Knowing what a property will realistically rent for is critical.  Without this, you don’t know what the property is worth.  So, how do you estimate rent?  Simplistically, you find recently rented comparable units, calculate the rent/sqft for each, average the numbers together and multiply the average times the subject property's sqft.

For example, suppose you have three comparable condos that were recently rented in the same complex.  Below is a table showing the key data.

All three comps are very similar and the rents are as similar for the sqft as you could hope for. So, if you are looking at buying a unit in the property and it is a 1080 sqft, 2 bedroom condo, a reasonable estimate would be: 1,080sqft X $0.85/sqft = $925. It might be $900 or $950, but it is in that range PROVIDED the unit is in similar condition to the three units that recently rented and in a similar situation. Notice that I said "in similar condition", not in excellent condition. I will talk about rehab and what is appropriate in a later section.

Ok, the above was easy, now lets make things a bit more real world. The aerial photo below is of a small condo complex. It is sandwiched between an office/light industrial complex, a busy road, an industrial storage area and a major highway exit.

Suppose you had a comp for a unit in building "C", could you apply it to a unit in building "A"? Not necessarily. This is where common sense must come into play. Since "A" will have significantly more traffic noise than "C", it will likely get a little less rent. However, if the unit in "A" was in better condition that the unit in "C", you might ge the same.

The thing to keep in mind is that even units in the same complex may get different rents due to situation issues. It might even be something like one unit overlooks a dumpster and another does not. Only physically visiting the property will do when you need to accurately estimate the rent.

Where do you find rent comp information? It is not that easy without access to some specialized databases which I pay for. Your best bet would be to see what the asking rent is for comparable units on rental.com and similar sites. The challenge is that you don't know how long the unit has been for rent and what the final rental rate was.

For my clients, I mine data from the MLS plus two other databases and correlate the information together using a statistical technique to eliminate obviously invalid comps. I then provide an average as well as the raw data so you can see for your self. Below is an example.

In the above case, my software sifted through about 150 comps and narrowed the list to the eight above. The software estimated the rent for the 1,710 sqft 4 bedroom property to be $1,250. And, while I believe that this is a reasonable estimate, it would have to be validated by a visit to the property.

I provide my clients rental comps. I am uniquely able to do this since I developed software that analyzes comps based on the geolocation of comps to the subject property.

In summary, the basic technique is to locate similar properties recently rented and to calculate the average $/sqft for rent. Then, multiply this average times the sqft of the subject property. This will give you a reasonable idea as to what the property will rent for. However, you must also use common sense to take into account local anomalies that could positively or negatively affect the rental rate.

Call me today to discuss your real estate needs. You will be glad you did.

Eric Fernwood
702-358-8884
EricFernwood@Gmail.com