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Rental Basics in 77375 : Real Estate Advice

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Sat Jan 5, 2013
Don Tepper answered:
It doesn't matter. That's irrelevant.

You lease the house based on what the comps in your neighborhood rent for. If you price it higher than that (to cover more of the expenses, or to get a larger return on investment), it won't rent. It's that simple. And, obviously, you don't want to underprice it.

So: Do research. Look both on sites like Trulia (or Realtor.com) and on sites like Craigslist to determine what similar houses in your area are renting for. Also, I kind of like http://www.rentometer.com That's what you can rent it for.

From that figure, you can then determine whether the monthly income will cover expenses. And if it does, what the (positive) ROI is.

But there's no average. You may have bought your home in 2000 for $100,000. Your neighbor may have bought the identical home next door for $200,000 in 2006. You and he are able to rent your homes out for the same amount. He can't get any more because he paid more.

Real investors--who go out and run the numbers before buying--do have desired minimum rates of return. It might be 5% or 10% or whatever. But that's not your situation. You've got the house. Your investment is already determined. And the amount you can get for rent, whatever that is, is pretty much set. So: Definitely work the numbers and figure out whether you'd be losing money, breaking even, or making money. (Don't forget to factor in things like vacancy--allow 8.5% of income--and maintenance--generally around 1% of the value of the house annually, though that'll vary.) But the numbers are the numbers and it's too late to work toward an "average" rate of return.

Hope that helps.
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