Georgia Real Estate Investors
Rental Price - How You Determine It
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by: Ryan Ward
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The first rule to follow is that real estate is local and rental prices are local. What you can reasonable expect to charge a tenant in one area of your city may be very different than what you can charge in another area. So, the first thing you will need to do is ascertain what comparable properties are charging for rent to their tenants. Without the help of a REALTOR, you will be on your own to check rental prices. For an online source, be sure to check craigslist.com as this will more than likely be your best source and will be very helpful in getting a baseline. Your local newspaper is sure to have many properties to give you a rough outline of what a baseline rental price might be as well. That’s the easy part. Sometimes, a much more difficult aspect of determining rental values centers around honesty and your ability to objectively evaluate a piece of property for what it actually is, not what you want it to be. It sounds simple, but it is very easy to get caught up in dollar signs long before you have done your due diligence in evaluating a home. Here are some guides to follow when looking for comparable properties:
- Do whatever is necessary to stay within a one mile radius of the subject property. Work out from there only if you cannot find something similar within 1 mile.
- Stick with properties that have the same number of bedrooms, bathrooms, square footage, architectural styles, type of siding, basement, parking and lot size.
- Only properties with similar interior amenities will rent for around the same price as the subject property. If a comparable rental property is listed for rent at say, $1,000 and it has brand new bathrooms and a new kitchen, your property will not rent for as much money – you have to be honest with yourself.
- Repairs – does your home need repairs to be brought up to the condition of the comparable you are looking at? If so, factor in your repair costs as you will need to be able to recoup those expenses as well.
- Systems – if you are buying a property to use as a rental, you absolutely must check the systems to see whether you can reasonably expect to get extra life out of the current HVAC system, roof, water heater, electrical system, plumbing and flooring. If these items are in good repair, you might be able to use them for a number of years, thereby extending your return on the investment a bit farther.
If you do not perform your due diligence at this step, you may not be able to return a positive cash flow because of an overestimation of a fair market rent. A price at which you can reasonably expect to obtain a tenant needs to be determined before you decide to purchase an investment property. To do otherwise could leave you in a position of having to sell your property for a loss much more quickly than you might think.
About the Author
Ryan Ward of Keller Williams Realty Consultants in Roswell, Georgia is a member of the national, state and local REALTOR associations, and resident of Alpharetta, Georgia who specializes in listing and selling real estate in Metro Atlanta. For more information about Ryan Ward,visit his Atlanta Homes website or call 404-630-3187.
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