Why are some properties rent higher even though they are cheaper

Question

I was wondering why a property of $70k can rent for $850 while a property of $85k also rents for $850 assuming they both are fully rehabbed. It would be amazing if someone could enlighten me on this. Thanks!

Account Closed · Answer

Because people are not computers.

Jay Hinrichs · Answer

In addition at those price points in major MSA areas  it could simply be one is on a better street.. or a few blocks over or a different school.. or their is a corner liquor store right across the street from the one with less rent.. all sorts of reasons.

Nick Rutkowski · Answer

@Samuel Chua Landlord #1 was smart and negotiated a higher rent than Landlord #2.

Thomas S. · Answer

There is no predetermined rent for any particular property. Too many different variables to list. Maybe just as simple as one is priced under market. Some times hobby landlords think they can keep tenants longer by supplementing there tenants rent and will charge $50 -$100 below market. They tend to screw with market pricing for serious landlord/investors. That may be all you are seeing in the differences. Keep in mind the vast majority of landlords are not professional and do not keep their rents at full market. Many don't apply annual rent increases and don't know what market rent is.

Mike Dymski · Answer

Rents are often a reflection of local income levels whereas home values are often a reflection of long-term intrinsic value.  That's why a home may rent for 1.5% of its value in a stagnant market and 0.5% in a growing market.  The same applies to the valuation of businesses...the long-term (not just the current) cash flows matter.

Kyle J. · Answer

@Samuel Chua Rents aren’t based on the price of the property. The buyer of that $70k property could have just negotiated a better sales price than the buyer of the $85k property, but if they’re truly comparable properties that wouldn’t have any effect on the rent they can charge.

Fair market rent for a property is based on things like number of bedrooms and baths, size of the property, condition of the property, amenities, desirability of the location, etc.

Account Closed · Answer

@Samuel Chua

Depends on the type of rehab done and how well the owner markets the place. If it looks like the rental is still "dated" it probably won't rent for as much. Also, sometimes it's a matter of just asking a higher price and seeing what happens. "Sell" the place in your add, and during your showings! Heck, I have $50K rentals that rent for $895-$1,000/mo.

Jason L. · Answer

In addition to all that's been said, there's also the concept of time at play (i.e. some properties just get listed at the exact right time, whereas a similar property could get listed at the wrong time). Rent is certainly not a linear proposition.

Frank Wong · Answer

If everything is equal area, location, bedroom, bath, sqft then it comes down to layout and aesthetics.  I see so many ugly rehabs with ugly colors, floor material, etc.  Aesthetics matter. Renters like buyers want to walk in a house and have their eyes glow.

Bjorik Mutize · Answer

@Samuel Chua properties in different neighborhoods can command different rents even though varying prices.

With your small variance example it may just be amenities, finishes, Bed Bath is it a 2/1 vs a 3/2 and what is more desirable.

Why are some properties rent higher even though they are cheaper

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