How to Calculate How Much to Charge for Rent in Utah (2024)

As a landlord, one of the things you need to figure out is how much to charge your tenants for rent. You want to make sure you are getting the most out of your investment and generating positive cash flow, but you can’t charge so much that potential renters pass on your unit for cheaper options.

Charging too low for rent not only means missing out on revenue, but it might also attract lower-quality tenants.

There are a few different considerations to be made when calculating how much to charge for rent. As a property and tenant management company in Utah, here is our guide for Utah landlords.

Based on Property's Value

One method for calculating how much rent to charge is to base it off of your property’s value.

A common rule of thumb in the industry is to settle on a monthly rental charge that is around 1% of the property’s market value. However, the rent amount for a higher-valued property probably needs to be less than 1% in order to attract enough tenants. It’s not uncommon to have good revenue-producing properties charging a monthly rate that is 0.5-.75% of the current market value.

In a normal and stable Utah market, you’ll find that many rental properties charge rent near this range, give or take a bit, but there is no definitive “rule”.

Based on Local Market

Rental markets are not always normal and stable, however. Utah has experienced higher-than-average demand in recent years with housing inventory being stretched thin.

It’s important to be aware of your local market: how much demand there is for rented housing, the quality of your property’s location, how your property size and amenities compare to other nearby options, and the cost of utilities in your area.

Demand

Obviously, higher demand means you can charge more for rent. That’s basic economics. But Utah landlords should closely monitor demand to make sure they understand what is driving it, and how it might be changing in the near future. Even if high demand allows you to charge more for rent, you still need to stay competitive within the local market.

Location

Certain neighborhoods and cities are particularly desirable for renters. Others may be notedly less desirable.

Figure out how your property’s location is perceived, and the amount other Utah landlords are charging for rent in their nearby property.

Elements that might make your location worth paying a higher rent for include:

Proximity to schools, dining, or shopping.
Higher property values and perceived neighborhood quality.
Special views of the city, nature, etc.
Proximity to water, especially water with recreational access.

Property Size / Tenants Per Unit

Multifamily property, where there is a high number of rentable units within the same property, have more opportunities to collect separate rent payments each month. These units can also be rented out to more than one renter at a time, like students who room together.

The size of your property and the amount of tenants per unit play a part in determining how much rent to charge. If each unit needs to make x$ per month in order for you to have the cash flow you need, that number can be divided up among multiple tenants per unit.

You’ll need to calculate not only how much rent payment you need the property to produce overall, but also what percentage of that amount will be reasonable for charging each individual tenant.

Utility Costs

Consider how much utilities cost on average for your property and work that into your calculations. You need to charge enough rent to cover utility costs while still making a worthwhile profit.

Based on Mortgage and Other Overhead Costs

No matter how much you feel your market will allow you to charge for rent, it won’t matter if it’s not enough to cover mortgage payments or any other overhead costs that come with owning the property.

At a very minimum, you should at least be charging enough rent to pay your mortgage with.

Consider What Ideal Tenants Will Pay

Don’t just set your rent rate for what you think most renters will pay, and call it done. Instead, consider who your ideal tenant is, based on your property class and investment strategy.

If you want the most stable and reliable tenants that are most likely to rent long-term, then you will probably set the rent higher (within the range of your local market) than you would if you were planning on renting to tenants in a low-income neighborhood, which are more transient.

But if you charge a rent that is too low for what your property could yield, you may attract tenants that don’t fit your ideal strategy.

Consider Seasonality

The amount you charge for rent may fluctuate seasonally.

In Utah, this is especially true for student housing property; rent is usually higher in the fall and winter months, when demand is higher and supply is lower. Then the rates drop for summer months when less students are living near campus, so demand is lower.

Assess Value of Amenities

Certain amenities may be rent-boosting features. But this only applies to amenities that are highly-valued by most tenants generally.

Some examples of amenities that might allow you to charge a little more for rent each month include things like pool/spa, heated/covered parking, on-site gym, dog park, on-site restaurant, special service, etc.

No Rent Control Laws in Utah

As mentioned before, Utah is not a rent control state. That means that the government does not regulate how much landlords charge for rent.

The government can still enforce anti-discrimination laws, however, which may include charging unequal/unfair rent amount based on discriminatory factors.

Experts in Utah Rental Markets

Our team at Joseph Thomas has years of experience managing our own Utah properties and those of our landlord clients.

We help Utah property owners set competitive rental rates and efficiently manage tenants for long-term success and revenue. If you’re ready for a property management partner to make your life much easier, let’s talk!

FAQs

What about rent control?

Some states (not Utah) have rent control laws, which regulate how much rent can be charged. If you own rental property in a rent-control state, you’ll need to adhere to those local regulations.

What are the 1% and 2% rules?

The 1% rule and 2% rule in real estate serve as rough guidelines for determining how much rent to charge, but they should not be used as hard-and-fast rules. For most markets in today’s world, these rules seem to be a little out of date. It’s more important to research your specific market and consider the elements covered on this page.

Joseph Thomas does not provide legal, tax, or investment advice. We recommend the reader consult their attorney, accountant, and/or financial advisor before making any personal investment decisions.

< Older Post

Share

Mail

Investment Property Types Ranked by Risk Level

By Camden • February 24, 2023

As a rental property investor, choosing the right investment property is crucial to ensure your success. There are various types of investment properties available in the market, each with their own level of risk. It is important to understand these risks to make informed decisions about where to invest your money. Below, we rank different investment property types by their risk level and provide insights into each of them. Understanding Investment Property Risk It is essential to understand the concept of investment property risk itself and the types of risk. Investment property risk refers to the likelihood of losing your investment or not getting the expected returns due to various factors such as economic conditions, property location, and tenant quality. The risk level of an investment property is dependent on its type, location, current state of the economy, market demand, and more. In general, the higher the potential returns of an investment, the higher its risk level. However, there is no guarantee that higher risk will always lead to higher returns.

What is the 2-out-of-5-years rule?

By Camden • July 7, 2022

The “2-out-of-5-years rule” is a rule related to the criteria that must be met in order for a property investor to avoid or reduce capital gains ... Avoiding Capital Gains Tax To understand the 2-out-of-5-years rule, you need to understand the desire for property owners to avoid or reduce taxes owed when they sell a property. To avoid paying more than they have to in taxes, many property investors take advantage of opportunities such as the 1031 exchange process or “home sale exclusion” tax breaks. The 2-out-of-5-years rule is one of the criteria that must be met in order to qualify for the home sale exclusion.

Emotional Support and Service Animal Laws in Utah

By Camden • June 29, 2022

For anyone renting to tenants in Utah, it’s important to be aware of current laws regarding emotional support and service animals. This is a Utah landlord’s guide to animal laws to help you decide on your policies. Definition of an Emotional Support Animal in Utah Emotional support animals, often dogs or cats, help people with mental illnesses such as depression or anxiety by providing comfort or support. Emotional support animals (ESAs) are not trained to do special tasks like service animals. ESAs are not permitted to be in public places where pets are prohibited. The designation of an animal as an ESA is not something a renter can claim for themselves independently. Official ESAs must be prescribed and designated as such by a licensed mental health professional (see “ESA Letter” below ). Emotional Support Animal (ESA) Letter For a pet to be considered an emotional support animal under Utah law, the handler must have an official ESA Letter from a licensed mental health professional. Mental health professionals have screening measures to help determine if an individual qualifies for an emotional support animal. ESA’s have less rights than service animals, and are not covered under the American Disability Act. Definition of a Service Animal in Utah Service animals are animals that are trained or are being trained to provide some sort of service or carry out specific tasks for a person with a disability. Service animals must be permitted public accommodation with their handler. Although some animals such as miniature horses can sometimes be used as service animals in some states, only dogs may qualify as service animals under Utah disability rights law. Service dogs in Utah may be trained for tasks such as helping the deaf, blind or visually impaired, or seizure prone. There are also dogs that are specially trained to alert their handlers about the presence of dangerous allergens or to help with psychiatric services such as preventing self-harm, reminding handlers to take medication, or providing calming measures during psychological distress. Service animals are protected under the American Disability Act.