Determining a rental rate.
So you have a house or condo that you want to lease out. You would like to cover your bills and hopefully make a little money. How do you find the right rental rate? If your rents too high you're not going to attract a good tenant, yet you don't want to price it too low and leave a bunch of money on the table.
You need to compare you property to like/same properties that have recently rented (best) or that are currently on the market. My like/same I mean that if you have a single family home using other single family homes as comps. Items to compare are:
- Type of property - house, apartment, high-rise building, townhouse, gated community.
- Within one mile of your home or less. This can vary greatly depending on how spread out or tightly built your town is. In more rural areas like East King county your comp zone could be 5 miles or more .
- Number of bedrooms and baths.
- Same or similar square footage.
- Same age of home + updates like renovated kitchen, stainless steel appliances, etc.
- Unfurnished or furnished.
- Type of parking (street vs. covered, security garage, number of spots, assigned or not).
- Whether pets are allowed.
- Whether utilities are included and which ones.
The best place for comps in the NWMLS, which will let you know what the property rented for, as opposed to its advertised rate. But only real estate professionals can access the NWMLS, which doesn't do most landlords any good.
Zillow has something called a Rent Zesimate, which has gotten a lot better over the last year. Zillow collects data from both the NWMLS and on line ads thru Zillow, Postletes, Hotpads and a bunch of other sites. When Zillow first started with Rent Zestimates they weren't very good and seemed to inflate the rent a lot. Since they acquired Postlets however they have gotten much better.
When comping a rental from properties that are actively listed I will collect a list of properties most similar to mine then throw out the most and least expensive. Then with the remaining properties I average the price by adding all the rents together and divide by the number of properties. This number will be will be the average and most likely your rental amount, or should be close to it. Sales brokers do something similar for their clients only they use the square footage, which is very effective. Unfortunately a lot of rental ads don't list the square footage.
Now you might be wondering why not list the rental at the high end of the comps? You could and you might get it. But in my experience the best tenants don't pay the most in rent. They start looking early (5 to 6 weeks) before their move in date. If they are looking at your home and a similar one down the street that's for less, they are going to rent the home down the street. One of the best way to compete for the best tenants is to have a competitive rent.