How to Determine Rental Price When No Comps in Area?

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I am looking at a beautiful 4 bedroom 2 bathroom home with finished basement near a University I would like to rent out for Student housing. 2 miles from a train station, 5 blocks from the University entrance. The problem is that there are no comparable rentals in the area where I can gauge the market to see how much I would rent out this property to see if it's a worthwhile investment. How would you determine the pricing for rent in this scenario? I can find a 2 bedroom 2 bath in a very fancy apartment building right next to the train station, but that isn't necessarily the same. Help! :)

Hi David, have you checked the MLS, going further back in time? I would even look at the active rental listings and what others are asking for, the conditions, and look at the days on market.

Just to get a ballpark #, see what Section 8 has determined is Fair Market Value for 4 bedroom houses in the area. I believe you can find that online.

Zillow sucks, but they usually have a rent estimator. Take it with a grain of salt though.

I would contact someone with access to the local MLS also to research it.

Are you planning to rent it to students? If that’s the case you could always rent it by the bedroom and you determine the price. I would ask my realtor for rental rate or like Kevin mentioned check what section 8 would pay. Every market has a market value. You could also go off of 1-2% of the value of the house. That will also help you determine if the deal is good. If you’re buying it for 100k and can pull 2k per month in rent you meet a 2% rule. 

unfortunately I don't have access to the MLS, but I might know someone who knows someone who does. What type of information should I be asking from from the MLS listing?

As for active listings, the only things I have to go off of at the moment are the Student housing prices per semester at the University, and one luxury apartment complex that has a 2 bed 2 bath asking for about $3,160 (includes 24 hour fitness center, monthly catered Resident Receptions, health and wellness programs, and a resort-style pool. So again, not really comparable.

If I go by the Student Housing, it's roughly $5k per semester, totaling $10k for 2 semesters (aka for the year) PER STUDENT without a meal plan, so if I have 4 bedrooms, I can charge a maximum of about $834 per room per month, totaling in a rent of about $3,336/month, so I could charge about $3.2k/month, but I'm not sure it will rent because there isn't any true comps in the area.

@Kevin Hill I'll look in to the Section 8 Fair Market Value for 4 bedroom houses and get back to this forum post if it is a publicly available figure. Thank you. The Zillow rent estimator estimated at around $1.5k rent, but that's because no one is renting, so there are no true values. What specifically should I ask someone with access to the MLS? Is there other information other than the price, location, taxes, and utilities estimations?

Thanks for all the help already guys,

David

Ask them to search for active & leased house rentals in the area in the past 12 months. Go back further if need be.

Sounds like you're targeting Kean University. That is a major commuter school. I grew up 1/2 mile from it and knew a ton of people who went there, maybe one lived on campus and everyone else commuted. 

You might just go around asking a few neighbors. Most people are willing to talk.

This may be obvious but have you looked at Craigslist? Still analyzing for my first deal and I typically use rentometer and follow it up with craigslist adds. If you are looking for price per room for a college town I would look under the room/shared area on craigslist. This is how I listed rooms back in my college days. 

This may be obvious but have you looked at Craigslist? Still analyzing for my first deal and I typically use rentometer and follow it up with craigslist adds. If you are looking for price per room for a college town I would look under the room/shared area on craigslist. This is how I listed rooms back in my college days. 

@David Casas

I would simply run a craigslist ad and guage the response at different prices. 

Take a guess at where to start and let the market teach you. 

Good luck! Let me know if I can help ya craft the ad. 

$/sf method  

Not all student care about cost. For example, Stanford students want to live away from campus willing to rent an apartment up to $5000 for a 3 br town home. Guess what? It is their parents who are footing the bill.  A single room costs about $900. 

@David Casas  

You have got excellent feed back here.  I will add as a investor in the college market.

I own a 3/1 ranch house 1 block from Rowan University (Glassboro) 

It is a completely different market than Northern NJ (where I live).  I charge $535 per bed room and they pay all their utilities (gas electric water).  

SFR, 1 water meter, they pay. I put all of their names on 1 lease, though give them the option to pay their portion separately, always take 1.5 months security because college students love banging counter tops, throwing beer bottles, and tossing each other into walls after 2 shots of gin.

Students typically get their refund check end Sept-ish, I give them an option to pay Fall semester Sept-Dec (4 months) and spring semester Jan- May (5 Months) up front, with no discount. I provide a receipt for months paid upfront. Some students find it easier to pay it all up front since they have new found loan dispersement money, then can then budget accordingly for beer, POF premium, and netflix.

I write in the lease they need to take care of snow removal and lawn care, though I provide a mower.  Any citations for violations I receive I gift to them, as per the lease.  

If you WIND up purchasing, please write this down somewhere and staple it.  This tip will save you from financial alot of stress in which I endured and cut my teeth on.  If you want to target college students only, this is the best strategy: 

Always rent from JUNE 1st to May 31st, 1 year lease. I send a letter to the house via regular mail in January. Every January.  In the letter, I explicitly ask, if they want to renew for the following year, then I need to know by end of Feb. Why?  If you do not do it this way then you risk running your unit vacant because college students tend to start looking for a place to stay around Feb-May for the following year, actually more like Mar-May, but you want the Ad up in Feb. After May, in a predominately non-commuter, most college students go home for the summer.  And your house sits. When they return in September, they already know where they are going to live and they start the semester and the house sits vacant because you didn't put in on the market from Feb-May. I learned the hard way, trust me, staple this to your t-shirt.  In Glassboro at least, its incredibly ****** market to rent to families, alot like chewing on glass, it may be different for other college towns of course, but Ive had to evict 1 family, and the other, they had a drug operation (found out from neighbors) and a family of 5 plus the family of 3 I rented to living out of the house. 

I manage long distance, have contractors on speed dial, and several college friends I can call to run over to the house if needed for 50 bucks a trip. 

This may not be what you were asking about but I hope this helps and Good Luck!!

@David Casas the information from @Antonio Porta is very spot on for leasing to college students.  Section 8 can help give you an idea of fair market housing rates for rentals in the area.  

Whatever your decision in choosing how to rent the property it is important that the lease you have the tenants sign accurately provides all of the terms you wish to have.  It might also be a smart move, if renting to college students, to have their parents co-sign the lease as a way to guarantee payment when the tenant might not have an income.  

Have you looked at Rentometer.com? I have heard varying reports about it's accuracy (probably 60-40 in favor of it being accurate). If you buy a Pro membership you also get the local comps they use to come up with the estimate. But you get like 10 reports with the free version.