One of the tougher jobs of a landlord is determining what your houses will rent for when it comes time to lease them. I have used Craigslist in the past to see what is on the market to get an idea of rents. However, Craigslist does not tell you the entire story because you do not know how good or bad a house is unless you personally view it and you only see what people are asking for rent, you do not know what houses actually rent for.
I happened upon a site a couple of weeks ago that was using a company called RentRange to calculate the potential rents on properties. I was curious how accurate the site was, because it would be nice to have a second opinion on what my houses will rent for (besides my analysis in Craigslist). I was surprised to see that the site was fairly accurate to what my rental properties are renting for or the current market rents in my area. I contacted the company and they were nice enough to let me use their service on all my properties to see just how accurate it is.
How close were RentRange estimates to what my rentals are rented for?
Below you will see a chart with my 13 rental properties, what they are rented for and what RentRange thinks they will rent for. Not only did I include RentRange, but I included the Zillow estimate for rent as well. I wrote an article on how accurate Zillow is on house values using my rental properties and they were way off on many properties. I think Zillow has gotten better at valuing properties, but still should never be counted on.
How did the two companies do?
Rental Property Current Rent Rent Range Estimate Zillow Estimate
1 $1,300 $1,350 $1,505
2 $1,500 $1,560 $1,409
3 $1,300 $1,370 $1,505
4 $1,500 $1,650 $1,511
5 $1,250 $1,350 $1,361
6 $1,500 $1,640 $1,385
7 $1,400 $1,550 $1,466
8 $1,400 $1,450 $1,418
9 $1,400 $1,300 $1,297
10 $1,250 NA (est $1,200) $1,297
11 $1,400 $1,510 $1,331
12 $1,300 $1,460 $1,217
13 (est) $1,500 $1,550 $1,336
Totals $18,000 $18,940 $18,038
As you can see Zillow and RentRate came both came close to the actual rents of my properties, however I believe RentRange was much more accurate. Many of my properties have had the same tenants for years and I do not raise the rent on my good tenants unless my houses are really under rented. Rental properties 1,3,5,7 and 12 are definitely rented below current market value, which means the $18,000 I am receiving in gross rents is not market rent. If I were to raise rents to market levels I could be receiving at least $750 a month more in rent on my properties.
If I had my properties all rented for current market rent I would be receiving from $18,750 to $19,250 in rent, which would mean RentRange was right on and Zillow would be low. If we are looking at market rents then RentRange is more accurate than Zillow, but that is not the only advantage of Rent Range.
What does RentRange offer that Zillow does not?
When you look at the rent estimate from Zillow it will show you the estimated rent and that is it. You also have to rely on Zillow to have accurate information on the house. There is a really good chance Zillow may have the wrong bedroom count, square footage or other characteristics wrong.
When you use RentRange you get much more:
- The ability to enter the square footage, bedroom and bath count for the rental property.
- A detailed three-page report that shows comparable rental properties that have been rented in the last six months and a confidence score about how accurate the rent is.
- How many comps they found as well as the high low and median rents for those comps and the high, median and low rents for the zip code the house is located in.
- Rental trends for the last 12 months.
- The report gives you the estimated rent as well as a confidence score, vacancy rate, market strength, historical trends and much more.
Overall the RentRange report gives you much more information than Zillow and in my opinion is well worth the cost. By seeing properties that have actually rented, seeing the address and the characteristics you can also make a much more accurate judgment on rent than simply using Zillow or Craigslist.
What does RentRange charge to give you market rents?
For each report you order on RentRange you have to use credits. For me to pull up one advanced report on a rental property it cost me 4 credits which if you order the lowest volume of credits would be $12. You can also pull up a basic report, which does not have as many comps or market data. The more credits you order the lower the cost of the reports and credits do not expire. Below is a chart outlining the costs.
I think RentRange is extremely valuable for investors looking to determine market rents on their first properties or when re-leasing current properties. Not only does the RentRange report give you the estimated rent, but also the additional information is very valuable for learning about your market.
How am I using RentRange?
If you have been following me this year I am going to buy a turn-key rental property. This week I found the property I am going to buy and I am working on getting the paperwork together with my IRA. The turn-key rental property company I am using told me what the home is rented for now and what they thought market rent is. They told me the home is rented for $800 (purchase price $45,000), but the property manager had said they thought the home would actually rent for more with a new tenant. I checked RentRange and they estimated the rent at $900 a month. I was very happy to see RentRange was right on target with the turn-key company.
I was not sure how close RentRange would come to the market rents on my properties, but they were very close. Zillow was closer than I thought they would be but were actually pretty far off when you consider many of my properties are rented below market.