When analyzing a prospective buy-and-hold, how do you account for super low rents?

When analyzing a prospective buy-and-hold, how do you account for super low rents?

Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes

Just curious what other investors do.  If you see a new rental come on the market for sale, and it has rents that are significantly below market (say, renting at 75% of market rate), how do you account for that when considering what kind of offer to make?

Assume, for sake of discussion, that the property is in average condition and could get market rent if a unit became vacant, and there is no rent control.

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  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    11y

    Base your offer on current rents being received.  You may know rents can be increased at turnover and you may include that in your pro-forma analysis, but only offer  based on what they are bringing in now.  Nice find @Kimberly T. !

  • Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    11y

    we immediately bumped ours up to just below market rents...

    $500 to $780

    $375 to $575

    Those at $780 wanted it in writing so we gave them a month to month rental agreement & we threw in a new stove for $375.

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