Getting into the rental industry is a big step in the real estate market, and there is arguably no better time to get into this market than now. As the younger generations continue to put off buying homes due to immense student loan debts, becoming a landlord at this time can be a lucrative opportunity. However, that does not mean that it will be easy or stress-free. If not done correctly, owning a rental property can be a financial burden, instead of giving you the positive cash flow that you would anticipate. It is important to know how much you need to charge for rent, how often to raise rent, what to include in the cost of rent, and so much more. Charge too much rent and your property will never be occupied. Charge too little and you will be left with monthly losses on your property. Charging rent is a science, and we are here to help you perfect it.
How Much to Charge for Rent
Before you can think about what you charge monthly for rent, you need to know what your property’s value is. You can get a rough estimate through various websites, however since this is such an important number to know when it comes to monthly rent, you should get an appraisal done. From there, it is a good strategy to charge about 1% of your property value. If that number appears to be too high, some say anywhere between 0.5-1% is the perfect range. The exact number depends on a variety of factors, in addition to market value of your home, including location and amenities. For example, is there parking provided? Is there elevator access? What about a fitness center? Answering “no” to any of these questions means your monthly rent should be closer to the 0.5%, as opposed to 1%. If your rental property is a standalone home, consider the conditions of the area and neighboring properties.
Why Isn’t Anybody Renting my Property?
Before you start to panic and instantly lower the price, consider other factors. Although often times rent being too high is the reason nobody is renting your property, there are a variety of other factors that could be causing this vacancy. For example, how well presented is the property? When possible tenants are touring it, do they find torn up curtains and chipped paint? Always remember that your property is not the only one they will be touring, so even if it is a beautiful place to live, small details can make the difference on luring those tenants in.
What About my Mortgage?
The idea of having a rental property is that you should not even have to worry about a mortgage. You should be charging enough for rent that your mortgage on the home is covered, and then some. Being a landlord, you need to always have money ready to fix things that go wrong in the property, so simply having enough to pay off the mortgage on the home is not enough.
By factoring in all of the above factors, you should be able to turn a nice profit on your rental property. Although determining how much rent should be is a difficult process, it is not one that you want to take lightly, as it can make or break the success of your investment. By not charging the right amount for rent, it could be decades until you finally see a profit from this property. Always remember to analyze the market, and to know that every property is different. By following these simple tips, you will be on your way to owning a successful rental.