Rent Comps

In this article we will unpack what a rent comparable is and why it matters to you as an investor. A rent comparable or rent comp, as referred to in the industry, would be another property of similar vintage in the submarket that your subject property investment is in that you would compare to your property to find your market rental rates.

A rent comparable or rent comp, as referred to in the industry, would be another property of similar vintage in the submarket that your subject property investment is in that you would compare to your property to find your market rental rates.

This is a rental real estate business, and rent comps are created based on several metrics.  One of the metrics is the size or square footage of the apartment units, for an apartment community. The floor plan is also used as a metric. The floor plan would include how many bedrooms and bathrooms are in an apartment unit. Most apartments are one bedroom, one bathroom, two bedrooms, two baths, three bedrooms, three baths. Very rarely is there a four bedroom, though you will see four bedrooms, four bath apartment units in student housing developments.

At APTVEST, we approach our market rent for an apartment community based on comparable properties in the submarket that are similar vintage. We look at their finish outs and the amenities at the community. We can then price our apartment community unit rent in comparison. Your submarket research should answer questions like - is your investment property inferior or superior to the rent comparable? What is your competitive advantage as it relates to the other rent comparables in the submarket that you own and manage the apartment community you are investing in?

‍

Additional factors to consider in rent comps include the physical attributes of the property.  Factors such as: does the community have a pitched roof? Is the roof flat? Are there individual mechanical systems like HVAC units, individual hot water heaters? Are there washer dryer connections in the units, or is there a laundry facility on site? Is the façade brick or stucco?  Is the façade vinyl or wood siding?

Rent comps also consider the finish outs of the interiors of the units.

• What do the surface of the countertops look like, and what material are they?
• What is the condition of the floors, and what material are they, and how do they look?
• What color are the walls painted?
• What do the fixtures look like?
• Fixtures being ceiling fans, cabinet fixtures, faucets, doorknobs etc.
• Are the fixtures dated?  What color and age are the appliances?
• Are they white? Are they cream? Are they black?
• Are the appliances high end stainless steel?
• Are the cabinet doors original?
• Are they updated cabinet doors and interior finish outs for the interior design trends of the year of acquisition?

Additionally, what does the bathroom, including the tile tub surround look like?  The fixtures, the countertops, also. Additionally, does the unit have washer dryer connections in the unit?  All these factors go into play when you are comparing other properties to your property and investment to find your market rental rates.

You can create value at a property by making updates to the interiors of the units. You can also complete updates to the exterior of the community and add amenities. You can operate the rental real estate business effectively and try to be superior to other rental comps in the area.  By doing so, you would drive rental traffic and residents to want to live at your community as opposed to the submarket competitors.

Other rent comparable factors also include community amenities.

• Is the community is gated?
• What is the parking like, and is there reserved parking?
• Is there covered parking?
• Is there ample parking, or is it tight?
• Is there a gym? Is there a pool?
• Is there a package centers for services like Amazon?
• Are there yards on ground floor levels for pets, or anything to give the resident a little green space?
• Are there pet parks?
• Additionally, where's the location?
• How are the schools?
• How are the retailers, like Walmart, or the restaurants in the area?
• Is the area more urban or suburban?

All of the above are the factors that are used when determining the market rental rate per square foot at an investment property compared to others in the submarket. The goal is to create value at the property by having the best quality interiors and best amenities, and the best price as it relates to other rent comps in the area.

The goal is to create value at the property by having the best quality interiors and best amenities, and the best price as it relates to other rent comps in the area.

Now, there are several resources and software that you as an investor can utilize to obtain rental rate comparables in the submarket where your property investment is located. The following are three inexpensive options. The first, and one of the main resources available, would be apartments.com. It's a free resource, though you can pay to have an upgraded subscription. Another resource that a lot of professionals use is apartmentdata.com. Lastly, another resource is ALN data. These will help you determine most rental rates in most submarkets and their data is accurate most of the time.

More expensive and more professional robust software is also available. One example is Yardi. Yardi is a property management software platform, and they aggregate a tremendous amount of data nationally for a lot of large ownership companies and investors. They have real time data at their fingertips. It is pricey but that's what we at APTVEST use, and it's fantastic. There's another platform called Costar.

Costar is not just for apartment communities. It is also for other CRE product types. They are the unregulated MLS, as it relates to commercial real estate. They have a lot of aggregated data and it's pricey. Another platform is Axiometrics and it’s owned by Real Page. Axiometrics’ data is excellent as well. These platforms don't just have rent comps, they have sale comps, market data, ownership information and macro market data as well to assist in your research for creating rent comps.

We hope this article has been beneficial in unpacking how to pursue finding rental comparables for your investment property.  We have many other resources available via our weekly market updates.