The first thing that you look at when buying an investment property is whether the rents are going to be adequate in order to make that investment worthwhile. In that vein, today I want to share some practice points for verifying that you’re charging enough rent for your property. Here are four rules to keep in mind:
1. Use the MLS to see how much rent currently is for your type of property in the area. Whether you have direct access to the MLS or if you’re looking via your Realtor, you should be able to generate a report that shows what the current rents are for your type of property in your area. I typically do a radius or zip code search and then go back six to 12 months to look at the history of rents within my criteria.
2. Ask property managers about where rents are currently and where they’re headed. There are many property managers out there in the industry who have their fingers on the pulse of current trends in rentals, and they can advise you about what you should be charging for your rentals based on their experience.
3. Keep an eye out for local listings and how much rent they’re going for, including listings online, in the newspapers, and wherever else rentals are advertised. Be sure to account for listings that have a property type similar to yours.
4. Cruise the neighborhood and look for rental signs. Call the owners or landlords to ask how much is being charged for rent to give you an idea of what you should be charging.
If you use these four approaches, you should get a really good sense of what the rental incomes for that building would be. In turn, you’ll also get a better sense of what you should be inputting into the spreadsheet I mentioned in my last video so you can do an actual evaluation to figure out what the rate of return might be.
If you have any questions about this or any other topic, as always, feel free to reach out to us. We’d be happy to answer any questions you have.