Rental Market vs Actual Rent

[Nehal Ahmed]

When running my numbers, I’ve run into this issue a couple of times. The actual rent is either much higher or lower than the rental market in that area. Which numbers do you go with in this situation to see if this is a viable property?

[Darius Ogloza]

The market for rental properties is not efficient like, say, the market for the price of Amazon stock.  At best, what you have are a few rules of thumb based on some research/polling that is only as good as the person or entity conducting it.  There are simply too many variables.  A 3/2 house with great quartz counters that could rent for $3,000 in one location will only go so far if garbage trucks wake your tenant up at 4:00 a.m. every morning in the location of your rental.   

You can trust an actual rental rate like you can trust a closed property sale - it is the number that is arrived at through an arm's length transaction by a willing buyer (renter) and seller (landlord).  Sure, some property owners do not maximize the rent they charge (e.g., to avoid the hassle of a turnover) but putting too much faith into an overall "market" rental rate could burn you too.  You will get a feel for what is the right amount with greater experience.