How much rent can you get for your investment? Keen to know how much monthly profit you can obtain from your rental unit?
There is no hiding the fact that a rental property offers an investor numerous benefits. From a recurring monthly income to diversification of your portfolio, rental properties are a sure-fire way of building wealth over time. The key question many often ask where rental properties are concerned is how much rent can you get for your investment?
1. Rent price guidelines
First and foremost, you can’t charge whatever you feel like charging. That’s not how it works. The rent you charge is determined by your property’s market value. The rent is a percentage of this home value. The stipulated range for rent is that it should be somewhere between 0.8 and 2% of your investment’s value. Thus, if your rental property is worth $250,000 then you’re well within your rights to charge an amount between $2,000 and $5,000 per month.
2. Home aspects that influence rent
If your property has extra features or you’ve made significant modifications that improve the standard of living in the house, then these may be reflected in the monthly rent you charge. In addition, apartments or homes that boast garden views or have their own backyards will more often than not command a little more than those that do not. If your apartment is also on a higher floor then it will be extremely desirable – this is of course if there is an elevator in the building!
3. What your rent should reflect
When you’re trying to decide which percentage you should settle for between the recommended 0.8 to 2%, the figure you opt for should cover the following:
- The monthly mortgage repayment amount you agreed to with the bank
- Regular maintenance and occasional repairs to be made on the property
- Monthly utilities and property insurance
- Potential eviction costs and security deposit
- Monthly property taxes
After you’ve factored all these things in, the remaining amount is the profit you can expect to make every month from your investment.
4. Other things about rent to know
Another good way to establish what a fair amount to charge will be is to see what other investors and or landlords have set in terms of rent for properties in the same neighborhood and area as your own. This will give you a good ball park figure to work with. In addition, you should look at homes or apartments that are similar to yours and have the same number of bedrooms and bathrooms.
5. Familiarize yourself with the rent laws
If this is your first investment you might want to get yourself acquainted with the respective rent laws in your state. This includes the Landlord Tenant Laws too. By joining the American Apartment Owner’s Association, you’ll get access to help on lease agreements, tenant screenings and other valuable information that might not be readily available elsewhere. You can also find information according to the state that you live in. This makes it very easy for you to make informed decisions.
Do the Math first before buying your property
One of the fundamentals to making good money from your rental property is to do your Math at the beginning before you purchase the property. This includes determining the potential rent and figuring how much the monthly profit you can make is. Any investor knows that the real money is made when you purchase the property. So, do your due diligence thoroughly.
Are you looking to rent out your property? Talk to one of our PMI Colorado friendly staff members for more information on how we can facilitate the process and make it easier.