Basically - I’ve read & seen that if you’re managing your own property - the best way to determine market rent [especially if you’re NEW to a neighborhood] is to just pickup the phone & start calling other landlords on the same street, or in the intermediate area - where you see FOR RENT signs? Does that sound right to you guys? Thanks!
Yes that is correct. Look in the paper as well. You can get a good base at http://www.huduser.org/datasets/fmr.html.
I would think the best rent is between 0.8-1% of the cost of the house.
Benjie
I would think the best rent is between 0.8-1% of the cost of the house.
Benjie,
A rental that only generates 1% of the cost of the house per month will ALMOST ALWAYS LOSE MONEY!
Mike
Mike,
You are correct, I was think of the 2 combined. :banghead
I’ve read this same figure as well… just a quick question though… is it .8-1% of your cost or market value? I would think FMV would be better representative, right?
The old addage was .8 - 1% of the purchase price.
What you paid is irrelevant to the market rent, they should not be tied to each other. Just because some fool overpaid for his property it doesn’t mean he can charge more for rent and you should charge less. Rental prices and prices of properties tend to change at different rates and never keep pace with one another. Market rent is just that, what the market will bear in the area. Find out what others are charging in the area, you can even ask when you call a generic question to probe them for info.
Try this:
You- “Hi, I’m calling about the 2 bedroom apartment in the paper”
LL- “Yes, what would you like to know?”
You- “What is the rent?”
LL- “$650”
You- “Ok, that sounds fair. What do you charge for a security deposit?”
LL- “We usually charge 1 month’s rent plus $100 extra if you have pets.”
You- “Ok. I’ll have to check with my girlfriend to see what she thinks before I come out to see it. It might be a few weeks before I can get a depsit together and get ready to start thinking about moving. How fast do your apartments normally get filled?”
You just found out how much he’s charging and most importantly how fast the apartments get filled. If he’s charging too much you will find that he doesn’t fill his apartments very fast. If he’s getting them filled really fast he’s probably at or below market rent. Kind of a market barometer to figure out where he is in the spectrum. Call around for anything that sounds comparable to what you’re renting and use these little tricks to get your info. Finding out things like the extra fees for pets helps also to be in line with what others do in your area, you don’t want to be the only one charging a pet deposit or something like that as you might find your apartments harder to fill. Ask anything that you think might help you figure out how you will charge for things and how you will price your unit.
Ps- Old adages suck.
that’s cunning. i will write that down.
Rich,
I think you misunderstood what Benjie was saying. I think Benjie was saying that after you have determined the market rent, that this monthly rent should be .8-1% of the cost of the property (if you want to make money). While Benjei is correct that this is the rule a lot of people banter around, that “rule” just doesn’t work. I have not seen a single property that has market rents of only 1% of cost of the property that will generate a positive cash flow. The math just doesn’t work.
Mike