Running proper rental comps for a house lets the real estate investor identify the perfect property with rent that attracts qualified tenants.
Table of Contents
- What Are Rental Comps?
- What Do You Need to Find Rental Comps?
- Where to Find Rental Comps Data?
- 3 Other Things to Consider for Rental Property Pricing
- Conclusion
As a real estate investor, this article will improve your understanding of rental comps and the importance of different property aspects when calculating the ideal rental rate for your property. You’ll be able to use the data from rental comps to the fullest to help generate the most lucrative return from your rental property.
In order to run rental comps for a house accurately and efficiently, you can make use of Mashvisor’s set of real estate investment tools. Real estate investors can find and run rental comps within mere minutes. The platform is designed to help both amateur and experienced real estate investors who are in need of quick rental comparison for their homes.
Essentially, users can run rental comps for every single property that’s listed on the platform, as well as homes that aren’t, simply by entering the exact address and basic information. Mashvisor offers comprehensive information for both traditional and Airbnb comps. To learn more about how to use rental comps to set the best rates for your property, continue reading.
What Are Rental Comps?
Rental comps, which is short for rental comparables, refers to rental properties with similar characteristics and features to the investment property you already own or plan to buy. The rental properties are also located within the same real estate market.
They can be either traditional or Airbnb comps; it all depends on what your rental strategy is. When you run rental comps for homes, you can gain valuable insight into the rental prices that work the best for successful landlords in the desired area. You can use this knowledge to adjust your own rental pricing further and improve your return on investment.
It’s only logical that setting up your rental price too high will turn off potential tenants, making your property stay vacant for way too long. On the other hand, setting the rent too low is not a good idea either; not only can it attract less qualified tenants, but you’ll also be losing money on your monthly rental income.
Basically, when you run rental comps for homes in a specific area, you’ll be able to set up the ideal rent that attracts the most qualified tenants. It often means getting the highest possible income from renting out your property for the longest time period possible.
That said, it’s crucial to learn how to find and run rental comps. It s important regardless of whether you already own houses you’re planning to rent or still need to find investment properties to purchase.
How Do Rental Comps Work?
As mentioned, rental comps allow investors to compare similar properties within the same area in terms of potential rental income. The tool is very useful for real estate investors who are still assessing what house to buy and where. The property analysis provides insight into the realistic income and cash flow associated with specific homes.
In order to use rental comps as a powerful investment tool, the property comparisons should involve certain aspects that the comparison is based on. For instance, there are different house features that will be taken into account, such as the number of bedrooms, the size of the property, and so on.
It means that if the house you’re interested in comes with four bedrooms and three bathrooms, you can expect the rental comps to contain homes with pretty much the same number of bedrooms and bathrooms within the same neighborhood.
Now, there are several factors and aspects to consider when you want to run rental comps properly. Things like the number of certain rooms and house size are definitely important – but not the main priority. Still, they will help limit the property results in rental comps to homes with the exact same characteristics. Such situations may warrant further adjustments so that the rental comps actually include the necessary differentiating factors.
Related: Search for Investment Properties: The Best Tools to Use
What Do You Need to Find Rental Comps?
Once you have a house in mind for your investment portfolio, you need to compare it to similar properties. In order to find rental comps, you need the specific information and characteristics of the property you’re interested in. That said, the following aspects will be necessary to run rental comps successfully:
- Location. While it’s possible to run rental comps even when you proceed to search for rental comps that are near you, entering the specific location/address of the property will generate better results.
- Property market value. The value of the sold property that signifies the accuracy of property income makes it easier to estimate the cap rate and cash on cash return.
- Property size. The accuracy of the property analysis is higher when you consider properties of similar sizes in your comparisons.
- Property type. The kind of property you wish to rent out is an important factor for correct rental comps. It means single-family homes should be compared with other single-family homes and not multifamily ones or whole apartment buildings.
- Condition of property. The date of the construction and the overall condition of the house must be taken into account for a fair listing comparison.
- Rent prices. The average monthly rent for every single house in the comps, together with the rent per square foot.
Additional Information
In addition to the above, you will need the following information in order to run a rental comps for a house:
- Number of bedrooms. The best way to get to the most accurate rental price estimate is to have homes with the same number of bedrooms in the rental comps.
- Number of bathrooms. The bedrooms are more important than bathrooms when the property’s characteristics are concerned. However, the number of bathrooms is still a valuable metric for added accuracy.
- Amenities. The appliances available and their age, together with other amenities such as pet-friendliness, swimming pools, landscaping, etc., can all affect the rental price.
- Parking. Investors should also include the parking type when looking for rental comps, such as on-street parking, a carport, or an entire garage.
Related: 8 Characteristics of the Best Rental Markets
Where to Find Rental Comps Data?
Thankfully, nowadays, you don’t need to go around the cities and neighborhoods that interest you to collect information about different properties for rental comps manually. There are several other options to make things easier for new investors.
For instance, you can team up with property managers or real estate agents to get valuable rental comps data. You might even be able to work with another real estate investor. Comparable listings can be found among online sources like Zillow, for example.
Most of the existing platforms charge a certain fee, but they also typically provide other useful information aside from rental comps to make the overall investment property analysis more comprehensive and efficient. You must be careful, though, as some platforms don’t offer that many services to justify a rather hefty fee.
To find the best real estate comps to make smarter real estate investment decisions, click here.
Using Mashvisor for Rental Comps
That said, you can always turn to Mashvisor for rental comps source that’s reliable and easy to use, not to mention budget-friendly in terms of everything it offers to its users. Investors can count on thorough real estate analysis and run rental comps for homes across the US.
Through the Mashvisor platform, users can download the Neighborhood Report file with previously set up filters for whatever features the investor wants to make a property comparison.
What’s more, it’s possible to access the rental comps section when you select specific neighborhood pages within the platform. Here, you can see properties that are similar within the said neighborhood. Additional information is available, such as distance, number of bedrooms and bathrooms, monthly rate, and more.
And if you proceed to visit a page of a specific property, you’ll also get info on other homes in the area that are fairly similar, if not the same. You can turn to previous sales data if you want to check competitive prices or plan a profitable rental strategy.
While you can check rental comps at both the neighborhood and property level, you can also check both traditional and Airbnb real estate comps. If you haven’t decided what the ideal rental strategy is for you in that regard, you can utilize the stats and data with the two sets of rental listings.
Essentially, Mashvisor can save you both time and money when you want to perform accurate property analysis. It enables you to run rental comps successfully and make informed investment decisions.
You can use Mashvisor to run rental comps for a house at both the neighborhood and property level and find your ideal investment property.
3 Other Things to Consider for Rental Property Pricing
It’s absolutely necessary to run rental comps for a house or other potential investment properties in a specific area. They will certainly provide the investor with valuable data, statistics, and estimates. Also, there are other things to consider before setting up your rental price.
1. Rent Restrictions or Regulations
Rent control exists in some areas to manage the amount of money that landlords can charge for rent. It also affects just how much of a rent raise is possible to enforce on an annual basis. Rent control is a rather beneficial thing for renters. It is easier for them to plan on staying at one house for a longer period.
However, as a landlord, you probably wouldn’t want something limiting your income. It is especially true when not all cities or states impose rent control. Such locations will allow you to adjust your rental rates and eventually boost your net income.
If you’re specifically interested in purchasing homes in New York, New Jersey, Maryland, Washington DC, and some cities in California, you should definitely make it a point to check whether rent control laws apply.
2. Local Market Conditions
Don’t rush to set a rental rate for your property before checking the local market conditions first. It is a part of the analysis that should be done even before purchasing investment homes. However, if you already have one that you want to rent out, make sure to still see just how well the house in question fits the market it’s in.
Basically, you should think about demographic data in relation to setting the right rental price. In areas where there are more single people looking to rent, homes with one bedroom will fare better than multifamily units.
Consider the median income of a specific market as well. If it falls under $35,000 per year, chances are that a $2,000 monthly rent for a house with one bedroom will be too expensive for single renters. On the other hand, it may be acceptable for two-earner families.
Related: How to Find Multifamily Investment Properties
3. Total Cost of Ownership for the Rental Property
As an investor, you obviously want to ensure that you’ll generate profit from the investment property you’d like to purchase and rent out. In order to do so, consider the total cost of ownership for the rental property. You want the rent-generated income to provide you with more money than what you’d need to spend on mortgage, taxes, maintenance, etc.
It’s true that lowering rent a little bit can attract many interested renters. However, if you lose too much money doing so, it might prove to be challenging to maintain the house properly. It would eventually make the renters leave, regardless of whether the rent is cheaper compared to other homes in the area.
Conclusion
Before you make a purchase, it’s absolutely crucial to run rental comps for a house. It will allow you to see whether the property in question is a profitable asset to add to your investment portfolio.
When you run rental comps, you get to organize and narrow down your investment property search. You are able to place your undivided attention on the few selected homes that are expected to perform well in a specific neighborhood.
Thanks to Mashvisor, you can find and run all types of rental comps for traditional and Airbnb listings on a property level and neighborhood level across the US. Also, the platform also offers additional tools and features that will further aid you in your decision-making process. You can secure the most profitable deal without wasting your time or money.
Sign up for Mashvisor today and get a 7-day free trial to check just how big of a difference it can make.
