If you’re a rental property investor, there must have been a time when you’ve wondered whether you are charging too little for your property. Naturally, you don’t want that to be the case as you want to make rental income and positive cash flow. That doesn’t mean you should charge too high, however, as this can negatively affect your real estate business when it comes to rental demand and vacancies. Thus, landlords and investors need to learn how to price their rental properties to find what the right amount to charge for rent is. And the best way to do that is by looking at rental comps. Keep reading as we explain what rental comps are, how they’ll help you set your rental rate, and how to find rental comps in your area.
What Are Rental Comps?
Let’s go over what real estate rental comps are. The word “comps” is short for “comparables.” A comp is a house similar to yours in location, size, condition, and features. Sellers use comps to find the value and the right listing price of their properties. Buyers use real estate comps to decide how much to offer on a home for sale. Rental property investors and landlords use rental comps to determine how much to charge for rent. How exactly does that work?
How to Use Rental Comps
You need to learn how to find rental comps because they are the core of rental market analysis (known as comparative market analysis). Every real estate investor should run a rental market analysis because it’ll help to determine multiple things. First of all, it’s used to analyze the local housing market in which you’re buying a rental property to understand the rental potential of the area. Meaning, it lets you know whether or not buying an investment property in a given market can yield good rental income.
Once you own the property, you can compare rental rates (rent comparison) of similar local properties to derive the average rent for the entire area or the local housing market. After that, you calculate the price per square foot for each rental comp and compensate for the differences. If you chose your rental comps correctly, the final number should be close to what you can charge for your rental property.
This is only a very simplistic description of how to run a comparative market analysis. For more details and information, read Comparative Market Analysis: A How-To Guide for Real Estate Investors.
How to Find Rental Comps
So now that you have an understanding of what real estate rental comps are and how they can help you decide how much to charge for rent, it’s time to go over the main subject of this blog post – where to find rental comps. There are 3 main ways that real estate investors follow to find houses for rent that work as rental comps for their rental properties which don’t really require much time or effort. These are:
#1. Real Estate Agents
If you’re a beginner real estate investor, then hiring an agent is one of the smartest moves you can make. Your agent will not only help you find real estate deals but also run a rental market analysis for you! This means he/she will be responsible for finding rental comps for you – and who is more qualified to do this than someone who understands the business and has been in the local housing market for years? Not to mention, a real estate agent will have access to the Multiple Listing Service (MLS) where he/she can find properties in any neighborhood and city across the US housing market. As a result, a real estate agent will know how to find rental comps in your area and in no time!
#2. Home Appraisers
Hiring a professional home appraiser is yet another way to find the value of your rental property and get an idea of how much to charge for rent. An appraiser’s role is to provide objective, impartial, and unbiased opinions about the value of real estate properties. They provide help to those who own, invest in, manage, sell, and/or lend money to others to buy real estate. They do that by gathering a series of facts, statistics, and other information regarding specific properties, analyzing this data, and developing opinions of value.
If you live in a competitive housing market or you’ve made renovations to your rental property and are not sure how they affect your rental price, getting a home appraisal is a good idea. However, the setback that comes with this way is that you’ll need to pay the home appraiser per each rental comp analyzed. In other words, you’ll need to pay a few hundred dollars multiple times, which might cost you almost as much as working with a real estate agent.
#3. Mashvisor – The Easiest Way
The best way of how to find rental comps is by using online tools. Ever since the emergence of big data, predictive analytics, and machine-learning algorithms driven by AI, the real estate industry has become even more competitive than what it originally was. Now, real estate investors can’t compete without using the best investment tools of 2020 like the Rental Property Calculator. With this tool that Mashvisor provides, you can say goodbye to running a comparative market analysis on your own or hiring someone to get rental comps for you!
Mashvisor’s investment tool uses real estate data to find rental comps in your area that are similar to your investment property. Simply enter your property information. Our calculator will then show you a complete property analysis including estimates and data of potential rental income, expenses, cash flow, cap rate, cash on cash return, and occupancy rate. On top of that, you’ll also be given a list of local properties that are suitable as rental comps.
Let Mashvisor Find Rental Comps for You!
Instead of investing a lot of time trying to figure out where to find rental comps and estimating a fair price for your rental property, consider signing up for Mashvisor. Owning a rental property that makes rental income and positive cash flow all depends on the numbers. You can make things easier for yourself by letting Mashvisor run the numbers while you focus on growing your real estate business and not having to worry about how to find rental comps in 2020! So what are you waiting for? Start out your 14-day free trial with Mashvisor now!