Trouble Getting Rent Estimates

[Warren West]

I'm pretty good when it comes to analyzing a deal besides one aspect: figuring out what a reasonable monthly rent would be for a property.  I can plug in hypotheticals to see what the cash flow would be, but I struggle to get a good estimate on what the place would actually rent for.  I know that everyone mentions using other rental listings in the area as guides, but I'm in RI and don't often find a ton of rental listings to use as comparisons.

I asked my agent on one particular property that I looked at and he said I should be able to do $1,100 for a 3 bed unit if it's in medium shape in an area where I saw another listed at $1,275 and rentometer gave me an average rent cost in the area of $1,467.  Now these are  3 very different numbers and really change the way cash flow comes in.  They're all cash flow positive; however, if he is right about $1,100/month then it's not the best deal as the cash on cash would only be around 6-7%.  This is obviously a dilemma since renting at $1,450 puts my estimated cash on cash return around 32%.

What is the best trick to finding the right amount before actually buying and listing a property?

[Nancy DeSocio]

Hi @Warren West,

Not sure where in RI you're looking, but there are plenty of rentals on Zillow and Craigslist to use as a guide.  You can even take the extra step to find a rental that is similar to the one you are analyzing (i.e. location, number of bedrooms, utilities included or not, etc) to get a first hand look at the competition.  Once you see enough of them, you'll have a decent idea.

A slightly longer-term suggestion (but worth the effort) is to make connections with property managers in the area.  I trust their input more than I do realtors, as they fill vacancies all the time and have seen enough properties to give you accurate information.

All that said, when in doubt, I'd suggest being conservative with expected rent when running your numbers.  If (or when) the market shifts, it won't hurt as much.  Good luck!