Rental Property

Is there a general rule as to how much you should be able to charge for rent on a property compared to the payment on it to come out even? For example if your payment on the property is $500 per month then would you need to charge $700 per month in rent to consider it break even? You will have costs to maintain the property and other indirect cost. I know this is going to vary a lot but I thought maybe someone on here has rental property and has a ball park rule.

 

Of course you always want to make some money but just breaking even will get the mortage paid for you. Rule of thumb is take expected cash flow and deduct at least 30% for reserves, maintenance, etc and if what you get pays the mortgage then that's a good thing. If not, the property probably won't cash flow. Of course, there are other things to consider like depreciation, etc.

 

So the rule of thumb is your mortgage payment should be no more than 70% of the rent you charge. Thanks that is good to know.

 

Rent shouldnt be determined by your mortgage payment... but by what the market for that rental will bear. But you could see it in reverese(which is what you may have meant) where you look at your "costs" and they should be a certain percentage of your rent.

Your payments are a function of down payment, interest rate, etc... none of which has anything to do with rent rate.

 

You are correct, of course, but it helps to know a rule of thumb. I am going to have to decide what to do with my current house in a year or two.

 

The rule of thumbed I mentioned is a simply calculation bankers will do to see if a property cash flows. I learned it a while ago and use it when considering buying rental property. If it's your personal residence you want to rent due to the current market, etc then breaking even is great. As long as you get the mortgage, taxes, escrow paid for by someone else what is there not to like? Good luck!

 

When I refi'd, there was a section in the mortgage that I signed that said that I was only going to use my house as a personal residence. From your experience, have you seen banks make a big deal out of turning your house into a rental at some time in the future?

 

I'm sure technically there's something in the mortgage that says we aren't supposed to do that. That's probably because the bank considers a rental more risky and would thus either lend less of charge a higher interest rate. If I ever did rent my current home I'd put it under an LLC in order to deduct depreciation as well as protect me personally from any idiot renter that slipped and wanted to sue.

Having said all that, I sure do see a lot of homes for rent that I bet aren't in LLCs, etc. These days the banks may just look past that in order to get a monthly payment.

 

To have break even on the rentals of your property but.... dude you also have to pay mortgage and some other expenses are also involved... you should be charging more to meet you all expenses and you would also love to earn some money too.

 

The rent you can allegation depends largely on the demand for for rental apartment bounded economy, health, your bounded apartment bazaar and the area and action of your home. Ideally, you accept a acknowledgment of 1.25 percent anniversary month, a huge market demand.