What is the best way to estimate rent and CapEX's for out of state investing

[Chizitem Ibeneme]

I'm a college student, and I plan to start investing in multifamily homes once I graduate, and I recently started looking at deals on Zillow just so i can practice underwriting. But I hit a wall.

First: Trying to find out what similar properties in the area (10 m radius) rent for, I used rentcast and rentometer for this, but they gave me two very different results. So I'm asking, What is the best way to utilize the results they both gave me and narrow it down? Just so i can do the preliminary analysis on the property

Second: I'm finding it difficult to get a clear price estimate of the CapEx's that might be needed. So what I'm asking is if there's a better way to estimate CapEx on a property during preliminary analysis, i.e., without having to go to the state where it's located and asking around, i say this because there has to be a good way to estimate these things before going deep into the deal

Any insights on this guys?

[Drago Stanimirovic]

Hi Chizitem,

Great questions! Here’s how you can approach both issues:

For rent comparables, since RentCast and Rentometer are giving you different results, the best way to narrow them down is by averaging the estimates and focusing on properties that closely match the one you’re analyzing in terms of size, number of units, and amenities. Additionally, checking local listings on Zillow or Craigslist can help fine-tune the rental rates in that specific area. You might also want to consult local property managers or rental market reports for a more accurate picture.

When it comes to estimating CapEx during preliminary analysis, without visiting the property, you can use a general rule based on the property's age and condition. For older properties, expect a higher CapEx due to potential issues with major systems like roofing or plumbing. Many investors estimate 10-20% of the property value for older units or around $250-$500 per unit annually, depending on its condition. You can also check online resources like BiggerPockets or Roofstock, which offer general CapEx guidelines based on property type and age.

These methods should help you perform a solid preliminary analysis. Let me know if you need any more guidance!

Best,

Drago