Setting the right rent price is a common challenge for rental property investors. If you set your rent price too low, you risk having a negative monthly cash flow. On the other hand, if you set your rent price too high, you might deter potential tenants from renting your property and risk having a vacant unit.

So, how do you find that sweet spot when setting your rent price?

Rental comps help real estate investors determine how to price their rental property. Let’s review what rental comps are, how to use them properly, and where you can find rental comp data.

What are rental comps?

Rental comparables are used to compare the rent prices of similar properties within the same area. They help predict what the rent price for a rental property should be and will ensure that, as a landlord, you’re charging a fair market rent. A few important factors that are included in rent comps are location, number of beds, number of bathrooms, square footage, type of property, and of course the rent price.

Benefits of running rent comps

Rent comps take the emotions out of decision-making as an investor. Instead of pricing your property at what you think it deserves, rent comps allow you to make decisions based on data.

Using rental comps when setting your rent price helps maximize the monthly cash flow of your investment property. Additionally, they help you identify if a property is a good investment or not when analyzing potential properties to invest in. This is why having accurate rent data is crucial for any rental property investor.

Maximizing cash flow

Setting the right rent price can be tricky. If your rent price is set too high, your listing will be unattractive to potential tenants and your unit may sit vacant. On the other hand, if it’s too low, you’ll risk having negative monthly cash flow. This would leave you with no choice but to pay the bills out of your own pocket, which is not ideal as a property investor.

When you set your rent price to align with market rent, you’re able to maximize your monthly cash flow without risking vacancy. Knowing what other properties are renting for in your market is extremely helpful to an investor.

Identifying a good investment property

When analyzing a potential property to invest in, rental comps can help determine whether or not it’s a good investment. Generally speaking, you typically want to identify in a property that will cash flow.

To calculate cash flow, subtract the total expenses from the total rental income. Having access to rent comps will give you a general idea of what the property could rent for each month. Once you predict the rental income, you can then resume with your cash flow analysis to determine if the property will be a good investment.

Where to find rent comps?

Rentometer takes the guesswork out of setting your rent price and is the best way to find rent comps anywhere in the U.S. By providing readily accessible and reliable rental market data, Rentometer helps investors make smart, data-driven decisions.

Conclusion

Using rent comps will drastically improve your rental property investing business. Having accurate rent data will help you set a fair rent price, allowing you to attract the right tenants, minimize vacancy, and maximize cash flow. Additionally, rental comps will help you in your deal analysis to determine if a property is a good investment.

This article was written by the Rentometer Content Team. The Rentometer Blog features fresh takes and insights on rental housing topics, services, and technology.