How to Find Out What Apartments Are Going to Rent for

Columbus Real Estate Podcast with Rob Ellis

If you are interested in buying a rental property, how can you determine what residential apartments or other properties will rent for? We often get this question from apartment investors who are trying to run some numbers, looking at pro forma operating statements, and figuring out what these units will rent for. One of the things you’ll see if you are looking for a rental property is “value-add opportunity,” which means that rents may be low for that unit. In that case, you need to figure out what rents can be. How do you do that? I want to share a few resources that we use to see what a property will rent for. We then take an average from these resources to get the best idea. The first thing you can do is check out Apartments.com. They use back data from a lot of commercial resources. If you are running reports and things like that, you can look up some of the larger apartment complexes and see what the 1-bed and 2-bed units are renting for. Pay attention to the year of construction and the type of building they have to make sure it is in line with yours. Next, go to Zillow or Trulia, enter the ZIP code, and see what apartments are being marketed for right now. Typically, the advertised rents will be a little higher than what the actual rental comps are going to be, but you’ll still get a wide range to work with. “These resources will help you decide if you want to renovate the property to increase the rent.” Here in Columbus, some 1-bedroom units might be advertised at $500, while others will be advertised at $900 or $1,100 even if they are in the same ZIP code. It could be that one building doesn’t offer a dishwasher or washer and dryer, or the tenant doesn’t have to pay utilities. It could be that one unit is in an older building; new construction 1-bedroom units are going to be a lot different. It all depends on the finishes, so make sure that you are looking at buildings like yours. The most formal way to do your research is to contact an agent who has access to the MLS and have them pull rental comps. An agent can find what apartment complexes where advertised for and what they closed at. We typically go back two years to get an idea of what the rent would consistently be. You can even take a look at Craigslist. Again, the most important thing is picking out similar properties. Try to pick an average of all of those units and determine your best case and worst case scenario. See what it would look like if you rented the unit as it is now and what it would look like if you renovated the property. Depending on the area you’re in, adding stainless steel appliances, hardwood floors, and new countertops can make a big difference. In addition to pulling other apartment complexes that have sold from the MLS, we have access to other commercial databases, like CoStar, that can show sold properties and what they are renting for. Rentometer.com is another great website that shows the range of worst case and best case scenarios so that you can decide if you should renovate the property or just maintain the apartments. Those are just a few of the great resources we use to research rents for investment properties. If you have any questions, please don’t hesitate to reach out to us. We would be happy to help you!