What Are Comparable Rental Reports? (Landlord Guide)
Renting out your property can be a rewarding experience for your personal finances. You can use the rent you earn to save up for a future business, pay off your mortgage, or save up for retirement. As a result of these lucrative incentives from rental properties, there has been a large increase in rental housing units on the market.
America, the nation of renters
America has become a renter nation. In 2017, America has approximately 43 million housing units occupied by renters. That’s 10 million more from 33 million in 2005, equating to a huge revenue opportunity for rental property owners.
Rental Property Pricing Expectations
If you are serious about making real money with your property, prepare your rental to make sure it is rent-ready. But before you list it on the market, you need to do one very important thing. You need to strategically price your property.
If you’ve invested a lot of money to improve your property’s street appeal, you’d want to get a positive return on investment. The sooner the better, right? After all, you spent more money for brand new furniture, stainless steel appliances, or even a major renovation.
Setting your rental price isn’t based on how much you want to get, or what your gut feeling is telling you it should be. Asking your friends and family could give you an idea, but that is still not a foolproof way of setting rent amount. The worse you could do is to make a guess; it could cost you a lot of money in lost rent over the years.
To make the most out of your investment, you need to set your rent price competitively. This is done through comparable rental reports.
What Are Comparable Rental Reports
Comparable rental properties refer to rental properties in the market located in your area that have similar features as your property. By choosing properties closely comparable to your home within the same area, you can determine the median rental price of these properties and use that figure to base your rent amount on.
With a comparable rental report, you have a clear basis for comparison against similar listings within the neighborhood. You avoid the risk of going beyond what the market dictates for a property like yours.
A rental priced higher than the market can get lower traction. This means there is lukewarm interest from high-quality renters. If you don’t find the quality of renter you want, your rental stays empty. This means higher vacancy cost for you.
If you set your rent without the benefit of a comparables report, you could end up renting below market rate. A lower rate can get you a lot of interest from renters looking for a cheaper place. That also means you end up losing potentially higher rental income over time.
Using a comparables report would put you on the safe side. It’s important to compare ‘apple to apple’ when selecting Comps. It helps ensure you get a more grounded comparison of their prices from which you will be pegging yours.
Here’s how you can come up with your own Comparable Rental Report:
- Conduct research to find a price point that strikes a happy balance between what you want for the property and want the tenants will be willing to pay.
- Browse listings for other properties in your area on Craigslist, Onerent, Zillow, and other listing sites.
- Find properties that have the same size, number of bed/bath, and amenities. If your property features more recent upgrades or additions, it may warrant an increase in listing price.
- Gather a list of 5-8 similar properties within your area. Record the highest and lower rents out of this list and find the median rental price.
- Decide which pricing strategy you would like to take: aggressive – higher rates, at market rates, or conservative – lower rates.
If you aren’t getting any interest in the property at that initial price, drop it by $50 or $100 increments every 4 days until you start getting calls. This will allow you to find the perfect price point that delivers you the monthly income you need from this property while still keeping it affordable for tenants.
So how does a Comps report compare a property to others to determine its value at a given time? Here are the factors that come into play.
Comparable Rental Reports: Location is key
Choose comparables that are as close to your property as possible. If there isn’t much to find within your area, you can expand your search. It is important to define a boundary, like keeping within the school district.
If there is a lack of available comparables in your area, consider looking beyond the set radius. It’s important, though, to choose properties that are comparable to yours.
For instance, if your property is an apartment, you can compare it to condos or single-family homes. Make sure they have the same bed and bath count, as well as size and condition.
Comparable Rental Reports: The More Data The Better
To get a better grasp of the market’s going rate, your comparables list must have at least 5 properties. It might be difficult to find three or more homes that are completely identical to yours. Having more than 5 comparables can give you enough to come up with reasonable comparisons.
Comparable Rental Reports: Soft Features Matter
Most properties will have individual characteristics that set them apart from others. While your property may have curb appeal like those in your comparables list, yours could have a better sidewalk, nicer landscaping, and a more appealing look.
Other soft features to compare are the property’s exterior condition. Does the roof look sound or does the facade’s paint look good? It can even extend to the immediate neighborhood. Do nearby homes look well-maintained or they falling apart? Is the property located along a busy street or within earshot of freeway or traffic noise?
Comparable Rental Reports: Extras Come In Handy
A property gets extra points for its proximity to cafes, restaurants, parks, shops, schools, entertainment spots, and public transportation. Accessibility to any of these denotes convenience and a fuller lifestyle, making the property more attractive to renters.
If you are planning to include utilities and services such as water, electricity, gas, landscaping, or trash with the rental, this can warrant a slightly higher rental price.
The more the comparables features and characteristics are similar to your property, the better it is. It makes your comparables list much more relevant and can provide you the best rent estimate for your rental.
Get a comparables report from reputable real estate leaders like Onerent. You don’t have to waste your precious time doing the research yourself. You can also avoid spending precious money on a broker or real estate agent to help you with a Rental Comps. Let Onerent do all the work for you—for FREE.