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How much a rent should be compare to the value of the house?

Moving furnitures 1%? 0.9%? 1.1%? 0.8%?

Are you a homeowner or real estate investor who wanting to lease your property and wondering “How much should I charge to Rent My House?” Are you a Tenant looking for a property to lease in a neighborhood and wondering “How much should I pay to rent a House?”

Of course, the best way to find the fair market value of the rent is to hire a REALTOR® who has the knowledge and has access to all data and necessary tools and can come up with the best recommendation that holds for your specific property.

Disclaimer:

This article comes up with some “rule of thumb” numbers that shows the relationship between the values of the house vs. the rent that landlords and Tenants could use. Please note that, this would be an estimate rule of thumb, would not be even close to the exact value and should only be used as a guideline and not to be used as a legal advice for contract. It is strongly suggested that you get the help of REALTOR® in your area.

The rent that a landlord can charge depends heavily on local rental-property demand, the economy, the health of your local housing market (supply & demand), type of the property (e.g., Single Family, Duplex/Condo), Square Footage size, age, number of stories, features, plus the location, sub-division and condition of your house. The amount to charge in rent is also related to the home’s value, but not necessarily directly.

Based on several comprehensive CMA (Comparative Market Analysis) from North Texas MLS system, we looked at similar houses (same type, age, size, condition, etc.) that were sold and leased in the last 6 months in a specific location (subdivision) of city of Frisco in Collin County Texas. We also excluded from our study foreclosure properties and those properties that needed a lot of repairs and were sold very low, since they were not move-in ready for tenants.

Our findings, for those specific subdivisions and neighborhoods of city of Frisco in Collin County Texas are as follow:

Rent compare to the
% Value of the House		Value of the House Range
1.10%		$75,000 - $127,500
0.90%		$127,500 - $175,000
1.00%		$175,000- $250,000
0.80%		$250,000- $400,000

Conclusion:

The amount to charge in rent is related to the home’s value, but not necessarily directly.
A lower percentage is charged for higher cost homes because once rent gets too high, the pool of renters who can afford the monthly payment is too small.

A good rule of thumb for landlords to calculate rent, at least in Collin County Texas, is the 1 percent factor.

If your property is worth between $175,000 and $250,000, which is the most common value in Frisco, TX; you could rent it for 1% of its value. E.g., rent for a house which is valued at $220,000 should be $2,200 per month.

If the value is $127,000 or less, it should rent for at least 1.1 percent of the market value of your property: $1,320 per month for a house which worth $120,000.

If the value is $127,000 to $175,000, it should rent for at least 0.9 percent of the market value of your property: $1,530 per month for a house which worth $170,000.

If the value is $250,000 or more, it should rent for at least 0.8 percent of the market value of your property: $3,200 per month for a house which worth $400,000.

Detail Calculations: Detail of Rent Calculation

For those of you who are interested in detail calculations and see the supporting documents, read the following or visit my site at http://www.TexasFiveStarRealty.com/How_Much_Rent.asp OR see below:

Case #1: Home Price Range Searched ($75,000 - $127,500), in Frisco, Sub-Division: HICKORY

Average Monthly Leased was about $1,060

Average Monthly Leased/Sq. Ft. was about $0.98

Average Sold Price was about $101,167 ($85,000 - $127,000)

Average Sold/ Sq. Ft. Price was about $90.11

With this information, a 1000-SqFt house in this neighborhood on average could be purchased at $90,100 and could be leased at $980 per month (1.09% of the value of the house). Use 1.10% of the House Value

Case #2: Home Price Range Searched ($127,500 - $175,000), in Frisco, Sub-Division: PRESTON VINEYARDS 02

Average Monthly Leased was about $1,475

Average Monthly Leased/Sq. Ft. was about $0.87

Average Sold Price was about 175,000)

Average Sold/ Sq. Ft. Price was about $94.48

With this information, a 1800-SqFt house in this neighborhood on average could be purchased at $170,100 and could be leased at $1570 per month (0.92% of the value of the house). Use 0.90% of the House Value

Case #3: Home Price Range Searched ($175,000 - $250,000, in Frisco, Sub-Division: PRESTON VINEYARDS North

Average Monthly Leased was about $1,448

Average Monthly Leased/Sq. Ft. was about $0.87

Average Sold Price was about $200,838 ($183,000 - $203,000)

Average Sold/ Sq. Ft. Price was about $86.86

With this information, a 1800-SqFt house in this neighborhood on average could be purchased at $170,100 and could be leased at $1570 per month (1.02% of the value of the house). Use 1.00% of the House Value

Case #4: Home Price Range ($250,000 - $400,000) in Frisco, Sub-Division: VILLAGE AT PANTHER CREEK 01

Average Monthly Leased was about $2,782

Average Monthly Leased/Sq. Ft. was about $0.69

Average Sold Price was about $314,500 ($255,000 - $374,000)

Average Sold/ Sq. Ft. Price was about $89.51

With this information, a 3500-SqFt house in this neighborhood on average could be purchased at $313,300 and could be leased at $2,415 per month (0.77% of the value of the house). . Use 0.8% of the House Value

See CMA_Sold_Leased_Percentage_20013.xlsx for detail information

Bahman Davani, CM, RP
Broker/REALTOR®
ABR, GRI, CDPE, SFR,
TAHS, eAgentC, and
CCIM Candidate

Texas Five Star Realty
Office: (214) 457-7055
Cell: (214) 457-7055

Plano, TX 75026-1665

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How much a rent should be compare to the value of the house?