I Want to Rent My House: How Much Should I Charge?
Renting your home can be a great way to cover your mortgage bill, build equity, and generate passive income. The challenge lies in setting a price that achieves these benefits without deterring tenants. Just because your expenses are a certain amount doesn’t mean this is the amount that you charge nor is it what the market allows.
1. There are 4 ways to generate rental income.
Speaking generally, a landlord will generate additional money in one or two of the 4 categories. 1- Cash Flow 2- Equity Pay Down 3 – Taxes benefits 4 – Appreciation. So, if you don’t have much cash flow, you might actually generate income somewhere else.
2. What are similar properties renting at?
One of the best ways to determine an appropriate rental price for your house is by looking at what other landlords are charging in your local area. Check Craigslist, your local newspaper, and online ads to see what similar properties are asking for in rent. Understand the ad is the asking price, not the leased price. Call RPM 907-268-4779 and we can provide you an average dollar per square foot over the phone. No sales pitch.
3. Rentals is a business – always run the numbers.
You’ll want to create a realistic budget with more items than just rent minus your mortgage payment. A common area that is forgotten is routine inspections for dryer, gutters, and HVAC cleaning, missing these items can quickly be an expensive item later. Collect some bids for the snow plowing and lawn care. Another item to consider is your insurance rates will probably change from being a homeowner to a landlord. When making this budget, be sure to call and collect realistic bids as prices have changed and hiring a true professional that is insured, bonded, and licensed might be more expensive, but as the old saying goes – “ You pay for what you get”.
4. What makes your property stand out?
Special features and recent upgrades can lower the number of vacant days. It is important to realize what perks will help you rent the property quicker. As a landlord, it is more important to rent it quicker than it is to wait too long for a high rental price. There is such a thing as diminishing returns for asking for too high of a rent amount.
5. When will you be listing your property for rent?
The housing market is constantly changing due to changes in the economy, supply and demand. During the summer, more people are looking for rental housing, creating a need. How you price your rent should depend on the time of year, charging more in the summer and less in the winter. The Anchorage Market use to be 1%-2% vacancy and it is now 5%-7% vacancy so the need is less compare to previous years.