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The Big Question: How Much to Charge In Rent?

The Big Question: How Much to Charge In Rent?

You just bought a new house and apartment and want to rent it out for extra income. You are eager to get your hands wet in passive income and real estate. You must be wondering how much to charge in rent. 

If you charge too high, no one will answer your ad. If you charge too low, you will not profit. Continue reading to learn how much you should charge for rent.

Why Is It Critical To Charge a Reasonable Rent?

Before we examine what constitutes a reasonable rental fee, let us explain why it is important to charge the correct amount. Here are some reasons why it's vital to charge responsibly:

It Enables You To Find the Best Renters and Collect Rent on Time

According to a TransUnion study, 84 percent of landlords cite payment issues as their primary worry. This is unsurprising given that the cost of eviction for nonpayment may exceed $10,000 in court expenses and legal fees. Not to mention the time and money associated with filling an unexpected vacancy.

Consider the median household income in the neighborhood. Your rental pricing should be targeted towards tenants with comparable salaries. That way, you can fill your space fast and without worrying about being paid on time. 

It Assists You in Meeting Your Mortgage and Other Operating Expenses

Your property is an investment. If your rental revenue is insufficient to pay all your property's costs, you haven't established the appropriate rent price.

It Enables You To Optimize Your Rental Revenue

Setting the appropriate rental pricing may imply maximizing profits. According to The Balance, landlords may be able to pocket between 0% and 6% of monthly rental revenue.

How Much To Charge Rent

Establishing the appropriate rental rate is critical. However, determining what to charge renters may be a little more complicated. There are many variables to consider before settling on the optimal rental rate for your home.

Be Aware of Your Competition

Before establishing your rental cost, it's critical to research what other landlords in your neighborhood charge. The average varies significantly across states and cities. For instance, rental properties are likely to be more expensive in San Francisco and Los Angeles.

You should examine comparable properties in your local neighborhood. Determine the rental rates charged by other landlords and use it as a starting point. Depending on what you discover, alter the price of your rental.

The 2% Rule Is Only a Guideline

Some landlords are familiar with the 2% rule. This rule states that monthly rent should be about 1-2 percent of the property's worth. This is just a rough estimate of your prospective rent. 

It is not a replacement for researching similar units in the area and analyzing the rentals charged. Given that property values have increased more rapidly than rent rates in recent years, this kind of computation may be inaccurate.

Seasonality Is Important

Seasonality has a significant impact on rent costs. Demand for rental property peaks in the spring and summer and then plateaus during the winter months. This occurs because moving during the winter months is more difficult for tenants. 

Most people are opposed to moving during a blizzard or interfering with their children's school year. According to Apartment List, 25% of renters who begin their search in July will move within 30 days. While 22% of renters who begin in January would take more than 90 days to find a new home.

Rent Home or Apartment: How to Get an Accurate Rent Estimate

Whether you have rental apartments or desire to rent a home, accuracy is vital. You want trustworthy renters, so you can avoid a late charge for rent. Before establishing a rental fee, consider the following additional tips:

Investigate Rental Property Websites

Conduct a thorough search of sites such as Craigslist and Trulia to understand the area. Search for rental ad text ideas to help you create a successful ad that attracts high-quality candidates.

Take into account the amount of interest accrued on your property. If no one is applying for or showing interest in your rental, this may indicate that your rent is too expensive.

Consider The Amenities

It is critical to consider what the property has to offer. For instance, if you come across a comparable property that is equivalent in size to yours but lacks a critical feature or amenity, such as an in-unit washing and dryer, you may be able to justify a higher price.

The following are some of the top features renters want in a rental property:


Parking is a major perk for many tenants. Make a point of mentioning features such as allocated parking, a large garage, or enough street parking.


Security makes renters feel more secure about their general safety. Make a point of mentioning any smart house technology or additional security systems/personnel that your rental may provide.


There is a reason why the phrase "location, location, location" is so prevalent in the real estate industry. The proximity of your property to local shops and services may be a significant difference. Possessing a good location may enhance your unit's appeal to tenants, thus increasing its value and giving you the ability to price it more than comparable apartments. 

If it is near attractive schools, restaurants, grocery shops, retail outlets, or public transit, these are likely to be strong selling factors and justify higher rental prices.

Outdoor Space

Here are some attractive outdoor amenities to mention:

  • Indoor or outdoor pool
  • Patio 
  • Balcony
  • Tennis court
  • Dog park

These are all excellent elements that may help attract potential tenants.

Demand and Supply Calculate the Rent Amount

Supply and demand dictate the rent that your home will generate. It's the same as selling any other service or product in a free market economy. There is a price point at which people are willing and able to pay, which is the rent you may charge.

Calculating the maximum rent, you may charge starts with an examination of your market competitors. By comparing your property's characteristics and facilities to those of the competitors, you can determine the rent you may fairly anticipate.

Positive Cash Flow Is Critical for Rental Properties

Whatever approach you choose, you'll want to run the statistics before diving in. It's as easy as determining the rental revenue you may anticipate and the expenses associated with generating that money.

When rental revenue surpasses expenditures, a property is said to be "cash-flow positive." Here is an illustration: If your monthly rent is $1,800 and your monthly expenses are $1,500, your property has a $300 positive cash flow.

When calculating the expenses of your rental property, you'll want to include the following:

  • Mortgage
  • Insurance
  • Taxation of real estate
  • HOA or condo association dues

The tenant is not responsible for utilities or upkeep. It will cost two times the monthly rent to replace a tenant who departs.

Fees for Licensing and Inspection

Additional line item charges may apply depending on the location of the property. For example, Baltimore assesses ground rent on a large number of buildings. The critical point is to ensure that you incorporate all potential expenses in your estimates.

Along with these upfront expenses, you'll need a cash buffer. This is what people refer to as their "It's Gonna Break" money. For example, the water heater is just five years old, it may still fail, and you will need to repair it promptly.

How Much Rent Is Sufficient?

Therefore, how much rental revenue is required to make a home a sound investment? To begin, a "good" rental property generates cash flow. You want a positive cash flow of between $300 and $500 per month on each property.

What Factors Affect the Price?

The house or apartment alone does not make the price jump or dip, it's the other factors. Usually, renters will go on google and type "homes for rent near me," and they already have a set price in mind. If you want to stay ten step ahead of them, here are some factors to consider:


It goes without saying that a multi-level penthouse with almost 2,000 square feet will not be priced similarly to a modest ground-floor apartment. Bear this in mind when you experiment with numbers.

Lease Term

In order to negotiate a cheaper monthly rent, tenants sign a rental agreement for the maximum period they can afford. This implies that it is acceptable to modify your rental price in response to a customized offer made by a potential renter. Greedy landlords are penalized by greater vacancy rates for their own lack of judgment. 


If you are a pet-friendly landlord, you have two choices when it comes to renters with four-legged companions. To begin, you may charge the same rent with and without pets while requiring pet owners to pay a separate pet deposit. Second, you may charge a higher monthly rent with dogs while maintaining the normal security deposit.

Where To Learn More About Rentals?

Now that you know how much to charge rent, you must have more questions to ask. Renting out a property can be challenging. However, once you do it successfully, it can lead to a very lucrative, passive income.

If you are still eager to learn more, we can help you. Contact us today for more information about rentals and property management.

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