Rookie Reply: How Do I Find Rental Comps for My Property?

Ashley:
This is Real Estate Rookie, episode 138.

Tony:
Welcome to the Real Estate Rookie Podcast where every single week, two times a week, you get Ashley and I breaking down the basics of becoming a real estate investor. And we do that by going deep into the topics, into the questions that you know you want to ask but sometimes you’re too embarrassed to ask. So, that’s what we’re going to get into today, some questions that folks might have. I am here with my lovely co-host Ashley Kehr. Ashley, what’s going on?

Ashley:
Hello, Tony Robinson. Before we do any small talk today, getting into the episode, I want to read the question that I have chosen for this Rookie Reply, because I feel like you will have some comments based off of this person’s message to me. So, this message is from Daniel O’Neil. He sent it to me on Instagram and he says, “Episode 126, Movie Quotes. Princess Bride is always good. Emperor’s New Groove, wrong lever. Not much of a movie person but growing up quoting Tommy Boy, so you always make me laugh when you throw one in there. For your brother, I’d recommend civil or architectural engineer. I work in civil and electric, but civil is really handy for anything outside the building, water, sewer, grading, soil composition.” Okay, so before we get to part two of his question, we had asked, said on an episode that maybe I need to start quoting new movies. So, those are his recommendations. Tony, have you seen any of those movies?

Tony:
Well, I just had to Google The Princess Bride. I’ve definitely never seen this movie, came out like in 87. So, I was, I don’t know, not born yet. And then the other was Emperor’s New Groove, right? I love that one.

Ashley:
Yeah.

Tony:
I can get down with some Cusco all day.

Ashley:
Okay. My brother was… Him and his friends were people from Emperor’s New Groove for Halloween this year. Maybe we can post a photo of my brother in the show notes.

Tony:
Well, funny enough, David Spade is also the voice for the main character in that movie. So, there’s that [crosstalk 00:02:03] connection.

Ashley:
Oh really? I didn’t realize that.

Tony:
Yeah. Still some Tommy Boy connection there.

Ashley:
Okay. So we’ll have to freshen up on that one then.

Tony:
All right. I’m going to re-watch that tonight.

Ashley:
Yeah. I had asked for my brother too, my youngest brother, who is 17, asked about careers he should go into if he even goes to college, so that was Daniel’s recommendation for that.

Ashley:
Okay. So part two, here we go. Enjoyed the podcast, by the way. An episode about gathering local rent numbers would be cool. I know it’s mentioned before, but a refresher would be nice for this rookie. Well Daniel, your wish is our command. We are going to break that down today as to how you can find what rent is going for in your area. Tony, kick it off.

Tony:
There’s a lot of different ways that you can go about this. I think maybe we can give them both ways, right? We can give them the kind of free, easy way to do it. Then we can give them the Biggerpockets kind of way that makes it probably a little bit easier, but both of which I think a new rookie can go with. So I’ll maybe give him the quick and dirty way, and then you can give the Biggerpockets way. But I just want to highlight really quick before we keep going, this question came in through your Instagram. For those of you that are watching, that are listening, if you want your question possibly featured on the show, feel free to reach out to Ash and I on Instagram as well, I’m @TonyJRobinson, she’s @wealthforrentals. And from time to time, we’ll pick some questions that people kind of slid into our DM’s with and use those as the premise for an entire show.

Tony:
Okay. So getting into the nitty gritty here. If I wanted to understand potential rents and I wanted to do it the kind of quick and dirty way, my preference is to go with a site like Zillow or Redfin, whatever, any other website that shows all of the properties that are for rent in your area. I like to get really narrowed down and focused on a specific zip code when I’m looking at long term rentals. So, for example, me, when I was investing in Louisiana, I knew that 71105 and 71104 were the two zip codes that I focused on in Louisiana. So what I would do is I would type in those zip codes into Zillow, change a little filter to say ‘For rents’ and I would start looking for properties that were comparable to my property or the property that I was thinking about purchasing.

Tony:
For example, my first purchase was a three, two. I looked at all of the other three two’s that were for rent in that market, just started in a little Excel sheet, a little Google Sheets file, putting down here’s the address, here’s the rent, here’s the address, here’s the rent, here’s the address, here’s the rent. And if you do that enough times for enough listings, you start to get a sense of what things might rent for in your neighborhood.

Tony:
Now, the kind of important thing I think to take note of is that it’s helpful if you can check this at more than one point in time. For example, someone might list a property for rent today, and then two weeks from now, they decrease that rent because it hasn’t been rented out yet. So I’d try to get at least two different time points, data points, to support that. And if I see that the price didn’t decrease, or maybe that listing went away, then it’s a good sense that, or it’s a good indicator that someone’s probably actually rented that property out. That’s really the easiest, kind of quickest, dirtiest way that I did it when I first got started in long term rental space was just getting really, really intimate, really, really familiar with the data in that specific zip code. And when you see enough, you’ll kind of understand what you might be able to charge for it. That was a mouthful, Ash. What do you got for us?

Ashley:
Tony, the only things that I would add to that is if you want to get super technical is actually start an Excel spreadsheet. So every day you’re going through the listings and you’re putting in the address and then what it’s for. And then when it’s taken down and it’s no longer up, that probably means it was rented. You’re getting an idea of how fast things are rented and if they’re actually renting for that price. If something is staying on for a long time, then it’s probably too high of a price and people aren’t paying that. You can also look at the pictures too, to see how they compare to your unit. Another thing to note was use the map view. So on Craigslist, Facebook Marketplace, they all have the map view where you can see exactly where these units are located, which can kind of help you stay within your area, too.

Ashley:
Then Biggerpockets. If you are a Pro member, they have the Rent Estimator Tool. And all you have to do is put in the property address or the zip code of where you want to invest. And that will actually give you comparables. So you can put in, if it’s a two bedroom, one bath, three bedroom, two bath, whatever it is, and it will pull up those comparables for you in your market. And it will show when it was last rented, how much it rented for. It also does a map view for you. And you can click on those and go to the old listing sometimes too. So if it was listed on Zillow, you can usually click on the Biggerpockets website where they show that comp and it will take you to the actual listing, even if it’s expired, so you can see some pictures through there too. Also, checking dates, making sure the dates are comparable, that it’s not from a long time ago.

Ashley:
If you’re in really rural areas, it’s going to be a lot easier to do what Tony talks about is going through and searching because there’s not going to be a lot of comps anyways. And the Biggerpockets rent estimator might not have that much data for you because it’s so small and there’s not a lot of rentals anyways. I think one thing to note too, is if you are having trouble finding comparables, because there’s nothing available, then that’s a good sign potentially that there is not a lot of vacancy in the area and that there is a demand for units.

Tony:
Or you could live in maybe in the middle of nowhere where there’s no people either. So it could go either way. But I think just one thing to add on the Biggerpockets data side is that whenever you’re using software tools like this, there always is some kind of margin of error. But Ashley just looked up the zip codes that I invested in, in Louisiana and our last house, it was a three bedroom, two bath. We had it rented out for 1350. I plugged in that same data into the rent estimator here and it said that the median rent is 1325. So it’s actually pretty close to what we were actually getting. So, just to give you a little bit more confidence in the data that’s presented there.

Ashley:
Okay, well, awesome. Hopefully that helps you guys. One last thing that you can actually do is you can call property management companies in those areas too. Just ask what rents are for two bedroom, one bath. You don’t have to say that you’re going to be their competitor, that you’re looking to buy investments in the area, but just say that you’re looking for an apartment if they even ask, but you can get data that way. I’ve had other investors call me saying that their tenant’s giving them a hard time raising rent and they want to show them that it’s actually not that high compared to other areas. I’ve given out that information. No problem. One great thing about real estate investing and investors is that everybody is willing to give out so much information. You’ll rarely find somebody who keeps it a secret of what they’re doing or is not willing to share.

Tony:
Yeah, that’s great advice, Ashley. I guess just last thing they even do that like apartments calling each other, they do that with bigger apartments as well. I worked for a property management company briefly after college and part of our job as the leasing agents was to call other apartment complexes in the area. And you know, these are big apartments. These are like thousand plus unit apartment complexes. And part of our job was to call the other apartment complexes in the area to see what their rents were. And you know, every time we call it, it was just a normal thing. They knew that that was part of what came with it. So really, really good points to do that with the single family houses as well, because they’re even nicer than these big corporations. And they’re probably even more willing to share that information.

Ashley:
Well, thank you guys so much for listening to this week’s Rookie Reply. Big shout out to Daniel for giving us our topic on talking about estimating rent in your market. If you guys have other tips, check us out on YouTube and leave a comment below our YouTube video of where you guys find out what your market rent is. My name is Ashley Kehr. You can find me at Wealth from Rentals on Instagram and my co-host is Tony Robinson. And you can find him on Instagram @Tony J Robinson. And we will be back on Wednesday with another great guest.