How do you estimate correct rent prior to buying a rental property?

[Jack Srimani]

Hi,
I am in the process of analyzing a townhome. This is a three bedroom and one bath property. I am estimating the rent that I can have should I finalize the deal. I am using zilpy.com which states the asking price of 1200 while rentometer.com shows the 1200 price reasonalbe rent. However in the rentometer in the nearly places the rents are showing from 800 to 1000. This is confusing to me. My question is how do I accurately estimate rents for rental property for a particular area so that I am neither undercharging or overcharing. This estimation accuracy is vital for me to do my analysis of rental purchase for this property. I appreciate your help. Regards.

[Chris Colvard]

Hi:

Do a rent survey for properties of the same type in the same neighborhood.

Find all the for rent ads in the paper and online call to verify the amenities and square footage.

Do at least 5, the more the better though. When you get those, use only the ones with comparable amenities. Divide the rent amount by the square footage and you will get the rent per square foot. Add all the sf numbers then divide by the number of comps you are using. This will be the average sf rental rate. Multiply that times the sf of your unit. This will be you base rental rate then add or subtract based on how your unit compares to the comps.

I would try to get a little more than the base rate or at least ask for that. Make sure your deposits and fees are equal to you competition. Adjust as needed until it is leased. Try not to leave any money on the table and start on the high side, you can always go down.

Chris