How Much Should I Charge for Rent?
How quickly your investment property rents, how long it rents for and the quality of the tenant you rent to will all revolve around one general data point - the cost of the monthly rent. You could have the most attractive property in the neighborhood, but if your asking rent is considerably higher than the going rate, you may have trouble finding a tenant.
At the same time, if your asking rent is too little, you could be leaving valuable income dollars on the table that you’ll never be able to recoup. Figuring out how much you should charge in rent for your property, and what factors go into making that determination, is an exercise in research that involves many parts.
Is Rent Calculated by Square Foot?
In many of the major metropolitan regions of the country, rental rates are calculated in large part on a price-per-square-foot basis. This equation is an easy way to level the playing field for a location or, more specifically, a neighborhood.
This measurement is popular in places such as New York City, where the value of a particular rental or piece of property can often be gleaned just from its size and location. Each neighborhood will have the generally accepted price-per-square-foot number to start at, with adjustments being made up or down based on the remaining factors of the property, such as:
- Number of bedrooms and bathrooms
- The view from the property
- Surrounding amenities such as restaurants and public transportation
- Walkability of the neighborhood
- Amenities of the building, if it’s a multi-tenant building such as high-rise apartments
In suburban or rural areas, price-per-square-foot is an easy measurement to calculate, but isn’t something that will generally be used to determine a property’s rent. Instead, this the square footage will be a base from which rents can build off of, based upon features of the home, neighborhood and the local rental market itself.
How Much Should I Charge for Rent, Using Calculators?
There are many online rent calculators that help you determine how much you could charge for rent. One of the best around is Zillow’s rent estimate tool. You simply go to Zillow’s website and type in the address of your property. When you do so, you’ll be given a listing of other homes for rent that are in the vicinity of your property.
This allows you to determine what you might want to charge for your home based on what properties nearby are charging. It will also allow you to fine tune your rental pricing up or down based on what other rentals with similar home specs are charging. This Rent Zestimate, as Zillow calls it, is a nice starting point for determining what you could charge for rent.
What Do Realtors Charge to List a House for Rent?
When a home is sold, a standard 6 percent fee gets charged to the seller that is split between the listing real estate agent and the purchasing real estate agent. When a Realtor lists a house for rent, though, there isn’t a standard figure that is acceptable across the industry.
The National Association of Realtors polled a few Realtors in a blog on their site, and their answers were generally the same. Some agents said if all they are doing is listing a house for rent, they would typically charge either 10 percent of the monthly lease price or the value of one month’s rent.
Some Realtors are asked to be property managers as well. In these cases, the fee is closer to that 10 percent mark, or even higher.
How Much to Charge for Security Deposit?
A security deposit is a means by which property owners can protect themselves from any damage a tenant may cause to a property or for any non-payment of rent under the contractual agreement. But how much you should, and are allowed, to charge as a security deposit will vary depending on both the monthly rent of your property and the state you are in.
Half of the states don’t have any regulations when it comes to security deposits, but half of them do. Some states limit the security deposit amount to two weeks’ rent, while others say two months’ rent is the most you can charge. It is very important that you first figure out whether your state has restrictions on security deposits before setting a limit.
Once you have that information in place, keep in mind that while you want to protect yourself with a security deposit, this is also a factor in how popular your property will be on the market. A high security deposit may deter tenants from considering your property, and a lower security deposit may attract more to it. It wouldn’t be unreasonable, though, to charge the equivalent of one months’ rent as a security deposit, as long as your state allows it.
What is a Typical Charge for Pet Rent?
Another decision you need to make as a property owner is whether you will allow pets at your property. If you decide to allow them, you might consider charging a deposit or monthly fee for allowing pets. Typically, the pet deposit would be refundable, while the monthly fee would not be.
Once again, though, state rental laws will determine whether you are even allowed to charge pet rents and, if so, how much you are allowed to charge. New Jersey, for example, does not have any specific statutes that ban pet deposits, however, they can’t exceed one-and-a-half months’ rent.
Landlordology is a great site for checking all the rules and regulations regarding property rental. You can go to their site and search all pertinent laws on a state-by-state basis.
How Much Can You Charge for Rent Late Fee?
Once again, state laws will dictate whether property owners can charge a fee for a late payment and how much of a fee they can charge if the practice is permitted. Generally speaking, if your state allows you to charge a rent late fee, it has to be outlined in the lease agreement. You won’t be able to charge a late fee after the fact if the lease your tenant signed didn’t explicitly state this.
A typical late fee would be a percentage of the monthly rent (say 5-10 percent) or could even be a flat fee such as $50. Some states either allow late fees across the board and say they must be “reasonable” in nature. Others, though, are much more strict.
Oregon, for example, only allows late fees if they are laid out in the lease and if the tenant is more than five days late on the payment. Even in that case, rent late fees are capped based on the number of days late and a percentage of the rent.
So, What Should You Charge for Rent?
How much you can charge for rent, and what other fees you can include in your lease agreement, is heavily dependent on your location. To determine the fair market rent value of your property, use every online tool at your disposal, including HomeUnion®’s RENTestimate website, which helps you determine the price valuation, rent valuation and expense estimate of your property based on its address.
If you decide to go it on your own, you will need to do this research yourself to ensure you are listing your property at a competitive rate that will land you a good tenant quickly. You can also go the route of hiring a Realtor to help you list, and even manage, your property, but you will pay a fee for doing so.
Another route you can take is to invest directly with HomeUnion®. By doing so, you can invest in the real estate market remotely without having to worry about handling the day-to-day operations of managing a property. Partnering with HomeUnion® also allows you to invest in real estate in hot markets throughout the country with ease, instead of just your local market, giving you the best opportunity to make real estate investing profitable for you.