Fair market rent is a tool that can be used to assist both tenants looking for an affordable apartment and landlords who wish to occupy their properties. While it is not a hard or absolute limit, fair market rent can be a great starting point for all parties involved.
What is Fair Market Rent
Fair market rent is a standard price of rent in any given area. It is calculated across the US and it can inform tenants what price they should look for and landlords what price they should set. To find FMR (fair market rent) in your area visit this website.
Fair market rent is not the end all be all of the pricing, however. Each unit/property is going to be unique in what it offers. Thus pricing should reflect that. FMR is also dependent on the size of the apartment. For example, if you have two bedrooms versus one FMR will be higher for the two-bedroom unit.
How to Determine Fair Market Rent
To understand FMR, we must understand how it is calculated. Firstly, it is not a private firm that calculates the FMR, it is the government that calculates this. More specifically the Department of Housing and Urban Development or HUD.
To calculate the FMR value HUD finds the 40th percentile of rent paid in an area. So, out of 100% of the range of rent paid, HUD looks at the 40% mark of that range. Importantly, this only includes standard apartments. This means that low-quality housing or 2-year-old or less apartment buildings are not considered for FMR.
However, the HUD doesn’t have exact access to rental agreements all across the country. This means that instead of the FMR being based on exact numbers, it is an estimation based on the census and surveys. This means that the FMR is not the perfect pricing option but is instead just something to consider and use as a guide or starting point.
No matter if you use fair market rent or not, you still need to list your property so that you can find a top-quality tenant to stay in the unit. For more information on where and how to list your properties for rent, visit this blog post.
Fair market rent is simply a tool that can be used to help the rental process for every market. No tool is going to be perfect, so considering a variety of factors is always going to be the best path forward. Use FMR in consideration with other pricing options to find the best price for your property.