Analyzing Rental Properties | REI | Property Management | EP. 43

Hey everybody, this is vlog number 44. I'm Chris with Independence Property Management and the Freedom Real Estate Group family of companies. Today I have Mariah with me. She's the assistant manager for Independence Property Management.

Hi everyone.

We're going to be talking about analyzing rental properties, setting rent rates. It's a fun little topic, isn't it?

Oh, yeah, yeah.

So this will be a quick little just summary of what we're going to talk about. We are going to be dropping a podcast on the subject in about four weeks. So we just want to give you a little insight, a little window peek into what we're going to be talking about here shortly. So first off, why do we do rent comps a rental analysis? The number one reason is to be competitive in the market. I mean, I think as a business, you know, we wanted to have some say and how the market performs. Equally as important is our clients, our owners that buy properties in our area, they buy because they want to have cash flowing, passive assets. Right. And the, the method of that is real estate and the vehicle of that is rent satisfying residents. IPM plays a pretty big role in that in this group to, to be able to facilitate that for our clients. So setting the rent rates is really, really important. We can't set the rents too high because then when the market turns and there's issues with valuations of properties it may not re rent for, we use an example of it won't re rent for $1,500. So we have to set the rent in a way that we can scale it or dial it back a little bit without taking too much out of our client's pocket and kind of ending the their progression on their properties and their plan. But at the same time it can't be too low because then we can't necessarily increase the way we need it to. So it's a bit of an art setting rent rates. My per. I may be a little bit biased here, but it's a little bit more difficult than setting property values. Okay. Because there's a lot more calculations than just, hey, where's my neighbor's house selling for? So we're going to talk a little bit, just really briefly about how we do that. So Mariah always starts with Mariah. Right. So she heads up our leasing department, Independence Property Management, amongst other things, for the sake of this one, for the leasing. So she starts out by doing inspection. Can you tell us a little about what that inspections for?

Yeah, so I basically go in and just make sure that the place is up to our standard, making sure that all the work that was supposed to be completed previous from the turn and everything, or if it was a, a property that we onboarded, that the, the property was completely renovated like it was supposed to be. And then, you know, a big thing that gives to that also is location. Location is a big thing to determine the, the rental price as well. And then we do do a rental comparison and we use, we use that to kind of give like a ballpark range, to kind of determine, determine a range that we can give to our, our owners to kind of tell them, hey, it might be on the low end of this or it might be on the high end of this.

Yeah, yeah. So that rent comparison she's talking about, we use Rentometer and a few other residual services that are tied into our, our appfolio service that we use essentially gives, like she said, a range of a, the lowest end property rents for this normally in this area. And the highest end is this. Those are our competitors and other investors in the area that are renting properties. That's where that data comes from. I will say though, with that, like she mentioned, our clients, you know, we try to present, hey, these are what the ballpark numbers are. She's looking at standards to determine if there's something we can do to maybe bring the property up in value a little bit as far as rent. So she says appliances, light fixtures, doorknobs, things that may not have been on our list for a turn, but because it wasn't like a safer, sanitary type thing, it was more of a, they are functional, they work, they're in good condition. And. But if I could change them, then it might bring the rent up a.

Little bit more, spice it up a little.

So there's that. And then one thing that we take into account is a lot of our investors, a lot of our clients, they set rent rates internally, like on their books, based on 1% of the value. Now, I'm not going to go into big detail of that here. That's more for the podcast. But there is a calculation to determine rents based on the value of the property. It's not always perfect. Property values are a little bit inflated right now. So we take the tool from Rentometer and other services like Rentometer to give us a ballpark. We then say, okay, is this in line with the rent, like the value of the property? Because that way we know that it's going to work for our clients. And then we hit the home run by tying it against our portfolio. So we manage just about 500 single family and multifamily homes throughout Ohio. So when we set rent rates like being able to see how they're performing in our portfolio definitely tightens that number down to dollars where our competitor may be able to rent a property for 750, but I have performing properties that are 850, 900. Obviously I know that we can get that more close to that range. But that's a quick look at what we're going to be talking about here in a few weeks. That podcast, like I said, will drop in about four weeks. Is the real podcast is Real Talk, which is real talk with real estate investors. It's found on any major platform. I personal listen to it on Spotify. Do not always say Spotify, but it's available everywhere. Like I said, three to four weeks. Take a look out for that. We always like to end these podcasts or these little vlogs with Invest Smart and Live Happy. Bye. Nothing on the show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss.