You can make a sizeable profit by offering cars, boats, AV equipment, event venues, and other things for rent. But you will be more successful if you understand how to price your rentals. You must set rental prices based on how long someone will rent something for, the time of the week or year when someone will rent your item, and the general value of whatever you offer for rent.
The goal of setting rental prices is to produce something reasonable and appealing to your prospective clients without losing money. While you might feel tempted to charge a high amount for a rental, doing so could cause long-term vacancy. You don’t want the price to be too low either, as a low price will harm your bottom line.
Your rental price should be something reflective of the value of your item for rent and the demand people have for the item in question. You may have an easier time getting a profit if you provide a sensible rate based on these two factors.
There are many useful factors to review when looking at how you’re going to set a rental price for anything:
You can start reviewing how much you should charge for rent by looking at what your competitors in your local area are charging. If you have a property you can rent out for events, you can review what other landlords and property owners are charging for rentals and use this to start.
Not all competitors will provide direct information on how much they charge for rentals. You might have to request a quote for services. For example, you could tell a company that rents AV equipment that you have specific needs and that you have a particular budget to work with when getting these items ready.
One common idea people use when setting up rental prices is the 2% rule. This rule states that the rent cost for something should be about 1 to 2 percent of the value of whatever someone rents.
While this sounds reasonable, it could make it harder for you to achieve a profit for two reasons. First, the value of your item for rent might change after a while. A property can rise in value depending on the market, while a vehicle will drop in value as it ages and takes on more miles.
Second, there may be times when the demand for something could be higher. For example, a car rental might be in higher demand during weekdays, so you could charge more during those times.
Various rental websites will set their pricing with a few steps:
You can use a reasonable formula for determining how much you’re going to charge for a rental:
For example, if you have a car worth $20,000 that you want to rent out, you can take 1% of that car’s value to get $200.
For a car, you can review how much you spend on insurance, gasoline, and other inspection and maintenance costs. You can add those to the value of the rental if you wish. For a vehicle that costs $500 to maintain each month, you can add that total to the $200 in the earlier example to get $700.
You can divide the total of $700 by 7 to determine that it will cost $100 per day for someone to rent your vehicle. You could reduce that daily cost if someone spends more days with that vehicle, or you could increase the price if the scheduled demand is higher.
You can boost your rental profits by as much as 30% if you use a sensible plan for work. You should assume that at least 30% of the money you earn from a rental will go towards expenses.
There are many things you can do to increase your rental profits:
After a while, you might need to remove your rental equipment from service because it is getting older or is not as useful as something new. You’ll need to review how much you will sell your rental item for when it is no longer of use to you.
The goal for selling your rental items is to try and get about half as much as what you spent on them in the first place. The total should be enough to cover many of your expenses while also helping you get started in finding a viable replacement.
You can use a few points for dictating when you’re going to remove your old items from service:
You can also increase profits by adding these optional rental pricing points:
You can negotiate rental rates with clients if you wish, but be sure you understand your local market and economic climate when doing so. You can afford to reduce rates when the market is active and you’re more likely to earn money regardless of what happens.
But in cases where you do negotiate, try to get a long-term deal going with a client. You could offer a membership or lease on something where a person spends more in the long run but still has access to your items for rent.
The last point to consider for offering rentals involves whether you should be showing your pricing rates on your website. While doing so can be advantageous in how it keeps you transparent and lets people know what they will spend, there’s also the concern that rates can be flexible. Your pricing rates might change based on the time of the year, the demand for something, and how the value of the asset you rent out might change.
Not sure what rental business you should start? Try checking out our new 100 ideas for starting a new rental business guide.