Renting out a property you own can be a lucrative career or simply a way to make some extra money on the side. However, determining how much you should charge your tenants for rent can seem difficult.
That doesn’t mean it has to be. While determining what you should charge does involve accounting for a variety of factors, it can be much easier to calculate rent than you may assume. The following tips will help:
Use a Rent Estimate Tool
One of the simplest ways to begin deciding how much to charge for rent is to use a rent estimate tool or service. This merely involves providing various pieces of key information regarding the type of property you’re renting out, where it’s located, how large it is, etc. The tool will factor in all these details and provide an estimate you can use as a starting point. You may not end up charging that exact amount, but it’s unlikely what you do charge will be much less or much more than the sum an estimate tool arrives at.
Investigate Other Properties in the Area
The Internet has made determining how much to charge for rent easier than ever before. Now, you can search for properties that are in the same area as yours, are about the same size, and offer similar amenities.
Make a thorough list of such properties and check real estate websites to find out how much their owners are charging in rent. This will help you learn whether what you were thinking about charging is way off or right on the money (no pun intended).
Check Fair Market Rents
Along with checking rental amounts on Zillow and similar websites, you can also use a helpful resource from the U.S. Department of Housing and Urban Development. Every year, HUD releases a document listing what’s considered “Fair Market Rent” for various types of properties in about 2,500 areas throughout the nation. This is another easy way to get a sense of how much rent is too little or too much.
Check Rent Control Laws
Rent control laws can limit the amount of rent a landlord can charge for a given property, as well as how much rent can increase each year. Check to see if you live in a state with rent control laws. If you do, those laws will at least let you know the maximum amount you can charge.
Consider Your Own Costs
Your tenants will generally not be responsible for covering costs associated with repairs and maintenance. You need to account for these costs when determining how much to charge for rent. You don’t want to charge so little that you barely end up making a profit (or even end up losing money, which could theoretically happen).
Calculating an estimate for annual repair and maintenance costs will be somewhat time-consuming. However, it’s important not to skip this step. By calculating your own expenses, you’ll better understand whether you’re charging so little that renting out your property won’t be worth the time and effort.
Hire a Consultant
This isn’t a tip everyone will be able to apply. You need to be able to afford a consultant to hire one. That said, if you can justify the cost of doing so, hiring an expert to determine what you should charge for rent is certainly a way to make this process much easier.
The main point to take away from all this is that determining how much you should charge your tenants doesn’t need to be as overwhelming as it may seem. Calculating fair rent may take some time and effort, but it’s not necessarily a significant challenge when you keep these tips in mind.