Projecting Rent Rates on an Investment

8 Replies

Hi BP Family!

I’m currently analyzing and evaluating numerous properties for a potential househack. I’ve found that most properties I am evaluating will work for what I want to do in my market area of Raleigh, NC. Now, the problem becomes, can I still get my househack to cash flow after I move out without renting by the room? I’d much rather know I’m investing in a househack that would still cash flow if I decided to not rent by room.

My question is, I know what I can demand per room in the Raleigh area, but I'm a little lost when it comes to evaluating fair market rent for the SFH as a whole. Is there a certain way you've had success in determining fair market rent on your properties?

My goal here is to fully evaluate my deals both as a househack and a SFH rental. I'm hoping this will help with identifying a great deal amongst the many "good househack deals".

@Ryan Smith determining market rent is no different, then determining market sales price. You just look at the properties around your subject property that has been rented within the past 6 months and adjust for any differences (like extra room, garage, corner lot, etc). 

Renters are not as picky about specific finishes and from my experience, it is easier to rent a home with average upgrades than asking higher price for higher end finishes. 

But it also depends on the specific location and the price you charge. If you work with a realtor, ask them to send you rental comps as well when you looking at property to buy. That will usually help you figure out what your top purchase price should be in order to stay cashflow positive. Its pretty much the fastest way to figure out if property is yey or nay.

To @Jiri B. 's point, rentometer.com can help there. Also consider going to meet-ups and talk to folks who own SFH investment properties in the area. Real world evidence.

@Ryan Smith I have been in a number of different markets and Raleigh has been without a doubt the hardest to pull rental comps. The MLS seems to have very few, and Zillow hasn't been the most helpful either. I have used a combination of Zillow, Rentometer, and MLS to find my rates, but the best tool I have had is reaching out to property managers in the area. I found found 2 or 3 I trust and their numbers usually line up.

Originally posted by @Jiri B. :

@Ryan Smith determining market rent is no different, then determining market sales price. You just look at the properties around your subject property that has been rented within the past 6 months and adjust for any differences (like extra room, garage, corner lot, etc). 

Renters are not as picky about specific finishes and from my experience, it is easier to rent a home with average upgrades than asking higher price for higher end finishes. 

But it also depends on the specific location and the price you charge. If you work with a realtor, ask them to send you rental comps as well when you looking at property to buy. That will usually help you figure out what your top purchase price should be in order to stay cashflow positive. Its pretty much the fastest way to figure out if property is yey or nay.

 Thanks for the insight, Jiri. This helps a lot because I was also thinking on how to project rental rates if there were comparable properties with upgraded features. 

-Ryan

Originally posted by @Nick Schultz :

@Ryan Smith Have you checked rental rates on Craigslist, FB marketplace and Zillow? I've noticed SFH rent rates seem to be slightly less than by-the-room for 3/2s, but it is pretty close.

Hi Nick- I have scoured those places and have found a degree of success using each. My main question stems from the curiosity of what is the "tried-and-true" method that everyone uses or has found success in. You're correct in saying that the rent-by-the-room rate is very close, though. I appreciate your insight!

-Ryan

@Ryan Smith  

Hit a variety of sources and find the middle space that feels right to you:

Rentometer estimate

RE Agent and a local Property manager can answer "What are market rents for the area"... take advisement from both, not just one or the other

MLS/Apartments.com/Zillow/etc...: listings for rentals that actually leased...

Surf Craigslist and Facebook market for a few weeks... look for units similar to yours, call/message the listing and see how firm they are... if they're willing to drop $100-$150 a month without much fight, then that's your competition showing you how fast they would undercut you in a weak rental market.

Originally posted by @Ryan Groff :

@Ryan Smith I have been in a number of different markets and Raleigh has been without a doubt the hardest to pull rental comps. The MLS seems to have very few, and Zillow hasn't been the most helpful either. I have used a combination of Zillow, Rentometer, and MLS to find my rates, but the best tool I have had is reaching out to property managers in the area. I found found 2 or 3 I trust and their numbers usually line up.

 Interesting. I'll definitely reach out to property managers in the area and start making those connections. I appreciate the perspective!


-Ryan

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