How to price a room, not a house

Pricing a whole house is comparison: look at what similar properties ask, place yourself among them, adjust. Rooms need arithmetic. The market gives you one number for the property, and you have to divide it between rooms that are unequal.

The method has three parts: find what the house must earn, add a premium for the differences a tenant notices, and settle exactly what the rent includes.

Start from the cost floor

Before you look at anyone else’s listing, work out what the property must earn in total each week: the mortgage, rates, insurance, utilities if you are covering them, and an honest maintenance allowance. Divide it across the lettable rooms. That is your floor.

Any market-led price below the floor is a slow leak, and slow leaks are hard to notice in property because the loss arrives as an absence rather than a bill.

Adjust for the differences tenants notice

Once you have the floor, spread the premium across the rooms on what a prospective tenant sees when they walk through.

• Size and natural light. A sunny double is not the same product as a small interior single, and pricing them alike leaves money on one and a vacancy on the other.
• A bathroom of their own. An ensuite usually carries the largest premium in shared housing.
• Floor level, street noise, and how close the room is to the kitchen and the shared bathroom.
• Storage, a desk, a built-in wardrobe or a balcony: each worth a few dollars, and each worth naming in the listing.

Decide what is included, then be precise about it

Bills-included rent is simpler for tenants and removes a whole category of household argument, but it moves the usage risk onto you. If you include utilities, build a per-resident figure into the rent from last year’s bills, and review it each season rather than each lease.

Reprice at turnover, not on the calendar

A vacancy is the only moment you can reprice a room without disturbing somebody who lives in it. Use it: check the floor, check what comparable rooms are letting for rather than asking, and set the new figure before you photograph the room.

If the same room keeps emptying, the price may not be the reason. The guide to reducing turnover covers the other usual causes.