The current condition of the Bay Area housing market, specifically the low inventory, has altered the approach of homeowners and property management companies alike. An alternate option to selling your home is to rent it out. Black Diamond often finds our clients confused on how they should go about this. Below, we offer some practical factors to consider when establishing a rental rate. Property Worth The rent directly correlates with the value of your home. Property management companies generally suggest to charge between 0.8 and 1.1 percent of your home value as monthly rent. For example, if your home is worth $100,000 than we would recommend renting it out for $800-1,000. For property values of $100,000-125,000, don’t charge less than 1-1.1 percent. The more your property is worth, the lower the percentage should be. Never go below the minimum of .8 percent in the event of unforeseen expenses. Expenses A common delusion is that the landlord’s mortgage payment should dictate the amount of monthly rent. In actuality the renter could care less how much a homeowner pays; rent is ultimately established by how much a renter will pay. If you offer features such as pest control or home security, homeowners could always include it into monthly rent. Don’t go overboard with your rates or you’ll get no business. Compare and Contrast Properties Always make sure that you price your property aggressively with other homes. Property management companies suggest the home value as a general rule of thumb when determining monthly rent. However, that is just a guideline. Make sure that what you’re asking is competitive with other homes in your region. Return on Investment Make sure to estimate how much it will take to maintain the property before establishing a rental rate. Remember those discrete costs such as property taxes. To conclude how much to charge for rent, the owner should add his mortgage, operating costs and anticipated return. Test Runs You can always post an advertisement of your highest price and see if you get any bites. If people aren’t contacting you, than that means no one is willing to pay your preferred price. Gradually lower the rent and monitor the responses you get. Source: SF Gate