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judianderson · Apr 5, 2011, 07:14 AM

I have several rental properties and wonder whether I am charging enough rent. Is there a standard that is set for the % of profit one should shoot for in a rental investment.

ballengerb1 · Apr 5, 2011, 07:22 AM

No standard, supply, demand and local competition will likely set your rent more than anything.

excon · Apr 5, 2011, 07:35 AM

Hello j:

I agree with ballenger that your prices are generally fixed by the market. The only thing you CAN do is reduce your costs. Do you do your own maintenance? Do you weatherproof your units? Do you buy your furnishings cheaply? Did you refi when rates were lower?

Look. I'm not a landlord, so I don't know if these are the right questions to ask, but if you want to increase your profits and you can't raise your rents, lowering your costs is the ONLY way to do it.

I saw a special on American Airlines the other day... They needed to save gas. The ways they DID that were very innovative, and cool. For example, they threw away ALL the magazines to save weight. They found out they didn't use all the potable water they carried on board, so they eliminated HALF of it. They taxied with ONE engine instead of two... You've just got to be innovative.

excon

joypulv · Apr 8, 2011, 06:09 AM

I was a landlord. I looked in the local classifieds, and asked around a little.
A 'standard profit' is meaningless, unless you inherited all your buildings. The idea for investors is that you start broke and earn more and more as the years go by.
A good rule of thumb for rents after finding out the going rates is to keep them just a tiny bit lower, and let tenants know that if they take good care of their units that you will show your appreciation that way each year. Don't lower rents too much, because that can have the effect of attracting deadbeats.

judianderson · Apr 8, 2011, 10:04 AM

I guess that is what I am trying to figure out. I don't furnish or pay for utilities for my rental homes. I do have to pay for most of my maintenance but I do all my own painting and landscape (stuff I know how to do). I want to keep the properties up nicely so I get and keep good quality renters but there are limits to what a person should invest. I guess I was just wondering if there is a recommended percentage of profit one should strive for.

excon · Apr 8, 2011, 10:10 AM

Originally Posted by judianderson

I guess I was just wondering if there is a recommended percentage of profit one should strive for.

Hello again, j:

If you make more than you would if your money was in a bank, and you are paid for your labor, that ain't bad. Should the housing market turn around, you'll make your money in increased equity.

excon

joypulv · Apr 9, 2011, 01:57 AM

Any % right now is a good one, with banks paying 1.5% for CDs and so on. Mutual funds, ETFs, riskier stuff, maybe a lot more, maybe a lot less.
You should be setting aside a couple of hundred dollars a month per building, depending on the size and condition, for minor repairs and long term major ones - heating systems, roofs, etc. Keep track of each group. I would start a LLC and pay yourself for what work you do, and it will protect you somewhat too.
Other factors such as property and income taxes will go into your accounting as you figure your profit or loss.
You realize that even though you depreciate the properties on your taxes, you pay a whopping capital gains tax when you sell. All this needs to be part of your financial plan.