For a quick estimate, you can multiply the property’s value by anything from 0.8% to 1.1%. This is a good baseline for properties throughout the US. Naturally the final price may require further tweaking and investigation.
If you’re moving, you may wonder if you should keep your home and rent it out or sell it. Both require plenty of work and decisions.
Selling means you get rid of the house right away and get the profits from the sale. Renting means you keep ownership and rent it to others. You manage the property, collect the rent, and hopefully make profits.
Renting it out could be a great way to start investing in real estate without giving up too much capital since you already own the home.Before you decide, it’s important to determine how much you could rent the house for, as each area differs.
Here’s how to tell.
Factors To Consider When Setting Rental Price
1. What’s your property’s value?
This is important. You can base your rent on the property’s value by charging 0.8% – 1.1% of the home’s value. For example, if your home is worth $250,000, you could charge $2,000 – $2,750 per month.
Compare the range to the average rent in the area. Some areas will be on the higher end and you’ll still attract tenants and others may do better on the lower end.
2. What is the average rent for similar properties in your area?
Don’t compare your home to others in the area that aren’t similar. Work with a licensed appraiser or real estate agent to find out the true average rent for homes just like yours.
For example, comparing your one-story, 3-bedroom home to a 2-story 4-bedroom home isn’t accurate. Compare the rents for homes of similar size, features, number of bedrooms, and number of bathrooms.
Use this as a baseline. Do you want to charge more or less? The more reasonable you keep it, the higher the demand, but the fewer profits you make.
3. What are your expenses?
No two landlords have the same costs. It doesn’t make sense to rent out your home if you can’t cover your expenses AND make a profit.
Think about all expenses including the mortgage, taxes, insurance, maintenance, and repairs. Also consider administrative costs, vacancy costs, and any other costs you incur to keep the property.
4. What’s the demand?
Some areas are in higher demand than others. High demand usually means you can charge more, while lower demand may require lower rents if you want to fill it.
This goes back to knowing the area’s average rent. What are other landlords doing? What are the current vacancy percentages? Are renters buying more than renting now or is there a large demand at the moment?
Talk to a real estate agent or appraiser to see what the norm is for the area when you’re about to put the home up for rent.
5. What unique selling points does your propertyhave?
What sets your home apart from others? Do you have a pool? Are you located near the expressway or train station? Does your property have on-site parking, a large yard, or access to community amenities?
Anything that sets your home apart from others will help you figure out how much to charge for rent. The more luxuries you offer, the more rent you can charge.
6. What are you comfortable asking?
It all comes down to what you’re comfortable asking for rent too. Remember, you are the landlord. You are responsible for collecting the rent, dealing with non-payment, and collection practices.
If you don’t want to handle the administrative work yourself, you may consider hiring a property management company, but this eats into your profits and should be factored in when determining the rents.
Take your time when determining how much to rent your house for as there isn’t a one-size-fits-all answer. Even if your neighbor rents out his property – you may charge a lot more or a lot less depending on the many factors that go into determining the fair market rent.
If you are in a hurry and need to rent it out fast, consider pricing it on the lower end of the area’s average rent. You’ll get more interest and potentially rent the house out faster. If you aren’t in a financial bind and need to rent it fast, price it accordingly and see what happens. It may take al little longer, but you’ll make more profits for your efforts.