I won\u2019t quote something I recently came across, so as not to embarrass anyone. They were surely well meaning. But seriously, some of what I\u2019ve read lately about establishing rents and vacancy rates are, um, wanting at best, and hopelessly misleading at worst. Some of the advice has been off the wall.<\/p>\n
Here\u2019s something ya don\u2019t wanna do in your attempt to find out neighborhood rents.<\/p>\n
Possibly the #1 mistake would be asking the local real estate agent. That\u2019s not in any way a slam on house agents. I used to be one. However, knowing rents, generally speaking, isn’t in their job description. Chances are, your kid\u2019s history teacher, who owns a duplex down the street is a far better source than the agent who sold you your home.<\/p>\n
So how do you, a real estate investor, find out what rents are on that property you’ve your eye on? Since you’re investing real money I suggest you, or someone you trust, do the following. (Of course, this in addition to getting estoppel agreements from the tenants when you buy. Always<\/strong> get those.)<\/p>\n 1. Grab a clipboard\/pen\/paper.<\/p>\n 2. Head out to the neighborhood and park your car.<\/p>\n 3. Spend as much time as possible talkin\u2019 to tenants, on site managers, and others you see, in person, belly to belly.<\/strong><\/p>\n 4. Make note of \u2018For Rent\u2019 signs and their phone numbers, then call them while standing there<\/strong>. Ask the pertinent questions.<\/p>\n 5. Make extensive notes about the interiors\/exteriors of everything you see. I bring a camera when I do rent surveys.<\/strong> I make a note of the order of what I see, and describe the picture I took, in order to make it easier to match pics with market info.<\/p>\n Here are just some of the questions I usually ask:<\/p>\n What\u2019s the rent? The deposit? How thorough is their background check? Do they take Section 8? In their opinion, are they under rented for the neighborhood?<\/strong> Silly question? Not in my experience. Many landlords, for myriad reasons, mostly subjective, keep their rents lower than everybody else\u2019s. Sure, you\u2019ll figure that out while doing this \u2018boots on the ground\u2019 rental survey. But how much better to hear it from the owner’s lips straight up? What\u2019s the square footage. (take the answer to that one with a grain or five of salt)<\/p>\n On site managers as a breed, love to help those not tryin’ to BS them. I tell ’em exactly who I am, and what I\u2019m doin\u2019. They appreciate the honesty and the chance to strut their stuff. It\u2019s similar, only much mo betta when you run into the occasional owner occupant of a multifamily property. Think they pay attention to rents? You bet. They\u2019re almost always pure gold.<\/p>\n 5. Visit, in person, all the local professional management companies in the narrowly defined area.<\/strong> They want your business. The caveat, is they sometimes tend to understate their vacancy rates. Duh.<\/p>\n Try to talk with several tenant\u2019s in a building if possible. See a maintenance guy around? They\u2019re solid gold info machines.<\/strong> Take him around the corner to Starbucks and pump \u2018em \u2019till the well\u2019s drained. It\u2019s more likely than not other owners in the area use him too.<\/p>\n The highest quality source are other income property owners.<\/strong> You\u2019re thinkin\u2019, well duh, of course. Yeah, me too. But after having read what’s available these days in some places, not one said to query income property owners themselves. Go figure. They can also tell you things only long term locals would know. Who maintains their property better or worse than others? Or, who\u2019s experienced an outa whack string of vacancies recently. Drugs maybe? Check it out — now<\/strong>.<\/p>\n And yes, look at Craig\u2019s List. A word to the wise though \u2014 use it as your secondary data source<\/em>. Asking prices for rents are equivalent to pending sales \u2014 not worth all that much. Tellin\u2019 potential buyers for your property that the guy down the street is \u2018askin\u2019 $1,200 for his new vacancy\u2019 usually doesn\u2019t cut it.<\/p>\n Again \u2014 amateur night.<\/span><\/p>\n In the end, the more time spent with your own boots on the ground,<\/strong> the more hard, reliable data you\u2019ll accumulate. Can\u2019t tell ya how many times, workin\u2019 for the seller or the buyer, that my first hand knowledge<\/strong>, based upon my own size nines, made the difference. It\u2019s called income property for a buncha reasons, not the least of which is \u2014 the value is based upon the property\u2019s income stream, quantitatively and qualitatively.<\/p>\n If you don\u2019t know the facts, you could either miss out on a good deal, buy a pig in a poke, or find yourself out of a sale you thought you had.<\/p>\n Over the years, I\u2019ve saved clients literally millions of dollars both in acquisitions and sales cuz I was able to undress the other side\u2019s baseless claims for rent. If I said rents should be higher, I always had empirical, documented evidence<\/strong> awaiting any skepticism. It works almost every time it’s tried.<\/p>\n Real is real.<\/strong><\/span><\/p>\n The best result an income property investor is when you or your advisor does what I\u2019ve recommended here, happily discovering the rents are easily X% below market. Talk about some pretty quick equity gain.<\/p>\n There\u2019s more, but you get the picture, right? Driving the neighborhood, or Heaven forbid, askin\u2019 the local real estate agent, is the surest way to stay woefully ignorant about what might be the most important data required for the sale\/exchange\/purchase of income property.<\/p>\n","protected":false},"excerpt":{"rendered":" I won\u2019t quote something I recently came across, so as not to embarrass anyone. They were surely well meaning. But seriously, some of what I\u2019ve read lately about establishing rents […]<\/p>\n","protected":false},"author":555,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[1672,190,966,1712],"class_list":["post-20031","post","type-post","status-publish","format-standard","hentry","category-real-estate-business-management","tag-fair-market-rents","tag-landlord","tag-lease","tag-rents"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/20031","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/555"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=20031"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/20031\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=20031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=20031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=20031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}