If you are considering buying investment properties to rent out, one of the fundamentals to understand is how to calculate fair market rental value, or how much the ideal rent is for a property.

If you charge more than fair market rental value, finding tenants can be difficult and create excessive vacancy.  This cancels out any extra income earned from charging too much.   Then, if you charge below fair market rental value, you miss out on the extra income which undercuts profits.  That’s why this is the key to success as a real estate investor and will also help in knowing which properties to purchase and how much to invest in upgrades and renovations.  

The most important step in calculating fair market rental value is finding out how much tenants pay in comparable properties.   Some major factors that make properties comparable include:

1. Being in close proximity to each other
2. Being in the same neighborhood
3. Same number of bedrooms and baths
4. Similar square footage
5. Similar appliances and features
6. Similar updates
7. Similar condition

Doing thorough research helps by searching on websites like Zillow, Trulia and Apartments.com.  It is also recommended to visit the area of your investment property to determine the condition of the neighborhood and specifically the streets near the property.  But it is best to have a knowledgeable real estate agent who can guide you in the proper direction and get answers to your questions.  Whippet Properties of Florida has agents ready to assist you!