Setting the rent is one of the most valuable decisions a landlord makes, and one of the least studied. Many set a figure from habit or from what a neighbour charges, and then live with the result for years. A little research and a simple calculation will tell you whether you are leaving money on the table or pricing yourself out of the market.

Start with comparable properties

Find units that match yours in location, size, condition and type, and see what they actually let for. Look at listings, speak to agents and ask other landlords. Note the asking rent and, where you can, the rent that tenants actually pay, since the two can differ. Look at several properties, not just one, and ignore outliers. Rental yield explained shows how rent and property value relate.

Adjust for what makes yours different

No two properties are identical. Adjust the comparison for features: water supply, security, parking, an extra bathroom, a balcony, a generator, fibre internet, nearby schools and transport. Each can justify a premium, and their absence a discount. Be honest about the condition; fresh paint and working fittings can add more to the rent than the cost of the work.

Think about who your tenant is

A young professional, a family and a small business each look for different things and have different budgets. Decide who your target tenant is and price for them. A family house near a good school may let faster and for longer than a similar one on a busy road. Understand the demand in your area before you set a figure.

Allow for vacancy and costs

The rent you charge is not the rent you keep. Few units are let all twelve months, so allow for vacancy. Subtract the costs of ownership, such as land rates, insurance, repairs, agent fees and service charges, to see your net income. How to analyse a rental property investment before you buy shows the whole calculation, and the rental property investment analyser works it out for you.

Remember the tax

Rental income is taxable, so think in terms of what you keep after tax. Monthly rental income tax applies to gross rent at a set rate, or you can file annually and deduct expenses. The rental income tax calculator compares the two, and MRI or annual rental tax explains the choice. If your tenant is a company, it may withhold tax from the rent; use the withholding tax on rent calculator and read withholding tax on rent for tenants and agents.

Test the price

Advertise at a price slightly above your target and watch the response. Many enquiries and quick viewings suggest you are priced well or low; few enquiries after two weeks suggest the price or the presentation is off. Adjust early rather than leaving the unit empty for months, since each empty month costs a month of rent. A lower rent with a quick, reliable tenant often beats a higher rent with long gaps.

Set the terms with the rent

Rent is more than a number. State the due date, how it is paid, the deposit, the notice period and when and how it will be reviewed. How to screen tenants and write a tenancy agreement lists the clauses. Issue receipts for every payment, using the rent receipt book.

Plan rent increases

When it is time to raise the rent, do it fairly, with notice and a reason, and in line with the agreement and the law. How to increase rent fairly and legally explains the steps. Small, regular increases are usually easier for tenants to accept than a large jump after several years. Review the market once a year to see if your rent is still right.

Do not forget short stays

A property let by the night can earn more per month but needs more work and has different tax and insurance consequences. Short-term or long-term letting: which pays more? compares the two, and tax on Airbnb and short-stay rentals explains the tax.

Keep checking

The right rent changes as the neighbourhood and economy change. Keep a short record of comparable rents each year, and check how your yield compares with other options. A landlord who prices with evidence earns more, loses fewer months to vacancy and has fewer difficult conversations.