How do I calculate the best rent for my rental? This is a good question, and one we get very often here at Hemlane. Rents are the bread and butter of any good real estate investment. Come in too low, and you risk negative cash flow, but go too high and you extended vacancies and frequent turnovers are more likely.
All of these are cash flow killers.
That's why we developed the Rent Estimate Worksheet, to help landlords make an effective rent estimate to keep vacancy low and cash flow up. Download above!
To help you populate the above rent estimate worksheet, you need to be sure to come up with comparables that make sense in your market, here are a few ways you can dig those up.
Strategies to estimate fair market rent
1. Estimate rent by multiplying the home’s value (not purchase price) by 1%. That means if the value of a rental home is $100,000 the minimum monthly rent should be $1,000.
2. Back into a rental estimate based on your financial needs. Although this isn’t the best way to determine a rental estimate, the process will give you an idea of what your break-even point is.
You can also check out a Pro Forma calculator for this here.
3. Let your property management professional, broker, or agent provide a rent estimate.
4. There are a number of ways to research rent comps for your neighborhood, including the MLS, searching online for rentals, Craigslist, Zillow, Zumper, Apartments.com, or surveying nearby apartment buildings/duplexes/single-family homes.
5. Using an online rent estimate calculator is one of the easiest and most effective ways to estimate rent comparables: