Market Rent V. Under Market Rent

General Landlording & Rental Properties
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Market Rent V. Under Market Rent

Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

When choosing rent for a new property or when looking for a new tenant rent amounts are critical.

Each time you have a vacancy you should check the current trend and market for your property. You should never assume anything as the market is always changing.

I use multiple sources to determine what the market is. Since I self-manage and most tenants don't use listing agents in my area, I don't use the MLS. If you have access to it you should use it as another source.

I use Zillow, Rentometer and Apartments.com for the most part. I’ll add in Redfin, but I think Zillow has better information for rentals. There are lots of other sites, but these are the most reliable.

I don’t go for the highest marketable rent. Those tenants tend to not stay long term. Just under market rent I’ve experienced longer term tenants. The goal of course is to make the most money, but vacancies kill cash flow. Vacancy time plus repairs will cost you multiple months of rent when you do the math. Long term tenants are the best solution even if the rent is a bit less.

What has been your experience?

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Ke Nan Wang
Developer · St. Augustine, FL · Member since 2018 · 311 posts · 384 votes
9mo

Good advice. I'm also a self managing property owner of approximately 30 units for over the last 6 years, what you said checks with my experience and practices. 

I first started in 2019, back then it takes no more than 3 weeks to rent a unit at market rent around $1600 for a 3 bedroom. When COVID hit, the shortage of housing and growing of population in our area drove the rental market through the roof. Anything I listed gets rented in 3 days and the rent has gone from $1600 to as high as $2500 for a 3 bedroom. Then things started to die off with more apartment buildings have completed and less population growth in the last couple of years. In 2024, rent is coming down to $2200 to $2300. And 2025 rent is getting to $2000 with roughly 3 to 4 weeks time to rent. 

Another conclusion I've drawn from the long term rental experience is that cash flow pays the bill, but it will not create generational wealth. A good cash flowing property allow the property owner to hold on to the property indefinitely and only sell at the right time where it makes more financial sense to the owner. Appreciation is what's driving most of the wealth building over time. So in general, I'm not too stressed out about a few hundred dollars in monthly cashflow but I do want a long term stable tenant in the property. 

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  • Ke Nan Wang
    Developer · St. Augustine, FL · Member since 2018 · 311 posts · 384 votes
    9mo

    Good advice. I'm also a self managing property owner of approximately 30 units for over the last 6 years, what you said checks with my experience and practices. 

    I first started in 2019, back then it takes no more than 3 weeks to rent a unit at market rent around $1600 for a 3 bedroom. When COVID hit, the shortage of housing and growing of population in our area drove the rental market through the roof. Anything I listed gets rented in 3 days and the rent has gone from $1600 to as high as $2500 for a 3 bedroom. Then things started to die off with more apartment buildings have completed and less population growth in the last couple of years. In 2024, rent is coming down to $2200 to $2300. And 2025 rent is getting to $2000 with roughly 3 to 4 weeks time to rent. 

    Another conclusion I've drawn from the long term rental experience is that cash flow pays the bill, but it will not create generational wealth. A good cash flowing property allow the property owner to hold on to the property indefinitely and only sell at the right time where it makes more financial sense to the owner. Appreciation is what's driving most of the wealth building over time. So in general, I'm not too stressed out about a few hundred dollars in monthly cashflow but I do want a long term stable tenant in the property. 

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  • Kenneth GarrettPro Member
    OP
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    9mo

    @Ke Nan Wang

    Totally agree with you.  Appreciation is what creates generational wealth.  Cash flow takes care of the day to day bills and puts money in your pocket.  In some cases, it puts a lot of money in your pocket, but the bonus in my opinion is "Appreciation".  

    Thanks for the reply.

    1Reply
  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 815 posts · 599 votes
    9mo

    I generally agree with this, but I’d add one clarification from operating at scale.

    “Market rent” isn’t a single number. It’s a range, and where you land in that range should depend on your strategy, not just comps.

    For long-term holds, I intentionally price:

    Slightly under the top of market

    But not discounted to the bottom

    That sweet spot does three things:

    Keeps demand high so vacancy stays low

    Attracts more stable, value-oriented tenants

    Preserves leverage for future rent increases without shocking the tenant

    Vacancy is the real profit killer, not being $50–$100 under peak rent.

    Where I differ slightly is that I don’t chase “long-term tenants at any cost.” I still underwrite to:

    Maintenance tolerance

    Tenant profile

    Turnover risk by neighborhood

    Sometimes market rent is correct. Sometimes it’s aggressive marketing noise. The operator’s job is knowing the difference.

    Cash flow consistency > headline rent numbers every time.

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  • Kenneth GarrettPro Member
    OP
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    9mo

    @James Jones

    Appreciate your take on this. It always depends on your market. Vacancy kills profits and what looked like a good deal can get derailed. Rent is important, but we always need to look at the cost of vacancy.

    $100 below the high market rent is $1200 a year. A vacancy of 60 days plus rehab where rent is $1800 a month will cost you $3600 plus a $2000 in rehab although that rehab number varies quite a bit. Just to keep it simple thats $5600. Even a rent rate of $200 under the high market is still better off provided you can keep that tenant for a while. Tenant longevity is the answer to cash flow. Long term holds are the answer to generational wealth.

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  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    9mo

    @Kenneth Garrett Good input. Besides sources you cite, I also look at Craigslist and HUD Fair Market Rents, webpage, where MEDIAN rents for the entire country are listed. In some areas its by county but for other areas its listed by zip code. The information is gathered by local housing authorities, who locally manage the Section 8 program. They survey landlords yearly to come up with the figures. We have participated in the survey for many years as we are known to the housing authority as a rental provider. Their MEDIAN rent figure is used for allotting Section 8 rents, but is useful for determining how your rent stacks up against the MEDIAN rent with is the rent where 50% are lower and 50% are higher. In most cases our market rents are actually higher than the MEDIAN rent.

    2Reply
  • Kyle HendricksPro Member
    Lender · Member since 2021 · 171 posts · 74 votes
    9mo

    Couldn't agree more. Also creating a place that tenants WANT to live at and being a proactive landlord (for example, check ins on how the property is, asking if anything needs to be addressed, etc.) Little actions like this can go a longggg way with keeping tenants happy. This then often makes them care more about the property, treat it better and stay longer.

    [email protected]253-355-0247
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  • Alan AsriantsBusiness Member
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    9mo

    I always go in line with what the market is telling me, and I never over push my boundries. You're right - going to high on market rent leads to people who are not as stationary. In my market, Philadelphia, I am seeing a slow down in rent growth and lower demand. So when my renewals came up this year I was not as aggressive in price increases and in most cases I left rents where they were at. They were already top of market and pinching another 20-40 bucks a month was not worth losing a good tenant over. 2-3 years ago, when the market was crazy and just about anything rented, then i would be more aggressive with my pricing - albeit not over market. 

    Understanding trends keeps your head over water and makes it easier to float. 

    [email protected]267-767-0111
    Alan Asriants - New Century Real Estate 591 Reviews
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