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How much a rent should be compare to the value of the house?
1%?
0.9%? 1.1%?
0.8%?
Are you a homeowner or real estate investor who wanting to lease
your property and wondering “How much should I charge to Rent My
House?” Are you a Tenant looking for a property to lease in a
neighborhood and wondering “How much should I pay to rent a House?”
Of course, the best way to find the fair market value of the rent is
to hire a REALTOR® who has the knowledge and has access to all data
and necessary tools and can come up with the best recommendation
that holds for your specific property.
Disclaimer:
This article comes up with some “rule of thumb” numbers that shows
the relationship between the values of the house vs. the rent that
landlords and Tenants could use. Please note that, this would be an
estimate rule of thumb, would not be even close to the exact value
and should only be used as a guideline and not to be used as a legal
advice for contract. It is strongly suggested that you get the help
of REALTOR® in your area.
The rent that a landlord can charge depends heavily on local
rental-property demand, the economy, the health of your local
housing market (supply & demand), type of the property (e.g., Single
Family, Duplex/Condo), Square Footage size, age, number of stories,
features, plus the location, sub-division and condition of your
house. The amount to charge in rent is also related to the home’s
value, but not necessarily directly.
Based on several comprehensive CMA (Comparative Market Analysis)
from North Texas MLS system, we looked at similar houses (same type,
age, size, condition, etc.) that were sold and leased in the last 6
months in a specific location (subdivision) of city of Frisco in
Collin County Texas. We also excluded from our study foreclosure
properties and those properties that needed a lot of repairs and
were sold very low, since they were not move-in ready for tenants.
Our findings, for those specific subdivisions and neighborhoods of
city of Frisco in Collin County Texas are as follow:
|
Rent
compare to the |
|
|
|
|
% Value
of the House |
|
Value
of the House Range |
|
1.10% |
|
$75,000 - $127,500 |
|
0.90% |
|
$127,500 - $175,000 |
|
1.00% |
|
$175,000- $250,000 |
|
0.80% |
|
$250,000- $400,000 |
Conclusion:
The amount to charge in rent is related to the home’s value, but not
necessarily directly.
A lower percentage is charged for higher cost homes because once
rent gets too high, the pool of renters who can afford the monthly
payment is too small.
A good rule of thumb for landlords to calculate rent, at least in
Collin County Texas, is the 1 percent factor.
If your property is worth between $175,000 and $250,000, which is
the most common value in Frisco, TX; you could rent it for 1% of its
value. E.g., rent for a house which is valued at $220,000 should be
$2,200 per month.
If the value is $127,000 or less, it should rent for at least 1.1
percent of the market value of your property: $1,320 per month for a
house which worth $120,000.
If the value is $127,000 to $175,000, it should rent for at least
0.9 percent of the market value of your property: $1,530 per month
for a house which worth $170,000.
If the value is $250,000 or more, it should rent for at least 0.8
percent of the market value of your property: $3,200 per month for a house which worth $400,000.
Detail Calculations:
For those of you who are interested in detail
calculations and see the supporting documents, read the following or
visit my site at
http://www.TexasFiveStarRealty.com/How_Much_Rent.asp
OR see below:
Case #1: Home Price Range Searched ($75,000 - $127,500), in
Frisco, Sub-Division: HICKORY
Average Monthly Leased was about $1,060
Average Monthly Leased/Sq. Ft. was about $0.98
Average Sold Price was about
$101,167 ($85,000 -
$127,000)
Average Sold/ Sq. Ft. Price was about $90.11
With this information, a 1000-SqFt house in this neighborhood on
average could be purchased at $90,100 and could be leased at $980
per month (1.09% of the
value of the house). Use 1.10% of the House Value
Case #2: Home Price Range Searched ($127,500 - $175,000), in
Frisco, Sub-Division: PRESTON VINEYARDS 02
Average Monthly Leased was about $1,475
Average Monthly Leased/Sq. Ft. was about $0.87
Average Sold Price was about
175,000)
Average Sold/ Sq. Ft. Price was about $94.48
With this information, a 1800-SqFt house in this neighborhood on
average could be purchased at $170,100 and could be leased at $1570
per month (0.92% of the
value of the house). Use 0.90% of the House Value
Case #3: Home Price Range Searched ($175,000 - $250,000, in
Frisco, Sub-Division: PRESTON VINEYARDS North
Average Monthly Leased was about $1,448
Average Monthly Leased/Sq. Ft. was about $0.87
Average Sold Price was about
$200,838 ($183,000 -
$203,000)
Average Sold/ Sq. Ft. Price was about $86.86
With this information, a 1800-SqFt house in this neighborhood on
average could be purchased at $170,100 and could be leased at $1570
per month (1.02% of the
value of the house). Use 1.00% of the House Value
Case
#4: Home Price Range ($250,000 - $400,000) in Frisco,
Sub-Division: VILLAGE AT PANTHER CREEK 01
Average Monthly Leased was about $2,782
Average Monthly Leased/Sq. Ft. was about $0.69
Average Sold Price was about
$314,500 ($255,000 -
$374,000)
Average Sold/ Sq. Ft. Price was about $89.51
With
this information, a 3500-SqFt house in this neighborhood on average
could be purchased at $313,300 and could be leased at $2,415 per
month (0.77% of the value of
the house). . Use 0.8% of the House Value
See CMA_Sold_Leased_Percentage_20013.xlsx for
detail information
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