The amount of rent you charge is not a function of your wants or needs, but rather a complicated dance of supply and demand, cost and profit. In order to break even you will have to know your costs inside and out. This means more than the mortgage. Operating costs, taxes, permit costs, insurance rates, renovation and upkeep costs, accountant fees and all the costs that brought you to the sale to begin with (broker, attorney and contractor's costs) will all need to be accounted for in your figuring. And until you get in to it, you'll nickel and dime costs there are in running a rental property.
Your rent should cover all your expenses associated with managing the building and offer a percentage return on the costs you incurred in purchasing the building. But don't forget inflation-that bugged-eyed hobgoblin of commerce. You will need to routinely raise rents to keep inflation from eating away at your profits until there are none.
Not only do you need to know how much you need in order to break even on your investment, you also need to know what the market can bear. Identify securing deposit and rental rents for your area. Keep your eyes on the rental section of the newspapers (as well as any specialty papers that carter to your building type) to see how the rental rate is going. The local housing authority also tracks such information. And you may want to ask other landlords how much their tenants pay. Though many would want to keep that information private, try your luck nothing is impossible. There is nothing wrong with inquiring as if you were a potential tenant rather than a potential competitor.
Therefore, when comparing your property to others, take into account as many amenities as you can think of. Know the region very well. In some areas a pool is a necessity for an apartment complex. Snow removal may also be a necessity in some regions. Know what your tenants will expect for the rent they are asked to pay. By comparing your amenities to others' at the same time you compare rents, you should gain a good understanding of these expectation.
Your rent should cover all your expenses associated with managing the building and offer a percentage return on the costs you incurred in purchasing the building. But don't forget inflation-that bugged-eyed hobgoblin of commerce. You will need to routinely raise rents to keep inflation from eating away at your profits until there are none.
Not only do you need to know how much you need in order to break even on your investment, you also need to know what the market can bear. Identify securing deposit and rental rents for your area. Keep your eyes on the rental section of the newspapers (as well as any specialty papers that carter to your building type) to see how the rental rate is going. The local housing authority also tracks such information. And you may want to ask other landlords how much their tenants pay. Though many would want to keep that information private, try your luck nothing is impossible. There is nothing wrong with inquiring as if you were a potential tenant rather than a potential competitor.
Therefore, when comparing your property to others, take into account as many amenities as you can think of. Know the region very well. In some areas a pool is a necessity for an apartment complex. Snow removal may also be a necessity in some regions. Know what your tenants will expect for the rent they are asked to pay. By comparing your amenities to others' at the same time you compare rents, you should gain a good understanding of these expectation.
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