Concerns with market rates and what I should charge for rent

[Hunter Duplantis]

So I have spoken with a friend that manages an apartment complex minutes from mine but is a little nicer. Her rates for rent are in the 1300s on up. I have my rent average at 875 not counting the section 8 tenant I have which pays me 1270 a month. My friend tells me I should charge 1100 to the new tenant that I’m trying to acquire. My complex is in an area that has some sketchy 4Plexes and apartments around it. Not all of them are sketchy, but about half.  This is my first complex and first time having a vacancy so I’m just a little nervous about what price to charge and how long it will take me to acquire a tenant that is willing to pay it. if there’s anyone in the Baton Rouge area that can kind of help me, please respond. Thank you.

[Derrick E.]

Listen to your friend. You can always lower the rent if need be. Doesn’t hurt to try. 

[Justin Moy]

We tend to push rents $50 until we see the traffic on our listings drop. Once they drop to below our required lead flow to rent out the units when we want we'll drop it by $25. 

Keep experimenting until you find what works for the property. Look at what other complexes are charging and you should get a good feel of where to start off

[Savannah Yingling]

Quote from @Hunter Duplantis:

So I have spoken with a friend that manages an apartment complex minutes from mine but is a little nicer. Her rates for rent are in the 1300s on up. I have my rent average at 875 not counting the section 8 tenant I have which pays me 1270 a month. My friend tells me I should charge 1100 to the new tenant that I’m trying to acquire. My complex is in an area that has some sketchy 4Plexes and apartments around it. Not all of them are sketchy, but about half.  This is my first complex and first time having a vacancy so I’m just a little nervous about what price to charge and how long it will take me to acquire a tenant that is willing to pay it. if there’s anyone in the Baton Rouge area that can kind of help me, please respond. Thank you.

 Hi Hunter! I'm a PM in Maryland. I agree with one of the comments below, follow what your friend is suggesting. If you don't have the tools to pull a proper market analysis, they are likely your best word of advice. Otherwise, if you know any local realtors they can also help see what market rents look like in the area. Best of luck!

[Adam Bartomeo]

You always want to be just slightly under market rents. Just minutes away is not a good determination of rents. Section 8 rents will get you in the ballpark. You should really do your research on rents and then place yours $25 - $50 below that.

[Logan Lambert]

Quote from @Hunter Duplantis:

So I have spoken with a friend that manages an apartment complex minutes from mine but is a little nicer. Her rates for rent are in the 1300s on up. I have my rent average at 875 not counting the section 8 tenant I have which pays me 1270 a month. My friend tells me I should charge 1100 to the new tenant that I’m trying to acquire. My complex is in an area that has some sketchy 4Plexes and apartments around it. Not all of them are sketchy, but about half.  This is my first complex and first time having a vacancy so I’m just a little nervous about what price to charge and how long it will take me to acquire a tenant that is willing to pay it. if there’s anyone in the Baton Rouge area that can kind of help me, please respond. Thank you.

 Hey,

Great question here. I would absolutely put the rent at $1100 and see what happens. Also, why not utilize section 8 on this one?

[Gino Barbaro]

@Hunter Duplantis

Find out what median income is in your area/neighborhood, and don't expect to charge more than1/3 their income. If they make 3k a month, you'll probably top out at 1k for rent.

Also, go on apartments.com and zillow and see what the competition is charging. Finally, pick up the phone and call any similar complex to yours and see what they're charging

Gino

[Hunter Duplantis]

@Logan Lambert well my section 8 tenants that are currently in there are living pretty thugged out and I’m sure that when I need to recover the unit that it’s going to be significantly damaged due to the fact that I had an inspection done three months ago and wasn’t happy with the pictures I received. Makes me very cautious.

[Ian Stuart]

Have your broker or banker pull and send you rent comps / market concessions / etc. from like kind / vintage / size properties in the immediate neighborhood surrounding your asset in Baton Rouge, and then make a value judgement on whether you have room to push.

Also recommend pulling a few rent comps off of Craigslist yourself, and see how they compare to your units on a $/month and $/sqft basis. When it comes to comps - only compare on a like/like basis. IE - only comp studios to studios / 1BR’s to 1BR’s / 2’s to 2’s / etc. If classic non renovated units - only comp to non-Reno’s. If your project has limited amenities - don’t comp to fully amenitized assets with a pool / fitness center / carport and garage parking / etc. Sort the unit type comps by square footage descending for best results.

If you’re inside of market by $100-200… immediately bump by $75-175 and see what bites you get. Worst case scenario you have to offer a small rent concession, but now you know where the market is. Don’t get greedy though or market vacancy will straighten you out quickly!

Best of luck