Correctly predicting gross rental income is one of the most important parts of underwriting real estate- hard to nail it to a T but we get quite close.
Market rents will tell us a lot, but we need to blend:
-Where exactly the property is vs. market rates in this area (you can get $3.50 a sq. foot in a prime location and half that if you're in the same neighborhood but on the outskirts)
-Condition/Amenities (how do you or will you compare to surrounding inventory?)
-Sq.footage (tiny rooms and low ceilings will always make units tougher to lease)
-Floor plan (open lay-outs do best)
Whether the property is vacant and/or needs renovations- we need to source the rates we can achieve given the above and ensure we're not making apartments "too nice" within the scope of the project.
If we execute a luxury renovation to a bunch of 1 bed units, we'll be capped on rents if they're each 400 sq.ft.
After pulling enough listings and talking to enough people, we're able to tailor rates based on the product we’re dealing with.
Every property is different (we once looked at an apartment complex that got zero natural light), just need to account for how and adjust strategies accordingly.
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