It's easy to begin your rental property ownership journey with a lot of optimism, answering the question "how much can I rent my house for?" and assuming it will create a significant profit margin. After all, if the rental payment is enough to pay the mortgage on the property, you may feel like the rent roll report should show extra cash in your pocket! However, expenses of all kinds (including upgrades) must be tracked and incorporated into your rental rate. If not, you risk losing money on your investment.The best way to ensure that your rental property has a strong profitability focus from the beginning is to work with a tried-and-true method for calculating monthly rental property expenses and setting a rental rate based on that calculation. Keep reading to learn the strategies Bethesda property management experts use to recommend reasonable rental rates that also take into account the hidden costs of rental ownership.
The Rental Property Mortgage Is Just the Start
The first expense, of course, is paying for the mortgage on your Bethesda, MD investment property. Even if you bought your property in cash, you'll need to start with some of the core expenses related to ownership. For example, you'll pay various taxes and landlord insurance, so those costs should be factored into the rental rate choice.
Next, you'll need to look at the cost of any utilities you're planning to keep in your name, as well as the costs of any property improvements you did to prepare for the arrival of your first renters or next set of renters. Start a spreadsheet that keeps your rental income and expense numbers straight since you don't want to assume you're making enough rent to cover expenses and discover that you're losing money.
Rental Income Must Cover Contingencies and Potential Emergencies
The rental rate needs to be a little higher than the actual costs of owning the property because there are contexts where you'll incur greater risk than you'd have with one consistent, long-term renter. For instance, if your renter moves out suddenly, you'll need to account for the vacancy costs while you find a new renter.
Property managers know that the costs of finding a new renter also are essential to consider: applicant screening and marketing tend to cost more than you'll make in rental application fees, so you'll want to make sure you're thinking about those expenses when planning a budget. While you can't fully prepare for it, it's wise to have a little set aside if you ever have to go through the expense and time of an eviction process. Savings and cash reserves can be a source of rental property protection to cover emergencies and other unexpected costs.
The Costs of Doing Business Add Up
You may think of these rental properties as just a side business, but there are a lot of expenses associated with being a business of any size. A residential property management company knows that you may need business permits, and you'll want someone to help keep good financial records. Keeping an office could also be part of the costs you're working to cover with your rent roll if you grow your business.
Many rental property investors recognize that these expenses add up, especially when a property owner manages everything and creates a network of reliable connections from scratch. This is why many rental property owners also opt to save themselves time and money by hiring Bethesda property managers to help them with many of the processes mentioned above. A property manager handles everything from routine maintenance to applicant screening and marketing for new renters to reduce costs and manage budgets.
A Bethesda Property Management Company Helps Budget (and Collect Rent)
It can be overwhelming to see the number at the bottom of the spreadsheet after you thought your rent would be about the same as a rental property's mortgage. However, a property manager can help you budget for ongoing expenses—and collect the monthly rent on time to make sure you maintain consistent cash flow.
With the right experience, property management experts can help you answer the question, "How much can I rent my house for?" Once you have an idea of your expenses and reasonable rental income, remember that The Renter's Warehouse BW Metro team continues to help you keep expenses in check over time, as well as offering peace of mind through our Guaranteed Rent Program. We work to retain great renters and save you money on turnover and marketing costs. We're also knowledgeable about landlord insurance, helping you get everything you need without duplicate coverages that don't provide additional value.
It pays to evaluate your entire budget when setting a rental rate, and you'll be glad you fully estimated your costs ahead of time. Reach out to our team to learn more about how our Bethesda property management services can help you estimate accurate expenses and collect the rent on time!