How to Determine the Fair Market Rental Value of Your Home
Fair market rental value is the amount homeowners can reasonably expect to receive based on comparable rents in their community. Whether for personal or financial reasons, many homeowners at some point decide to rent rather than sell their home. While turning your home into an investment property can be profitable, you'll want to check out the competition before deciding if renting is the right choice for you.
Other People Are Reading
Instructions
-
-
1
Work with a real estate agent. Your real estate agent can provide you with comparable lease values, which generally include bed and bath counts, property types and listing dates. These professionals also understand that rents vary by property location, population need, community growth and cost of living.
-
2
Couple your agent's suggested rent with online information to help further determine whether you could be under- or overcharging your tenants. Some of the latest online rental market service companies such as Rentometer and Zilpy use aggregated U.S. Census data, zip code, and location to provide best estimates of low, average and high rents.
-
-
3
Don't overlook the importance of reading your local newspaper's classifieds and online classifieds such as craigslist when comparing rents. Drive the streets in your neighborhood in search of rental signs.
-
4
Don't be afraid to be assertive. Contact rental property owners directly and ask if the home is still available. If it isn't, it likely was leased at fair market value. Also ask how long it was advertised; if it was for only a short time, the rent may have been set too low.
-
5
Consider talking with a certified public accountant about the tax implications of turning your home into an investment property. Be sure to ask about the implications of leasing it out, and what happens when you decide to sell.
-
1
Tips & Warnings
When calling on homes, you'll want to compare "apples to apples." Ask about appliances, kitchen updates and other amenities to understand if they accurately resemble your property. Upkeep of the exterior, particularly landscaping, adds to rental value. So does cleanliness. Consider hiring a professional cleaner.
When researching fair market rents, understand that no one method is perfect. With town homes, for example, only you can ensure that amenities such as parking, security and newer construction figure into the comparison process. Don't rely on advisers to make final decisions. Remember that if you set your home's lease rate too low or high, you could cheat yourself out of profits or risk leaving your home vacant, all the while still making mortgage payments.
