Tips for Determining Your Property’s Monthly Rent Amount

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Determining the amount you want to charge for your Baltimore County rental property can be a delicate balancing act. Charge too much and you will surely experience high vacancy rates. Charge too little and your rental property business will suffer in the form of negative cash flow.

So, how do you go about deciding the perfect monthly rental amount?

Here are some tips that you or your rental property management company can follow that will establish a good rent amount that will make both you and your tenants happy.

 

How to Determine Rent Prices for Your Property

Take a Look at Your Property’s Value

One of the first places most landlords look when determining how much to lease their Parkville property for is the home’s value. The general rule states that a good and fair monthly rent falls within the 0.8 to 1.1% of the rental property’s home value.

Typically, the higher the value of your home, the lower the percentage you will be able to charge monthly for rent. For instance, a home valued at $100,000 could probably easily rent for 1% of the value, or $1,000 a month. On the other hand, a much more valuable home set at $350,000 will probably fetch a monthly rent closer to the 0.8% rate, or $2,800 mark.

In other words, the fact that your Pikesville home is worth a lot does not justify an inflated monthly rate. The only way this would work would be in cases where your property is in high demand, located in an affluent area, and has over-the-top amenities.

 

Check Comparable Rental Listings

Understanding that your potential Towson tenants will typically do their research when it comes to leasing a home is important when setting your property’s rent amount. Your tenants will know if you have priced your property too high and will go somewhere else to lease, leaving you with a vacant home.

This means you too should do your research and find out the going rate for properties similar to your own.

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Look at online ads and in the newspaper. Track this for at least a couple of weeks before setting your amount to account for any abnormal price settings. In addition, try doing the following:

  • See which incentives properties similar to yours are offering. Too many special deals may signal an over-saturation of properties available for rent. If there is an overabundance of incentives, you may have to adjust your rent lower than you had anticipated.
  • Visit some of the comparable properties. See how they actually compare to your valuable Essex rental property. Further, ask the landlord what kind of interest has been shown in the property to see what kind of activity you can expect on your own property as far as interested tenants are concerned.
  • Ask experienced professionals what they feel a fair current market rent amount is.

By investigating the rental rates of properties similar to your own, you will be able to see if charging a higher rent is justified and how likely it is to be leased quickly. If you choose to use Baltimore County’s best rental property management company, this can be done for you. Aggressively marketing your property at the highest possible rate while getting it leased quickly is Bay Management Group’s specialty.

 

Take Note of Local Amenities

Tenants are more likely to pay a premium price for your Owings Mills property if it is located near amenities such as shopping centers, restaurants, parks, and schools. This is why becoming familiar with your rental property’s surrounding area is a key factor in advertising the value of your property and justifying a higher rent.

 

Factor in Your Property’s Amenities

In addition to being geographically close to amenities that tenants like to frequent with their friends and family, don’t forget to factor the amenities your Catonsville property has into the monthly rent. Here are some of the most popular things tenants look for while deciding which home to lease:

  • Recent Renovations – Highlight any external renovations to the property, this including recently added landscaping decor, a pool, well-maintained foliage, and even on-site maintenance services. Inside your home, some of the most attractive features to offer tenants are new flooring and updated hardware and appliances.
  • Parking – Tenants are always interested in where they can park their vehicles, especially if they have more than one. If you have special covered parking, a multiple car garage, or designated off street parking spots, your tenants will want to know. And the more convenient their parking is, the higher the rent can be.
  • Utility Inclusions – Including payment of small utilities such as the sewer, water, and trash can make a big difference in how much you charge for rent.

These are just some examples of the amenities that can play a role in how much you decide to charge for rent. The more exclusive the amenity, the higher the rent can be without causing people to look elsewhere.

If you are using a rental property management company to manage your White Marsh property, you can bet they will help you with the advertising your property’s best amenities. In addition, they should be able to give you some cost effective ways of boosting your property’s value. These tips will ultimately help you attract high quality tenants willing to pay a premium rent for a great property.

 

Other Quick Tips

In addition to the tips mentioned above, here is a list of other tips that can be used to help you determine the monthly rental rate of your Dundalk rental property:

  • When your property goes vacant, experiment by trying to bump up the monthly rate a bit. If you do not get any potential tenants within the first week or two, you know that it is too high. You can then lower it back down to a more reasonable rate. The point is, vacancies often allow you to “raise the rent” easily. And, it can’t hurt to try.
  • If your property is made available and you have tons of interested tenants, step back and re-evaluate the asking monthly rate. Chances are, you have priced your property too low and everyone knows it.
  • Factor in your own expenses for running a rental property business. You have to know what your expected return on investment will be for every rent rate you are considering. Factor in expenses such as the property’s mortgage, interest, property taxes, and insurance. And don’t forget other things such as HOA fees, maintenance and upkeep, emergency repairs, and property management fees. After all, the whole point of leasing your home is to make a profit.

 

Final Thoughts

In the end, deciding how much to rent your Baltimore County home for can be complex and involves many factors. Luckily, Bay Management Group is here to aid you in your quest to find the perfect sweet spot when it comes to a monthly rent rate. We can help you with everything including property advertisement, amenity upgrade ideas, and making your home competitive with other rentals in the nearby area in regards to both looks and price.

Call us today and see how we can help you set a competitive rent and keep high quality tenants in your home for the long haul. Have the peace of mind that your home is in good hands and is bringing in the highest return on investment possible by using Baltimore’s Bay Management Group.

 


How to Calculate the Rent Value of Investment Properties

Probably the most common question for most new landlords in Maryland is “How much should I charge for rent?

While this is a good question, there are a number of additional considerations property owners must first address in order to arrive at a rental fee.

how to calculate the value of maryland rental properties

What are the neighbors like?

What does the property offer?

Is it in good condition?

There are multiple tools, resources, and management groups available to help you navigate through the entire process.

 

Important Considerations to take into Account in Your Plan to Lease a Rental Property in Maryland

 

Survey the Market

In part, your rental fee will be determined by the local market. For instance, what you charge in Baltimore City for a two bedroom property will likely differ from the amount tenants would pay for a property in Montgomery County. In fact, what you may be able to charge may vary even from street-to-street in the more popular areas of Maryland.

Property investors have to research competitors’ rental properties in the area in order to make informed – and sometimes creative – decisions.

Roughly, rent is often around 1.1% of the home’s value. If you have a three-bedroom home worth $75,000, you can probably charge about $825 per month.

There are several caveats to this rule. First, if the home’s value exceeds $100,000, the percentage drops. By $350,000, you may only be able to charge 0.8%, perhaps less. Second, this estimation is only for 12-month leases. If you rent by the month or quarter, your rent prices will typically be higher.

And as with most things in real estate, timing is everything. The pricing that worked six months ago may not meet current demands of the market. You must make sure that you base your rental fee decision on the stability and demand of the current market in your region.

 

Estimate Minimum Required Return on Investment (ROI)

Before attaching any numbers, you should estimate how much you would need to collect each month to keep the business afloat. To calculate that, first add up all of your predicted expenses. Getting an exact number may be difficult because some expenses have multiple considerations of their own and can vary from county to county in Maryland.

 

Common Rental Property Expenses

  • Advertising. You cannot fill properties that sit unknown to the public, so advertising is important. This includes the total amount spent on a website (if you have one), signs, other website listings, and advertisements.
  • Travel. Driving between your properties, then to the accountant, and back to the bank all count as wear and tear. Do not exclude your vehicle from the equation.
  • Cleaning. How much will it cost to turn over a rental property between tenants? What about regular landscaping and mowing outside of each unit? Tenants expect their landlord to take good care of these things.
  • Maintenance. Things happen. Roofs begin to leak, and furnaces break down. There are always additional things that need to be done. This cost depends heavily on the age of your property and its appliances. A good way to estimate repair costs is to assume 5% of the monthly rent. Older buildings might be higher than 20%.
  • Legal Representation. Never skimp on the details included in your lease. You need something ironclad to protect your investment and business interests.
  • Taxes and Insurance. You may set up an escrow account or pay each separately. Both taxes and insurance are needed by landlords to cover major accidents and damage. Keep track of your tax documents because you can write off much of it when you file taxes with the IRS.
  • The Homeowners Association (HOA). Sometimes this fee is difficult to uncover. A real estate agent or property management company will likely have a record of it.
  • Vacancies. If you prorate your rent or have a lot of short-term tenants, you may want to estimate about 10% of monthly rent toward vacancies. You can remove vacancy expenses in your calculations for tenants who are in the middle of long-term contracts.

 

Once you estimate what you need to make, you can divide by the number of properties to calculate your “break even” number for each unit. Now, you need to determine what you can make. Remember, it’s important to leave enough of a budget to invest back into your business for routine maintenance and emergencies.

 

Follow the Numbers

There are a few tricks to determining a reasonable profit expectation for your property. For instance, many listing sites like Trulia and Zillow screen all available rental properties in your area. This will give you a quick idea of what prospective tenants expect in terms of square footage, price, number of bedrooms, and more.

Rentometer.com is another helpful tool. It lets you enter an address and number of bedrooms, and then it provides you with a complete list of comparable rental properties.

Next, you can use one of the housing market’s favorite tools: the Price/Rent ratio. This quick calculation will help you broadly determine if your local market is stronger in home ownership or rentals.

 

Calculating a Price/Earnings Ratio (P/E)

To sustain long-term in a housing market, an average P/E of 16.00 is necessary. Pretend you are looking to rent out a property in Baltimore County, and a house you found is listed at $388,000. Currently, a tenant who rents the property for $1,525/month occupies the home. Divide $388,000 by the total rent paid over the last year, $18,300, and you get 21.20.

This P/E tells us the house is likely priced far too high for its market. If other houses in the area are similarly expensive, the market will eventually stall until the average home purchase price decreases. Ultimately, a P/E ratio helps set fair prices in each market. You want to be able to compare prices directly to similar rental properties in your area, and this allows you to do so quickly.

The more listings you contrast, the better idea you will have of what prospective buyers are willing to pay. You do not want to gouge tenants, but you do need to make a profit.

 

Find Expert Help

Trying to navigate through all of the considerations that go into a rental property fee can be overwhelming for many private owners trying to manage investment properties on their own. This is why many landlords turn to experts like Bay Management Group to help them make the most informed decisions for their investments.

 

speak with our baltimore county property management experts

 

Bay Management Group has extensive experience with all matters of professional property management in Baltimore County, Prince George’s County, and throughout Maryland.

We have a thorough understanding of the local market and will work diligently to make your job as landlord as simple as possible. Our promise to you is complete control over your property without any of the headaches.

 

Contact us today for answers to your questions about investment properties throughout the Baltimore-Washington, D.C. metro area.