Renting out a property is one of the most popular ways of making passive income and for a good reason. If you own multiple properties, renting one out might seem simple and uncomplicated. However, it’s not always very simple. Many expenses follow the profits of rental properties.
As a business owner, you expect to make much more money than there are costs. So what can you charge for a high-end property? Property values vary depending on the value of the real estate, which is determined by the market and demand.
Factors to consider before renting out a property
As mentioned above, rental properties can bring a lot of income, but a lot of expenses should be expected as well. Firstly, there are tax costs that any property owner is responsible for. Secondly, property owners are required to pay for maintenance issues and take care of legal matters.
Daily vacation rental property management is much different from residential rental property management. Once you invest in a high-end property, you must determine which type of rental property is more profitable for you.
A high-end rental property could be rented out for a lot of money monthly, therefore, you may not need to go through the headache of cleaning and paying utility bills that come with owning a vacation rental. When you rent out monthly, the tenants are required to take care of such issues. However, renting out daily might be more profitable, considering daily rent prices.
You might consider hiring a professional property manager to help you with the complications of owning a rental property.
Owning a Vacation Rental
A high-end property is supposed to be a luxury accommodation. Therefore, you will be able to charge a large sum for it. However, the first thing you must consider is the location. Is your property located in a vacation spot? Are there tourist attractions all year round? If there are tourist seasons, you might end up making a large profit for only a few months. The profit might be big enough to let you enjoy the rest of the year. If your property is located in a region where tourists visit all year round, then you are in luck.
However, when you own a vacation property, you must pay the bills and clean up after every guest. You must create a website for your property, social media pages, or both. You need to advertise every day and put a lot of thought into your marketing strategies.
Owning a Residential Rental
If you own a high-end property that you wish to rent out monthly, you will make the same amount of money each month. You can lay back and relax, as after you have found the right tenant, you don’t need to continue advertising. Tenants will most likely pay for utilities themselves and they will be responsible for the tidiness of your property.
On the other hand, there will occasionally be some maintenance problems and legal issues you will need to deal with. There will be less work, but probably less profit, depending on your property location.
How Much Rent Can You Charge for Rentals?
Figuring out how much rent you can charge requires much consideration. Firstly, you need to think about your property’s value on the market at the moment. You might have bought your home for a lot of money, or very little, however, the market shifts yearly and the property worth might be completely different today.
Property value depends on the location, utilities, features, size, and condition of your real estate. However, the price can also vary depending on property values in your area, inventory, and demand.
There are multiple ways to determine the value of your rental property. Consulting with property managers, and using websites and software are some of the ways to figure out your property’s worth on the market today.
A monthly rent price is calculated by the percentage of your property value. Usually, investors price their property rent at 0.8% or 1.1% of the property value. If your property is of high value, it’s best to charge closer to 0.8%, but if the property value is less than $100 000, you might want to charge closer to 1%.
You might determine the rent price considering the real estate value only, but it’s best to look at what landlords in your region ask for similar properties. You can surf through rental property platforms and property management websites to find out what most investors charge for real estate that’s similar to yours.
After considering each factor and aspect of rental property management and determining the rental cost, you should be able to make a decision. Make sure that the rental payment is enough to pay out the mortgage and taxes, and still leave a good amount of profit for you to use freely.
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