A wise real estate investor looking to own rental properties always considers rental comps a valuable resource before making any final decisions.
Table of Contents
- The Importance of Finding Reliable Rental Comps
- Where Can You Find Reliable Rental Comps?
- The Bottom Line
It is safe to assume that no investor goes into a rental business without taking into account all the possible expenses and costs associated with starting a traditional rental or Airbnb business. Every landlord and vacation rental owner wants to determine the best possible rental rates on their properties. However, in the real estate game, wanting something and actually getting what you want isn’t always the same thing.
Below, we will talk about the importance of both traditional and vacation rental comps and how these can help investors get more bang for their buck.
The Importance of Finding Reliable Rental Comps
Investment properties abound. You just need to know where to look for them. But location is only one part of the profit-making equation. One very important aspect that investors need to consider is what type of investment strategy should be applied to a particular investment property located in a specific market. You may find the right location, but if paired with a poorly conceived and ill-advised strategy, you will be wasting your money and time on it.
One of the most important responsibilities of a real estate investor is to ensure that every decision is based on extensive research and analysis. Big money is involved in real estate investing, and whether you purchase a property in cash or take out a loan, the amount of money involved is not a joke. As an investor, your goal is to protect your investment and ensure that it generates enough passive income to create a positive cash flow.
This is where rental comps come into play.
What Are Rental Comps?
Rental comparables, or rental comps, are simply properties that possess similar characteristics as an investment property being considered by an investor. They are typically presented in a spreadsheet or table format for easy comparison between properties. One might say that rental comps are very similar to comparative market analysis or CMA. However, unlike CMA, which is used to determine if a property’s market value is fair, rental comps are used to determine how much a property owner should charge for the rental of their property.
The primary reason for using rental comps is to ensure that an investment property can go toe-to-toe with other similar properties in terms of rental rates. It will help maximize the rental property’s value, lower the vacancy rate, and get as high rental income and cash flow as the market allows.
Traditional Rental Comps
Traditional rental comps are long-term rental properties used for comparative analysis by a real estate investor who plans to buy an income property to use as a traditional rental.
Airbnb Rental Comps
Airbnb or vacation rental comps, on the other hand, basically just pertain to comparable short-term rental properties that allow would-be Airbnb hosts to come up with reasonable rates that will make their properties fairly competitive in a given market. It also increases their chances of achieving higher occupancy rates if their nightly rates are reasonable, considering the competition. Referring to Airbnb rental comps will allow Airbnb owners to fully capitalize on their investment and get a good cap rate and cash on cash return.
Regardless of whether an investor intends to operate a traditional rental business or get the property listed on Airbnb and other similar platforms, rental comps are essential to rental property investments.
Important Rental Comps Information to Take Note of
When looking at rental comps, it is important for property owners to know what to look for. Of course, the properties you will be comparing the subject property to have similar qualities and features and should be in the same neighborhood. It is because fair market rents vary from one area to another, and looking at rental comps in another neighborhood will not give you the accurate information you’re looking for.
That being said, it is best to focus your search on comparable properties in the neighborhood the subject property is located. Start with the same street and move out from there.
As for things to look for, here is a shortlist of what investors should take note of:
- Property Location. Any investor knows the role of a good location in an investment’s success. The right property in the right location can make a world of difference.
- Property Rental Rate. Rental rates here pertain to either monthly (or annual) rates for long-term rentals and nightly rates for Airbnb and other similar vacation rental properties.
- Property Fair Market Value. The property’s current market value is needed to calculate its performance, such as gross return on investment.
- Rental Rate (per square foot). The rental rate helps determine the property’s fair market value.
- Property Size. The size of the property also factors into the rental rate. It is best for property owners to charge rates according to the size of their rental property.
- Property Type. What type of investment property do you have? Is it a single-family unit? An apartment? A condo?
- Number of Bedrooms. The number of bedrooms helps renters (especially long-term renters) determine if a house is the right fit for their needs or not.
- Number of Bathrooms. Next to bedrooms, tenants are very particular about the number of bathrooms on a property.
- Parking Facilities and Availability. Does the place come with its own parking? How many cars can it hold? Does it come with a garage or shed, or is it just street parking?
- Appliances Included as Part of the Rental. Certain appliances can increase a property’s rental rates, such as a washer, a dryer, and a fridge. While they are almost always already a staple in vacation rentals, such appliances allow landlords to charge higher rates.
- Pet-friendliness. What do properties that allow pets charge renters? What are the pros and cons of allowing pets on your property for the entire rental period?
- Landscape and Gardening. Although the two can be a plus for vacation rentals, they are not a must-have. However, if you’re considering getting a property and renting it out as a long-term residential unit, landscaping and gardening are definite rate boosters.
- Property’s Construction Date. Investors need to factor in the age of the subject property they’re looking at and compare it against older and newer properties to determine fair rental rates. Newer properties tend to command higher rates compared to older houses.
- Property Condition. What is the overall condition of the property? Is it a fixer-upper, or is it ready to be rented out upon turnover?
- Recent Home Improvements and Updates. Home improvement projects to be undertaken need to be considered when coming up with rental rates.
- On-site Amenities. What other features does the subject property have? Does it come with a pool? A playground for kids? A spa? A porch and deck? All these added features should be taken into account.
- Community Amenities. For both traditional and vacation rentals, accessibility to community amenities like schools, restaurants, shopping complexes, hospitals, parks, public transportation, and other public spaces can make a difference in the rental rates.
Where Can You Find Reliable Rental Comps?
Investors and real estate professionals can get easy access to rental comps from different sources. They can either be offline sources or found on the internet.
If you’re an investor wondering about where to find rental comps near me or how do I search for rental comps in my area, your best bet in finding one is one of the following sources:
Offline Rental Comps Sources
Leasing Agents. An investor can talk to a leasing agent as they possess up-to-date price information about what other landlords and Airbnb hosts are currently charging for their rental properties. Most of them are also aware of certain incentives offered to tenants to sign a lease. A lot of them also are able to access rental comps MLS, so they should be able to help point you in the right direction.
Property Management Companies. It makes plenty of sense since such companies manage lots of rental properties. They can give landlords a pretty good idea of what rates can attract the best tenants who are prompt payers and good property stewards.
Other Real Estate Investors. Even though you may be a competitor, most investors are willing to help out since they also see fellow investors as possible joint venture partners for major deals in the future.
Online Rental Comps Sources
Real Estate Websites. A lot of real estate investors utilize real estate websites to look for profitable properties worth checking out. Some websites, such as Mashvisor, include features that allow users to get a glimpse of rental comps when looking at a particular neighborhood.
Rentometer and Other Similar Sites. Rentometer is a website that specializes in neighborhood rental properties and makes the information available to real estate professionals and investors. There are several other sites similar to Rentometer. The only difference between them all is the data accuracy they provide, as well as their subscription rates.
Craigslist. Investors can also go to Craigslist to see live rental listings on similar properties to give them an idea of how much they can charge.
Mashvisor: One of the Most Efficient Sources of Rental Comps
As we have already mentioned earlier, some real estate websites provide their users with access to long-term and short-term rental comps. Mashvisor is one such example. The real estate website allows investors to locate rental comps by zip code by using some of its noteworthy features like its Real Estate Heatmap or rental property calculator.
How to Look Up Rental Comps on Mashvisor
Investors wondering how to find rental comps can simply just go to Mashvisor to get access to its investment tools. The tools allow Mashvisor users to gain access to rental comps and download them using the Export Neighborhood Report function. Users can even adjust the filters accordingly to help them locate similar properties to the subject property.
Users can go to the Neighborhood Analytics page to find the section on rental comps that highlight similar properties in a particular neighborhood, along with their rental rates, ratings, occupancy rates, and other essential information.
Mashvisor subscribers may also go to any property page as it features a table of comparable properties within the same neighborhood. The table includes previous sales information that can be used by investors to come up with the right rental strategy or a competitive selling price if the intention is to resell the property.
Investors may also use Mashvisor’s rental property calculator as it is designed to help get rental comps and compare rental properties quicker and easier. One great thing about using the platform is its highly accurate and massive database that covers almost all real estate markets in the country. The website uses data coming from highly reliable sources like the MLS, Zillow, and Airbnb, which helps boost user confidence in the platform.
Using the rental property calculator is easy. All you need to do is locate a specific property and click enter. You will then be taken to a page where the basic property information is listed. Just click on the tab labeled Rental Comps and Insights to find a list of traditional and Airbnb rental comps.
If you want to get real estate comps for a property that is not listed on the platform, just enter the address on the search field to get the information you need.
Traditional Comps Data
For investors who are looking at getting their investment properties rented out for longer periods, the website will show users the following data:
- Property address
- Percentage of comparable property’s similarity to the subject property
- Distance from the subject property
- Number of bedrooms
- Number of bathrooms
- Monthly rental rate
Airbnb Comps Data
On the other hand, investors who are keen on getting into the short-term rental business can see the following information:
- Property address
- Percentage of comparable property’s similarity to the subject property
- Distance from the subject property
- Airbnb monthly rental income
- Airbnb daily rate
- Airbnb occupancy rate
- Ratings and reviews
On top of getting access to accurate rental comps, Mashvisor also allows investors to perform a comprehensive investment property analysis in a matter of minutes, regardless of their experience as an investor. It makes the process of due diligence a lot easier and less time-consuming.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
The Bottom Line
Any real estate investor who intends to rent out their property will find using rental comps a very big help in coming up with the right rental strategy. They are one of the best ways to determine competitive rental charges that make you stay in the game and achieve a higher occupancy rate compared to others. The question now is finding the most accurate rental comps and the right investment analysis tools.
Fortunately, Mashvisor offers both and a lot more to investors. To access our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.