We have a couple who has rented a home from us for 20 years (long before we decided to take real estate investing seriously). We're currently renting it for $2300.
We know we need to increase rent on the property, but how much? One online estimator (Bigger Pockets) says rent should be about $2800, and another (Zillow) says $4800. That's a wide gap!
What's the smart way to determine rent on this property?
Real Estate Consultant · Austin, TX · Member since 2020 · 95 posts · 88 votes
4y
Have you hard of rentometer? Thats a great way as a non-realtor to get a baseline and compare current active listed rentals in the area to get a baseline.
In the end, the most accurate way would be to get with a realtor in that area to check previously closed leases!
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
4y
Rent pricing is actually set by the market - supply and demand. And, the best way to gauge it is to compare your property (bed/bath/size) to others that are listed for sale. You can simply go to realtor.com, select Rent, type in the zip code of your property, and you can even choose the property type. That will give you the listings that are available for rent in your market. From that point, you can compare your property to those most comparable to yours. There are algorithm pricing sites available as well but the real power is knowing your market, the demand for rentals, and what price the market is commanding. When you quote the rent to your tenants, you can confidently share that it is based on current market rent; if they choose to move, that's the rent they will find for comparable housing. Congrats on the long-time tenant...and for the opportunity to raise the rent to the current market price. Best...
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
Contact 2-3 local property managers and ask them for a ballpark rent they would ask if you had them manage your property. They are usually within $100/mo of what they can get. Then you can offer the current tenants 10-15% less than that (since you’ll save the vacancy/turnover and PM fees) you might find out you can have someone else manage it and bring in an extra thousand a month.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
4y
@Larry Scott Hastings Rent prices are also impacted by property condition. So a fully updated home may command top dollar but a home that is fully functional but with a dated interior would rent for less. Consider this when you are setting the rent amount. whatever you do use real properties in the area combined with rentometer estimates. zillow and relator.com estimates fluctuate by the day.
Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
4y
@Larry Scott Hastings I would not go off the BP estimator. I have found it to be inaccurate in my markets (but maybe its accurate in other markets?). I would get on Zillow and see what similar properties are renting for. You could also reach out to a local property manager and get their opinion, but they may want your business if you do that.
How long has it been since you increased rent? How much longer until the current lease is up and will they stay if you increase rent?
Real Estate Agent · Daytona Beach, FL · Member since 2019 · 37 posts · 15 votes
4y
I recommend the expertise of a property manager with a gap that wide. They will be able to get you an idea what your property is actually worth and will be able to find tenants to meet that price if you can't yourself.