How much can I rent my house for? This is one of the questions most rental property investors ask and probably one that requires a great deal of thought. Setting a price for your rental is never easy, especially if you’re new in the business.
Determining the Rent Price: 4 Factors to Consider
When renting a property, the price determines much of its desirability, and that also determines how much money you can make from it. If you set a rental price of $1, you’d have the hottest property in the city and would be beating away would-be renters at the doorstep… but you wouldn’t make much money off rent that low. Conversely, if you set the monthly rent at $20,000, you could make a lot of money off just one month’s rent… but who would possibly pay that?
When determining how much rent to charge, you need to come up with a price that will ensure maximum profits without turning potential renters away. To do this, you need to take several factors into consideration, which may include the rental home characteristics, the rental value of homes in the area, local rent control laws, and changes in the market.
Rental Home Characteristics
The rental value depends largely on the number of bedrooms and bathrooms, parking space, square footage, location, and available amenities on the property. While a majority of renters (85%) are looking for properties that are within their budget, 69% prefer rentals with air conditioning while 68% consider the number of bedrooms as top priority.
Additionally, some renters would appreciate properties with fitness centers or gyms (20%), designated pet areas (17%), recreation space (15%), and hot tubs or pools (14%).
And since location is everything when it comes to real estate, your home’s rental value may also be influenced by the neighborhood. According to Zillow.com, a leading online real estate marketplace based in Seattle, WA, 77% of renters is looking for homes located in safe neighborhoods while 57% consider the commute to work or school as their top priority when choosing a place to live.
Rental Value of Similar Homes
If you’re still asking yourself how much you should rent your house for at this point, “spy” on your competitors and know how much they charge. Take a look at rental properties in your area having the same general characteristics (number of bedrooms, bathrooms, square footage, etc.) and amenities as your home and use the information to determine how much rent you can charge.
Local Rent Control Laws
Some states (including California, Maryland, New Jersey, New York, Oregon, and the District of Columbia) are governed by rent control laws. Thus, the landlords are obliged to limit the amount of the rent they charge as well as the rate by which they can increase the rent.
If you’re operating in areas with rent control laws, check with a licensed attorney in your jurisdiction to determine how much rent you can charge and be aware of any restrictions that may be in place.
Changes in the Market
Rental prices are never fixed. They can be influenced by a variety of factors (such as those mentioned earlier) and may also be affected by the competition as well as changes in local market conditions.
Setting the Rent: Which Method Should You Use?
There is more than one method of setting the rent. However, you may first need to ask yourself why you are renting your home and what you hope to achieve by doing so. For example, some people rent out properties to create a source of additional monthly income, while others do it to subsidize the cost of maintaining the property while waiting for the value to increase over time (asset appreciation). Know your whys and everything will fall neatly into place.
Method 1: Use Home Values in Setting the Rent
Most landlords set the rent using the 1% rule (charging 1% of the home’s value for rent). Since the median home price in the U.S. is estimated to be around $374,000 by the second quarter of 2021, the monthly rent for a house can be in the vicinity of $3,740.00. Again, the final amount will depend on several factors, and if you’re renting out an apartment, it will be lower.
For more realistic rent prices, set the monthly rental price at 0.8% (for homes worth less than the U.S. median) to 1.1% (for homes worth more than the U.S. median) of the home’s value.
Method 2: Use Comps
Using local or online listings, find properties with similar characteristics and use the information in setting the price.
Method 3: Use an Online Calculator
Online calculators can be a great help in estimating the appropriate rent but they might not be totally accurate, so if you’re using this option, use different calculators and rent estimate tools and don’t forget to take note of the median error rates.
Method 4: Consider Your Financial Needs
List down your monthly financial obligations (monthly mortgage payments, taxes, insurance, repairs and maintenance, utilities, etc.) and use it as a basis in setting the rent.
Hopefully, this short guide settles the issue so you won’t be asking questions like “how much can I rent my house for?”, “how much rent should I charge?”, or even “how much should I rent my house for?”.
Method 5: Hire a Credible Property Manager
If you’re not confident that you can do the job and still feel you need some help, it’s time to consider hiring a professional property manager to sort things out. By tapping into your property manager’s expertise, there is no way you can ever go wrong.
Admittedly, this option can cut into your profits, but working with the pros allows you the luxury of watching the rental income roll into your account month after month without doing any work.
Need Help Managing Your Properties? Call Tenant Planet!
Managing rental properties is not easy work. Whether you’re just starting out or a seasoned rental property investor, you’ll definitely need professional help at one point or another so why not go for the most logical option? Consider hiring a professional property management company like Tenant Planet to ensure the profitability of the business without sacrificing your time or energy.
By working with Tenant Planet, you can be sure that your investment will work for you, and not the other way around. Say goodbye to hard work because we will take care of everything for you!
To learn more about us and what we can do to serve you, please visit our main website or request a proposal. Let’s work together so you can make the most from your investment. You may also email me at parker@tenantplanet.com for additional questions or comments.