Best way to find or estimate rent prices

14 Replies

I found a property here in Wichita I really like and I’m trying to run the numbers to find my offer price but I have some questions. It’s a duplex right by Lincoln and rock and it meets almost all my criteria. Southeast side, little to no renovations and tenants already renting one side. 

Now I'm not to worried about the ROI numbers this time because I will be using FHA and my initial cash investment will be very low. I've looked at the average rent prices in that area from a Zillow spreadsheet and they look to average at about 980-1000. Looking at those numbers and using them I should be able to cash flow close to 200 a month when all is said and done and hopefully I'm not being to modest with expense numbers. 6% vacancy, 5% repairs and 100 CapEx seeing as how the appliances are almost new. I will be house hacking this property so these would be future cash flow estimates.

If anyone has any information or tips on how to truly estimate rent prices or my percentages for expenses for my analyzing I would appreciate some help. 

Thanks  

@Dylan Fellows

Other options for getting an idea of what rent in the area can be is by calling property managers that manage in the area and picking their brains on what they're seeing, asking your agent to run rental comps from the MLS, and looking at Craigslist as well.

Originally posted by @Bob Okenwa :

@Dylan Fellows

Other options for getting an idea of what rent in the area can be is by calling property managers that manage in the area and picking their brains on what they're seeing, asking your agent to run rental comps from the MLS, and looking at Craigslist as well.

I’ve been looking at rents around that area from realtor and Zillow also but I wanted more of a concrete idea. Will property managers freely give that information out?

 

@Dylan Fellows I go to my property manager and get them to give me the high/low. They're experts and often already have the formulas on the top of their head.

If you dont currently have a manager but are considering using one, this is a great way to start having conversations, too, and get an idea if they would be good to work with.

And a plug for PM's, for me personally, they make me money. When I managed the property I didn't do background checks, didn't know what the going rate for rent was, didn't have a good handyman, etc, etc. If those are all things you're ok doing yourself then it might be worth the 10% you'd pay them, but I compare it to changing the oil in my car - its certainly something I CAN do, but those quickie lubes have it down to a science.

Best way is to look at comps and get fluent as picking the rent value based of that. Perhaps not super advice for you right now with this property - but at least something to start practicing. "Average" rents aren't super helpful because a lot of factors, location, size, condition, characteristics come into play so always best to pick out some comps around the subject, then start "adjusting". Use discrection - and pick a value you think people will pay. Look at things such as: how long ago did the comp lease, how many days the rentals around you take to lease, size, bed, bath, etc..

If you have a buyer agent or a PM - obviously a great value they could/should be adding.

Good Luck!

Originally posted by @L'aura Bradford :

@Dylan Fellows I go to my property manager and get them to give me the high/low. They're experts and often already have the formulas on the top of their head.

If you dont currently have a manager but are considering using one, this is a great way to start having conversations, too, and get an idea if they would be good to work with.

And a plug for PM's, for me personally, they make me money. When I managed the property I didn't do background checks, didn't know what the going rate for rent was, didn't have a good handyman, etc, etc. If those are all things you're ok doing yourself then it might be worth the 10% you'd pay them, but I compare it to changing the oil in my car - its certainly something I CAN do, but those quickie lubes have it down to a science.

I am on the fence about having a property manager at least for my first property since my plan will be to house hack but you make a good point about building a relationship and finding good ones because if this route continues for me I will eventually end up needing one. Thank you.

 

@Dylan Fellows   To estimate the rent, you really should check multiple sources and try to get the best comps/data you can.  I've compiled many of the top sources available in this blog article here: How to Determine Fair Market Rent

It also gives you an explanation, and the pros/cons, of each one.  So hopefully that'll be of some help to you.

As for how to estimate repairs, that can be a little tricky as there is no one specific formula.  Many people will just use a % of the purchase price.  However, you have to ask yourself...if you have to replace an HVAC unit, is the HVAC company going to charge you 75% less because you bought the house for $100k instead of $400K?  The point is, repairs are not based on the cost of the house, so why should we budget for them that way? 

Plus, there are so many other factors that can affect how much we spend on repairs.  Things like the age of the house, condition of the components of the house, class/quality of the tenants and how hard they are on the property, how long existing repairs are allowed to go unrepaired (e.g. if a roof leak were to not be repaired in a timely manner it could end up causing additional ceiling, wall, and/or flooring damage that maybe didn't have to happen), etc. 

So it's really all just a guessing game.  I have 70+ year old properties that have cost me nothing in repairs each year, and other properties much newer than that which have cost me thousands in repairs.  Ultimately, it's better to set more aside than you think you'll need, and if you don't end up needing it, great.  But at least you have it ready/available in case you do.

Check Zillow for postings in the street or area with the same number of rooms, etc. You can also call your local property manager. 

@Dylan Fellows Not how but who! Pick up the phone and call a knowledgeable local PM. They can tell you instantly the info you need to know as their pulse is always on the market. Otherwise, do rent comps by studying existing rentals in the market and consult rent o meter (a great tool!).

@Dylan Fellows

I've owned 2 duplexes near there -  mine were in Cherry Creek -- so Harry/Rock just a hair south of Harry and E of Rock - virtually same area -- decent area of town - rent is affordable and you're spot on with the rent estimates -- $895-995 would likely be most reasonable - maybe $1100 if you decked out the unit and it was super nice 3/2

Anyways one thing to be careful of in that part of town is the basements -- I had one of mine flood a bit due to poor drainage -- that can happen anywhere but there is a lot of clay in that part of town - So look for any bowing walls, stay on top of your drainage and you'll be good - downspouts draining away from the house - bury them if you need to - stay on top of the sump pump, clean the gutters etc  and make sure the ground slopes away from the house.

Looking at comparable rentals on Zillow or hotpads or Facebook marketplace is a good place to run your own comps -- I dont use the rent-meter site - I dont trust it - but I guess it can give you an idea.

Most of the houses should have had their roofs replaced in that part of town as around 2010 - 2013 or so - somewhere in that time and area various  hail storms and a tornado/windstorm went through.  

Originally posted by @Shane H. :

@Dylan Fellows

I've owned 2 duplexes near there -  mine were in Cherry Creek -- so Harry/Rock just a hair south of Harry and E of Rock - virtually same area -- decent area of town - rent is affordable and you're spot on with the rent estimates -- $895-995 would likely be most reasonable - maybe $1100 if you decked out the unit and it was super nice 3/2

Anyways one thing to be careful of in that part of town is the basements -- I had one of mine flood a bit due to poor drainage -- that can happen anywhere but there is a lot of clay in that part of town - So look for any bowing walls, stay on top of your drainage and you'll be good - downspouts draining away from the house - bury them if you need to - stay on top of the sump pump, clean the gutters etc  and make sure the ground slopes away from the house.

Looking at comparable rentals on Zillow or hotpads or Facebook marketplace is a good place to run your own comps -- I dont use the rent-meter site - I dont trust it - but I guess it can give you an idea.

Most of the houses should have had their roofs replaced in that part of town as around 2010 - 2013 or so - somewhere in that time and area various  hail storms and a tornado/windstorm went through.  

Thanks for the information I will keep that in mind about the basements on the southeast side because that's the side I'm most interested in.. I feel like I am getting a lot better at analyzing just by doing it daily on random properties but it seems pretty hard to find a deal right now. unfortunately the duplex I found went off the market pretty quickly.