How We Evaluate the Rental Market & Establish Rents — Alex Craig

With increases in rent over the last 24 months, we are getting more individuals asking us how we establish our rental amount. To evaluate rent we will go to sites such as Rent-O-Meter and Zillow simply as a reference point to keep up to date with all data that is available and a starting point of our evaluation. These sites are not comprehensive of the entire rental market, rather they are only pulling data from those advertising on certain platforms or paid advertisements on these individual sites. More often than not, Zillow estimates are overstated because of the amount of hedge funds who advertise high rates, but eventually rent their properties at lower amounts or a lower net rent via promotions. Although we reference those sites for data, ultimately we are using real-time data we obtain as being experts in the market, analyzing competitor rental rates and landlords ourselves. We have agents and project managers in the field daily looking at the current available rentals, which is the real time data we are looking for.

Once we establish the rental rate, we then analyze your home and immediate area to make sure that market rent is obtainable. If you have a Turnkey home, your home is positioned for success to achieve the highest possible rent for several years.  As we have been in business since 2008, naturally homes have deferred maintenance (carpet replacement, hardwood flooring refurbishing, exterior painting, fences, grout cleaning, etc.) that need to be addressed. If the property owner is making those repairs, those homes are positioned to capture top of market rents. If not, then it may be necessary to discount the home vs. higher priced homes that look newer. If you are purchasing a Rent-Ready home, the rental rate at the time of the sell will be maintained, but forced appreciation can occur to get higher rents. If you are not familiar with our Rent-Ready Model vs. Turnkey, check out the link HERE.

On the topic of rents, I feel that we have hit a ceiling for the next 2 years. In both Memphis and Little Rock, for years rental increases lagged behind national averages, thus these increases were a long time coming.  Although rents may stay put for 2 years, the good thing about our leases is that they are 2 year agreements with an increase in year 2, typically up to $50. This rental increase in year 2 covers possible increases in operating cost (taxes & insurance) along with making sure you are not missing out on rental increases due to inflation while at the same time, locking in a longer occupancy.