The science of rent takes part in answering the question “how much can I rent my house for?”
That science is Rentology! Rentology attempts to explain “how much can I rent my house for.” Here, we use Rentology to break down all things that have to do with setting your rental rates!
Setting Prices- How Much Can I Rent My House For
The real estate business has a common way of setting rental rates for rental properties. To answer “how much can I rent my house for?”, a rule of thumb can give you an answer. Generally speaking, rent should be around 1% of your house market value. Realistically speaking, a percentage between .5 and .8 is more like it. Normally, this rule is applied to a long term rental.
Keep in mind: When you are looking at the short term real estate investment strategy, this rule of thumb is inapplicable. For example, renting out a room on Airbnb or owning vacation rental property have their own set of guidelines to set rent.
Read More: All You Need to Know About Short-Term Rentals in the US Housing Market
How Much Can I Rent My House For Rule of Thumb in Action
So how can we put numbers to words? Let’s go over an example. Let’s say you purchased an investment property for $300,000. If we were going with the set rate of 1% rental rate alone, then you will be charging your tenants $3,000 per month.
We know it doesn’t always work like that in the real estate world. There are a number of factors that play into how much you charge for rent. So instead, let’s use a rate between .5% and .8%, like .6%.
($300,000)(.6%)= $1,800 per month in rent
Again, we want to stress that this is not a set in stone rule you need to go by. Location of property and amenities play a prime role in how to calculate rent to charge your tenants.
Related: How Much Should I Charge for Rent?
9 Things Affecting How Much I Can Rent My House For
- Swimming Pool
- Fitness Center or Gym
- Elevator
- Onsite Parking
- Security/Doorman
- Stairwell Only Building (Lack of Elevator)
- The absence of reserved parking
- Very Little, to no, security
- Real estate investment home value
As shown, things like a swimming pool, gym or fitness center, elevator, available parking, and property security can play a role in increasing your real estate rent. Whereas aspects like lack of property security, reserved parking, and an elevator will decrease how much you can charge for rent.
Your real estate investment home value is the second obvious factor that plays into “how much can I rent my house for.” What we mean by this is that with rental properties purchased for lower prices, you are able to charge a higher percentage of the property price.
Let’s compare the example we used above with a real estate investment property that costs $100,000 instead of $300,000.
($300,000)(.6%)= $1,800 per month in rent
Versus
($100,000)(.6%)= only $600 per month in rent
Realistically, finding a rental property with a low purchase price gives you the ability to play around more with the monthly rent. If you were to raise that rule of thumb to the full 1%, you will be charging $1,000 per month instead. Positive cash flow is coming your way so long as you’re owning a rental property that is being charged for what it’s worth.
Putting yourself in a tenant’s place helps determine “how much can I rent my house for.” Would you pay what you’re charging for in consideration to what’s being offered? That is one of the best ways to determine if your rates are reasonable and will attract tenants.
Other Techniques That Help Determine How Much Can I Rent My House For
The Rule of Thumb is useful to get an overall idea of “how much can I rent my house for.” However, this technique should not be used alone if you’re trying to figure out that rental rate. Here are other techniques you can use to answer the question, “how much can I rent my house for?”
Real Estate Comparables
Taking a look at real estate comps is probably one of the most effective techniques you can take advantage of. By comparing different investment properties, their price, and how much they are charging for rent, you’ll be able to get an idea of a range. Not to mention, you know who you’re competing against.
This gives you the advantage of setting monthly rates at a competitive, yet profitable, price. Mashvisor is one good way to get an idea of the real estate comps in the area of your choice. Utilize this simple real estate investment technique, as it can seriously make a difference in your price setting game.
Put Yourself Together a Rental Market Analysis
A rental market analysis is yet another effective technique when trying to figure out “how much can I rent my house for.” The status of U.S. real estate markets is one of the biggest factors that affect property value. An effect on real estate property value means an effect on how much to rent your house for.
This is where a rental market analysis is most needed. A home value analysis will allow you to make easier decisions, leading you to buy an investment property that is worth every penny. Not to mention your ability to see real estate comparables, allowing you to set the rental fee you need to compete with others in U.S. housing markets. Long story short, a real estate market analysis is one technique you can’t neglect.
Learn How: How To Perform A Real Estate Market Analysis
Your Friends, the Real Estate Agents
One rule many real estate investors like to go by is to ask at least three real estate agents for rental price advice. Not only are real estate agents able to tell you whether you are paying a reasonable price for the property, but they know their territory well. Real estate agents will be open to suggesting rates to you for no charge at all.
They are the ideal fit for the job, as they are experienced in their field, know the real estate area more than anyone, and well, it’s their job! Three is the magic number here, as you want to be able to take the average of the three financial suggestions. This way, you are able to set the price you believe is the most beneficial and appealing to both you and renters.
Putting It All Together-How Much Can I Rent My House For
Finito
We’re all done – finito. “How much can I rent my house for“ is one of the most common questions in real estate. There is no set in stone price. Use your best capabilities to set the rental fee you feel is most suitable for you, your real estate market, and your potential tenants. If you need some time to save, use Mashvisor for things like property analytics and real estate comps within a couple clicks. Rentology has made its mark here, now go make yours!
Next Up: The Use of Predictive Analytics in Real Estate Investing