One of the most difficult aspects of renting out a house is determining how much to charge. In this article, we’ll compile some of the best advice from across the internet and help you factor in things like maintenance costs. Finding the balance between profitability and affordability is important so we’ll want to look at it from the landlord’s perspective as well as the renter’s perspective.
Most places will tell you that the target window is between 0.8% and 1.1% of the home’s value. Home value can fluctuate a fair amount from year-to-year, but we suggest basing your home value on a bank’s appraisal or your mortgage rather than sources like Zillow and RedFin which can sometimes overestimate the value.
Once you have your home value, say $250,000, you can estimate monthly rent between $2,000 – $2,750. If your property does not have parking, isn’t close to amenities, or if the building isn’t in pristine condition then you may want to consider the lower end of that scale. If the house you are renting is in a great neighborhood, with a garage, and has some furnishings then you may want to look at the higher end of the scale.
Always be sure that your rent covers your maintenance, taxes, insurance, and mortgage fees. This can be tricky as you may need to make large investments like a new roof or plumbing stack. Zillow suggests planning for repair and maintenance at around 1% the cost of your home per year. For our previous example of a $250,000 house, that would be $2,500 per year in maintenance or one month’s rent.
Another starting point is to look at others home for rent in your part of town. In Cincinnati, you can look at websites like www.cincyrents.com and shop by neighborhood. As you look around the neighborhood consider lot size, number of bedrooms, number of bathrooms, year built, year of remodeling, and included amenities when you compare your price to others.
One final consideration is to factor in annual increases in your rental agreement. Not every state allows this so be sure to consult your state’s rent control laws. For states that do control rent prices, you may need to pad your rent a bit on the front end.
If you’re looking to control your costs, you may consider hiring a property management company. Cincy Rents charges 10% and handles finding your tenants, moving them in, collecting payments, and 24/7 maintenance calls. If you plan to use a service like that then you may want to factor some of that cost into the rental price as well.