You own your home but aren't going to live in it anymore. If it's not the right time to sell the property, you might decide to rent out your home to bring in additional income to cover the mortgage and other costs and to buy yourself some time. Depending on how things go, you might decide to keep the property indefinitely, continuing to rent it to tenants.
Before you can put your home on the rental market and find the right tenants for it, you need to figure out how much rent to charge each month. Asking for the appropriate amount of rent will help you attract more potential tenants to the home and make sure the rental income you earn is enough to cover the costs of owning the home. Here's what to consider when you're trying to figure out how much rent you should charge.
How to Determine Your Property's Worth
One of the first things to do when finding out how much you can charge for rent is to figure your property's worth. Knowing the value of your home will help you pick a monthly rent that is neither too high nor too low.
You can figure out your home's worth in a few ways, some of which are more accurate than others. You can use websites that provide an automated valuation model to calculate your home's value. An automated valuation model looks at public records, such as tax assessments and recent sales, to provide an estimate of a home's worth. The tools might not be the most accurate way to calculate a home's value, but they can give you a ballpark figure to work with.
Another way to figure out your home's worth is to hire an appraiser. Most likely, you had your home appraised before you purchased it to make sure you weren't paying more than it was worth and that your mortgage wasn't for more than the value of the home. A professional appraiser will examine the property's characteristics and condition, the market for the area and comparable sales in the neighborhood to give you an idea of the value of your home.
A professional home appraisal is likely to be more accurate than the figure you would get from an online tool, but you will have to pay for the privilege of working with a professional.
How to Determine Rent
After you get an idea of your home's value, you can use the figure to determine how much to charge for rent each month. A common rule to follow when calculating a monthly rental price is the 1% rule. Following the 1% rule, you charge 1% of the value of the property's value as rent. If your home is worth $220,000, an appropriate monthly rent might be $2,200.
The 1% rule isn't set in stone, as there are often other factors that influence what you should charge for rent. For example, your local market plays a significant role when it comes to influencing rental price. If your home is in an area with a lot of demand for rental properties, you might be able to find to charge more than 1% and still find a qualified tenant. If demand for rentals is low, or if you're trying to rent out your home during a slower time of year, you might be better off charging less for rent.
It's also important to consider affordability and how your home's value can affect it. The lower your home's value, the closer to 1% you can charge for rent without making the property out of reach for the average renter. For example, if your house is worth $100,000, a monthly rent of $1,000 isn't beyond the grasp of many renters. But if your home is worth $400,000, a rent of $4,000 is likely not affordable for most people.
Another factor worth considering is the amount of your mortgage payment. Ideally, the rent you collect monthly will be enough to cover the cost of your mortgage payment. Along with using your mortgage payment as a guide, it's useful to consider the cost of other home-related expenses when setting a rental price. For example, if you are including utilities in the monthly rent, it's important to estimate their cost and add that to the rental amount.
How Much Should I Rent My House For? Other Things to Consider When Determining Rent
Home value aside, there are a few other things to consider when deciding how much to charge for rent. One consideration is the amount charged by similar properties in the area near your home. You don't want to charge hundreds more per month for rent than your competitors, as people will be more likely to rent out the less expensive properties. At the same time, you also don't want to undercharge for rent. If your home is priced much lower than comparable rentals, potential tenants might raise an eyebrow or two and wonder what's "wrong" with your property.
Another thing to think about is what your home has to offer compared to similar rentals in the area. Does the property have a swimming pool or a large backyard? If so, you might be able to charge more for rent than a house with the same number of bedrooms and bathrooms but without the outdoor amenities.
A few features and amenities that can give your home's rental value a boost include:
- Proximity to public transportation
- Garage or off-street parking included in rent
- Nearby desirable schools
- Central air conditioning
- Plenty of closet and storage space
- Permission to have pets
Learn More About Our Rent Collection Assistance
Figuring out what to charge for rent is just the first step towards success as a landlord. Once you've set a rental price and have people living in your property, the next steps are to make sure they pay their rent on time and to keep them as your tenants. Offering tenants as many ways to pay their rent as possible will help to ensure that they pay on-time and regularly.
For rental homes and apartments in Harrisburg, Hershey and Mechanicsburg, Harrisburg Property Management Group can help to streamline the rent collection process. We make it easy for tenants to pay, either online with a credit or debit card or bank account or in person at our office. We also make it easy for landlords to get the rent money owed to them. After we collect rent from tenants, we pay our landlords via check or direct deposit within a week.
Contact Harrisburg Property Management Group Today
Whether you're a first-time landlord or have been renting out property for a while now, it helps to have someone on your side to handle the day-to-day tasks of property management. Harrisburg Property Management Group provides comprehensive property management services in Central Pennsylvania. Whether you need help finding tenants, pricing your rental or collecting monthly rent, we're here for you. Contact us today to learn more about our services.