What to charge for monthly rent can be quite a challenge for those transferees that have never been a landlord. When the property rents out too quickly it often indicates you are not charging enough for rent . Setting it too high and the home will sit vacant. So, how does your transferee go about setting a rental rate that is in line with the current market?
If your transferee is considering hiring a property management company to handle all operations and maintenance of the property, they can provide him/her with fair market value rents in the area which will illustrate the correct rental rate to charge. Some individuals prefer to do the research themselves first, regardless of the eventual outcome.
A great place to start is the Department of Housing and Urban Development or HUD. Their website www.hud.gov contains information on Fair Market Rents for the 40th and 50th percentiles. What does this mean? Well, it is basically the rental dollar amount that 40% (or 50%) of the rents are below. Most areas will use the 40% mark, while larger metropolitan areas will fall into the 50% arena. There are other websites that allow you to type in a city or county and receive basic rental rates for that region. This, of course, is very generic information, but it will give you a broad idea of where rents in your area stand. Websites such as rentometer.com, rent.com, craigslist and rentals.com are quality resources for researching local rental rates. Be sure to compare “apples to apples” when it comes to your property’s location, square footage, bedrooms and bathrooms.
Select a few homes that closely resemble your property from the best websites, and contact the owner or management company directly. Below are a few things to ask to make sure the home’s rental rate isn’t priced too high for the location.
- Begin by asking if the property is still available. Obviously if it isn’t, then there is a good chance that the rent was set at a fair market rate.
- If it has already been leased, find out how long it was available. If it was only available for a very short time the owner may be under estimating the rental rate. However, if the property was on the market for 6 months, then the price may be too high.
- If the property is still available, try to get more information on the home’s amenities. This will let you know how closely it resembles your property and whether it is comparable.
- Ask the same questions regarding the length of time the home has been on the market. Once again the same rules would apply.
To stay continually updated on rental rates in your local area join a local association for landlords. It is a great way to make sure that you keep your finger on the pulse of the local rental market. Emerging trends in the area will not only affect you but other landlords as well and chances are you will hear about these trends prior to them affecting the rental market.
After you have completed your research, you will be able to set the fair market rent value of your property with confidence.