@Charles Kao - for the single family rental that we bought, it was somewhat straightforward as there was one single tenant and an associated rent rate. With that being the case, we would call around to local houses that had for rent signs up to get a gauge what the "going rate" was on the street / in the area. Then, if the house had a tenant, we compared what the current landlord was getting vs. what the market seemed to be demanding. We would also look at for rent listings on Zillow. For the multi family properties, it tends to be a bit more challenging. We would look for comparables in the area for rent to get an understanding of where the current landlord had the rents (above, below, in-line). We would ask for a full rent roll, P&L, etc. to determine what our cashflow would look like. You can request bills and tenant ledgers to confirm that the numbers the seller are giving to you are correct. At that point, we determine a break even point by adding "fluff" to the expenses (making them higher than stated) and reducing the rent rates / increasing vacancy to see if the deal truly works.
There is no perfect science, but making sure you approach the deal with a skeptical / conservative eye is important. Sellers will always try and paint a rosey picture.
Mike
