How We Conduct Rent Surveys For Real Estate Investment Properties
Posted @ 10:35 pm - Filed under Real Estate Investing, Check This Out, Investment Lessons, RE Investment Practice
As promised, the following will show how we establish what rents are in a designated area. It takes time, expertise, patience, and above all attention to detail. Mistakes in the field transferred to paper transferred to an Excel sheet can lead to some chaotic and unintended consequences.
Let’s get started.
I’ll be jumping around, so I apologize in advance.
First thing is to understand exactly what info you’re seeking — where you’re seeking it — and what kind of property will offer this info.
What — Rents for condos? apartments? large/small complexes? 1BR? 3BR? Where — Don’t kid yourself with plastic boundaries — stay hyper-local Property Type — Stick with EXACTLY what you’ve defined as our target
Now that you know what you want, where to get it, and what sorta properties you’ll target, it’s time to start walkin’ and knockin’.
Don’t do this — Make up some cock ‘n bull story designed to more readily elicit info from a tenant or building manager. It’s simply the wrong way (not to mention wrong period) and it will come back to haunt you. As a 20-something moron I did exactly that and had to eat a gigantic Karma-Burger for lunch one day. Don’t do it. In fact, being straightforward and honest will not only get you more reliable info, you’ll make some solid contacts for the future.
Don’t skimp on the number of properties you survey. Error on the side of way too many than one too few. Getting caught with an anomalous couple of rents will lead you down the primrose path to somewhere called ‘what happened?’ Remember, you want not only the big picture, but the perfectly focused one too. Shortchanging yourself on the depth of your survey is a sure way to arrive at silly conclusions.
Anyway, with clipboard in hand, knock on the door. We all have our own ‘patter’ when we’re talking with a tenant. Me? “My name is Jeff, and I’m a real estate investment broker trying to find out the rents in the area. Do you know the rents for 2BR’s in this fourplex?” If they feel I’m asking for private info I empathize and politely thank them while leaving. Respect goes a long way.
When you’re able to speak with a resident manager, gold is within your reach. I ask them for some info based upon ‘professional courtesy’. Again, it’s respect. Several times I’ve had a local building manager literally walk me across the street to the manager of another building.
The idea is to get the most info possible along with rich detail. Bedrooms, bathrooms, square footage, condition, length of tenancy, last rent increase, and the list grows. I’ve surveyed all the tenants in a building many times. Do that for the entire survey and I’ll guarantee two things.
1. You’ll be very, very tired.
2. You’ll have acquired invaluable info which will be the gold standard for how you value property in the area.
Though I haven't had to do a survey for awhile, there's not been one that hasn't been worth its weight in captured treasure. The real advantage is going into a room knowing the other side is either guessing or trying to pull the wool over your eyes. The value of knowing area rents in the way only a survey would allow, cannot be overstated.
We've negotiated higher prices for sellers and lower prices for buyers armed with our trust survey results. Sometimes these surveys irritate folks. :) In a previous life as an expert witness, I've used them as evidence supporting my professional opinion.
Rent surveys aren’t rocket science — in fact an eighth grader could do a C+ job their second try. Still, an A+ job is what’s desired, so do it yourself, or have a dang reliable and trustworthy surrogate.
So much in the execution of a rent survey relies on the ability to think on your feet, and get the pertinent details. Just wait ’till you have everything you need except the square footage; or you plain missed the fact the 2BR’s in one building had an extra half bath — not something on which you wish to remain ignorant.
Ever asked a tenant if they were related to the owner or manager? It’s something you’d probably wanna know. 
This leads to a final caveat.
From time to time you might be looking at an income property which appears to be projecting rents far to grandiose for the neighborhood. Don’t leap before you know what you’re doing. That may be the case — it may not. Most of Brown and Brown’s ‘targets’ these days are brand new — and there’s nothing like them around. This is can be a problem, but it needn’t be.
If the property(s) is indeed replacing nothing, you have to take a step back and decide what they offer setting them apart in a positive tenant sorta way. Better kitchens? Two instead of one car garages? New instead of 30 years old? A couple full baths instead of 1¾ baths. See where I’m goin’ with this?
Right — this is where experience and expertise comes in big time. When you have nothing of merit to survey, only experience and expertise will supply reliable answers to your questions.
This entry was posted on Friday, March 14th, 2008 at 10:35 pm and is filed under Real Estate Investing, Check This Out, Investment Lessons, RE Investment Practice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.