How Do You Ascertain Market Rents...

…for median to higher priced SFRs? It’s not like I can just pick up the apartment guide and find out how much a 4bdrm/2.5ba 2-story Colonial would rent for to a tenant-buyer.

One idea I had was to figure out what their likely PITI payment would be if they got a 100% LTV conventional mortgage loan, and rent it somewhere in that range. Does this make sense?

Where does your cashflow come in if you are paying the same amount for a mortgage and still have expenses to contend with?

I admittedly didn’t explain myself very well. What I’m trying to do is find a method to estimate the maximum underlying payment I can expect to be covered by a tenant-buyer on a given property, specifically median price range on up. So I can ensure I don’t commit too high of a payment to the seller, and ensure I receive an acceptable monthly cashflow.

I keep getting leads where the seller has equity but a relatively high payment (at least in my eyes). For example, got a lead where the approx. value is somewhere around $360K with an underlying PITI payment of $2,200; it’s a 3-level townhouse with 3bdrms/3.5ba…how do I know how much I can charge a T/B per month for this house? By the way I live in the DC area.

Start with the local newspapers and see what other, similar properties are asking for rent.
Then, call the property management division of a local realty office or two. Try calling a property management company, also.

Thanks AJ, will do!

Call several local area management companies, explain to them what you’re wanting to rent out and what they believe that they could rent it for if you go with them. See what you get, average them together and probably lower it by 10% or so, and you’ve got a good idea of what the average rent for the property would be. This is standard market rent, not a lease-option rent.

To me, at least, there is a BIG difference. If you are planning on putting people in on a L/O, then you want to know what their payments will likely be if and when they go to get permanent financing and base your payments on that.

For example, using your $360K townhouse, assuming a $10K option fee, if they would finance the balance of $350K for 30 years at 9% (not uncommon for bad/shakey credit), then the monthly payment would be approx $2800/month NOT including taxes/insurance. So you’d want to have a monthly payment in the $2500-3000/month range (the higher the better) or it simply would make no sense for them to buy vs. continuing to rent.