January 11, 2021
Tagged in: Setting Rent Prices

Rentometer: A Great Starting Point For Rent Guidance

Rentometer is a great starting point for rent price guidance when you need to evaluate a rental. Compared to DIY methods of compiling rents (time-consuming!) and algorithmic pricing models (expensive and opaque), Rentometer provides fast, cost-effective rent information that is transparent and easy to use.

Rentometer saves you time and allows you to get an instant evaluation of a rental using QuickView. QuickView is fast and easy to use so you can run multiple scenarios of the same address using a variety of filters (BR, Look Back, and Building Type). By saving you time on your initial evaluation, you can evaluate more deals and have more time to focus only on the deals that make it past your initial evaluation.

For example, an email came through today for an off-market 4-BR house in Philadelphia, that was being offered for $85,000. Within seconds, QuickView provided me with a median rent of $1,400. Applying the 1% rule, 4-BR rentals in that area will support a $140,000 valuation which makes the $85,000 offering price attractive. The differential of $55,000 between the offering price and the 1% rule calculation means this could be a good deal and maybe worth further review.

Keep in mind, the 1% rule is just a quick test and rule of thumb. Significantly more due diligence is required to determine an accurate valuation of a specific property.

In addition to the median rent, QuickView also provides the 25th and 75th percentiles which can help set high and low boundaries on the potential valuation. The median rent represents the mid-priced rentals; the 25th percentile represents the lower-priced, less expensive rentals; and, the 75th percentile represents the higher-priced, more expensive rentals.

Applying the 1% rule to the 25th and 75th percentiles can help you understand the range of potential valuations and the differential from the offering price. In this case, the 25th percentile rent is $1,297 which translates into a potential valuation of $130,000 ($45,000 differential); and, the 75th percentile rent is $1,580 which translates into a potential valuation of $158,000 ($73,000 differential).

So we now know, using the 1% rule, that the potential valuation range for a 4-BR rental in this area is:

  • High - $158,000,

  • Middle - $140,000

  • Low - $130,000

    This information can be invaluable as you go further into your due diligence and evaluate an investment. Just as importantly, it was completed in a few minutes, cost-effectively, and from the comfort of your own desk and computer!

    About Rentometer

    Rentometer analyzes over 500,000 rents every month! We help hundreds of thousands of customers answer the question – “how much is the rent?” We have a variety of customers – landlords, investors, renters, underwriters, etc – and they all have important decisions to make that require quality rent data. And why do so many depend on Rentometer? Because Rentometer is easy to use, and, we provide a quality rent analysis, quickly, and cost-effectively.

 

This article was written by the Rentometer Content Team. The Rentometer Blog features fresh takes and insights on rental housing topics, services, and technology.