How Much Can I Rent My House For?

Whether you have purchased an investment property or are considering renting out your own home, the big question that is probably on your mind is how much you can charge for rent. After all, becoming a landlord usually only makes sense if it benefits you financially. At a minimum, you should be charging enough rent to break even on your mortgage, homeowner’s insurance, property taxes, and other expenses.

So how do you figure out a good price for your rental? Deciding a fair market value for your rental can be challenging, particularly in the current shaky economy. There are a number of different ways to calculate a rental price. A skilled property management company can also work with you to help you set rent for your home or rental property.

Based in Lithia, Eaton Realty specializes in real estate throughout Hillsborough County. We offer a range of services to clients in the region, from real estate sales to property management for investment properties. Reach out today to learn more about how we can help you achieve your real estate dreams.

Want to learn even more about competitively pricing your rental? Contact us to speak with an experienced Hillsborough County property manager.

Ways To Calculate A Fair Rent Price

It can be hard to come up with the perfect price for your rental. After all, you want it to be high enough to cover your costs and earn a bit of profit - but not so high as to scare off prospective tenants and leave your unit sitting empty. Fortunately there are a few ways that you can calculate a fair price for your rental.

Before you set a price for rent, you should consider what your goals are with the property. Do you want extra monthly income from your rental property? Or are you more interested in asset appreciation, where the rent is mostly to cover basic property expenses?

Neither goal is better than the other, but it is worth spending some time thinking about your short and long-term plans for the property. Once you have a better understanding of what you hope to achieve, you can work with a real estate professional to set a fair rent price.

Calculating Rent Based On Your Home’s Value

For some landlords, the easiest way to set a rental price is by calculating it based on the value of the home. To do this, you will first need to determine the current value of your home. Using that figure, you can determine the rent price as 0.8% to 1.1% of the home’s value.

For example, if your home is valued at $440,300 - the median sale price for a house in the second quarter of 2022 - then you could set your rent price between $3,522 and $4,843 per month. The percentage that you use should be based on your home’s value relative to the current median home value in the U.S. If it is close to or more than the median price, you should use .8%. If it is lower than the median, consider going up to 1.1%.

Of course, there are a lot of different factors that can influence the value of a home (and the median sale price). If the Fed continues its interest rate hikes, then home prices will likely go down as it gets more expensive to borrow money. In the current economy, tying your rent price to the value of your home might not make a lot of sense.

Calculating Rent Based On Comps

Another method of setting a rental price is by using comps. Just like when you are making an offer on a house, you can use comparable rental prices from the neighborhood to set your rent.

To do this, start by finding rental homes that are comparable to yours based on size/square footage, features, number of bedrooms and bathrooms, location, and age. Make a list of these homes, and the rent for each unit. The easiest way to find comparable rentals is typically by searching for online listings so that you can set the filters appropriately.

Once you have found a few rentals that are similar to yours, you can set your own price based on what those landlords are charging. You may need to adjust the rent based on the ways that your property is different - such as recent renovations. This method has the advantage of ensuring that your rental price is in line with the market for your area.

Calculating Rent Based On Your Financial Needs

For landlords who are more concerned with long-term appreciation of an asset, it may be possible to set the rent for a property based on what you need to cover your expenses. The rent price may end up being less than what you could charge based on comps or your home’s value, but it can be a way to get a high-quality tenant who will stay in the property for a long time.

This method is straightforward: add up your current expenses for owning the home, including any mortgage payment, taxes, insurance, and maintenance costs. Set your rental price based on what you will need to cover these expenses. While you may just break even or potentially lose a bit of money some months based on maintenance needs, you will ultimately come out ahead because the house should appreciate in value over time.

Calculating Rent With A Real Estate Professional Or Property Management Company

The easiest - and perhaps best - way to set a price for your rental is to work with an expert. While there are benefits to each of the methods described above, they may not lead to the optimal number for rent because you probably don’t have access to the same data that a real estate professional does.

A real estate agent or property management company will have access to databases like the Multiple Listing Service (MLS). Combined with their own experience, they can use this information to come up with a rental price that truly reflects the realities of the market in your area. They will typically use a combination of all of the methods listed above to come up with a number that covers your expenses and takes your home’s value and comps into account.

Expenses To Factor Into Your Rent Price

At a minimum, your rent price should cover your monthly costs. While there may be months where the rent doesn’t meet this threshold - usually when you have a major maintenance cost - the amount it costs to own the property is a good baseline for a rental price.

Here are the expenses that you should take into account when calculating a rent price:

Down payment, monthly mortgage payment, closing costs, and the interest rate on your loan

Property taxes

Fees for rental licenses or other necessary permits

Homeowners’ insurance

Maintenance, which is typically budgeted at 10 to 15% of the annual property rent

Association fees

Utilities that may be included with rent (or that must be guaranteed by a landlord)

Landscaping and/or pest control

Tenant search costs, such as background check fees, marketing, and property management services

Vacancy allowance

Depending on your situation, you may have other expenses - such as pool maintenance - that may be included. You may also budget for professional services, such as an attorney to handle evictions or other legal matters.

How Accurate Are Zillow Rent Zestimates & Redfin Rent Estimates?

There are a number of popular websites where anyone can look up an estimated value of a house or an estimated rent. Two of the most popular are Zillow and Redfin. Both of these websites are easy to use, but do they provide accurate estimates?

As a general rule, neither site is particularly accurate when it comes to estimating home or rental value. Both tools have a wide margin of error, particularly when it comes to off-market properties. You may have experienced this yourself if you checked your home’s “Zestimate” over the past year or two. In fact, Zillow tried to use their Zestimate tool to flip homes and ultimately shuttered the division after taking a $421 million loss due to the inaccuracy of their estimates.

The best way to get an accurate, up to date estimate for rental prices is by talking to a real estate professional. Unlike Zillow and Redfin - which use an algorithm based on publicly available data - a licensed realtor will take a more thorough approach. This typically includes evaluating your home, valuing its upgrades and renovations, and comparing it to other properties in the area.

What Is The Average Rent In Florida?

The average rent in Florida ranges from $1,289 per month for a studio to $2,407 for a four bedroom property. Rental prices can vary wildly by location, with larger cities and areas that are closer to the beach demanding a premium. Because this is a statewide average, it takes into account rents from every part of the state - including places that typically have lower rent prices.

What Is The Average Rent In Tampa?

In Tampa, rents may range from $1,831 for a studio apartment to $2,912 for a three bedroom unit. These prices may go up or down based on neighborhoods, how updated the property is, and the features of the property.

When Should I Raise Or Lower My Rent Prices?

There are a number of reasons why you might consider increasing or lowering your rent. The primary reason that most property owners decide to increase their rent is because their own costs have increased. Additionally, some landlords will raise rent because the market has changed and can support a higher rent.

Conversely, there may be times when it makes sense to lower your rent prices. One of the top reasons to do so is when your rental unit has been sitting vacant, which may be a sign that you are asking too much for the property. At a certain point, it will make more sense to cut the rent than to continue carrying the costs for an empty property.

If you currently have tenants, then you may not be able to change the rent pursuant to the existing rental agreement. Many leases provide that rent can only be increased upon expiration of the current lease term. Before making a decision to raise the rent, review the lease and consult with an attorney to make sure that any proposed change in rent complies with local laws.

Other Things To Consider Before Renting Out Your Home

Renting out your home can be a smart financial decision, but it isn’t without its drawbacks. You can make a tidy profit and build up a portfolio of properties - but you may also lose money. Before making the decision to rent out your house, consider:

Demand for rentals in your market: if there is a glut of properties available for rent, then it may not make sense to rent out your home.

Whether your house is rentable: if your property does not appeal to prospective renters - or needs a substantial amount of work before you can rent it out - then it may not be a good choice for you.

The costs: the rent check that comes in every month isn’t pure profit. It has to cover your costs, including a mortgage, taxes, and more. Think about whether you can afford to pay for these expenses if the property sits empty.

The time: having a rental property can require a lot of work. It may mean late-night phone calls from tenants, time spent showing the unit, and more. If you don’t want to spend your time taking care of these tasks, consider hiring a property management service.

Finding tenants: putting a house on the market for rent is easy enough - finding a high quality tenant is a different matter. Finding a great tenant can be challenging. Unless you hire a property management company, you will need to devote time and money to screening tenants.

Legal aspects: it is important to understand state and local law before renting out your house. This includes having a well-written lease that complies with Florida law and protects your interests.

If you’re thinking about purchasing an investment property or renting out your home, you should talk to a real estate professional before making any decisions. They can give you a more realistic picture of what it means to be a landlord - and guide you through the process.

Considering Renting Out Your Home? Speak With Our Real Estate & Property Management Team

Setting a rental price can be difficult, particularly if you don’t have access to current, in-depth data about the local market. There are several different methods that you can do to calculate a price based on your goals and risk tolerance. A skilled property management professional can help you set a fair rental price that meets your needs.

Eaton Realty works with property owners in the greater Tampa Bay region, guiding them through every step of the process from initial purchase through setting a rent price through property management. If you are interested in becoming a landlord, we will partner with you to help your endeavor succeed. To learn more, fill out an online contact form or give us a call at 813-672-8022 to talk to a team member.