Unlocking Rent Comps | Going Beyond the Numbers

July 14, 2023

With all of the data available at our fingertips, obtaining rent comps has become easier than ever for investors. While the numbers do reveal rent trends, data on rents still paint a limited and incomplete picture.

The numbers can’t tell you the why behind the rent comps, leading to the importance of gathering qualitative data, or information that falls outside of what can be quantified. Factors such as curb appeal, unit layout, nearby conveniences, amenities, safety, etc … are all important factors behind why a tenant might be willing to pay more.

While relying on a set of recently pulled comps can help with initial research, it will never replace human judgment and the need to get in your car and study the comps with your own eyes.

For example, when pulling rent comps, the standard default radius applied is 2 miles. Once you drive the comps, you may find a seemingly perfect property just four blocks away that shares similarities such as vintage, unit size and amenities could actually be in a starkly different part of the neighborhood, despite the shared zip code. If you visit the subject property and the comps, you may find other important details Google Street View didn’t reveal. Perhaps one of the lower rent comps is next to an abandoned building that attracts squatters, and now you don’t have to wonder why that property is struggling. Or, maybe you will find one of the higher comps is in a more visible and convenient location. These are all key observations that require a visit, and these nuances can easily lead to miscalculations on your proforma rents.

For smaller multifamily properties under 50 units, driving is especially critical due to the lack of data showing a uniform pattern. Multifamily data providers such as ALN and Yardi do not have reported rents for properties under 50 units. Additionally, leasing information from a multiple listing service (MLS) will only have data on what was leased using their platform.

Thus, data from properties that are mainly finding tenants by a simple For Lease sign with their phone number, a website, or by word of mouth through tenant referrals will not be known. This will make it harder to uncover rents for smaller properties. It’s not uncommon to find bigger rent discrepancies with smaller multifamily, presenting more challenges with knowing true market rents. This is where driving for comps is especially critical. Since many of these smaller properties won’t appear in an automated search, one will need to drive the area and take note of smaller apartments nearby, then take it a step further and call the owner or property manager to find out what monthly rents are if it’s not shown on a website. When analyzing market rents for smaller apartments, you may find the MLS showed similar properties renting between $975-$1,100, and settle on $1,100 for your proforma rents. However, after driving comps and calling owners and managers, you may find some comps are easily renting for $1,200-$1,300 and learn your subject property can obtain significantly higher rents than what published data revealed.

If you’re not local to DFW but want to invest here, make sure you have someone on your team who is local, whether it’s your agent, property manager, or partner who can help you make a more accurate projection.


Author: Esther Cho