Does This Rent Seem Low To You?

Question

Hi All,

We have yet to close on our first deal, and I am being very cautious when it comes to our first purchase. That being said, I've found a 4-Plex currently listed at $290k, all with 3 Bed/1 Bath units. (Each one has 1100 Sq. Ft.) I requested information from my realtor about the rent rolls expecting them to be in the $900-$1000 range, but found out each one is currently rented for $700 per month in a non rent-controlled area. I understand we are currently in a seller's market and the owner is surely trying to get top dollar for their property, but that still leaves the question as to why the rents are noticeably lower than market for that area. Any opinions? Thanks!

-Ryan

Grant Rothenburger · Answer

@Ryan Mattson Hopefully just a lazy landlord/PM. Could also be that the units are outdated and/or in disrepair and the market rents you have are for updated units.

Cara Lonsdale · Answer

Without knowing any info about the property, the area, or anything else, it is hard to speculate.  However, I would look at the nearest apartment community to compare rates on a multi-unit as it most similarly compares.  Hopefully you aren't using rental rates from SFR as those would be expected to fetch more rent.

If it is just about a lazy/uniformed owner, GOOD FOR YOU.  Take that gift and run with it.  You can just plan on raising rents as the leases renew.

Kyle Mccaw · Answer

I am always amazed at how investor justify not increasing the rent.

1) afraid the tenant will move and they will have a vacancy / it will cost money to make ready -

tenant doesn't ever move because it cost money to move and the new place will cost more anyway.

2) they feel sorry for the poor tenant - this isn't a charity. it is a business

3) they don't know the market rate - that is their bad for not being a good investor / manager

4) they have a lazy manager - the world is full of lazy managers