Owning real estate investments is the best venture to accumulate wealth. However, there is more to the process than meets the eye. Since it is an investment, you want to make sure you are making money and avoid losing any at all costs. While this relies on a lot of different factors, it can all circle back to how much you charge for rent. So, let’s first go through ways to estimate potential rental income. Then, we’ll go straight to the variables that influence that income for traditional rentals vs. Airbnb rentals.
Related: How Much Can I Rent My House For?
Pricing Your Rental Property: 3 Ways
1. Real Estate Agent
There is no better way to assess the potential rental returns of an investment property than talking to a professional. The professional, in this case, is the real estate agent who knows the market inside out.
The process of setting a rental rate to ensure you end up with a profitable rental property is very meticulous. With the market fluctuations and the various investment expenses, the process can get a bit complicated for a beginner real estate investor. Therefore, finding an agent might be an easy way to go about estimating the potential rental income of an investment property.
One thing we should tell you about this method of determining the rental rate is that you’ll have to pay real estate agent fees. If you work with the agent from the get-go, he/she will charge a commission which you need to keep in mind. Even if you enlist the help of an agent after the purchase, they will still charge some kind of set fee. Thus, getting an idea of your finances might help you decide whether you can afford to hire an agent or not.
Visit our Agent Directory to find the top real estate agents in your location of choice.
2. Real Estate Investment Tools
Another way to estimate how much will my house rent for in 2019 is to use real estate investment tools- the rental property calculator in particular. This investment tool is all about computing return on investment. If you use this tool when trying to find a rental property which will bring in a high rental income, you’re given all the data you need. The calculator uses historical comps to show you the monthly rental income you can expect from the property you’re interested in. That way, you won’t have to wait until you bought the house to ask “how much can I charge?” Not only that, but it will also calculate the other prominent figures for a complete property valuation. In this way, you’ll be able to save money since this tool costs way less than an agent’s fees.
Learn How to Use Mashvisor’s Rental Property Calculator for estimating your potential rental income.
3. Real Estate Comps
Rental comps are also an efficient way to evaluate potential rental income. These are investment properties for sale that share similar characteristics with your investment property. Whatever they rent for, your property will probably bring in a similar rate.
So, let’s say you own a two-story house that has three bedrooms, three bathrooms, and two kitchens, for example. A comparable property must have the same characteristics within the same real estate market. This will ensure the most accurate estimation of the rental rate in that neighborhood.
Related: How to Easily Find Real Estate Comps
What Variables Affect How Much My House Will Rent For?
Since we are talking about Airbnb rental income vs. traditional rental income, there are a few factors that make the difference in estimating how much will my house rent for in 2019. Here are the most critical factors:
Location
Location, location, location! How many times have you heard that phrase in real estate? A thousand times for sure. Well, this is another occasion for you to pay attention to the location factor. In this case, when we are talking about rental income from two different rental strategies, location plays a significant role. Not all locations support Airbnb rentals, nor do all areas support traditional rentals. Therefore, you need to make sure that you are analyzing market data properly to determine the kind of rental rate you can charge and how much money you’ll make with the rental strategy of your choice.
This is where real estate investment tools play a significant role. One specific tool that will help you is the heatmap analysis tool. You can select a few filters that reflect your rental strategy including rental income. From there, you can see how each neighborhood performs in terms of each rental strategy. This way, you can choose the location that will allow you to charge a high enough rental rate to get a good ROI.
Start using Mashvisor’s heatmap tool right now.
Rental Occupancy Rate
Rental occupancy rate will largely influence the rental income from investment properties. This metric indicates the percentage of days your property will be occupied in a year.
There is a difference between traditional and Airbnb occupancy rates in terms of how you analyze them. Long-term leases usually last for a year at the very least, which means that as long as you have tenants, you won’t have to stress over your property being vacant for that long. You can price the rental accordingly to ensure a good ROI and typically this rate remains steady for years at a time.
On the other hand, Airbnb leases last for way shorter than that. You might have multiple guests in one month for separate periods. One week you’ll have guests, but you might not have any the following week. This is the main difference in occupancy rate for both rental strategies. For Airbnb rentals, you will often change your rental rate based on the occupancy rate. During times of high occupancy, you may charge more to make up for the times of low occupancy (when you’re likely to charge much less to attract tenants).
The best way to determine this before you actually start renting out your property is by using past and current rental data on the US housing market, which help predict future trends. Luckily, a real estate investor can get this kind of data using Mashvisor. Combined with other data from the rental property calculator, you will be able to determine how much you should charge for rent with each rental strategy.
Rental Expenses
Owning a rental property comes with its costs- from mortgage to insurance to property management fees to unexpected rental expenditures. So, how do rental expenses affect your income in traditional and Airbnb rental properties?
Rental expenses have a massive impact on your rental income. You have to set a rental rate that will cover all expenses and leave some cash left in your pocket as profit.
This is why it’s also a good idea to try and cut costs where you can. For example, you can choose to manage the property yourself, which means you can save on property management fees. You can also learn about tax deductions, which is one way investors save money. Not only should you try and save money, but you can also come up with ways to boost your rental income by offering more services to your tenants. This way, you will be sure to have a high positive cash flow at the end of every month.
One thing to look out for is the difference in expenses for traditional and Airbnb rentals. For instance, there is always the maintenance fees that you should set aside. However, in conventional rentals, your tenants might or might not cause damages and, in some cases, they’d be responsible for the costs. While, on the other hand, with tenants coming in and out of Airbnb rentals all the time, there is a higher chance for damages on a more frequent basis. So, before you ask the question “how much will my house rent for in 2019?” it makes sense to educate yourself on these expenses so that you set a high enough rental rate.
Related: 9 Rental Property Expenses Real Estate Investors Shouldn’t Forget
There is a lot that goes into setting a rental rate for your property. Take these factors into consideration and choose one of the reliable methods listed above to help you find out how much you need to be charging in 2019.