There are many different strategies you can adopt in real estate investing. One of them is becoming a landlord. Becoming a real estate investor of a rental property, however, is not a simple task. There are many variables to consider when renting out a house. First of all, of course, you need to choose the investment property. This is typically done through conducting investment property analysis, but more on this topic in a second. Besides answering the question “Should I rent out my property?”, there is something else that is even more vital to your success and the ability to be making money in real estate. This has anything and everything to do with how much rent to charge. How much rent to charge will certainly have an impact on the process of making money in real estate as it affects directly your rental income as well as the occupancy rates of your rental property. One of the main real estate questions, thus, is: “How much should I charge for rent?”. Sure enough, how much rent to charge depends on various factors such as: location, desired rental income, rental expenses, property price, the local housing market, etc. Before answering: “How much should I charge for rent?”, we should review in which cases becoming a landlord in real estate investing is a good idea.
How to Know Financing a Rental Property Is a Good Real Estate Investing Decision?
In order to own and manage an income producing real estate property, the house investor should conduct investment property analysis. Investment property analysis takes into consideration different real estate metrics such as cap rate, cash on cash return, potential rental income, cash flow, etc. As you can imagine, to conduct such a research on your own takes a lot of time and effort. That is why there is a tool which every house investor can use when becoming a landlord. This is, namely, the rental property calculator. Mashvisor’s rental property calculator computes all the necessary variables such as: cap rate, cash on cash return, cash flow, etc. for you. Besides the cap rate and cash on cash return, this real estate investing tool will provide you with detailed information about the investment property and its location as well. In addition, Mashvisor’s rental property calculator will suggest the optimal rental strategy for the chosen investment property. In this way, the house investor would not need to wonder whether to rent out a house in the form of Airbnb rentals or traditional rentals.
As previously mentioned, when becoming a real estate investor of Airbnb rentals or traditional rentals, one of the major real estate questions concerning you is: “How much should I charge for rent?”. In order to provide you with all the information you need, as a landlord, we will review all the variables you need to take in mind.
How Much Should I Charge for Rent?
When deciding on “How much should I charge for rent?”, it is advisable that you take into account the location of your property as well as the local housing market. Do not forget to conduct real estate market analysis. Additionally, pay attention to your rental strategy. When becoming a real estate investor, make sure your investments generate positive cash flow. “Why do I need all of this when deciding how much should I charge for rent?”, you may ask. Keep reading to find the answers to one of the most frequently asked real estate questions.
#1 How Much Should I Charge for Rent? – The Local Housing Market
In order to be making money in real estate, every landlord should study in depth the local housing market. The real estate market can provide you with information such as the supply of rentals in the area as well as the demand tenants have. This certainly is a valid point when renting out a house. Additionally, you can explore the average rent other landlords charge their tenants. Exploring how much do real estate investors make can be used as a guideline when answering your question: “How much rent should I charge?”.
#2 How Much Should I Charge for Rent? – The Real Estate Market
“Before I rent my property on the real estate market, I need to conduct real estate market analysis” should be the motto of every landlord. Real estate market analysis can help you in establishing the property price of your investment through comparing it with real estate comps. Knowing the property price is important in answering the question: “How much rent should I charge?”. This is because the rent you charge your tenants is typically from 0.8% to 1.1% of the market value of your rental property.
What are real estate comps though? And how are they useful when I rent my property? Real estate comps are recently sold real estate properties with similar characteristics as yours. Through comparison with such properties, you can easily establish the market value of your rental. A simple computation after that, and you have the answer of “How much rent should I charge?”. To learn more on the topic, make sure to read “How to Perform A Real Estate Market Analysis”.
#3 How Much Should I Charge for Rent? – The Rental Strategy
Income producing real estate properties are associated with the optimally chosen rental strategy. This, by the way, is an important feature you need to consider when establishing the rent of your investment property. Airbnb rentals, for instance, generate higher rental income per night. However, you should keep certain limits by checking how much do real estate investors make. If you establish the rent too high, you risk having your property vacant. Traditional rentals, though generating lower rental income, have a relatively constant cash flow. In both cases, you need to consider the demand in the market and establish your price accordingly. With short-term rentals, nevertheless, you should be able to constantly adapt your price to the market changes. This is usually not the case when it comes to long-term rentals. For more information, check out “Real Estate Investing: Traditional vs. Airbnb Investments”.
#4 How Much Should I Charge for Rent? – Generating Positive Cash Flow
Generating positive cash flow is a huge part of income producing real estate investments. Yes, it is also valid when establishing your rent. See, you should always aim for positive cash flow properties. This means that the rental income should be higher than the rental expenses of the property. By estimating the potential rental expenses, you can quickly compute how much your rent needs to be. Make sure to read “Real Estate Investing 101: How to Find Positive Cash Flow Properties in the US Housing Market”.
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