Determining fair market rent for a rental property is no easy task. Vacancies are expensive so overshooting on the rent could end up costing you more in the long run. I’ll give a personal example (a painful one) to show just how expensive vacancies are.
I hired a property manager for my Greenwood Indiana property and told them I was hoping for $1100 per month in rent. This was February, which in my experience has been a good time to rent. Instead of listing the property for $1100 they listed it at $1150. At first I thought great, I was low on my estimate and it will rent for much more.
About 3 weeks later I asked them to reduce the rent to $1100 since they had yet to receive any applications. About 30 days in they found a tenant for one side, who wanted to move in 30 days later. I said okay and to reduce the other unit to $1050. 75 days in I fired the property managers (there were many more reasons that just them not renting the place). 10 days after I hired the new property manager a new tenant was secured for the other unit at $1050 and they wanted to move in at the end of the month (25 days later).
So I lost out on 60 days of rent on one unit, and 95 days of rent on the other unit which comes out to $5,448. So in an effort to make an extra $1200 per year we ended up losing $5448. Yeah, that was painful.
Now I want to share how I determine fair market rent on my own, and when I have followed this process we do not leave money on the table nor do our units sit vacant and lose income.
How To Determine Fair Market Rent
You can follow the steps and try it on the property you’re living in or use my example.
We are getting ready to rent one of our properties located at 702 E 3rd St Arlington, WA 98223, I used that for this example.
- Start with your property address and go to each website as described in the steps below
- Visit www.rentometer.com and type in the property address and the number of bedrooms. You can leave the rent amount blank. Click analyze my rental and you will get something like this:
3. Next go to https://www.zillow.com/rent/ and type in the property address and click search. Look for the Zillow Rental Zestimate as shown in the highlighted area:
4. Next, staying on the zillow website click close in the property window and zoom out to see how many rental properties are available in that area.
5. Review how many rental properties are currently available in that area. This would be your competition.
6. Go to http://www.realtor.com/rentals and search the city where your property is located.
7. Use the map search feature on realtor to see how many listings are active and what the rental rates are.
8. Review your findings:
- Rent O Meter gives a median of $1,126
- Zillow says $1,395
- Zilpy says $950 – $1,395
- There are 16 active rentals on Zillow & 6 on Realtor
- If the condition of the property is upgraded, I would assume a high of $1,350. If the property is not updated I would assume $1250. Since the property has updates such as new windows, laminate flooring, new paint and new bathroom but an older but clean kitchen, we’ll list it for $1,250 per month to make up for that.
Do you have something to add or another service to use to find accurate rents? We’d love to hear about it!
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