How Much Should I Charge for Rent?
Looking to buy your first rental property investment? If you are, you might be wondering how much you can charge a tenant in rent per month. Thankfully there are a few different ways to come to a good estimate of what you should be able to charge for rent.
The 1% Rule
The first way to estimate how much you should be able to charge for rent is to calculate the rent based on the 1% rule. This rule states that you should be able to charge 1% of the market value of the home. For example, if you buy a $50,000 house the rule estimates that you should be able to charge $500 per month or 1%.
This rule is a good place to start when estimating how much you should be able to charge for rent. In our experience though it should not be the only guiding factor for your decision.
Research Your Local Comps
This brings us to the second way to estimate what you should be able to charge for rent. An even more accurate estimate is to look at comparable rental properties in your location.
You might be wondering how to figure out what other landlords in your area are charging for their properties. There are several places you can look to find what they are charging for rent.
TOP PLACES TO LOOK FOR RENTAL PROPERTy Income rates
- Facebook Marketplace
- Craigslist
- Newspapers Ad Listings
- Realtors or Realtor Website Listings
- Yard signs – Pick up the Phone & Call!
An additional factor to keep in mind is to make sure you are comparing similar rental properties. Are you looking at homes in your location that have two beds and one bath? Maybe your property comes with a garage? Or maybe it’s newly renovated? All of these amenities should be taken into consideration when you are comparing properties to determine if you can charge a certain monthly rental rate.
It is important to do your due diligence and invest in locations that you are familiar with and understand the market. We’ve seen success investing locally within a 30 mile radius of our community. We know the area well and have a good network established when it comes to buying and renting out properties. We hope this information will help you feel more confident in what you can charge for your rental property.
Once you know what you can charge for rent, the next step is to calculate the property’s expected expenses. If you want to determine if your property will be cash flow positive make sure to check out our latest article: Complete Must Have List of Rental Property Expenses.
Happy Investing,
