Landlords/Property Managers: How do you price your new rentals?

Question

Hello, I'm Vince, a realtor and property manager. In January 2019, I decided to head-up our office's rental dept. Our company has had a rental dept. for about 10 years, but at my office no one was handling anything to do with rentals. I saw a huge opportunity, so I decided to take it on. The guy who built the dept for our franchise has helped me out with building my rentals.

My question is...  Prop Managers/Landlords: How do you guys price your rentals? When you get a new owner who wants to turn their properties over to you and they ask, "What would my property rent for?" how do you come up with the price you tell them? Do you just take a good look at the property and pull a number out of your head or is there a better way to come up with a price for your owner?

I understand that with more experience you can figure out a good price based on a certain things like Square Footage, Number of BRs and BAs, How updated it is, Location, and so forth, but it's almost 2020. I wonder, is anyone using some sort of spreadsheet where you can plug in some of these factors and figure up a good price?

When we list houses, we do CMAs and pull comps to figure up a good list price. We can find out what other homes in the area listed for, sold for and how long it took them to sell, but with rentals, there's no detailed info other than looking at what other properties in the area are asking for rent. We don't know what it ACTUALLY rented for or how long it took to get it rented, or if they started too high and had to drop the price.

I guess I'm just looking to see what you other Prop Managers and landlords are doing to come up with your rental prices?

Thanks Vince

Vince Custode · Answer

Our MLS doesn't allow for rental properties to be posted to it, so there's no way for me to use that as a method for pricing.

John Thedford · Answer

I access the MLS to see what properties rent for. I price them just under market so they don't sit vacant for months. About the longest vacancy I get is one month when I have a turnover.

Vince Custode · Answer

Yea, I don't have any issues with securing tenants, screening them, or any part of property management duties for that matter. I believe I have done a good job up to this point at pricing my properties, but occasionally I think to myself, why isn't there a better way to price these properties.

I have thought about creating my own spreadsheet where it gives me a price range for a certain sized property, then all I need to do is rate it on a 1 - 5 scale (based on how updated or outdated it is) and there's my price range.

Michael King · Answer

My PM does a market comparison for me, but in my area it's pretty easy. About $1.00 a foot is a good starting point, give or take 15%. A lot of factors enter into it I'm sure you know, but once you've done your market research you'll know almost immediately what a property will rent for. Obviously that's the most important question for the owner, but the most important task for you is proper screening to ensure success for your clients (nobody wants an eviction).

Daryl Luc · Answer

Legwork.  Every four months or so, I go onto one of the realty sites that let me filter the results.  My personal favorite is Hotpads.  It's got everything contained in the Zillow companies websites and is purely the rentals.  Once I have my scrubbed and filtered results, I sort the configs, (3/1, 4/2, duplex etc.) set a range of $ per square foot for each config based on their listings.  I then go look at a few to get a feel for actual v pictures, condition, street traffic etc.  All the things that matter to people when considering the value of one property over the other.  It tells me then what I need to give my prospects...why my property, and why it's priced as it is.  Trust me, if I have to, I can convince a woman with children, why she doesn't want to rent a house with granite or stainless appliances, which makes my listing more attractive even at the same price.  Without your legwork, you're not doing anything different than they can with their smartphone....    In marketing it's basically a SWOT: Strengths, Weaknesses, Opportunities, Threats.

Charles Carillo · Answer

@Vince Custode

This is a great question. I have previously fully renovated, previously vacant apartment buildings with no historical rents and once you are starting to rent, you need to review the market. I will take the size of the units and try to get the closest comparables that are nearest to yours in location and try to find an average. I check; Zillow, Craigslist and apartments.com. You can drive the neighborhood and make a couple calls if you are in the neighborhood. Make sure you are reviewing actual comps. When in doubt, I might go a few percent higher to start, you can always lower it after a couple showings.