The Expert Podcast

• How is Rent Calculated?
  • Learn how landlords come up with the rent amount, including insights into the formula they use.
  • Understanding these calculations can give you leverage when negotiating rent prices.
• Example Property: A 3-Bedroom House in Georgia
  • The house is priced at $275,000.
  • This type of home is common for rental purposes.
• Key Expenses Landlords Face:
  • Mortgage Payment:
    • $240,000 loan at 7.5% interest, fixed for 30 years = $1,688/month mortgage.
  • Taxes:
    • $2,000/year property tax, which equals approximately $166/month.
  • Insurance:
    • Estimated $1,200/year, translating to $100/month.
• Total Basic Expenses (Mortgage + Taxes + Insurance):
  • $1,688 (mortgage) + $166 (taxes) + $100 (insurance) = $1,954/month.
• Reserve Fund for Repairs and Maintenance:
  • A recommended 1-1.5% of the home's value for maintenance savings, which for this house amounts to around $3,500/year or $300/month.
• Vacancy Deficiency:
  • Account for the potential loss of one month’s rent between tenants, adding $100/month.
• Property Management Fees:
  • Some landlords hire property managers, typically charging around $100/month.
• Total Monthly Cost for the Landlord:
  • $2,400/month including mortgage, taxes, insurance, reserves, vacancy, and management fees.
• Profit Considerations:
  • Many landlords break even, especially if their property is appreciated or offers tax benefits.
  • If the landlord charges more than $2,400, they could be making a significant profit.
• Alternative Example: More Expensive House
  • New Home Priced at $389,000:
    • Higher mortgage, taxes, insurance, and reserve costs.
    • Rent price might need to be around $3,700/month to cover expenses.
• Comparing Rent to Landlord’s Expenses:
  • Use tools like Zillow and mortgage calculators to estimate your landlord's costs.
  • Don’t just assume they’re charging what they paid for the house—current market value matters too.
• Key Takeaway:
  • Understanding how landlords calculate rent helps you assess whether their price is reasonable or inflated.
• We Want to Hear From You!
  • Share your thoughts on rent prices and your experience with landlords' calculations.