased 20 years ago, it is worth much more now, so the current value should be considered. This is when it makes sense to use an online valuation tool such as the one on Realtor.com, or to hire an appraiser. It is also important to compare this price to the expenses calculated in the previous section to ensure there is still a profit. If this 1% value is less than the average rent in the area and the property is in good condition, increasing the rent might be a good idea.

Rent Control Laws

Some states, cities, or counties have laws in place to protect renters from high prices. This can act as a cap on how much to charge for rent. This is more likely to be a concern in high rent, low-inventory cities, like New York City or San Francisco. There are currently no laws concerning rent control in St. Louis and there are no state-level rent control laws in Missouri. However, it’s always best to check for any updates to rent control in any area before determining how much to charge for rent.

How a Property Management Company Can Help

Landlords have many responsibilities outside of determining how much to charge for rent. This is especially true for those who own multiple properties or work another full-time job. When landlords start to feel overwhelmed with their responsibilities, it might be time to consider seeking the help of a property manager.

With their specialized expertise in the local market, property managers can help landlords determine the best rental prices and help implement the new rates. Landlords still play an important role in the process and, ultimately, make the decision about what price they charge for rent. The exact details of the property manager/landlord relationship are spelled out in the contract and can be negotiated before signing.

Aside from pricing rental properties, property managers can help with everything from property maintenance to paperwork. Contact Select Leasing and Management to learn more about what a property manager can do to streamline the management of investment properties.

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