How do you know what rent to charge?

24 Replies

Good evening everyone, I was wondering if any of you guys had an opinion on rentometer.com as a way of deciding rents? Also, what are some other ways you've found helpful in calculating rents? It's difficult to find that balance of not too high but not too low. Thanks in advance for the advice! 

I've used a combination of Zillow and Craigslist.  If you're doing an analysis I tend to use the lower amount.  I usually check out the pictures and the features of the rental (2 car garage, condition of the house, etc) compared to my listing as well as the days on market. When I list a property, I can determine how competitive my rent is based on the response to the listings. 

Do you homework and call signs and look at adis online and compare. If you have it too high the market will tell you that you're to high by not looking or renting your property. 

I've read a few postings on a site called rentometer that compares rents around you. not sure how accurate it is but just thought it might be worth checking out. best of luck.

@Steven Myers Thanks so much for your input! I'll add zillow and craigslist to the rotation. Thanks again.

@Peter MacKercher  Thanks for the advice! I'll continue to monitor it. Thanks again.

@Tanner Savage  Thanks buddy for the help, wish you the best of luck too!

Pretend you are a target customer and go shop the comps.   If you spend some time shopping for the same footprint by actually viewing the properties in question and ask questions to get a feel of the demand you will have a much more complete picture of the real market.  

@Kevin Haskins  Thanks for the feedback! Putting myself in their shoes will def help me determine more accurate rents. Thanks again!

Rentometer, Zillow, and MLS. Usually between the two I can get pretty close to the norm. But, I'll take the lowest amount and round down. This way if the lowest is 1,175 then I use 1,100 to determine if I'm buying or not.

@Bryan N.  Thanks for the input! I'll look into the other two, thanks again for the extra tools!

@Ross Ellington  

there's a lot to your question. @Kevin Haskins  said it well - compare the way your customer does. However, applicants will screen out your rental if it's outside of their range. So your goal might be to get them in the door with an attractive price, then present a list of upgrades that have a monthly customization fee.

Giving applicants a chance to customize their home is a big value add and a great way to get above market.

Best to you

Hey @Al Williamson  thanks so much for your feedback! But I'm new to this so I'm gonna have to ask questions :) What would be an example of a customization fee and what are some options you gave your tenants to customize the unit? Those are great ideas I just couldn't think of any examples off the top of my head. Looking forward to your response, thanks again for your help!

@Ross Ellington With regard to Rentometer, keep in mind that it does not factor in how many bathrooms a home has, the condition of the home, size of the home, or even type of home (apt vs SFR). It's mainly just comparing properties with a similar number of bedrooms in a given area. Hardly the most accurate way of determining "comps".

With that being said, it's okay to check Rentometer as ONE of your sources.  But you should have many sources (i.e. Craigslist, Zillow, local property mgmt company, etc) because not one of these sources by themselves is entirely accurate.

Lastly, BP actually has its own comprehensive guide on this topic which could give you some additional ideas.  Check it out here: The Ultimate Guide to Fair Market Rents

@Ross Ellington  you also might want to reach out to a local property manager and/or Realtor. They many times have a good pulse on what the market is commanding, and may be able to give you some advice on what you can do to have your rental stand out to rent it quicker or for more money - especially if it's not yet rent-ready. 

I would definitely look up comps of similar homes in the area on MLS. I'm not all the sold on rentometer. It seems to be all over the place.

I keep my rentals very nice and charge $200-$400 more than market rate on a single family that would be in the $1,200-$1,400 range, I'll get $1,600+. I figure it costs me much less than $2,400/ year (12 months x $200 above market) to keep it very nice and I'm getting the cream of the crop for tenants. They get a nicer house, I get more money. 

The downfall, when I first purchase a home (typically rundown with lots of equity) I'll put a minimum of $10k into it and it won't be rented for the first 3+ months. 

@Kyle J.  thanks so much for your response! I'm new to BP so I wasn't familiar with that and didn't know about that tool. I'll definitely be looking at that in a bit. Thanks again!

@Jonathan Makovsky  Thanks for the feedback! Talking to a Property Manager is definitely a step I need to make, thanks for the reminder.

@Fred Heller Thanks for the help! MLS is one of the tools I've been using as well, thanks. I'd definitely like to stay in touch with you, I might be looking to buy a multifamily in the Houston area this year. Thanks again for your input!

@Eric Christians  Thanks for the advice! That's a good strategy, some upgrades go a long way. I appreciate it.

@ross Ellington dropping a storage shed in the back yard and tacking on additional rent is an example of endless ways to boost rent above market after you've secured a qualified tenant.

Every market is different so you have to do your own work.    I'd also not necessarily trust other people's opinion (professional or otherwise) without verifying it yourself.    Even if they are landlords in your market there are differences in the segments (low quality housing vs. high quality, single family vs. apartment).   Go do the leg work and ask the questions.    That will give you the confidence to get started and with experience you will learn how to price it for your market.  

A bigger deal to me than rental rate is the quality of tenant.    A bad tenant will cost you a ton of money, time and aggravation.    Something most landlords eventually learn the hard way.  

@Al Williamson  Thanks for the feedback! I could see where offering extra storage could raise the rent. Appreciate the example.

@Kevin Haskins  Thanks for the advice! You're def right about a quality tenant being worth their weight in gold. The goal is to have nothing but quality tenants. Wish me luck? :) Thanks again!


@Kevin Haskins Thanks for the advice! You're def right about a quality tenant being worth their weight in gold. The goal is to have nothing but quality tenants. Wish me luck? :) Thanks again!

Best of luck!   But luck will have little to do with it.  ;-)  

@Kevin Haskins  haha I agree buddy. Hard work fueled by motivation! Appreciate the feedback and the vote!

There are lots of sites that offer rental comps that you might consider using to help set rent pricing. Some only have data for certain locations, some aren't so accurate except for certain locations. So you have to figure out what data best fits your area, and which source(s) can be trusted to give that data. 

And lots of them only work by tracking ASKING rents, and not the actual agreed rent; it's quite possible for an ad to ask a certain rent, and the landlord and tenant agree to settle on a different number. 

Now, you can ask a very low rent, a very high rent, or a reasonable rent. If rent is way too low, you could be deluged with callers looking for a great deal. If rent is too high, fewer calls come in, and you might find that the prospects that call are borderline in quality ( euphemism for crappy). 

So let's say you asked too low a rent, and got a good tenant quickly. Over time, you can try to catch up to market rent with gradual increases; so all is not lost, but you won't profit as much. 

The "REI Resources" link you find at this next link might be helpful:

http://www.biggerpockets.com/resources

Related discussions:

http://www.biggerpockets.com/forums/52/topics/3954...

http://www.biggerpockets.com/forums/81/topics/8790...

@Steve Babiak  Thanks again for the help! I agree with what you said, asking and actual can be two different things. Also, thanks for the links, they'll be very useful I'm sure!

@Ross Ellington  I recently discovered (through a friend) a nice site that grabs the posts from several other sites, such as Craig's List, Postlet, and Appfolio, and lays them out on a map of the local area. I've not used it much since my properties are all rented out at the moment, but it appears, at first glance, that it's going to be a great resource. You can find it at http://mapliv.com/.

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