Thinking of becoming a landlord but you don't know how much to charge for rent?
Maybe you're planning to relocate in the near future or you'd like to become a real estate investor. Renting out your home is a great way to pay off your mortgage and add supplemental income. But how do you know how much you should rent it for? You could charge what you think its worth, but you run the risk of overpricing and higher vacancy rates that have the opposite effect. Or you can underprice and lose profit which would negate the whole idea of becoming a landlord in the first place. Chin up, beginner landlord.
Here's how you can ensure your rental property is priced correctly:
Determine Fair Market Rent
Fair Market rent, at its most basic definition is the amount of rent that can be expected for the use of a property, in comparison with similar properties in the same area. For example if there are two rental properties in your neighborhood, both 2 bed 1 bath, unfurnished, renting for $900 and $950 respectively, you would take the average of both properties to determine market rent for your property. However, keep in mind that certain amenities may increase or decrease that number. (Pet friendliness, outdated appliances/furniture, number of bedrooms/bathrooms). Drive around your neighborhood. If you pass any for rent signs, call their owners or the rental agents and ask how much they are charging. This will give you a rough indication of how much you should be charging.
2. Is fair market rent, fair to you, the renter or both?
It is crucial that you are meeting the minimum rental requirement. The rent must be high enough to cover all expenses such as, mortgage payments, maintenance fees and to produce cash flow i.e profit while remaining within the range of fair market rent. There is a fine balance between charging what the property is worth and what is affordable to your ideal tenant.
Now that you've determined how much to rent for, the real work begins.
3. Ask a Professional
The number one threat to a new landlord is high vacancy rates. This means that your property needs to be rented by the best tenant for the longest period of time to ensure steady cash flow. When looking to get the best service, it stands to reason that you would choose a professional in that field. You wouldn't ask a chef to perform surgery, or a dentist to change your tire. In the same way, you should ask a realtor to list your property, often times they are able to get the property rented faster, rented at a better rate and to superb tenants. After all, they are in the business of renting and selling homes. They have working knowledge of current market trends, cap rates and a directory of clients to rent to.
Use this basic blueprint as a guide to finding how you can make the most out of your rental. It is important to consider fair market rent, your expenses and a professional's opinion. For more information on current real estate trends and prices get expert help at https://www.1oakbahamas.com.