If you are a homeowner or property owner in the Seattle area and you’re thinking about renting out your property, there are a number of factors to consider before moving forward. Some questions swirling in your head might be: Do I really want to rent out my property? How much should I charge for rent? What else do I need to know and do? Let’s break each of these down.
Is it worth it to rent out my property?
First, it’s important to know that while owning rental property can be a great passive stream of income, it does still require effort—so make sure you’re really ready to become a landlord. For example, do you know how to get the best tenants for your rental property and how to handle tenant emergencies when they come up?
Landlords have many responsibilities to juggle, and even great landlords face common problems that can be difficult to manage. There are a lot of details and moving parts involved in order to be successful with investment properties, and these common mistakes Seattle-area investment property owners make regularly cost them money in the long run.
How much should I charge for rent in the Seattle area?
Now, if you’ve decided renting your property is definitely the right choice for you, the next big question on your mind is probably How much should I charge for rent? Here are some key factors to help you answer this question:
1. Find out your property’s current value.
If you’re wondering how to value a house or how to find out the fair market value of rental property, you can use Zillow—or better yet, hire an appraiser to get an accurate assessment of what your property is worth today. Typically, landlords can expect a fair rental price to fall between 0.8% and 1.1% percent of the property’s current market value.
Related: [Real Estate Formulas Cheat Sheet] 12 Math Calculations for Landlords
2. Use the 1% Rule.
As personal finance site Afford Anything points out, if the rent you charge is less than 1% of the overall cost of the rental property, it’s going to take too long for the property to pay for itself. Additional costs accumulate over the years, and you still need to pay back the initial cost as well. If you’re charging anything less than 1% of the home’s worth, it could take decades to be worth it.
3. Consider your monthly mortgage payment.
If you’re renting out your house so you don’t have to pay for your home loan, the rent you charge should be equal to or greater than the cost of your monthly mortgage payment. And you’ll also want to factor in any estimated costs for repairs, taxes, HOA fees, and insurance when calculating the minimum rent to charge in your situation. Depending on the type of property and the tenants, you should plan generously for maintenance and repair costs.
4. Find out what the rental rates are for similar properties in your area.
As financial website SmartAsset points out, if the rent you want to charge is unreasonable compared to what everyone else around you is charging, you might struggle to find a tenant. We suggest checking out your competitors’ rental rates by looking at local listings on property management websites and other sites for rental listing such as Zillow, Trulia, and Craigslist.
Keep in mind that each property may have differing amenities that decrease or increase it’s value. Learn more about these amenities in our guide for getting maximum rent for your property.
5. Double check local Real Estate Laws.
Last but not least, make sure to look into any rent control laws in Washington state and your municipality. Some states limit what landlords can charge for rent, security deposits and late fees. For example, places like New York, Maryland, California, and Washington D.C. have rent control laws on the books—and other places, including Seattle are working to get these laws passed in the near future.
At the end of the day, determining the amount you can charge for your property may be the largest factor for knowing whether or not renting it out is the right move for you. Using the five guidelines above will help you figure out how much rent to charge so that you can have a smooth, successful, and profitable experience as a rental property owner.