“How much will I charge my home for rent?” is every beginner’s real estate investor question. And charging a high rental price may not be the right way to accurately charge your property. For one, there are several factors to consider in the rent calculation and we’re going to discuss important factors so that new investors can be more informed on how much rent to charge your property.
What is the Average Rent in Houston?
Before we go to the process of calculating the rental rate of your Houston property, let’s first go over the current average rent in Houston.
HAR: January 2022 Lease Property Update in Houston
1. Single-family home rentals rose 7.8% with the average rent up 9.7% to $2,070.
2. Townhome/condominium leases increased 2.% with the average rent up 11.9% to $1,801.
Apartment List: Average Rent in Houston
1. Studio apartment- $1,354.
2. 1-bedroom apartment – $1,368
3. 2-bedroom apartment – $1,918
4. 3-bedroom apartment – $2,393
Apartment List: Average 1 BD Rent in Houston Neighborhoods
1. The Museum District $2,096
2. Washington Avenue – Memorial Park $2,026
3. Downtown Houston $2,004
4. University Place $1,961
5. Neartown – Montrose $1,918
6. Afton Oaks – River Oaks $1,900
7. Midtown $1,761
8. Greater Heights $1,731
9. Memorial $1,696
10. Great Uptown $1,675
What You Need to Know Before Deciding How Much Rent to Charge
The overall cost of living in Houston remains nearly 5% under the national average and 14.7% lower than the national average when it comes to housing costs. This makes living in Houston remain affordable despite the increased demand even during the pandemic. As an investor, who is looking for an investment property in Houston or still looking for that perfect place to get a good return of investment, you know that the three most important factors when buying real estate anywhere are location, location, and location.
A good location is desirable and can naturally create or maintain a high demand for rental properties. But still, it all boils down to the type of property you’re looking for and your financial goal in your investment. For that reason, simply asking around – “How much can I rent my home for? – is not enough.
Turning your home into an investment property or even buying an investment property can be financially risky, but deciding to rent out your home could serve as a passive income or even provide financing to pay off your mortgage. While you may have heard that landlords have many tax breaks, there are still other expenses related to owning a rental property such as maintenance costs, homeowners insurance, property taxes, and additional costs when a tenant suddenly moves out.
How to Calculate Rental Rate
- Calculate your Property Worth or Home Value
Your overall property value can be used as a base rent value. This means that the amount of rent you charge your tenants should be a percentage of your home’s market value, which is typically between 0.8% and 1.1% of the value of the home. For example, if your home is valued at $300,000, a landlord can charge between $2,400 and $3,300 a month. If you want to know the current value of your home, find out for free here.
- Compare Local Rent
What landlords are charging for similar rentals in your area or comparing rents between similar properties in your area is another way to decide how much to charge for your rental property. The key here to get an accurate estimate is to only compare similar properties and to do so is to look into the following characteristics in a property – number of bedroomsm number of bathrooms, lot size, year built, amenities, and if there are recent updates to name a few. You can check with your local real estate agent to help you find the right balance between the rental rate that you want and your competitors’ offerings.
- Check the Demand
Demand greatly affects the price of a property. When the economy is bad, rental goes up which means only a few number of people can afford to rent bigger homes or apartments, but smaller and cheaper ones will more likely get rented out faster. So if you have done some research on comparable properties, you can reach out to your local real estate agents to ask about local market, the demand of your property and the current type of properties that are highly in demand.
- Determine Your Financial Needs
Another factor that can influence of your rental fee is your expenses as the property owner and as a landlord. If you’re out your home, you may factor in the following when you’re deciding how much to charge – monthly mortage payments, HOA fees, property management costs, insurance, taxes, an estimate of repair costs as well as maintenance, and don’t forget your profit. If you’ve factored in the your property value, demand, local rent, including your monthly expenses and you left with a negative number, you will want to consider increasing your rent to ensure that you have a profit every month while meeting your financial obligations.
- Be familair with Available rental calculator tools
Perhaps, this is the easiest and fastest way to determine the average rent that you could your property. While online rental calculators can give you an estimate on the average rental rates in specific areas, choose the right calculator that take into account the factors we have mentioned above, particularly your expenses. It is important particularly beginner investors to understand how to accurately calculate the rent of your property, but it’s also important to know the factors that influence the rental price of your property. Knowing these factor will allow you to make the best decisions in setitng legal, accurate and fair rental estimate.
- Hire an Expert
Tapping into the the expertise of a real estate professional or a property management company is considered a tried-and-true old-fashioned method. Hiring a local and reputable agent or broker, who has an extensive experience in rentals, is a great option because for one, they know and can provide you with the actual data about the rental market in your area, they are familiar with rental laws, and most importantly, they can do most of the work for you. However, in the case of hiring a property manager, you will be charge for a service fee, which is about 10% to 12% of the rental price.
Now that you have the basic knowledge and tools to get started in your rental property investment, you can now accurately answer the question we have raised at the beginning of this article – “How much will I charge my home for rent?.
Whichever way or combination of the methods mentioned above in setting your rent, we hope that you now have a basic understanding of the importance of accurately setting rent and why doing so can help you decide your profit, determine your tenant quality, prepare for vacancy periods, and overall see your rental investment thrive.
Start your investment property search with Apogee Properties and we’ll assist you in determining the fair market rental rate of your property. Start here…
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Apogee Properties is Houston’s Premier Property Management Company. We work and live in Houston and our property managers are local. We’ve been in business for more than a decade providing comprehensive property management services in the Houston region ranging from a studio condo to a multi-family million dollar estate. Contact us to learn more about our property management services, and what we can do for you and your rental property.
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