Estimating Rents: Top Resources To Figure Out How Much You Should Charge

Once you’ve completed the necessary renovations and have made your property move-in ready, you are finally at the stage of looking for tenants to occupy the home. Pricing rents can be tricky. Charge too much, and no one will rent your property. Charge too little, and you’ve locked the property with one tenant paying sub-market rents.

One general rule I follow: the higher you charge for rents, the better quality tenants you will have. The type of people that can afford a higher rent are generally people who are financially stable. They have good credit, they pay on time, they are reliable, courteous, and care about their reputation.

With that said, pricing your rental on the higher end is not something to be ashamed of. Pricing it too high, however, will price you out of the market.

In the beginning, however, is when you should have looked up rent prices for the property; before you bought and renovated the property. The reasons for this are obvious—you should have run the numbers on the specific property to make sure that it was a worthwhile investment. 

With that said, here are several tips for estimating how much you should be charging in rent:

1. Look on Rentometer.com—Rent-o-meter is a (semi) free service that allows you to look up a specific property address and get an estimate for how much other similar properties are renting for. It takes historic data from a timeline of your choosing, most commonly 12 months, and aggregates the data to provide you with a rental estimate for your property, based on square footage, number of bedrooms, and number of bathrooms.
2. Search Zillow.com’s Rental Calculator—Zillow is another source like Rentometer. You input the property address and Zillow provides you with an average rent figure that you can use to get a better idea of how much you should be charging. Zillow will also provide similar properties and estimate your rent on a dollar value per-square-foot basis. 
3. Current/Active listings—There is really no preference for which website you use for this one. Look at current listings on the market to see what homes are going for. Consider your home in the process. If you find a house renting for $3,000 a month in your area, how does your house compare to it? Does the home have the same number of bedrooms and bathrooms? Is the home remodeled and yours isn’t? Include other amenities, such as a pool, in-home washer and dryer, proximity to downtown and/or hospitals and schools, and general condition of the neighborhood.
4. Speak with locals—At the time of writing, the Tampa Bay Area is ripe with people constantly talking about how much rent prices have increased in the last year. It’s even on the news. People are constantly talking about how much landlords are charging for rent, for their homes, their studios, their apartments, 3 bedrooms two bathroom homes, 2 bed two bath apartments, and so on. This will give you an idea of the direction that rents are headed in, and it will give you examples of how much others are charging for properties similar to yours.
5. Forums—Look at forums for your state/city/zip code to get a better idea of what is happening with rents in your area. Other investors will post on forums like BiggerPockets.com and discuss what is happening in their area. Use these tools in order to get some insight into the rental trends in your specific city.

Knowing what you can charge for rent is crucial to real estate investing. If you know that a two-bedroom, one-bathroom home will rent for $1,000, but your monthly payments will be $1,500, then you know from the beginning that this specific deal is probably better left to someone else. Knowing how much you can charge for rent will also give you a better idea of what your cash flow will be. This way, you can analyze deals more accurately during the buying process.

Estimating rent correctly can be the difference between positive and negative cash flow, and can make or break your investing career and business.