Surveying your market
Where should rents be. That’s one of the most important questions you’ll have to answer before and during apartment ownership. Can I increase them enough to add substantial value to my investment. Are there enough similar comparable properties nearby to be confident of my projections. Is another apartment community about to go live soon right down the street.
These are all relevant factors in determining where rents could be. They are subjective, though, and you really want the objective numbers, the tangible data that will help you make good decisions.
What exactly are the rents in your area? You know about how to find them out. You can check Costar, Rentometer, Apartments.Com, and Zumper, but all of these sources use a limited number of data points, spread out over a wide area. Many times I’ve looked at the comps that Costar and Rentometer provide for their average rent calculations and saw that they were clearly not representative. They skipped properties much closer to my target and they took rents from 10 or 11 months ago.
Or you can check with your property manager. Good ones are reliable sources, but it depends on how closely they watch their market, and who on the PM team you’re talking to. In many cases they’re more motivated to get the unit filled than to maximize owner income, so if you ask them, their response might reflect that.
A more effective and reliable way to determine market rents is to survey the market yourself. It’s not hard. First find 10-15 nearby similar properties. You can do that on apartments.com or another rental site. Get their property name, address, and phone number and list it in a spreadsheet.
Then go to a freelancer website like upwork.com and post an ad for someone to call these properties. They need to present themselves as a prospective renter, not someone doing a survey. They have to be sincerely interested in renting to get the attention of the person answering the phone, because, believe me, those people are wary of their competitors doing surveys.
Make up a set of questions that your prospective renter should ask. Put yourself in their position. You want to know if they have a 2BR unit, what’s the rent, security deposit, do they have a unit available, does it have a pool, a fitness center, do they allow dogs, is there a place to walk my dog. No 2BR units? Okay how about 1BR. Has it been remodeled. I have about 20 different questions but it has to sound realistic, not like they’re reading from a script.
They fill out your spreadsheet and let you know when they’re done. They can be anywhere in the world as long as they can make a U.S. call with a U.S. area code.
Don’t do this yourself. You’ll easily find people who have already done this, who can do it better than you, and when you find someone good, you can use them again.
I can get these done for $50, so when I need it I hire two or three at a time. As a minimum it might validate information you have already collected. And you could be surprised to learn that yes their rents are similar to yours but nobody has anything available for two more months. That’s great insight you wouldn’t get any other way.
