“How much should I charge for rent?” That is the question every rental property owner has asked themselves at least once.
Knowing how much to charge for rent is like determining how much a piece of art is worth. Determining the right amount can be tough, but in the end, you want to charge whatever the market is willing to pay. However, since that’s not a very helpful answer, let me provide you with something more concrete.
Factors to consider
When deciding on rent for your rental property, you don’t want to overcharge and leave your property sitting vacant for an extended period of time, and you also don’t want to undercharge and not get the full rent amount your property deserves. Here are some of the main factors to consider when determining how much rent to charge:
- market demand & competition
- whether or not you allow pets
- neighborhood crime statistics
- nearby schools
With these factors in mind, here are 4 ways to go about nailing down the correct rent amount:
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In the world of real estate investing there are all kinds of formulas. One such formula is called the “1% rule.” The 1% rule states that the monthly rent should be equal to or (hopefully) greater than 1% of the property’s value. So, if a property is worth $100,000, then the monthly rent should be at least $1,000.
If you decide to hire a property manager (which I discourage), then the property manager should be able to provide you with some insight on a good amount to charge for rent.
Major real estate sites
You can also easily do your own research by using major real estate sites like realtor.com, zillow and Trulia and seeing what other nearby properties are renting for that are comparable to the size, condition, etc of your property. Mapliv.com is another site worth exploring.
Tools to help
I want to quickly discuss two additional free tools you have access to: Rent Zestimate & Rentometer.
Rent Zestimate is Zillow’s opinion of what a property could reasonably rent for. To find out the Rent Zestimate for your property, simply search for the property on Zillow, and you’ll find the Rent Zestimate to the right of the listing as shown below.
Rentometer is another great free tool to help you determine the appropriate rent to charge for your property. The tool is very straightforward. Simply visit www.rentometer.com and try it out.
Arriving at the right rent amount to charge is part art and part science. In this post, I’ve offered a number of ways to help you determine the right amount to charge for rent.
However, you should not determine your rent based on the results of a single tool. Gather as much data as you can. This will allow you to make a well informed decision and better answer the question, “How much should I charge for rent?”