Fair Rental Value

[Dan]

How can I find the fair rental value in regard to a house that parents rent to their son?  I have often heard that the fair rental value is determined by what comparable houses rent for.  Rather than doing all that work is there somewhere I could find a percentage to work with? 

Is there a certain percentage of the house value that you can use in determining the rent each month?  What is that percentage?

Value of the house_______________ times percentage__________ = rent per month.

Thanks for your response!

 

 

[kcjenkins]

Don't have to do the work, let the client do it.  Tell him to contact 3 local realtors, and ask them for advice on how much he could rent it for.  

[MAMalody]

I agree with the above.  I did find a book that indicated the following: "rule of thumb" among realtors nationwide is that the fair rental value of a home (whithout furnishings) amounts to 1% of the appraised fair market value per month.  This formula is fairly accurate.  However, the condition, location, local market demand, and local economic conditions of your home will need to be considered.  Ex. If your home is appriased at $150,000, the montlhly FRV could be $1,500.  Annual FRV could be $18,000.

[Dan]

Thanks KC & MAMalody  (I like your ideas)

I found the following link on line:  https://www.huduser.gov/portal/datasets/fmr.html

What do you think of it?  

 

[easytax]

7 hours ago, Dan said:

Thanks KC & MAMalody  (I like your ideas)

I found the following link on line:  https://www.huduser.gov/portal/datasets/fmr.html

What do you think of it?  

 

Thanks Dan,  good tool.

I also like to use Zillow.com to check real estate values and rental pricing.   It is a bit faster and more localized for the pricing (both selling and rental).

 

[Lion EA]

I tell my clients to find local newspaper listings of similar rentals and keep the papers in their tax folders.  Of course, I recommend an appraisal first, at least by local realtors who deal with rentals.

If the parents don't know the FRV, then they are probably NOT renting it for profit and that changes how you report it.

[RitaB]

20 minutes ago, Lion EA said:

I tell my clients to find local newspaper listings of similar rentals and keep the papers in their tax folders...

If the parents don't know the FRV, then they are probably NOT renting it for profit and that changes how you report it.

Yes, I agree.  I would definitely do some local investigating.  A $150,000 house rents for much less than $1,500 here.  I'm sure it's more in other places.  We've all seen the TV shows where we were shocked at how expensive (or cheap) property is depending on the location.  Obviously condition of the house matters, too.

[kcjenkins]

On 2/16/2016 at 8:53 PM, Dan said:

Thanks KC & MAMalody  (I like your ideas)

I found the following link on line:  https://www.huduser.gov/portal/datasets/fmr.html

What do you think of it?  

 

It's an interesting site, but VERY generalized.  Based on averages with the only variance being the county, when in reality rents vary widely depending on the type of neighborhood, schools, etc.  I looked at my old county, for example, and the weird thing was that it listed $884 for a 3BR and $887 for a 4BR ?  Anyone here believe that?  Go from three bedrooms to 4 bedrooms for an extra $3 a month?  And I know the numbers vary a huge amount between various neighborhoods.