Determining the appropriate amount of rent for your investment property as a landlord in Maryland is crucial. The rent you set can attract or deter tenants and help you create a sustainable investment as a property owner.

While you want the rental rate to be fair according to the market and the condition of your unit, you also need to cover your property expenses while making a profit.

So how can you calculate the optimal rent for your investment property? Keep reading to discover the top tips for setting your rent at an attractive yet profitable price in Maryland.

Understand the Market and Compare Rentals

The first step in calculating the optimal rental rate for your investment property is to research the local market.

You’ll want to look at similar properties in the area and what the asking rent for them is. You’ll want to compare the size, location, and features of these properties to yours in addition to the price.

As the market constantly fluctuates, it’s also important to consider the demand in your area. For example, are there a lot of rental units sitting on the market, or are there few to be found? Consider if units that have been sitting empty have too high a rental price while paying attention to those that are quickly leased.

Once you have an idea of the current market and comparable units, you can assess your property’s unique features, upgrades, and amenities compared to similar rentals. If your rental property has any features or upgrades that may justify a higher rental rate, be sure to consider them. Some of these features include:

• A home office
• A yard or garden
• Granite countertops
• Wood, tile, or luxury vinyl plank flooring
• A garage or on-site parking
• A home security system
• High square footage

Not only will features like these attract more potential tenants, but renters are also willing to pay more for them, so keep this in mind when determining a rental rate for your property.

Calculate Your Property Expenses

Another crucial consideration when asking what rent you should charge is looking at your property expenses. If you aren’t sure how much you’re paying in expenses, now is an excellent time to figure it out.

Calculating your property expenses is essential because your rental income will need to cover these expenses while still allowing for a profit. So you will need to add up all costs related to the property, including:

• Lawn care
• Maintenance costs
• Mortgage payments
• Property insurance
• Property management fees
• Property taxes
• Utilities

In addition to these expenses, remember that you will need to allow space in your budget for vacancies and rental income loss, so you should never be living payment to payment.

The rental rate needs to cover your expenses and allow you to have enough savings for periods when you may not have income and are actively looking for new renters.

Determine a Suitable Rent-to-Income Ratio

Part of calculating the optimal monthly rent for your investment property is determining a rent-to-income ratio that you are willing to accept from tenants. If you have a target rental market, consider your ideal tenant’s average income and what percentage would ideally go towards rent.

Typically, landlords set a rent-to-income ratio of 30% of the tenant’s monthly income. Doing so will ensure the rental is affordable for tenants without compromising profitability for you. It can also help ensure that tenants can pay the rent consistently and on time.  

Don’t Forget to Consider Rent Increases

Once you set an optimal rent for your investment property, you can consider increasing the rent every year. However, before you do so, it’s important to understand rental increase laws in your state.

For example, in Maryland, there are no rent control laws. However, in Washington, DC, the rent cannot increase by more than 6% every year in rent-controlled apartments or 4% for apartments with renters who are seniors or people with disabilities.

If you intend to increase the rent, establish a fair approach and be prepared to negotiate with tenants who want to stay but are unwilling to pay the new total amount. It’s also important to communicate any changes to tenants in advance and be transparent about your reasons for adjusting the rent.

Need Help Determining the Right Rent Price?

By considering the above tips, landlords can set a competitive rental price that maximizes profitability while attracting and retaining quality tenants. Do you need assistance determining the optimal rent price for your property? Our property managers can assist you. Contact FAS Management today at (202) 337-5080!