Best way to calculate Market Rent Level?

Question

Hello all,

I have a unit that will be up for lease renewal in the next month or so. In preparation for that, I have been keeping an eye on other properties in my general are. I have a duplex, the unit is a 3/2, so I've been keeping an eye on other apartments/SFH/multiunits within about 1 mile over the last 3-4 months. Each week I look at both craigslist and hotpads to put each rental ad's info onto a spreadsheet for easy analysis. I track things such as date, rent, deposit, sqare footage, number of bed/baths, address, etc. At this point I have 28 data points.

Based on price per square foot, after averaging the properties around me, my spread sheet is telling me I should raise rents by about $35 from $1200. HOWEVER, when I run the property address through Rentometer.com, I get that my rent should increase by $150-200, to $1400. Zillow.com lists a rent for that unit at $1295.

So here's my question...Which do I go with? How do you calculate your market rents? My gut tells me go with the spreadsheet and historical data over the last 3-4 months. $35 seems reasonable. I don't think it would be best practices to increase rents that much ($100-200) anyway.

Austin Fruechting · Answer

I would do a smaller increase for the current tenant because I would rather keep them there then have the expense to turn the unit over and be vacant for a while. If they aren't going to renew then try out the $1300-1400.

Stephen Haynes · Answer

If the unit is still tenanted I would do a $35 dollar increase for another year lease or $50 if they want to stay month to month.

Darek J. · Answer

@Austin Fruechting

That makes sense and was what I was thinking as well.

Darek J. · Answer

@Stephen Haynes

Thank you for the advice. Ahh... I left out one important detail. The Unit is not vacant, I have a current tenant. Their lease is up for renewal, so naturally I am evaluating the market to see if an increase is in order, which the data says it is. How would you apply that advice to the situation of raising the rent on a current tenant?

Josh Mitchell · Answer

@Darek J. $35/$1,200 is just under 3% which is a fair increase year over year. Your costs go up, so your rents should to. $200 seems very high unless you are already currently way under market value.

Stephen Haynes · Answer

You start high and lower the price weekly until you start to get enough traction. if you only get contacted three times in a week you should lower the price if you get contacted twenty times a day your price is to low it is all about finding the happy medium.

Best way to calculate Market Rent Level?

Best way to calculate Market Rent Level?

Most Popular Reply

7 Replies