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The rent will cover all of your costs only if it is larger than your mortgage payment, property taxes, insurance, management, routine repairs, savings for big-ticket replacements and an allowance for vacancy, added together. Most new investors count the first three and forget the rest, which is how a rental that looks profitable on paper ends up costing money every month.
This guide walks through every cost a Michigan single family rental carries, shows a clearly labeled example, and explains what to do when the numbers come up short. JMZ Management has managed rentals across Metro Detroit for more than 20 years, and this is the same math we walk owners through before they buy or list.
Write down each of these as a monthly number:
If you want a deeper list, our post on expenses rental investors underestimate covers the ones that surprise people most.
Your rent number should come from comparable rentals that leased recently, not from listing prices or a website estimate. A rental analysis compares the home to similar rentals nearby by size, condition and features. Our guide on how to set rental rates in Metro Detroit explains how that comparison works.
Example only. The numbers below are made up to show the math. They are not a market estimate for any city, and the interest rate is an assumption, not a quote. Replace every line with your own quotes.
Total example costs: about $2,143 per month, against $1,900 of rent. In this example the rent does not cover the costs, and the owner would be about $243 short each month before any tax effects. That is exactly the kind of result you want to find before you buy, not after.
Taxes, insurance and repair costs change. So does market rent. Review the home's income and costs once a year and decide whether to raise the rent at renewal. JMZ owners get monthly statements, a year-end 1099 and an annual statement through the AppFolio owner portal, which makes this review easier.
Add up your monthly mortgage, taxes, insurance, management, maintenance, capital reserves and a vacancy allowance, then compare that total to a realistic market rent. If the rent is larger, the home covers its costs.
The most commonly missed costs are capital reserves for big replacements, vacancy and turnover, non-homestead property taxes and management fees.
JMZ Management charges 10% of monthly rent with a $100 monthly minimum, with no management fee while a home is vacant, and a residential leasing fee equal to the first month's rent.
Usually, yes, because a rental generally does not qualify for Michigan's Principal Residence Exemption. Ask the local assessor for an estimate based on non-homestead status.
Some investors accept it when their goal is long-term appreciation and loan paydown, but it requires cash to cover the gap every month and carries more risk if values do not rise.
Rent covers your costs when it beats the full list, not just the mortgage. Build the budget with real quotes, a realistic rent and honest reserves, and you will know before closing whether the home pays for itself. At JMZ Management, your property is our business.
This article is for general information only and is not legal or tax advice.
Want to know what a home will really rent for? Get a free rental analysis at jmzmanagement.com/freerentalanalysis or call 248-284-6990.
CONTACT US to learn more about professional property management in Michigan.