How to Achieve an Optimal Rent Value

Dec 8, 20203 comments

There are many elements of being a homeowner, that can make the position vary in difficulty. Luckily, Mr. Property  has some insight on how to minimize hassle and get the most out of your properties. 

While dealing with tenants can be troublesome sometimes, we find that being well prepared is a sure-fire way to minimize trouble and create a positive outcome for both parties. First, having a well thought out and well-phrased lease agreement is the cornerstone of any successful owner/tenant relationship. Being able to outline all possible scenarios for the duration of a lease agreement is the best way to ensure both parties are protected and in the loop. A superior lease will both protect the homeowner and inform the tenant of all situations and potential troubles.

Determining a fair a reasonable rental value for a property can both be lucrative to the homeowner and attractive to a potential renter. But how does one find such a value? Well, there are a couple of easy ways to configure a fair rent. Firstly, we suggest using a simple rent to value ratio. For example, consider a home that is valued at $175,000 and rents for $1,100 dollars a month. If we divide the value of the home by a year’s rent ($175,000/$13,200) we find the “Rental Yield” to be 13.29%. This means that the home is valued 13.29 times the annual rent it has in the current market. This is similar to the earnings to price ratio in terms of the U.S stock market. The underlying idea behind such a ratio is that a higher number indicates that you can accept a lower level of appreciation in value. A homeowner can make up for low appreciation over the ownership period with higher cash flow over the expenses of ownership provided the homeowner can keep renters in the home and thus keeping vacancy to a minimum. Additionally, if you take this ratio and compare it to the rent of surrounding similar properties, you can find a happy medium between what is both lucrative for you and what is attractive to renters in the area. 

Another avenue to carefully consider when determining rent value and configuring the lease of a property is the use of a lawyer that specializes in real estate and or real estate professional. While we often think we have all the answers it is always wise to consider professionals in the field that can guide our decision-making. There are many outlets to find such an individual including justia.com and legalmatch.com. Mr. Property also uses online sources such as cozy.com, a management tool that assists us in efficiently communicating home values and ranges of rent possibilities. The tool can highlight key aspects of a homes value. Some highlights include rental averages in the area, housing history, its duration on the market and more which can all add up to the homes true value. Utilizing professionals in the field as a resource for such business is optimal. As always, we suggest that our friends and clients take advantage of such resources, as it is the best way to make sure we make our money work for us and not against us.

images from cozy tool

Sources: huffpost.com “The Rent to Value Ratio-Another Way to Evaluate Rental Homes”

 

3 Comments

  1. Anonymous

    If some one desires expert view on the topic of blogging and site-building afterward
    i recommend him/her to go to see this website, Keep up the fastidious job.

    Reply
  2. Anonymous

    It’s hard to come by experienced people for this topic, but you sound like you know what you’re talking about!

    Thanks

    Reply
    • mrpropertyllc

      Mr.Property strives to continuously learn new information on real estate knowledge. We are happy if we are able to provide reliable information.

      Thank you
      Rasool

      Reply

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