How to estimate the rent?

Question

Hi All

I am primarily interested in rental properties (Buy and Hold Investments). While I was looking for SFHs and MFHs in my area and trying to analyze some properties I was getting confused regarding how to estimate the rentals I can earn from the property or specifically from each unit in case of MFHs?

Is this something you can estimate only by visiting the property in person or is there a way which can give a ball park range regarding the rents? What I am doing up till now is estimating the rents by comparing them from the rents asked by large apartment owners from apartment.com and rent.com for comparable units. Is this a logical way to get a rough estimate on the rents?

Using the above method I found that most of the properties would generate a negative or probably zero cash flow (though the returns from them would significantly reduce or even sometimes completely cover my rent but the overall cash flow is -ve or 0). Would such deals be considered good? OR good deals are only the deals that generate some +ve cash flow?

Thank you :)

Regards

Navya

Navya Rajput · Answer

Hi @Michael Lee

Thank you so much for the suggestion and help :)

Jim Adrian · Answer

I have seen the range of 1.1% to 0.8% of the property value based. The lower the value of the house the higher %. Use 1.1% for $100K house and anything over $200k use 0.8%. This is a guideline so remember market will dictate the price people are willing to pay. Craigslist is another source to use. Zillow seems low for my area. I would look at several sources and use a guide to create a check and balance.

examples

$100,000 x 1.1% = $1100 rent

$200,000 x 0.8% = $1600 rent

examples

$100,000  x 1.1% =  $1100 rent

$200,000 x 0.8% =  $1600 rent

Navya Rajput · Answer

Hi NA Beard

Thank you so much for the help :)

Jeff B. · Answer

Let's assume we're discussing apple/apple units ( same bed/bath, sqft & all amenities too), the FMR is certainly City specific and frequently further refined by neighborhoods.

On one city block, I've seen lows of 825 to 1150 and the differences were the exterior paint.

Don't assume there's one right answer.

Michael Lee · Answer

Hello and welcome to BP!  Probably, the best way to use rent is to see what similar units in that neighborhood are renting for.  If the numbers don't work on that one go on to the next one.  Be sure that you know what the capital expenses are going to be.  They can really screw up a deal if you don't calculate them.  If you decide to make a lower offer just let the owner know why.  Good luck!

Navya Rajput · Answer

Hi Jay

Thank you so much for the help. I'll definitely look at the site.

Thank you :)

Jay Orlauski · Answer

Sounds like your on the right track with looking at rental on apartment.com and rent.com- but remember that a lot of those are apartment buildings so it's not always comparing apples to apples when you are trying to find SFR & MFR rental prices. Here is one site that I and a few other investors I know called Rentometer @ https://www.rentometer.com/ . You can get some quick and dirty stats on the local rents in the area - you can put in the area code and number of rooms and the rent amount and it will tell you if the rent is too high too low or just right .. it tells you how many rental it queried and it also has supporting information available to show where they got the data from , but I think that info cost extra - hope that helps you.

How to estimate the rent?

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