What should I charge for rent?

by | Jan 26, 2022 | 0 comments

What should I charge for rent?

 
This is a question as old as rentals themselves. The TL;DR (too long, didn’t read) answer is: As much as the market will support. But how do we get to that number? Read on to find out!
 
There are several factors you’ll need to consider when calculating your rental price. These include?
  • The overall rental market for like properties
  • The 1% rule

Before starting, there’s one item you need to know first – your actual, or if a new property, estimated costs.

On our Capitalization Rate (Cap Rate) Calculator we’ve created the ability to enter your expenses, rent, and other income (wash/dryer, cell sites, parking, etc.) and estimate your cap rate – the higher the better! Generally you’re looking for 5-10% Cap Rate on rental properties.

What should I charge for rent?

First, look at the rental market for comparable properties (comps). As a Realtor with access to the MLS I pull comps from our large database of current and past listings. I look for properties with the same square footage, amenities (pool, in-unit washer and dryer, balcony, parking, etc.) and also the overall furnishings. Has the kitchen been updated or is it stuck in the 70s? Sporting shag carpeting or updated flooring vs. refinished hardwoods. Each unit will bring something different but, overall, you’ll be able to find a price point that is comparable to your rental.

Next, I turn to everyone’s favorite – Craigslist. It’s no secret you can find some gems on Craigslist. I say that with truth and sarcasm in the same breath. Sometimes you have to weed through a bunch of ads but when it comes to rentals, there can be good data! Not all property owners use a Realtor when listing their units so the MLS doesn’t contain everything – it’s only as good as the data entered.

On Craigslist I’m looking for repeats to weed out but also more comps.

Is there another way to evaluate my rental costs?

Absolutely – the 1% rule. This one is quite simple and works great for a single family home, or non-multiunit property. Take your estimated property value – Be accurate and don’t inflate it, ca’mon now… – and multiply by 1%. The answer is your rental price. Need an example:

  • Home price: $257,000
  • 1% Multiplier: x .01
  • Monthly rent: $2,570

If you found this post useful, head over to our Learning Center for more great information!

Erich Schwenk Headshot

Written By Erich Schwenk

Erich Schwenk is the Designated Managing Broker for the The Pineapple Brand Company. He has a passion for hospitality and created a real estate, property & association management firm around high levels of customer service, communication, transparency, and above all - trust. Before launching The Pineapple Brand Company, Erich served 20+ years as a Flight Attendant. He has a background in web development, videography, photography, and digital marketing. Bringing years of service, knowledge and these skills to real estate and its digital marketplace. He aims to help real estate brokers and their clients capitalize on their investments and reach financial independence and security.

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