How to Сalculate Rent Estimates in 5 Steps

Introduction

Whether you are the tenant or landlord, the rent estimate is a figure that is important to both parties in the rental market. As a landlord, it’s what you use to set your asking price, and if you’re not careful, it can be the difference between an overpriced listing or a title that stays on the market for years and eventually gets rented at a discounted rate. To help you get it right, this article breaks down five steps for calculating rent estimates. Read on to check them out.

Rent Estimate: Why Finding the Right Asking Rent Matters

If you’re a landlord, the right rent is important because it has implications for your cash flow and investment value. Here’s why:

• If your rent is higher, you risk losing tenants if they can’t afford it.
• If your rent is too low, you may not be able to cover costs like mortgage payments and maintenance expenses on top of the cost of having another person living on the property. This leads to lower returns on investment over time.
• Your rental property valuation could suffer because of an inaccurate rent estimate.

Determining an estimated rent for a property makes sense at many points in the process of letting or renting out a property. Here are the five steps to calculate rent estimates.

Get the Data you Need

The first step is to gather the data you need. The most important parts of that data are:

• Rents for similar properties in the same area as your property
• Rents for similar properties in different areas

You can use sources such as rental listing sites, which offer a rent estimator by address, to optimize rent prices, so you don’t miss out on profits, and your property won’t sit vacantly.

Calculate the Current Going Rent Rate

The current going rental rate is the average rent paid for comparable properties in the area. For example, if a one-bedroom apartment costs $1,500 per month and a two-bedroom apartment costs $2,000 per month, then your current going rent rate would be $1,750 (the average of those two numbers).

Research Amenities and Features

You’ve got an understanding of what you can expect to make in rent, but how much are you going to charge? To find out, you’ll want to research the features and amenities that come with your property. Amenities can include things like laundry facilities and parking lots—things that make it easier for people to live comfortably at your property, and features are things that enhance the experience of living at your property. It’s worth noting that features tend not only to influence rent prices but also help with marketing.

Assess your Competition

In this step, you need to look at the properties in your area and see what they are charging. It’s important to do this because your rent estimate will be based on how much other landlords are charging for similar properties nearby. Once you’ve done that, take note of the average price per square foot in your area and any special features each property has (like an indoor pool or a garden). This information will help you determine a reasonable rent estimate for the property like how they do it at the apartments for rent in Augusta.

Calculate a Rent Estimate for your Property

The amount of rent you charge your tenants should be a percentage of the market value of your home. Generally, the rent landlords charge is between 0.8% and 1.1% of the home’s value. For example, for a $250,000 home, a landlord might charge between $2,000 and $2,750 per month. However, if your home is worth $100,000 or less, it’s best to set a rent close to 1% of the value of your home. Finally, don’t forget to consider your overall goals for the investment property. It’s easy to get caught up in the excitement of leasing a new rental and thinking about the money you’re expecting from it, but don’t forget that there are other costs involved with property ownership.

What Makes a Good Rent Estimate?

A reasonable rent estimate is based on research and market conditions, not just your own opinion. Your first step should be to analyze rental prices in your area—and don’t just look at the posted rates in apartment complexes or homes for rent. Consider how much other landlords are charging for their rental titles. You can use this information to set a reasonable price for your house and keep it competitive with similar units nearby. Furthermore, when you decide on an appropriate price range, be sure to consider the quality of your property compared to other properties available in the area.

Conclusion

The key to calculating a rent estimate is doing the research. You need all the necessary information at your fingertips before you can calculate an accurate rent estimate. Make sure you know what your competitors are charging and what amenities or features they may have that you don’t. The more information you have, the better.

We hope you’ve gained valuable insight into how to set your asking rents. As a landlord, your business is bound to go through fluctuations and changes over time. As your experience increases, so will your ability to estimate your asking rent and make smart decisions that benefit both you and the tenants who live in your property.