Four Tools That Help You Figure Out How Much a Property Will Rent For
Do you struggle with estimating how much can you charge for rent? Understanding how much you can accurately charge for rent is an essential part of the deal analysis.
Without a clear picture, you can accurately calculate Cash on Cash Return (CoC). In this video, I break down the 4 tools I use to estimate rent in a given area. And yes, I use ALL FOUR of these tools as I estimate rent for each property I purchase.
Here are my favorite tools.
Ask Your Property Manager
What's up, you guys? Welcome to investing with the Baldovino’s . My name is Josh Baldovino. If you're new to this channel, we're here documenting our real estate journey. And I also like to give some tools and tips to help you in your investing journey.
Today, we're doing just that we're talking about how to accurately calculate rent for subject property, either that you may potentially already own, or for one that you're looking to purchase.
Of course, knowing how much it'll rent for is basically all the income you'll get as the landlord, or owner of the property. And so that is an essential part of how to calculate cash flow and your analysis. For those who don't know how to calculate cash flow, how much can your property make? Simply right, and there's a few things that you need.
First is your income. Right? What is your rent, which is, I'd say for the most part, it'd be in addition to that, you may also charge back for utilities depending if it's a multifamily or duplex, however, the utilities are metered, split up also, you may also collect a small pet fee, that's talking about your income in terms of what's coming out your expenses, right, of course, you have your mortgage, your taxes, insurance, you also have your management fees, if you have a property manager, and then you're paying utilities on that. The last thing you're going to need is your saving. So I recommend that you also save for maintenance items. So requests like you have a leak or there's a plumbing issue.
Also saving for a capital expenditures. So those are big ticket items like a roof and foundation, etc. And then you also have vacancy, just so you're not out of pocket whenever someone moves out, and you're turning the unit over. So your income minus expenses minus saving equals your cash flow. Right, but how can you accurately calculate how much you like to rent a unit for? For example, let's say you have a beautiful duplex like this, right? It's a two bedroom, one bath duplex, let's just say in Columbus, and you're like, Hey, I'm thinking about buying it or I have it, how much can they actually rent and for your foolproof tools that you can use to make sure that you're having an accurate rent estimator, I'm gonna give you four different tools, but I would actually recommend using them all together or as many as possible.
That will you have as much data points coming in to validate how much you're estimating rent to be. So let's jump in. Let's just say for example, I have this duplex that's here. Let's just say it's a two bedroom, one bath on each side. Again, this is just a sample property, you copy the address, the first tool I would recommend is Rentometer, there is a free version and a paid version for it, you're allowed about five free analysis per month I have to do is copy in your address that's there, you can either put how much you think rent will be and it'll tell you , where you are in comparison, or if you don't know, that's okay, too.
From here, you select my two bedroom, one bath, and then press ANALYZE. So, from here, it'll give me what my average rents is the median, the highs, and then the you know, 75 and 25 percentile, all of which is really good baseline to assess, Hey, okay, here's a range now between 800 and almost 1100 bucks, which is the $300 difference, which actually is a pretty big spreads, we want to continue to narrow this down.
So that's so this is the first tool is Rentometer.
The second tool is bigger pockets. In order to use Bigger Pockets and their rent estimator tool, you will need their pro membership, which I believe is 30 bucks a month. If you're just starting out the pro membership, I highly recommend you get unlimited use the calculators you have to rent estimator, you get their insights, they're paid articles, which they basically lay out exactly how much markets can generate, whether it be a long term rental, there's just a treasure trove of information. Anyways, I digress. So once you get into bigger pockets, tools, rent estimator, again to plug in the address if we don't directly.
Sometimes I like to go the zip code route to just to see what an area is renting for. For example, this one is 43224. Let's search it to one. And so this is giving me $1,000 a month with a strong and a high confidence interval. You come back over here that meeting on this side was 950. So we have a $50 spread, which is not too bad. Right? This one here, which is also nice. It gives you what comparable properties are currently listed right now. So there's a two bedroom one bath for 1050. Another one looks like in the same building must be an apartment building 1100. For another one. There's 11 units at 675. Right so you can go on. If you notice what I'm doing now is I'm looking at comparable properties, which I think is really important. You have to look at comparable properties. And the best way I like to do that is to just see what's available on market right now.
So the third tool I like to use is actually seeing what listings are available for rent on Zillow. So for those who have used Zillow, of course to see how much money But it's worth to look what's on market. You just toggle this from for sale to for rent, you type in the zip code 43224. And boom! you can now see everything that's available to rent in that area. Of course, you want to make sure that you try and get as close to your subject property as possible. To summarize, Rentometer told me was 950 for two bedroom, bigger pockets, set up set 1000
We have a single family house here for 1150. Looks like a decent house clean. Nothing is updated. But a clean, safe place to live. For 1150.
Let's see losses there. What constitutes 750? This is looks like it's a duplex. So but very, that's an old enemy. This is less updated than the other one. Florida's got repainted, everything's got repainted and it kind of just threw back on the market, I guess. old cabinets, laminate countertops, black appliances, small kitchen.
Well, that's what 750 is. What else we have here. Let's see what this one looks like an updated house.
So, to one 800 square feet for rent. Let's take a look. This seems like this was an updated burr property, some big tile, new cabinets, new appliances, stainless steel with a dishwasher Hey, laminate countertops, still an updated bath, small bath but updated. And they are asking 30 100 for this.
Another fun thing that I like to do on Zillow is what's nice is that it tells you how many days it's been listed in how many contacts it has to. So this has been out for a little over two weeks, it has 94 contacts, but obviously has not gotten rented in two weeks. Let's see some of the other ones. This has been listed for five days, and 11 contacts. So a little bit less. That's anyways, I like that function because you can see how many people are inquiring about the property, how long it's taking someone to lease it out, obviously, that one for 1300. And it's been at the for two weeks and has that many contacts, but it's still up.
Maybe the market, I think that's a little bit high. And I've had that on some of my properties to the last in the final way that I would recommend to figure out how much you can rent this property for is just ask your property manager, it's super important to have a some kind of boots on the ground. Who knows the market? Well, especially if you're not going to manage it yourself. And you're hiring a property manager ask them, I always ask my property manager, before I even make an offer on the property. Hey, how much do you think this can rent out for that way I can read my numbers before I even make my offer. So that way I know what offer I need to make to hit the cashflow number that my goal is ask them they know way better than you know, no one's talking to potential tenants all day to current tenants, and knowing what the market is actually demanding. So they're an awesome resource that I recommend.
So those are the four different ways that I use all the time for every single deal to make sure that I know how much potential property can rent for. So first using rentometer and bigger pockets to get a ballpark of a median of what the rents are. Then I like to dig into the market myself to figure out hey, what level of finishes do I need? am I expecting on my property on my rehab? Or on the unit that I'm buying? That's maybe rent ready? And how much can I expect to charge? And then of course asking your local expert asking whoever is going to be leasing that property? Hey, what is realistic? Last thing, if you are going section eight, you can go on to your county or city section eight department and they'll tell you on how many bedrooms and baths how much you will actually get from that.
So that's another video. Those are four different ways that I use all together every single time I'm analyzing a deal. And my last bonus tip, right why this is important. Going back to our cashflow as one you want to see how much it's going to make. Two, you want to understand what that rent to price ratio is, right? So you need to know Hey, am I getting a decent deal on this? Meaning in order to figure out what your rent to price ratio is and what that threshold is you divide how much you are going to potentially estimate and rent by how much you're going to buy the property for. So for example, say I'm going to rent it for $1,000 and I'm going to buy it for $100,000 My rent to price ratio is less than 1%. When like, Okay, well, what does 1% mean? Right? I don't know. Look at these beautiful colors right? Now this is very market specific, but this is what I use for Columbus for my long term investments my buying holds. So first off, if it's at the 1%, there's gonna be some cash flow there. Now that cash flow is going to vary depending on what how much you want to save for your maintenance, capex, etc. How much your expenses are with your property manager. But for the most part a 1%, depending on your market will cash flow, right? Let's start with the beginning. So if it's under point seven, five, again, this is very market specific, it may be very hard to find cashflow.
At this, you know, medium, point seven, five to one, there's a chance and I have gotten things that are like at a point eight two or something like that. And there still is cashflow there. A lot of the bigger pockets articles and some of the podcasts will say 2%. And that was a few years ago, things are now obviously inflated since then, these are unicorns, although depending on the market that you're buying, and the asset that you're buying for buying a four Plex, you know, there could be a really good chance that you can find two percent, though.
So it just all depends on what type of asset you're buying, and where you're buying it at. But I hope you guys found this helpful. If you did, please give us a like, did take me a while to make all these slides to edit this all down. And if you'd like content like this, consider subscribing. And of course, if you think this video would help someone, please share it with someone that you think would find value. Coming up, this whole series that I'm going to make is all about how to actually find rent to price ratio automatically, how to pull this things from Zillow, that are live and be able to figure out what is rent to price ratio with you without you actually having to go to say, every single listing, let's just say what's for sale in this area. And then say, Hey, okay, this is a two bedroom, one bath. Let me divide, you know, $1,000 by 169.
Every single time which I'm sure you do, if you take your phone out your laptop, man, it goes just right. How long will that take me? 1000 bucks. I mean, if I am gonna move in decimal points, which I'm not, right, times 100, which means I'm at a point five, eight. Any for remember, from my handy dandy chart, screenshot this say that oh, man, take a picture. Right? Under point seven, five, there's little chance. So very little chance, I think this will cash flow. Although this is a nicer unit, maybe it'll run for 1200 1300 bucks. Who knows? At 1300? What are we at that just like game 169 900 times 100. Like that. You are now at point seven, six. So we've gotten closer, right? We've now went from the red to the yellow. Maybe you can run the numbers or better yet. Maybe you can get the property for cheaper so that you can continue to move up this chart, right? But if you don't want to look and calculate them manually every single time I did make a spreadsheet that will do it yourself. Check this out. Oh look at that rendered price ratio 1.46 2.87. In the next video, I'm going to show you how to build this so that you can do it yourself. I'll link it down below if you guys are watching this in the future. But thank you guys so much. Let me know what questions you have. And I'll see you all in the next one. Cheers!
