How much to charge for rent

1 Reply

Hello BP, so I want to start investing in my home time. It's a very small city in Alabama,but I'm really have trouble figuring out how much rent goes for. Making it difficult to analyze deals for me I've asked local land lords and the ranges are all over the place for example I asked one and he said he has had this tent for 8 years and the tent pays 450/mo without bills and wants to sell me the SFH for 69000 a basic 3/2, but there is this other landlord who has a SFH and it rents for 750/month with bills included and has had the tent for 3years in it, it's a basic 3/2 and they are less then 10 miles away from each other now I know I have only given two examples but I have asked multiple people and it's all over the place. I tried rentometer but I guess the town is to small no info. Facebook marketplace for rentals but same thing I've check multiple times Over the last couple of months and no listings I checked Craigslist and no listing there either have checked Zillow as well but noting. Any suggestions or advice has any dealt with a similar problem. I really like that's town it's starting to grow fast now lots of new business and commercial Real estate buildings are being built. Feel likes there big potential but would love your help and advice. Thank you in advance to everyone who responds and reads this post.

Hi Axel.  That's rough if there aren't enough rentals to validate a market rent.  This means that you will struggle with this every time there is a turnover.  I would probably pass on this opportunity and purchase in an area with more data.  We have that issue with a larger home we have in our area, and it is a constant frustration to wonder what a defendable market rate is.

The only other suggestion is to ask the selling landlord if he is willing to share the rental schedule of his tax returns for the past few years.  Or you could look to the nearest town that is large enough to have data.  Find the current market rental rate there and the average home value there, and use the average home value in your area to prorate to adjust market rent.  If home values are 15% lower, rent could be 15% lower too.  If you can find a reliable methodology it will make life much easier.

You can determine local utility bill history by calling the utility company, providing the address, and ask what it has been averaging.