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Home » Legal News » How To Determine A Fair Rental Price or Increase

September 11, 2018 By Willem Le Roux 2 Comments

How To Determine A Fair Rental Price or Increase

Let’s face it the rental market is not as simple as everyone makes it out to seem. Buy a place, rent it to tenants and have them pay off your bond or generate an extra income. But that 3 step process is anything but, with so many legalities and issues to consider, one of them is what is a fair price to charge for your place.

While the cost of living has increased every year, it can be difficult to set a rental price that benefits and suits both parties. Additionally, the myth of annual increases being at the fixed figure of 10% is simply that, a myth. Annual increases are often influenced and based on a case-to-case basis and based on the individual landlord and the relationship they have with the tenant.

So what is the correct way to evaluate your pricing strategy? What do you need to consider? Here are some factors that need to be taken into consideration when calculating your rental price/increase.

How to calculate a rental price

Historical trends

Rent is habitual in its increase and will likely follow the same pattern. If you are renting for the first time, you should look back and find out what the increase rate has been before so that you are prepared for the increase to come in the future.

The market value of the property

Rental prices are typically calculated at between 0.8% and 1.1% of the value of the property monthly. Thus, the increased market value will have an impact on the rent that is charged. That is why you should be aware of fluctuations in local property prices so that increases don’t catch you off guard.

Developments in the area

Developments in the neighbourhood can also influence rental increases. A new shopping centre or school can make the area more desirable for families or workers.

Consumer Price Index

This index which measures the inflation that will affect consumers must also be taken into account when calculating your rental fee or increase Landlords and agents will have to consider and balance the affordability of their tenants in high-inflation years, as well as securing their own profitability.

The right criteria

Landlords also have to check whether they have the right criteria for their tenants to want to rent out. These are:

  • Good, safe suburb (Location)
  • Generous clean spaces with ample cupboard space
  • Safe parking
  • Balcony or a space to go outside
  • Views
  • Modern kitchens and bathrooms
  • A shower option
  • Plumbing for ‘wet’ appliances

All of these factors will also affect the rental price and increase.

The market

The market can also dictate the rental price landlords ask for. Landlords can only increase their rentals to an amount that tenants are willing to pay, so they will have to be wise when making any modifications fairly and realistically.

Room for negotiation

When money is being exchanged, it immediately becomes a business transaction and tenants should keep that in mind when waiting to negotiate; especially when rent increases occur. However, one of the best ways to start the negotiation on the right foot is to be an exemplary tenant as it will definitely work in your favour.

Remember to do your own research

Always do your homework and acquire a second opinion from a professional and do not thumb suck a figure you’re comfortable with receiving each month. You could either be underselling your property or overcharging in both cases this can cause unwanted issues down the line.

Contact us

If you need advice on your eviction case or would like us to represent your case, get in touch with Le Roux Attorneys

Sources:

  • Private Property
  • Property24

Related

Filed Under: Legal News Tagged With: Landlord, Property, rental, residential eviction, tips

Comments

  1. Leonardo says

    March 15, 2022 at 8:29 am

    Hi

    My name is Leonardo, I am currently renting a RDP house which two bedrooms were added. But these two rooms were not built by stone or traditional housing material. The valuation of the property is R195 000.
    The area in which we are renting is quite dangerous and we are being charged R2500, is this fair and if not,what can we do about it?

    Reply
  2. Philna says

    November 6, 2021 at 6:35 am

    If n tenant rent your property for to stay in and after 5 month move out and then use it for business purposes and earn an income out of that property after you sign your contract the first time how did you calculate your rental increase then.

    Reply

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Le Roux Attorneys Inc. is a Cape Town based law firm specializing in residential, corporate and farm evictions. We are members of the Law Society of the Cape of Good Hope as well as the Attorneys’ Fidelity Fund, guaranteeing clients both expert assistance and the peace of mind that all funds held in trust are securely underwritten by a certified statutory body. Le Roux Attorneys' immigration division trades as SAvisas.com and assists companies and individuals with their South Africa visa requirements.

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