Rent Amount Set by Software

Is Your Rent Amount Set by Software?

July 30, 2013 | Rental Trends, Rental Trends and Real Estate News

If you don’t live in a rent-controlled apartment, chances are that you’ve been subjected to a higher rent amount as demand for apartments increases, with many people continuing to be wary of buying following the economic recession. While it may seem that the new number your landlord sent you was pulled out of thin air, in reality a new rental market trend is emerging to determine apartment value and set the cost of rent: the use of software.

While the U.S. Department of Housing and Urban Development sets guidelines for determining a fair market price for rent and payment standards (landlords must set their rental rates between 90 and 110 percent of the fair market price for a particular unit size), it is in the best business interests of your landlord to maximize the rental rate.

This process can be complicated, which is why many landlords are beginning to use computer software to do the calculating. The software uses a sophisticated algorithm to calculate a variety of market data that go into determining how much should (and can) be charged for rent, such as competitor pricing, renewal percentages, unit sizes, views and floor level.

Most landlords that choose to use the software have to pay an initial setup fee as well as a monthly subscription fee based upon the number of rental units that they have. In general, the fee is an insignificant amount compared to the amount of revenue that they will likely gain.

While it may seem like the technology only benefits landlords (in the case of large rental companies, it makes it easy for them to provide valuable information for their stockholders and assure them that they are doing all that they can to maximize revenue), it also produces some notable benefits for renters.

Just like airplane tickets, demand for apartments fluctuates from month to month. Landlords that use this new software are able to regularly adjust rental rates based upon market demand. As a result, renters may be able to score a better deal by signing or renewing a lease during off-peak periods.

In addition, renters may be able to lock in a lower monthly rate by signing a lease for a less popular unit, or agreeing to terms that help landlords avoid having empty apartments sitting in their buildings. Landlords have a significant financial interest in keeping their buildings as full as possible, so renters can use that fact to their advantage.

What do you think of this new rental market trend?

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