Last week, Rob wrote about one of our tenants moving on. Given his challenge, I thought I better get to work on a replacement. We know that No Basement rented reasonably quickly the first time out and three of our properties are in roughly the same area, so we’re starting out with a decent feel for market rents. However, the tenants in No Basement have been in the property for two years, so the first step we’re taking is checking rent comparables.

What’s Comparable?

The obvious points of comparison are square footage, number of bedrooms, and numbers of baths. The property has to be in close proximity to No Basement, and as importantly if not more so, in the same school district. Beyond that, there’s a laundry list of features that we’re comparing–age of the home, whether it has a deck/patio, whether appliances are included, whether it has a fireplace, whether it has a fenced yard, whether it has a garage (1 or 2 car; attached or detached), and whether the street number is divisible by 3 (the last one is purely Rob’s numerology bent that I suggest you ignore). Oh, I nearly forgot, we also pay attention to whether the comparable property has a basement.

As is the case with sales comps, the more comparable the better. But this is often easier said than done. So, we attempt to find rentals that match our property in terms of the basics (size, number of bedrooms, single-family homes) and then make reasonable adjustments, up or down, depending on how the comparable property matches up to No Basement on the remaining criteria.

Sources for Comparable Rentals

Unlike the number of resources available for sales comps, there just is no centralized source (at least that we’re aware of) that gathers rental comps. However, there are some resources to work from. Some time back, we listed one resource–rentometer. Rentometer is a site that allows you to compare the rent for a particular address to rents for surrounding rentals. When Rob first ran across this, I thought the problem of finding rent comps was solved. I ran a couple of quick tests of the site and found out that it just doesn’t give the greatest results. It suffers from two problems–it combines everything from apartment building to single-family homes to provide a median rental and the information on any given property is pretty scant. It’s pretty much number of bedrooms, monthly rent and distance from the property that you’re evaluating. Not terribly helpful. For No Basement, we currently charge $1025 per month. Rentometer informs me that the median rent for a three bedroom in the area is $875 and that just ain’t gonna pay for Rob’s singing lessons.

In looking at the individual properties, I can see that this median includes large apartment complexes with advertised rents starting at $625, but there are also listings that have to be single-family homes–ranging from a low of $900 to a high of $1300. Unfortunately, Rentometer fails to tell me much more than that. So we need to look onward.

Rob and I look at advertised rentals to find rent comps. In determining the sales value of a home, list prices are not very useful. However, for rentals, we think that using advertised rents for a reference point has some merit. Unlike list prices, advertised rents are not likely to be negotiated significantly. We use several different online rental advertising sites for this purpose. There are some sites with nation-wide coverage like Craigslist and Rentals.com, among others, but there are also several local realtor and investor sites that you can find with a search or two on google. We’ve also continually pick up realtor’s and investor’s sites from signs in the neighborhoods where we own properties. Finally, we check out the newspaper classifieds. Most newspaper classifieds are online as well. Since the newspaper classifieds are often abbreviated, we run the addresses from several of the ads on the county auditor’s site for more information on the property.

The Rents for No Basement Posers

No Basement is a two story subdivision “starter home” built in 1991 with 3 bedrooms, 1.5 baths with about 1350 square feet. It has some good rental features, like a good size fenced yard, deck, newer appliances and the like. But it doesn’t have a basement. In our area, we’ve found all of these features, the good and the bad, are important to renters. Here are a few advertised properties that we’re finding among single-family homes in the area:

• A 3 bedroom/1 bath ranch. Same square footage and school district; roughly the same age and pretty comparable neighborhood; no appliances; no basement. Rent: $1100
• A 3 bedroom/2 bath ranch that’s a bit smaller; also very comparable in the type of neighborhood; appliances and a half basement. Rent: $1050
• A 3 bedroom/2 bath free-standing condo; considerably newer; very close proximity to No Basement, but in a less-desirable school district; no basement. Rent: $995 (condo fee of $60)

All in all, we’re seeing a range of $995 to $1250 for homes that are in the ballpark. We’ll be bringing No Basement to market at $1045. We’ll be advertising the property starting this weekend. Since we’re starting early, we’ll be able to get a market reaction to the price and, if we need to, can reduce the rents if we find out we’re not where we need to be. There are a few other factors, such as amount of deposit, first month incentives, offering a purchase option, and/or length of the term of the lease that will come into play for our marketing of No Basement, but we’ll save some of these issues for another post.