We're considering moving at some point in the future, and right now we have a mortgage on our home. So far we've been here about 3 years, and we're considering renting out our home.

Obviously there will be costs associated with renting the home out: taxable income, maintenance on the property, etc., so if we rent it out we don't want to just charge what we're paying on our mortgage - we'd definitely be losing money if we did that.

Given the assorted costs associated with maintaining a home/rental property, what is the minimum amount of rent that would be reasonable to charge above the cost of the mortgage? Is there some rule of thumb to use? For example, say your mortgage/tax/insurance payment is $1,000 so add 50% and you'll need $1,500 in rent to pay taxes on your rental income, put money away for eventual repairs, etc.?

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    I've noticed this ratio depends drastically on the country/region.
    – Fattie
    Commented Oct 30, 2016 at 13:26
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    The rents of similar units in the area usually determines how much rent one charges rather than how the property was financed. Commented Oct 30, 2016 at 17:33
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    @JoeBlow - Exactly. In some locations, even the OP's assumption that the rent should be higher than the mortgage does not apply. There, the monthly rent on a house is usually less than the monthly mortgage payment. Buy-to-let landlords generally lose money each month, only benefiting due to capital gain.
    – user200783
    Commented Oct 30, 2016 at 19:45
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    You need to post what the alternative action is! Presumably it is rent or sell (and not rent or let the property collect dust). In such a case you need to factor in the cost benefit or renting vs. selling. Make sure to include all costs associated with both (real-estate agent, closing costs, taxes, time property will be on the market collecting no money, taxes etc.). Commented Oct 31, 2016 at 1:20
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    How much of that mortgage payment is interest? Only the interest part is real cost, the part that pays off principal costs you money but it also lowers your debt, so it's not a real cost. Commented Oct 31, 2016 at 10:59

12 Answers 12


I am sorry to say, you are asking the wrong question. If I own a rental that I bought with cash, I have zero mortgage. The guy I sell it to uses a hard money lender (charging a high rate) and finances 100%. All of this means nothing to the prospective tenant.

In general, one would look at the rent to buy ratio in the area, and decide whether homes are selling for a price that makes it profitable to buy and then rent out.

In your situation, I understand you are looking to decide on a rent based on your costs. That ship has sailed. You own already. You need to look in the area and find out what your house will rent for. And that number will tell you whether you can afford to treat it as a rental or would be better off selling.

Keep in mind - you don't list a country, but if you are in US, part of a rental property is that you 'must' depreciate it each year. This is a tax thing. You reduce your cost basis each year and that amount is a loss against income from the rental or might be used against your ordinary income. But, when you sell, your basis is lower by this amount and you will be taxed on the difference from your basis to the sale price.

Edit: After reading OP's updated question, let me answer this way. There are experts who suggest that a rental property should have a high enough rent so that 50% of rent covers expenses. This doesn't include the mortgage. e.g. $1500 rent, $750 goes to taxes, insurance, maintenance, repairs, etc. the remaining $750 can be applied to the mortgage, and what remains is cash profit.

No one can give you more than a vague idea of what to look for, because you haven't shared the numbers. What are your taxes? Insurance? Annual costs for landscaping/snow plowing? Then take every item that has a limited life, and divide the cost by its lifetime. e.g. $12,000 roof over 20 years is $600. Do this for painting, and every appliance. Then allow a 10% vacancy rate. If you cover all of this and the mortgage, it may be worth keeping. Since you have zero equity, time is on your side, the price may rise, and hopefully, the monthly payments chip away at the loan.

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    It doesn't mean anything to the tenant, but there are numbers that mean something to me. If I'm making a $1,000 mortgage payment and the number that would need to rent is $2,000, and local rent prices only fetch $1,300 then I know that renting the house would be a bad idea. I'm looking for the numbers that would give me the hypothetical $2,000 so I can make the good decision :) Commented Oct 30, 2016 at 19:26
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    @WayneWerner the optimal price does not depend on your financing situation in any way. Compare the optimal price with your costs of renting. The mortgage is not a cost caused by renting. The optimal price likely is to be determined empirically by comparing your property to others.
    – boot4life
    Commented Oct 30, 2016 at 20:52
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    @WayneWerner: It sounds like in your comment you are asking a quite different question, namely, given that your mortgage is $X, what will be the total cost to you to maintain the home as a rental property. That is a legitimate question, but it's not a question about income you will receive from the rental; it is a question about expenses you will pay on the property. If that is what you're asking, you should rephrase your question, because right now the text of your question is asking about what you should charge, not how much you will spend.
    – BrenBarn
    Commented Oct 30, 2016 at 21:12
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    And in the US you aren't taxed on gain up to $250k or $500k for couple (MFJ) on your 'main home' but this exclusion is not available for rental property. Commented Oct 30, 2016 at 22:05
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    @WayneWerner remember that even if rent - expenses < mortage you are still turning a profit as long as rent - expenses > interest.
    – Taemyr
    Commented Oct 31, 2016 at 11:01

The rent will be determined by:

the rent being charged on similar houses near you.

Your costs have no bearing, at all, on the price you will get.

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    Actually, the rent that one can ask is limited only by one's chutzpah. What you are describing is the rent that one can get! Commented Oct 30, 2016 at 13:49

As others have pointed out, you can't just pick a favorable number and rent for that amount. If you want to rent out your house, you must rent it for a value that a renter would agree to.

For example there is a house on my street that has been looking for renters for 3 years. They want $2,500 a month. This covers their mortgage, and a little bit more for taxes and repairs. It has never been rented once. Other homes in my neighborhood rent for around $1,000 a month. There is no value to a renter in renting a house that is $1,500 more then a similar house 2 doors down.

Now what you can look at is cost mitigation. So I am using data from my area. Houses in my part of Florida must have A/C running in the wet months to keep the moisture from ruining the house. This can easily be $100 a month (usually more). The city requires you to have water service, even when not occupied, though the cost is very small. Same with waste, which is a flat fee: $20 a month. Yard watering is a must during the dry months (if you want to keep grass). Let's say that comes out to $50 a month, year round. Pest control is a must, especially if your house has wooden parts (like floors or a roof). Even modest pest control is $25 a month. Property taxes around $240 a month. Let's say your mortgage is around $1,000 a month. That means to sit empty your house would cost $1,435.

Now if you were to rent the house, a lot of those costs could "go away" by becoming the tenants' responsibility. Your cost of the house sitting full would be $1,240. Let's pad that with 10% for repairs and go with $1,364.

Now let's assume you can rent for $1,000 a month. Keep in mind all these rates are about right for my area but will change based on size and amenities.

Your choices are let the house sit empty for $1,435 a month or fill it and only "lose" $240 a month. Keep in mind that in both cases you will be gaining equity.

So what a lot of people do around here is rent out their houses and pay the $240 as an investment. For every $240 they pay, they get $1,000 in equity (well, interest and fees aside, but you get the point).

It's not a money maker for them right now, but as they get older two things happen. That $240 a month "payment" pays off their mortgage, so they end up owning the house outright. Then that $240 a month payment turns to extra income. And at some point, their rental can be sold for (let's guess) $400,000. SO they paid $86,400 and got back $400,000. All the while they are building equity in their rental and in the home they are living in.

The important take away from this, is that it's not a source of income for the landlord as much as it is an investment. You will likely not be able to rent a house for more then a mortgage + costs + taxes, but it does make a good investment vehicle.

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    Good answer, except that appears to assume without reservation that the value in a house goes up over time. That is not always the case - and even if it is the case, it may not go up more than a similarly valued financial investment would have. ie: instead of the down payment + mortgage principal payments, the same money could have gone into stocks & bonds and perhaps earned a higher rate of return. There are reasons to own property, and real estate investment may make sense, but the risk involved must be conveyed as a key part of the decision. Commented Oct 31, 2016 at 13:13
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    Well yeah I kinda do, it's a simple example. It also assumes you keep the house for 30-40 years and sell it as a retirement option.
    – coteyr
    Commented Oct 31, 2016 at 15:15

While JoeTaxpayer gave a very insightful answer, and clearly the best answer, let me break it down really simple for you.

Talk with a good to great property management company.

Given that you will be out of state, you will need one anyway. A good one is worth their cost, a great one even better.

They will tell you what the "market will bear" on renting your place and the expected costs. From there you can make an intelligent decision.

Have you had any experience in running rental properties? I am going to assume not, and as such you should have professionals as part of your team.

More than likely you will have to put money in to sustain this property as a rental. It is just how the numbers tend to work out.

  • The money you need for maintenance and whatever gap exists on the mortgage should be viewed as an investment. Consider a $150k house with (all monthly) $800 mortgage payment (P&I), $90 for taxes, $110 for insurance. Rent in the area maxes out at $850. You need (8k/20 years for roof, 10k/25 years HVAC, 3k/10 years appliances, 10k/10 years plumbing) around $100 a month to cover maintenance. Mortgage plus expenses is 1100. The gap is 250 a month. Rent - expenses is 750 a month. Breakeven requires 3x the remaining time to pay the mortgage. 20 years left on mortgage needs 60 to break even.
    – Xalorous
    Commented Oct 31, 2016 at 18:30
  • Good point. After calculation one should ask: Am I willing to borrow money to invest? I feel like that this situation it should be a resounding "no" as there does not seem to be much ability to absorb set backs.
    – Pete B.
    Commented Nov 2, 2016 at 20:12
  • @Xalorous - I don't follow. You show a $250/mo gap, then say "rent - expenses is 750 a month." 60 years to break even? So rents will never rise, the gap won't be exceeded by principal payments? Ever? Commented Nov 13, 2016 at 22:31
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    Rent - Expenses is how much the house will make once the mortgage is paid. You'll be putting in 250 a month to cover the gap. I had the ratio flipped, the breakeven time is 1/3 of the remaining time of the mortgage. So if you have to pay in 250 a month for three years, then you'll break even in the fourth, and after that, the house will show a profit. But if it's 15 years to clear the mortgage, the profit won't start until five years after that. Each person would need to consider whether such an investment works for them.
    – Xalorous
    Commented Nov 15, 2016 at 17:01

first, let me reiterate what everyone else is saying about rental rates having nothing to do with your expenses. you should charge market rates. slightly higher if you want better tenants and slightly lower if you want to avoid prolonged vacancy. you can determine market rates by finding similar properties in your area and seeing what they are asking for rent. you will need to adjust for location, square footage, number of bathrooms, etc.

now that that is out of the way, here is a quick checklist of expenses that you will need to calculate and/or estimate for your specific property in order to decide if you should rent or sell:

  1. mortgage interest (you probably don't want to count the principle you are paying down each month). this is around 3-5% of the loan amount these days.
  2. lost capital (the amount of monthly income you would expect to get if you got your down payment back, or any other accumulated equity). 3-10% of your equity is a reasonable number.
  3. taxes. this is generally around 2% of property value, but varies wildly by state and even county.
  4. insurance. this is about 0.5-1% of your home value. you should already have homeowner's insurance, but you should probably upgrade to landlord insurance for slightly more money.
  5. maintenance. things like mowing the lawn and changing the furnace filter you might be able to pass on to a tenant. otherwise you might hire a service. also, you will need to do annual inspections and carpet care.
  6. repairs. when the furnace goes out or a pipe springs a leak, you are on the hook. estimates for repairs range from 0.5%-2% of the home value per year. a new roof might set you back 10% of the home value, but it is probably only needed every 15 years. the best estimates for these costs itemize every major item with an estimated lifespan and replacement cost.
  7. management costs. someone needs to be on call for emergency repairs, do annual inspections, follow up on tenant applications, late payments, etc. if you hire a management company, they typically take a percentage of rent. around 10% of rent is fairly normal, but rates vary widely and some management companies charge a flat monthly fee.
  8. appreciation/depreciation. this is normally actually an income rather than an expense. houses tend to go up in value in line with inflation. inflation in the us tends to be around 3% per year. however, in a bad market (e.g. 2009) house prices can go down dramatically.

if you add up all of the above expenses and it's more than the market rates for rent, you should sell. if the above expenses are below the market rates, then you need to consider if the profit margin is enough to justify the hassle and the risk.


I think you are trying to figure out what will be a break-even rental rate for you, so that then you can decide whether renting at current market rates is worth it for you.

This is tricky to determine because future valuations are uncertain. You can make rough estimates though. The most uncertain component is likely to be capital appreciation or depreciation (increase or decrease in the value of your property). This is usually a relatively large number (significant to the calculation). The value is uncertain because it depends on predictions of the housing market. Future interest rates or economic conditions will likely play a major role in dictating the future value of your home. Obviously there are numerous other costs to consider such as maintenance, tax and insurance some of which may be via escrow and included in your mortgage payment. Largest uncertainty in terms of income are the level of rent and occupancy rate. The former is reasonably predictable, the latter less so.

Would advise you make a spreadsheet and list them all out with margins of error to get some idea.

The absolute amount you are paying on the mortgage is a red herring similar to when car dealers ask you what payment you can afford. That's not what's relevant. What's relevant is the Net Present Value of ALL the payments in relation to what you are getting in return.

Note that one issue with assessing your cost of capital is, what's your opportunity cost. ie. if you didn't have the money tied up in real estate, what could you be earning with it elsewhere? This is not really part of the cost of capital, but it's something to consider.

Also note that the total monthly payment for the mortgage is not useful to your calculations because a significant chunk of the payment will likely be to pay down principal and as such represents no real cost to you (its really just a transfer - reducing your bank balance but increasing your equity in the home). The interest portion is a real cost to you.


I just wanted to add one factor to the other answers. The cost of maintenance etc. is not a fraction of the cost of financing - it is more likely a fraction of the value of the house, and a function of its age. If you say you need to replace a roof every 25 years, and that costs $10,000 (depends on the size of the house, obviously), then you need to set aside $400 a year for roof repair. Other costs (painting, flooring, kitchen, bathrooms, water heaters, heating, AC, yard upkeep etc) can be roughly estimated in the same way. A rule of thumb is 1% of the value of the house per year to cover all big-ticket maintenance. If you pay 4% mortgage, that would increase the reserve by 25%; but if interest rates rise, the fraction may be smaller (I remember paying over 10% mortgage...).

In general, whether keeping a property for long term rental income (with the potential for appreciation - but prices can go up and down) is a good idea will largely depend on your ability to predict future costs and value. If you have a variable mortgage, that will be harder to do.


Your reasoning is backwards. As others have pointed out, you cannot just decide how much you charge irrespective of the market. Let me paraphrase a little economics 101 to underline why you also should not think like this:

You can see a rental property like your house (the same reasoning is usually explained with the example of hotel rooms) as a series of perishable goods. Your house represents the potential sale of the January rent (which perishes once January is over), plus the February rent etc.

Your approach was to compute the total costs (all fixed and variable costs of owning that house as well as costs associated to renting specifically) and average them over the time period so that you know how much to ask at least.

Assuming that you are only looking to rent it out, not sell it or let a family member live there, you can't think like this. Most of those costs that you averaged are what economists call sunk costs. You have already incurred the mortgage costs and they are not affected by your decision to rent or not to rent. These costs are irrelevant to your decision making process. You only need to think about marginal costs: those additional costs that you have when you rent but not when you don't.

Look at the market prices for renting similar properties in that region and compare them with your marginal costs. As long as they are higher than your marginal costs, rent it out. This does not mean that you are sure to make profits, but it means that you are sure to make less losses than in your only alternative of not renting.

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    Correct me if I'm wrong, but wouldn't the sunk costs just be the costs that couldn't be made back by selling it outright? Or are you just talking about costs that don't increase the current value and therefore can't be made back in a sale (routine maintenance, etc.)? Commented Nov 1, 2016 at 18:37
  • You're wrong ;) en.wikipedia.org/wiki/Sunk_costs Commented Nov 1, 2016 at 18:53
  • @EJoshuaS All costs are sunk, even if you might make them back in the future. Commented Nov 2, 2016 at 20:47
  • @user7019377 According to the article you link to "...a sunk cost is a cost that has already been incurred and cannot be recovered." My point is that some of the costs can be recovered. If I pay $10,000 for a car and sell it later for $8,000, your sunk cost is $2,000 (not $10,000). Commented Nov 2, 2016 at 20:52
  • To be more specific, stuff you spend that increases the value of the house can be (at least partially) recovered. If you spend $1000 on something that increases the value of the house by $500, your sunk cost would be $500 (not $1000) because you could recover half the cost of the improvement by selling the house. Commented Nov 2, 2016 at 21:25

Agree with the previous posts the question is poorly worded.


Clark Howard does say you really need to be getting 90% back in the mortgage payment. Remember that what ever your paying in principle a month is adding to your net worth and every month that gets you a little more money than the last payment. Also this is a good hedge on inflation and at some point within a few years you will be at break even.

  • "you really need to be getting 90% back in the mortgage payment" - I'm still hoping you'll clarify exactly what this quote meant. Commented Dec 7, 2016 at 17:12

so if we rent it out we don't want to just charge what we're paying on our mortgage - we'd definitely be losing money if we did that.

I think you're overlooking one thing: your profit/loss is not monthly. Your profit is the property that's left after the mortgage ends. Even if you have to add extra $100 every month because you rent lower than the mortgage + maintenance + taxes, after 30 years you're left with property worth ie.$200k while you've paid for it ie. 30 years * 12 months * $100 = $36k.

You can rent it lower than your costs and still make a profit in the long run.


I think the mortgage must not be in the equation at all in order to determine how much to charge. Of course you want to cover your mortgage but the renting price is determined only by how much the renter is willing to pay (offer and demand) and not your mortgage (some people don't even have a mortgage).

In other words I think you should be charging a price based on similar rented houses.


In order to arrive at a decision you need the numbers: I suggest a spreadsheet. List the monthly and annual costs (see other responses). Then determine what the market rate for rental. Once you have the numbers it will be clear from a numbers standpoint. One has consider the hassle of owning property from a distance, which is not factored into the spreadsheet

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