The Investor's Guide to Pulling Realistic Rental Comps - Frank Buys Philly

How do you effectively find and evaluate rental comps?

Rental comps are just as important as sales comps when looking at buying a property. Knowing how to find them and accurately assess them will directly impact whether you’re able to achieve profitable deals.

This is true even if you are wholesaling or rehabbing and flipping houses versus acquiring buy and hold units for yourself. This is because you need to know the real resale potential and should retain renting as an alternative exit option if your plan A doesn’t work out.

Unfortunately, this is where many investors are blowing deals—and their financial futures along with them. Too often, they accept what a current landlord, wholesaler, or real estate agent tells them. Then they get stuck and wind up with a deadweight deal that negatively cash flows every month.

Features to Compare When Pulling Comps

You’ll be looking at many of the same features and factors for rentals as sales comps.

They include:

Living area square footage
View
Bedroom and bathroom count
Architectural style
Age
Property condition
Special features like pools
Parking spaces
Location

Rentals can also be impacted by a wider variety of factors, especially amenities like nearby gyms, pet spas, restaurants, etc.

Related: 3 Ways to Find Comps When Determining ARV for Your Wholesaling Deal

Other factors to consider with rentals may include the application process, upfront money required, seasonal fluctuations, inclusions like utilities and wifi, and special concessions and offers like free rent.

Pulling Quick Rental Comps Online

There are lots of online tools for pulling rough comps fast.

Some of these include:

Trulia
Hotpads
Craigslist
Zillow

Rentometer.com has a free neat tool for instantly getting a rough estimate of area rents and showing you where prices fall within the whole market. A paid plan offers a deeper analysis.

Zillow has a rent “Zestimate” for formulating a rent rate. It can be fairly close, give or take.

Note that you’ve really got to dig into the data if you want accurate answers. Sometimes your first answers can be a bit inflated, often caused by overpriced rental listings that no one is willing to pay for. These tools also do not take into consideration the types of renovations done to a property. Days on market need to be considered as well!

For example, if a comparable property across the street from yours is asking $1,300 a month and it has been on the market 90 days, then that is a good indication the market is not willing to pay that. The market will always let you know whether or not something is too high. The market (renters) provide the best feedback. It is also smart to look out for the number of rentals that are being advertised. If there are too many, landlords are going to have to fight hard for any tenants and may have to come down a lot by making concessions.

There can be a huge difference between asking rents and actual rents. One house might be asking $1,500 a month. An identical unit next door could have just leased for $800. It’s hard to know online because this data isn’t provided like actual recorded sales comps.

Getting Comps Offline

Look to local professionals who are active in the market for better data. Think property management companies. Find a company that manages several rentals in the neighborhood you target. They will give you a solid rate that they believe they can rent it for.

Related: How to Best Gauge the Correct Rental Rates for Your Investment Properties

Get in the trenches. Spend time in the neighborhood where you plan to acquire, and ask folks how much they are paying in rent, if they’d move into your property for $X, and what they think about the property.

Summary

Being able to get and evaluate rental comps is vital for all investors. Don’t get caught with longer vacancies by failing to do your own due diligence on rents and rental demand.