How To Determine Rental Comps

[Caleb Rehg]

I was looking at rental comps in my area and was wondering how trustworthy the information from sites like Zillow are, or if I should ask my realtor what the comps for the area.

[Chris Rich]

Quote from @Caleb Rehg:

I was looking at rental comps in my area and was wondering how trustworthy the information from sites like Zillow are, or if I should ask my realtor what the comps for the area.

I work for a PM company in the Orlando area and I can tell you Zillow almost always overestimates the rates by at least $100+. When I do my analysis I start with the MLS data because it will give you days on market (DOM) data. You can then analyze how long properties took to rent at certain price points and after price reductions.

I will then look at Z-rent because many self-managing landlords will list on Zillow.  I will then search the properties that APPEAR to have rented on Z-rent. Problem relying on Z-rent solely is that vacant properties that didn't rent will appear as rented just because the listing was pulled down despite not renting, and by doing that it is inflating the rental rates. You may also see the same property listed as "off market" and have an active listing at a lower rate.

When I present my analysis to my clients I will give them a rental range with a DOM to rent at that rate because vacant days are lost revenue and I want the client to make an informed decision.  

In my opinion, too many people don't learn from other people's listings. For example, in the first week of September I had a lead that wanted to list at $2,800 because, "It would be cool to make $1000 over the mortgage" despite the market being $2,200-$2,300 (We rented her neighbor's property at $2,250 in 11 DOM which is why she called up).  Well, I explained how most of the comps showed $2,200-$2,300, with $2,400 being possible, but with a longer DOM.  Most of the comps were originally listed at $2,700-$2,800 before renting $2,200-$2,400.  She chose not to work with us and instead hired an agent and listed at $2,700.... the property at this moment is still vacant and listed at $2,500.  If it rents at $2,300, that's $77 a day.  Even if it took 30 days to rent, she's lost over $5,000 in rental income.

My recommendation is to call a few PM companies and ask for an analysis, or ask your agent if they have a PM company they work with that can provide an analysis (I do for my referral partners).  Most PM companies will offer a free analysis.  Ask what process they use for their analysis and see what they say.  Some agents are well-versed in the rental market, but many are not.  If using an agent, ask them how often they lease properties because some will do it often for their clients who self-manage.  

Feel free to DM me if you have any questions.  Good luck!