Observations…5 validations for charging rent
Real estate agents always say location, location, location. These are the 3 main ideas about the value of the house. How about renting a house? What validations go in to making an acceptable amount of rent each month? What would be a good price? Let’s dive into this area and give you my idea on how I arrive at a price.
- Yes bathrooms. How many bathrooms are there? This will be the difference of at least 200 dollars per month. Houses with more than one bathroom move a lot faster than homes with one. Years of renting out homes have told me this. In certain circumstances, such as a two-bedroom 1 bath can rent quickly too. Depending on how many people are renting. The slowest mover is the 3 bed 1 bath. And of course, you must adjust for this when pricing your rental.
- Yes, size does matter, and of course it all depends. But this will be a direct impact on how much you can charge. In our area we can count about a dollar a foot. So, if we have a 1500 square foot home then you could get about 1500 a month. Of course, other factors will be factored in, but it is a good starting point. I have a home in Southern California, San Diego, and I get 1.50 a foot.
- Yes, this important, but not as much as you think. It is more of what the home has to offer than the actual location. Renters are not buying; they are needing a home for whatever situation they find themselves. This is only a small part of the overall decision. Usually nicer areas come with nicer schools. So, lets move on to number 4.
- There is nothing more important behind the house then schools. We have a school district in our area that is the best. When I take management of a house in this area, no matter what it looks like, I automatically add 200 to the price of rent. Two reasons for this. One, owners pay more in property tax and therefore need to charge more, and renters love good schools like everyone else. This Item is very important when looking for your next investment property. Never compromise on schools. House, area, and bathrooms yes. Try not to comprise on schools.
- Finally, what amenities does the house provide that may increase its value as a rental. Granite counter tops? New kitchen? A den in addition to bedrooms? Family rooms in addition to living rooms. Fully fenced yard? Carpets vs hardwoods. Garage vs street parking. One question in my area I get from people out of town is air conditioning. Does it have air conditioning? For us in our area this is not an issue. We have a couple of weeks of nice weather that may or may not need a fan. But this would not stop someone from renting. So many houses without air that is really is no problem. Hot tubs are more of a problem then an amenity. Yard service is a good one to have, but most owners do not want to pay for it and adding it to the rent is not an option. Owners that have never lived in their rental usually have no emotion in the place and will have the tenant take care of the yard. Owners that have lived there tend to hire outside yard service or do partial service.
So, lets go over the above and see what we can come up with. There are companies that will give you and estimate on what your house will rent for, but they have never seen inside, and they go off basic items, such as bedrooms, size, and come up with a basic idea. A great place to start. Let’s get back to my example. I have a 1100 Square foot home with 3 bedrooms and 1 bath. New carpet, 1 car garage parking. Schools are ok and it is a working-class neighborhood. It is close to the freeways and does not allow pets. The kitchen and bath are new and the yard is fenced. So how much do you think I could rent this for? If you said 1700 you would be right. What the heck you say? Sometimes formulas only work for basic outcomes. There are some other things that come in to play. Occupancy rate. I am 100 percent occupied right now. This house above will not come available until next month. When lack of inventory raises the rate, you benefit. Also, when you have a liberal political outlook in the area, you can charge more rent. Reason for this is taxes are higher because of all the free programs they spend on. Minimum wages are higher and therefore, rents are higher. This is not a political commentary. It is just the facts.
If this particular house was located in the great school area or near the bases, it would go for 1900. Everyone has their way of calculating. One you should not use is the, “I charged 1000 last year, so I should charge 1050 this year.” It can be a guide but not all inclusive.
I hope this has been helpful, or at least make you think about things you may not have thought about. The over all tell about a rent is, how long does it stay on the market? How many showings have I had? And of course you can check out your competition and see what price they set for their homes.