Any homeowner’s primary goal is to generate the most income from their rental property as possible. How much you pay for a rental property, and in turn how much you can charge for rent, is dependent on a variety of factors.
In real estate, the location of your home plays a huge role in how much you can get it for and how much tenants will be willing to pay to live there. For families with kids, proximity to schools is one of the most important factors when choosing a home, while quick access to major roads, downtown, and high employment areas are important to almost all home buyers, along with shopping and restaurants. You’ll pay less for properties that are in the countryside, tucked away from the community or in a less desirable part of town, but it may be harder to find renters who are willing to pay high rent prices.
Updates and Upgrades
A home that caters to the modern family is updated and has recently been fitted with upgrades will have a much greater chance of attracting high-quality renters who are willing to pay higher rent prices. If the home is outdated or in need of major repairs, it could significantly affect the rent you’ll be able to charge future renters. If you don’t plan on remodeling your rental, it’s important to at least update the kitchen and bathrooms, as these are typical “deal breaker” areas for potential renters.
Comps In The Area
If there are homes in your area that are similar in age, size, and features are selling for way below market value, you can expect yours to appraise for about the same, which lowers the average rent tenants will expect to pay to live in the area. If your neighborhood has multiple foreclosures and short sales, it’ll drastically bring down the average home price in your area.
In most cases, the more space and features you can offer, the more you can expect to pay for the property and the more you can charge for rent. Single family homes tend to have higher rents than apartments, and obviously, homes with more bedrooms and bathrooms, more square footage, extra features like a washer/dryer, and that are pet-friendly will cost more than smaller homes without extra features.
Other things that may affect the price of your rental home that you have little to no control over, are:
- Supply and demand
- Interest rates and
- Economic growth
If you’re thinking about investing in real estate to earn passive income, keep in mind that prices are based on an extensive list of factors, some of which you can control and some that you can’t. The amount of rent you can collect from a tenant will be based mainly on the location and specifics of your particular property, so it’s worth it to pay a little more for a home that “checks all the boxes” to ensure a more desirable listing and receive a higher rental rate.