Real Estate Investing Basics

Newbies: Before You Buy Property, Gauge Your Rental Rates. Here’s How.

Expertise: Personal Development, Real Estate Deal Analysis & Advice, Real Estate Investing Basics, Business Management
42 Articles Written

Truly understanding rental rates in any area takes a lot of time and experience. Most people go to Craigslist for a few minutes and think they understand rental rates. That’s not a good idea, and we’ll get to that in a minute.

If you don’t have time or experience, it’s best to leverage information from those who do and learn from their experience.

How Much Rent Can I Expect?

The beauty of investing in real estate is that you don’t have to do everything yourself. If you want to know what a property might rent for, ask someone (the property manager) who optimizes rental rates for a living. Here’s the best way to do it:

Related: The Newbie Challenge: 30 Steps to Get Started in Real Estate in 30 Days

Give a local rental agency a call.

Ask about their services and how much you could expect in rent in a given area or for the type of house that you’re considering buying. It’s free to have a consultation, and in just a few minutes you could walk away with a decade of rental knowledge for that area. They might even be able to tell you what’s the most profitable route for buying.

Go to a few local rental agency websites.

See what they charge for homes/apartments in your area. The job of a rental agency is to maximize profit and minimize vacancies. If they are getting more than landlords on Craigslist, then find out why and copy them. Rental agencies don’t inflate prices above what people will pay or they will lose money from vacancies.

Call a rental agency to gauge pricing.

Many property management offices use software that monitors how many people are looking at rentals in an area at a given time and adjusts price to reflect demand. You don't need this software; just call a rental agency that uses it (larger rental agencies) and ask what they are charging for different sized homes/apartments. Call a few times a year to see how things are changing. They get almost instant feedback about demand and can anticipate changes quickly. Rainmaker is an example of this software.

Bonus Leverage Tip

Sit down with a property manager and tell them your plan. Hear them out. It can be good to have someone else do the managing for you. Ask them where they would invest if they had the amount of money you have. If you sat down for a half hour with 10 different property managers that each had 10 years’ experience, you would gain 100 years’ experience in 5 hours. Leverage the knowledge you need.

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” – Archimedes

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Many people turn to Craigslist to see what rates to expect. If this is what you’re thinking, then you can see this article as an intervention. Stop.

While Craigslist is great for finding tenants, it is not so good for determining rental rates. When your average amateur landlord is having a hard time finding a renter on Craigslist, they don’t usually work on their advertising or marketing or even try to provide more value to renters; they simply lower the price.

Related: 5 Harsh Realities About Real Estate Investing Every Newbie Should Know

People go to Craigslist for the same reason they go to Walmart; lower price is more important than quality. You may not want these renters.

If property managers are able to get more profit than landlords (they usually are), copy what the property managers are doing, i.e. using professional photos, offering amenities, including well-written house descriptions and employing websites for advertising. Whatever you do, don’t try to compete by lowering your prices. Add more value instead. People are paying you for the value your property provides for them. What do the most expensive places offer? Can you copy that and get the rates they do? Do rental agencies focus on a certain area? Maybe you should, too.

Experienced investors: What tips would you add? Newbies: How are you going about gauging rental prices in your area?

Leave your comments and tips below!

Brett Lee is a licensed Real Estate Broker in Portland Oregon where he helps people achieve a better future so they can do the things that truly make them happy. Brett is also a buy-and-hold investor, property manager and investment advisor.
    Adolfo Zamora Real Estate Agent from Burbank, California
    Replied almost 6 years ago
    Hi Brett, I am new to investing and looking to invest on an out of state property. I currently reside in California, however it is getting to expensive out here. I was thinking of investing in turnkey properties perhaps Ohio? I would greatly appreciate any input or advice you can give me.
    Brett Lee from Portland, Oregon
    Replied almost 6 years ago
    I’m writing about exactly this for my article next week. I would be careful because you are going to have management and maintenance costs and less income with a cheaper house. Let’s say you can get $2,000 a month for a home in Cali but only $500 a month from a place in Ohio. The place in Ohio may cash flow more as a percentage of the mortgage but maintenance costs will be similar between the homes. Replacing a fridge on a $2,000 a month property will be nothing but it will be 2 months rent on $500 a month property. While they are cheaper it may not be worth it to manage 4 houses at $500 a month or 1 house at $2,000 a month. Be careful in your analysis.
    Mark Shaffar Real Estate Agent from Madison, Wisconsin
    Replied almost 6 years ago
    I’m curious about what the author Brett and other BPers suggest for adding value for a renter. Off the top of my head: clean freshly painted and carpeted a thorough inspection to make sure everything is in working order
    Brett Lee from Portland, Oregon
    Replied almost 6 years ago
    Get online ratings from your tenants or something that says you’re awesome, testimonials. Everyone has a bad craigslist story. You can add amenities like washer and dryer and dishwasher. Talk about the benefits of where you live. If you can’t think of anything ask your renters why they chose your house and what they like about it. Tell people where it’s near if shopping is close or it’s a good safe place to walk.
    Brett Lee from Portland, Oregon
    Replied almost 6 years ago
    If there are good schools nearby parents love that.
    Joey Wharton from Colorado Springs, Colorado
    Replied almost 6 years ago
    Good tips thank you! I most definitely agree with adding more value vs lowering rent, however I disagree on Craigslist, as most property management companies, apartment complexes and leasing agencies list their properties on Craigslist, at least in my area. Its the go-to rental place. Yes, CL has a Walmart-ish factor, and more than likely people searching CL will not want to pay a fee upfront to see properties as the nature of CL is free. Most people searching will scour CL, unless they just want to hand over the search to a company and budgets are high, which also means specialty properties. Most of us property owners are own mass market properties. What’s important is to have a good ad with clear contact instruction and info so to minimize spam. Although CL may not be the best source for determining prices, you need to know what your competition is.
    Ryan Ball Rental Property Investor from Chicago, IL
    Replied almost 6 years ago
    Rentmetrics and Rentometer are good sources for gauging the going rents in a neighborhood. I think they source data from a number of sources including Craigslist. Some of our places come up on these websites, with accurate info and I believe our property management company only advertises on Craigslist.
    Replied almost 6 years ago
    Bingo! I learned about Rentometer on BP, checked it out and raised my rents! I saw what other properties in my area were charging and realized that I was under market-rate. In regard to CL, I have never had a problem finding great tenants using this site. I have a lot of photos and a catchy, succinct ad line.
    Ayodeji Kuponiyi Investor from King of Prussia, Pennsylvania
    Replied almost 6 years ago
    Very great post Brett! I’m definitely going to call rental agency because I’m trying to rent out a unit from my duplex. I also plan to buy in upcoming and safe neighborhoods so rather than spend hours looking online, I’ll call some agencies to get an exact area to look into. Thanks for this post.
    Christopher Moran from Pueblo, Colorado
    Replied almost 6 years ago
    In general, Craigslist is THE single best, most comprehensive, easiest, and most up-to-date source of data for gleaning this exact information. Spending an hour researching Craigslist, and then testing different ads yourself, is exactly what newbies should be doing… and most everybody else too, including property managers. Ignoring Craigslist as your primary source of rental market data, is akin to completely ignoring the market.
    Mark Shaffar Real Estate Agent from Madison, Wisconsin
    Replied almost 6 years ago
    I know when I pay a property manager to find tenants for me their first stop is craigslist.
    Matt Slakey Investor from Salem, OR
    Replied almost 6 years ago
    Thanks for the article (and discussion)! As far as amenities, I have read that the more appliances (washer, dryer, dishwasher, garbage disposer) you have, the more things that will need to be replaced. When are those amenities a asset and when are they a liability?
    Tyler Nord Engineer from Portland, Oregon
    Replied almost 6 years ago
    Thanks @Brett Lee! As soon as we find our next investment, we will be renting out our current home. As a fellow Portlander, can you recommend websites or advertising sources that we should consider other than Craiglist? What have you found that is effective in our market?
    Karen C. from South Bend, Indiana
    Replied almost 6 years ago
    Would anyone reading this article or even the author consider Zillow an accurate reference to gather information on setting rental prices? If I compare the rentals prices others are asking for in areas of the city, would that be a good starting point if I want to manage my own property?
    Holden Latimer Investor from Salt Lake City, Utah
    Replied almost 6 years ago
    Some really great ideas for gauging the rental market. I agree with comment that a CL like service probably is a great first stop. In my market classifieds are dominated by KSL (a news agencies who’s classifieds were big online before CL and have dominated this market) where most rentals are listed. I know my investing friends have their rentals listed there by managers as well. Because of this I don’t know how much added insight I could get from PM themselves. Another resource I use is which seem to provide fairly accurate information in my market. The biggest thing for my rentals is that I really try to add value when compared with my sub-market. While marketing strategy is important offering a quality product really makes listing and renting much easier. As they say you can’t put lipstick on a pig.
    Christopher Moran from Pueblo, Colorado
    Replied almost 6 years ago
    I totally agree. Offer a quality product. Be better than the competition in some way. For me, I usually include a washer & dryer and dishwasher on basic rentals. Also, I allow dogs in nicer rentals. Most nicer places here do not allow dogs. Because I do allow them, my good tenants are basically locked-in. The benefit of long-term quality tenants, has outweighted the extra maintenance and cleanup expenses associated with dogs. To some degree that is luck, but it also seems partly attributable to screening; model tenants often have model dogs. I also like Brett’s suggestions to then show off your quality product: professional photos, testimonials, and descriptions of why people like living there.
    Jerry W. Investor from Thermopolis, Wyoming
    Replied over 5 years ago
    Brett, Thanks for the article. Figuring out what to charge for rent is difficult. I like the idea of value add and have done a few of those.
    Rajpuneet Singh Sandhu
    Replied 24 days ago
    I have never bought a property but I have been listening to the BiggerPockets podcast for quite sometime now and a lot of guests have said that they have rented out their property through Craigslist. After reading this article I don't know who to trust.