Rentometer: evaluating rental properties
One of my New Years resolutions was to become a rental property owner by the end of the year. With interest rates being at historic lows it really does make sense to invest in a property. After finding interesting properties one must answer the all important question: How much rent do you get in the area of the property? Will the rent pay for the mortgage costs and other expenses?
I read about the 0.8% rule, which means that you should try to get at least 0.8% of the properties value in rent to pay for itself. So if you get at least $1600 rent on a $200,000.00 home, you should be on the safe side (assuming a 5.5% thirty year fixed loan with 20% down payment). Anything higher than 0.8% will work out nicely.
And how do you find out what properties in a certain area rent for? Just plug in the property address and number of bedrooms into rentometer.com and it will generate a page like the one below:
The left shows a gauge that displays the current rent (I made that one up) with the green area showing the 20% cheapest rents in the area, the red area the top 20% and the gray triangle the median rent in the area. The map on the right shows where your evaluated property along with a selection of higher and lower prices ones. No need to call your real estate agent to find that information!