Determining comps when there is nothing comparable??

[Kyle Gregg]

I am currently estimating what i could rent a 3/1 in my area of Baltimore. It is a side by side duplex on a small piece of land. The immediate surrounding area is somewhat rural but its not too far from more populated areas with large multi family buildings. 

My problem is that the comps are all condos/apartments in these large multi family buildings. Is it right estimate my rents based on these comps? There isn't many duplexes in this area to appropriately base monthly rent. 

Could this property be a potential problem, seeing that it is somewhat 'unique', when it comes time to find a tenant? 

[Account Closed]

are their tenants living in it now? check out craigslist,talk to the agent to get a rental history go to - rentometer.com for area rents ,find  average price per sq ft in area  run your numbers thru the rental calculator on BP 

[Kyle Gregg]

@Account Closed The property is currently vacant. I could talk to the seller about rental history but the units both need significant rehab so those numbers wont give me an accurate rental rate. I can get a good feel using rentometer but most of those rents come from apartment buildings. 

[David Midgett]

Kyle- I too would prefer to have a duplex comp instead of a nearby condo/apartment.  As you suspect, a duplex and an apartment are apples and oranges to most tenants, and the difference in maintenance/repairs/management can be significantly different on your end.

One way to get a baseline is to look at other parts of your city where duplexes and apartments are both plentiful in a single neighborhood, and look at the ratio of rents between those two asset classes.  Then apply the ratio to your nearby apartments.

[Kyle Gregg]

@David Midgett 

Wise words. I appreciate the input. 

[Mike Kelley]

I agree with both Steve and David.

I would take no less than 3 rental rates and find the medium price range.

Craigslist, Property Management companise or local real estate investors is the place to start.

[Bill Gulley]

Yes, you can go further away to find comps and then try to adjust those comps as to their location, being in the same MSA or regional area. You also have the cost approach and depreciate for age and condition as well as the income approach with estimated rents.

You'll be better off going further away with like properties than trying to adopt dissimilar units.

Your total adjustments should not exceed 10% of the sale price of your comps, if it becomes greater then it's not a good comp.

That also tells you that the market is not established for that subject property, lack of marketability effects value, if a property can does not have sufficient comps it may not be financed and that is another marketability issue if customary financing can not be obtained.

Need to revisit your investment strategy in buying distressed properties that are not as marketable. :)  

[Kyle Gregg]

@Bill Gulley 

Thank you for the input. I think searching nearby areas as you mentioned might be the best route to take. I don't think using apartments as comps will be a viable option.

As for the area of this property. I think its wonderful area considering its proximity to Baltimore city. The schools are A+, the crime is very low, and median income is high...for baltimore, that's a golden nugget. Lets hope potential tenants think the same :)

[Bogdan Cirlig]

Adjust the comps, whatever you find, even across different bedrooms. Say you find SFH 4 comps and you want 2 bed apt, you can equalize down to $/sqft, also you can equalize further, the less sqft the pricier per sqft a home/apartment is. In the end it's how much people are willing to pay for living space. You will find there's not a huge difference between apt and sfh in terms of $/sqft, sometimes apt wins if they are upscale communities with amenities such as pool etc, sometimes sfh wins.