How Much Can I Rent My House for in Cambridge, MA?
Have an apartment you want to rent? Or did you purchase a second home for the purpose of earning consistent passive income to set yourself up for financial success in the future? In these cases and more, you need to know how much you can rent your property for in Cambridge, Massachusetts and beyond. This is a trickier question than you might expect, so let’s dive into the details.
How Much Should You Charge for a Rental Property?
In a nutshell, enough that you make a profit but not so much that you drive away potential renters.
Easier said than done, of course. In general, most landlords charge monthly rent at rates of about 0.8% to 1.1% of the property's total value. For example, say that you have a home valued at $350,000. This is a pretty standard home price for many properties throughout Cambridge, Somerville, and the surrounding areas.
You could choose to rent this house to a tenant with a monthly rental rate of 1% of the total price. That’s $3500 a month: again, a fairly competitive rental rate given the current greater Boston housing market.
However, keep in mind that this is just a general tendency, not a hard and fast rule. Furthermore, the ideal rental price for any property you own will vary heavily based on several key factors.
If you want to save yourself some time, contact Cambridge Sage today. Our realtors can offer help calculating rental rates for your Cambridge, Somerville, Medford, or other property. We’ll look at your home’s value, cash flow potential, and other factors to make your real estate investing strategy work.
Factors to Consider When Deciding Rent
What are those factors? Here are some of the major things to consider when settling on a rental price for a Cambridge, MA home.
Monthly Mortgage Payment
First, consider the monthly mortgage payment you make on the property, if applicable. This doesn’t count if you own the property outright, of course.
But if you are still paying a monthly mortgage payment for that house or apartment building, you need to be able to pay that mortgage from your collected rent. Your monthly mortgage payment is a good baseline rental price that you can adjust up or down based on the other factors below. Don’t forget property taxes, of course!
Ancillary Costs
Next, consider any ancillary costs you might have when maintaining the property in question. For example, if you have a new rental house you want to put on the market, you might have ancillary costs for:
Repairs to the property to make sure it is rental ready
Ongoing utility bills and associated costs, such as electricity or heat and hot water
The cost of a property manager or property management company, if you own an apartment building or several houses on the same block
Many landlords decide to fold these ancillary costs into their rental rates. For example, they may start with a base rental rate using the ~1% rule above. Then they add the cost of utilities and pass those fees on to their renters.
In any event, be sure to consider how much it costs you to maintain or own a property in full when deciding on an appropriate rental rate.
Potential for Profit
Then you have to remember that most people, likely including yourself, own and rent property to make a profit. That means you can’t just set the rental rate to be enough to pay for necessary bills.
Say that it costs you $4000 a month to pay the mortgage on a rental house and cover all other associated fees. To make any sort of profit, you’ll need to set your rental rate at more than $4000 a month.
If you set it to $4200 a month, for instance, you can expect a net profit for renting that property of just $2400 a year. That’s not much, but it shows that profit potential is something you should consider when deciding whether to rent your house at all.
Market Conditions
Don’t forget to consider broader market conditions. For instance, if you want to rent a house on a block with plenty of other rented homes, do some market research and figure out what their rental rates are. Be sure to look at similar properties. Local market value for homes can shift over time. But property value is often related to factors like:
The number of bedrooms
Upgrades for the home, especially if it’s a single-family home
Whether an appraiser has priced it
If you price your property too high relative to the broader market, you won’t get any renter applications since there will almost certainly be cheaper rental listings elsewhere.
Rent Control Laws
Lastly, remember that rent control may affect the rental market in the future. Right now, Massachusetts and the Boston area don’t have rent control rules in effect. But these could be voted into law in several years. If this occurs, you may face additional limitations as to the minimum and maximum rent you can charge for your property.
How to Calculate Rental Rates
With all that said, here’s a good breakdown of how to calculate fair rental rates for a property you own or have a mortgage on:
First, figure out what 1% of the property’s total cost or value is. Factor in the fair market value for comparable properties as a starting point for your calculations
Next, add the ancillary costs to that total, such as utility bills
Then add a little more so you make a profit on rental income, either to pay for your own bills or so you can invest that money into future rental properties
Once you come up with a number, you can adjust it based on your market research and what you think people will pay for the house.
Market research, however, can be hard to come by if you don’t know where to start. Cambridge Sage’s real estate agents help homeowners like you you estimate rent prices for investment properties in a matter of minutes when you want to rent a robbery in Cambridge, Watertown, or elsewhere.
Summary
As you can see, it can be tough to know how much you can write your house for in Cambridge, MA and in other nearby Boston neighborhoods. If you need extra help, you can contact licensed professionals at Cambridge Sage.
As knowledgeable real estate professionals for the greater Boston area, we’re well-equipped and very able to help you estimate great rental rates for your property in a matter of minutes. Whether you want to rent in Cambridge, Arlington, Watertown, Somerville, or somewhere else, contact us today for help calculating profitable rental rates!