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Beginner Question about performing Rental Comps

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Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 19 '13, 10:03 PM


Hello everyone! I'm a first time poster that has been in search of a great real estate investing forum, and hopefully I've found it!

One of the problems that I have when trying to look at potential properties that I'd like to make my first purchase is, figuring out property and rental comps. I usually go to the county auditor's website for my area to find the history, sales prices and ect on the property I'm looking at with accuracy and success, but the one thing I can't get a very accurate idea is rental comps.

I know the general rental rates are in my area, but how do I best determine them if I don't know what someone down the street is paying, or someone a few blocks over?

Is there a good site that has rental information regarding to current rental comps? Or is just knowing the general rental rates in my area enough to suffice?

Thanks!



Ned Carey Moderator

Wholesaler from Baltimore, Maryland

Feb 19 '13, 10:54 PM


Well and agent can pull them for you from the multiple listing. However in my area the multiple list does not list the majority of rentals. There are sites like RentoMeter or Pad Maper that can help. Just search for sites that list rentals. Rental prices especially from large apartments or rental companies tend not to be very negotiable so prices for rentals that are available are a pretty good guide.

Networking with other landlords or property managers can be a big help too. Lastly call or knock on doors to find out rents.



Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 20 '13, 10:36 AM


Thanks for the great information.

I found that RentoMeter appeared to be more helpful. My range was pretty much spot on, however I was on the lower end of that range, but I believe it's justified due to the location.

Pad Mapper was no help at all. I live in a small town of roughly 17,000+ residents, and there is not a lot of rental postings online for my town.

I prefer to start in the town I know best and can easily manage potential properties myself due to my lack of experience and wish for higher margins by doing the work myself.



Mike H.

Real Estate Investor from Manteno, Illinois

Feb 20 '13, 02:04 PM


Try craigslist, zillow and realtor.com.
You can get actual rental listings on there and see what other homes are going for. Do NOT use zillow for the rent estimate. Just use them
to view actual rental listings.

For the most part, rental listings are the actual rent that the owner is going to get. Its not like selling a house where the list price and eventual sales price are rarely the same.

So once you can see the rental listings, you can figure out what your house should rent for. 3 bdrm, 2 bath , 1500 sq ft built in 88...... Rental listing for 1,300.



Steve Babiak

Real Estate Investor from Audubon, Pennsylvania

Feb 20 '13, 05:19 PM


Originally posted by Mike H.:
...
For the most part, rental listings are the actual rent that the owner is going to get. Its not like selling a house where the list price and eventual sales price are rarely the same.
...

That usually works, but I've seen ridiculous asking rents that no tenant would be willing to pay; for example, in a roughly $1200 neighborhood for "fair" rent (+/- $50 or $100), and somebody asking $1600 - tenants aren't willing to pay that kind of money way over the "fair" rent in that area. So you sort of have to have an inkling of what the fair rent should be.



Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 20 '13, 05:59 PM


Great information everyone! Thanks for the help!

I have a pretty good idea of what the potential rent should be, and I've got some great reading material to further refine my findings.

I've got a few things to do before I actually make an offer on the property, but now I've got to figure out the best way I can purchase the property.

The property is listed at just over $15,000 and needs roughly $5-10,000 in repairs, and comparable comps in the area for this kind of house would be roughly $50-55,000.

So with purchase price and repairs, I'm looking at a rough estimate of $20-25,000 investment (not including taxes and closing costs or other MISC costs).

I'll have roughly $14,000 in cash in approximately three weeks, but I do not want to wait. I'm thinking of after looking at the property, of making an offer of $13-14,000 with an Earnest money deposit of $5,000 to the bank and hoping it gets accepted, giving me the time needed to pay for the rest of the property in cash.

The rest of the cash is coming from my Federal Income Tax Refund, which should be here soon.

I've never made an offer for a property for investment purposes, nor an all cash offer. Any potential issues?

I do not have a approval letter either since I plan on paying for the entire property in cash, and I do not currently have a statement to reflect the $14-15,000 in bank statements either (Only around $7,000 at the moment.)



Kyle J. Donor

Real Estate Investor from Northern, California

Feb 20 '13, 06:38 PM


Originally posted by Scott Bartlet:
Great information everyone! Thanks for the help!

I have a pretty good idea of what the potential rent should be, and I've got some great reading material to further refine my findings.

I've got a few things to do before I actually make an offer on the property, but now I've got to figure out the best way I can purchase the property.

The property is listed at just over $15,000 and needs roughly $5-10,000 in repairs, and comparable comps in the area for this kind of house would be roughly $50-55,000.

So with purchase price and repairs, I'm looking at a rough estimate of $20-25,000 investment (not including taxes and closing costs or other MISC costs).

I'll have roughly $14,000 in cash in approximately three weeks, but I do not want to wait. I'm thinking of after looking at the property, of making an offer of $13-14,000 with an Earnest money deposit of $5,000 to the bank and hoping it gets accepted, giving me the time needed to pay for the rest of the property in cash.

The rest of the cash is coming from my Federal Income Tax Refund, which should be here soon.

I've never made an offer for a property for investment purposes, nor an all cash offer. Any potential issues?

I do not have a approval letter either since I plan on paying for the entire property in cash, and I do not currently have a statement to reflect the $14-15,000 in bank statements either (Only around $7,000 at the moment.)

You won't need an approval letter since you're not making a financed offer, but you will likely need to show proof of funds. Whenever I make all cash offers, I submit proof of funds with my offer. In your case, you might run into a problem with them not even considering your offer since it's based on some amount of money you'll potentially receive in the future.

Also, as a side note, if $14k is all you have (or will have once you get your refund), you're not leaving much for repairs/reserves. It's always good to have an appropriate amount of money in reserves for those unexpected expenses that WILL come up at some point.



Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 20 '13, 07:24 PM


I should have posted the second part of my plan to get the money to fix up the property to a acceptable level for rental.

I was planning on taking a personal loan out using the property as collateral, therefore providing the money required to fix up the place.



Steven Hamilton II Verified Moderator

Real Estate Investor from Lake Villa, Illinois

Feb 20 '13, 08:29 PM
1 vote


Scott Bartlet,

You may want to consider going forward adjusting your withholding so you are not receiving such a large refund. Why would you hand ~7k to the government over the course of the year. If you had put it into savings you could have bought a property by now or even two!

-Steven



Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 20 '13, 08:42 PM


Steven,

You make great points and I've thought about it, but truth be told, I'm still a very inexperienced investor still trying to learn what I could do and ect.

By savings, are you referring to just a regular SA (Savings Account) or CD's, or other types of savings with investment in funds or stocks?

I know by claiming a higher withholding that I am losing interest and opportunity costs.

I earn an average salary for the geographic area I live and work, and I believe the reason I get such a large return is due to my dependents and qualifying for earned income credits.

Once my wife begins her teaching career, I know those credits will disappear and my refunds should drastically shrink compared to the large amounts I receive now. With saying that, I'm not a tax expert or even knowledgeable in tax areas.



Steven Hamilton II Verified Moderator

Real Estate Investor from Lake Villa, Illinois

Feb 20 '13, 08:47 PM


Scott Bartlet,

It really doesn't matter what type of account as long as it earns something. Even consider some type of temporary lending. Even $1 in interest is more than you are earning by giving it to Uncle Sam to use. Not to mention you do not have access to it when you need it.

Talk to your accountant throughout the year and plan accordingly. Once you have investment income over $3,200 the EIC would disappear anyway.

-Steven



Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 20 '13, 09:10 PM


Thanks for the help Steven!

Back to the post Kyle J replied to about:

So, If I've only got the 7k in the bank RIGHT NOW, and the rest of what I need coming in, say 21 days or less...

What are my options without trying to get financing? I was hoping to send a large earnest money deposit to show my seriousness in my offer, but it'd have to be 5-7K. Obviously I can not show proof of funds yet until the tax return comes in (which will be less than the 21 days).

So, if I want to make an offer, what can I do? Make the offer anyway and see what happens? Will they ask for proof of funds, with in days of the offer?

So, to recap the situation:

I've found a property about two blocks from my personal residence, that is listed around $15,500.

It's a 3 BR, 1 BA with 1,110 sq, and is in need of repairs. The roof and exterior (siding) look to be in decent shape. There is no garage or shed, but does have central air.

The inside appears to have been trashed, new flooring, patch several holes (dry wall), the kitchen needs replaced and I believe the bathroom will also. (This is just from looking in the windows so far, I'm scheduling a tour shortly).

I estimate at least 5K in repairs, with no more than 10K total. I should be able to rent the property out at $500 to $600 monthly.

I hope to submit an offer of either $14,000 - $14,500 and then taking out a personal loan using the property as collateral to get the money required to rehab the place to rent-able standards. I know I'm taking a big risk here by spending all of the cash I have available and becoming cash poor, but I'm prepared to take that risk.

So, I want to make an offer for all cash with having 7k in the bank with the other 7k coming in less than 21 days, but I feel if I wait that long, the property will be gone. So, I hope to send an offer with a EDM of 5-7K and no proof of funds, hoping that it buys me enough time to get the rest of cash I'll need (my refund). Also, I'll want to get an inspection.

Reasonable? Possible? Worth a shot? Risks? (Sorry for the long posts, but I wanted to post as much info as possible for the most informed replies.)



Steve Babiak

Real Estate Investor from Audubon, Pennsylvania

Feb 21 '13, 08:09 AM


Originally posted by Scott Bartlet:
... I was hoping to send a large earnest money deposit to show my seriousness in my offer, but it'd have to be 5-7K. ...

I hope to submit an offer of either $14,000 - $14,500 ...

I might make that big of an earnest money deposit on some of my purchases, but they are offers for several times your offer amount. I think you are putting in too much of an EMD, and should scale that back to no more than $2K or $3K (and maybe even less than that at those offer amounts).



Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Scott Bartlett

Real Estate Investor from Fremont, Ohio

Feb 21 '13, 03:46 PM


I was hoping that a bigger earnest money deposit would get a deal accepted without having to show proof of funds to purchase the rest of the property. So, therefore giving me the time needed till my refund comes in about two weeks or so now./



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