Request for Assistance - Determining Average Rent Prices

14 Replies

Hey everyone! I've been following bigger pockets since September '17, and I'm closing on my first 4-plex house-hack on Friday. Looking at the rent rolls, I believe that the rents are somewhat under-priced for my area; I'm trying to determine the average rent price, and what I should increase the prices to if at all. Any assistance would be greatly appreciated.

Property Characteristic:

  • Unit Types - 2 bed, 1 bath
  • Zip Code - 53210
  • Street Location - Lisbon & Hartung Ave
  • Appliances - Refrigerator, Oven/Stove/Cooktop
  • Tenant Utilities - Electricity, Heat, Gas, Air Conditioning
  • Landlord Utilities - Sewer, Hot Water, Trash

Current Rents:

  1. $525 - MTM
  2. $525 - MTM
  3. $675 - MTM
  4. $675 - 1 Year

Please note, I also intend to have tenants pay apportioned share of water/sewer/municipal cost. I understand the common practice of landlord paying, but I don't care for such liabilities. Given the information above, how would you price these rentals?

Hey John - congrats on your first purchase!

I've had personally had pretty good luck looking at zillow and craigslist rental prices in the zip code I've purchased in.  I've set my rates slightly higher, but the houses we invest in have generally been in better condition than many in the area.  Obviously, there are different neighborhoods within a zip code so look for the places as comparable as possible in both amenities and location.

I've also heard a few people mention rentometer but I haven't spent much time looking into that one yet.

Good Luck!

Pete

Originally posted by @Pete Woelfel :

Hey John - congrats on your first purchase!

I've had personally had pretty good luck looking at zillow and craigslist rental prices in the zip code I've purchased in.  I've set my rates slightly higher, but the houses we invest in have generally been in better condition than many in the area.  Obviously, there are different neighborhoods within a zip code so look for the places as comparable as possible in both amenities and location.

I've also heard a few people mention rentometer but I haven't spent much time looking into that one yet.

Good Luck!

Pete

Thanks Pete! I've run analysis using Rent-o-meter, Zillow, and Trulia. I guess I'm somewhat nervous to raise prices given the drastic difference between what tenants currently pay, and what I've approximated as appropriate - $800. I'll just go with my gut nonetheless. 

John,

Congrats on the purchase. I am currently trying to do the same thing as you, house-hack a 2-4 unit (hopefully 4). I do not currently own any units, so take this as you will, but a good strategy may be to call around to local units that are renting and pose as a potential renter. Ask the agent/landlord what the rents are and you should be able to get a decent idea of what the landlords in your area are renting for.

Your friend,

Nick

There is free landlord software available that can provide you with an average rent amount in a city through a rental estimate report. It is based off the number of bedrooms and bathrooms and area you are in. That way you can ensure you are not over or under charging your tenants. 

Hope this helps a little!

Originally posted by @Nick Mulligan :

John,

Congrats on the purchase. I am currently trying to do the same thing as you, house-hack a 2-4 unit (hopefully 4). I do not currently own any units, so take this as you will, but a good strategy may be to call around to local units that are renting and pose as a potential renter. Ask the agent/landlord what the rents are and you should be able to get a decent idea of what the landlords in your area are renting for. 

Your friend,

Nick

Nick, I never thought about that. I'll give that a try and add the numbers to my analysis. Thanks! 

Originally posted by @Katie Stewart :

There is free landlord software available that can provide you with an average rent amount in a city through a rental estimate report. It is based off the number of bedrooms and bathrooms and area you are in. That way you can ensure you are not over or under charging your tenants. 

Hope this helps a little!

 Katie, which software are you referring to? 

Congrats on the purchase and good luck. Which unit will you be moving into? (You said house hack). I think you seem to have it handled pretty well. If rent-o-meter and zillow all say 800 then go with it. I would probably have the MTM sign a new lease and gradually raise it. If you jump these tenants up to 800 all at once you could have a mass exodus and/or deal with several evictions in the coming months. Talk to all of them individually and work out a plan. Congrats again, I know it is exciting and overwhelming at the same time. Just remember to take the good with the bad and you'll do great.

I think that's a good point @Peter M. .  Another thing to consider might be how good these tenants are, which you won't necessarily know until you move in.  If you have someone clean and quiet who pays their rent on time each month, it might be worth keeping them around at a lower rent while slowly raising the rates of the "worse" tenants.  Keep the good ones around until the other units are re-occupied by better tenants at a higher rent.

I haven't used any software that does this, but I would just be careful because all neighborhoods in a city/zip code aren't created equal and won't rent at the same rates.  What I like about zillow and (with a little manual work) craigslist is you can find places super close to you that are better comparisons than another place across town.

Also really like @Nick Mulligan 's suggestion.  I've heard of people using that tactic before.

Originally posted by @Peter M. :

Congrats on the purchase and good luck. Which unit will you be moving into? (You said house hack). I think you seem to have it handled pretty well. If rent-o-meter and zillow all say 800 then go with it. I would probably have the MTM sign a new lease and gradually raise it. If you jump these tenants up to 800 all at once you could have a mass exodus and/or deal with several evictions in the coming months. Talk to all of them individually and work out a plan. Congrats again, I know it is exciting and overwhelming at the same time. Just remember to take the good with the bad and you'll do great. 

Peter, a gradual increase seems to be the recurring suggestion I've received from those whom I've solicited. I'll definitely heed your advice! I'll be moving into the 1st Unit; that was the recommendation from the seller and broker. I'll also enroll in carpentry courses, and use my unit as testing grounds for making upgrades, e.g. Painting/Refinishing cabinetry, replacing carpet floors with wood/bamboo, painting, etc. 

Originally posted by @Pete Woelfel :

I think that's a good point @Peter M. .  Another thing to consider might be how good these tenants are, which you won't necessarily know until you move in.  If you have someone clean and quiet who pays their rent on time each month, it might be worth keeping them around at a lower rent while slowly raising the rates of the "worse" tenants.  Keep the good ones around until the other units are re-occupied by better tenants at a higher rent.

I haven't used any software that does this, but I would just be careful because all neighborhoods in a city/zip code aren't created equal and won't rent at the same rates.  What I like about zillow and (with a little manual work) craigslist is you can find places super close to you that are better comparisons than another place across town.

Also really like @Nick Mulligan 's suggestion.  I've heard of people using that tactic before.

Pete, you're correct regarding the price discrepancy between neighborhoods. In the beginning, I hadn't noted this. It was once I saw the Trulia crime maps that I began paying more attention to these details and saw the differences between neighborhoods, prices, crime, etc. This is basic stuff, but it's not something many consider when transitioning from the consumer perspective of real estate.

@John Joey That's a great plan and it it exactly what I did. If you ever have any questions or run into any issues hit me up with a PM because I have had to fix just about everything in my 4 plex. I am making a video right now about putting down laminate flooring, I'll send it to you when I'm done. 

@John Joey

Congrats on the purchase. Based on the area, I would say $675 is about right for an average unit. If the units are updated, maybe you can get $750 but even that might be pushing it. I think $800 would be tough to get. And if you try and push water cost onto tenants in that area, many will balk at that as well. It’s just not common practice in that area or in the market here in general.

I have a 4 unit on 76th & Locust and they are all 2 Br units. I get $700. I pay water. Units are clean and functional but not updated if that helps.

@John Joey Another strategy that we are using to determine the rent rates is to ask our property management company to give us comparable property rates in the surrounding area and what they would try to advertise a certain property that we are buying. Property management companies will have a really good idea of what things are renting for in a specific area. Sometimes Zillow, rent-ometer, and other sites may be a bit off because they like to use averages and don't know the ins and outs of the local market. Hope that helps.