6 Tips for Setting Rents, Winston Rowe and Associates

If your rent is set too high, the property can sit on the market and you will miss out on monthly rental income.  And if the rent is set lower than the competition, simply put, you will leave money on the table.

Whether you own or manage one rental property or hundreds of rentals across the country, you need to be able to set fair market rents confidently.

As we know, rents vary greatly from market to market, but can even differ from one street to the next within a single neighborhood.  Obviously, numerous variables impact the rent you can charge for your rental unit, including location, type of building (duplex, apartment building, etc.), size/square feet, age of unit, number of beds/baths, and amenities (i.e. parking, AC, pool, roof deck, and so on.)

Don’t be fooled that any one rent comp, property manager, or local real estate agent can tell you the perfect fair market rent for your property.  We recommend that you tap into a handful of resources to help you set rents confidently.

1. Find some rent comps to give you a starting point

Check local apartment listings using the local newspaper, online apartment guides, or websites like Craigslist and Rentometer to get a feel for the “going rents.”  Rentometer can give you historical rent trends for the area and a good starting-point rent.  You can further refine the rent from there by using some of the suggestions listed below.

2. Stay up to date on the economic and business activity in the local market

Is it thriving? Are stores closing down?  Economic activity is one of the key drivers of rental housing demand and it can affect the rental market in unique ways. For example the current economy in Boston, Mass., is hot! Rental housing is in high demand, leading many renters to forgo amenities and perks in favor of securing a lease. This means that landlords can afford to make fewer concessions when negotiating.

3. Check occupancy rates for your area

Are the occupancy rates trending upward? Good! The stronger the desirability of a rental, or neighborhood, typically the higher the occupancy rate – and higher market rent. It’s a question of supply and demand.  Factors that can affect occupancy rates include local millennial population, employment trends, housing supply, and new construction growth, rent prices, and the location and  condition of the rental property.

4. Chat with a local real-estate professional

Talk with an industry professional about their take on the market or a specific neighborhood. Local experts (property managers, brokers, agents, appraisers, and lenders) are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, building permits, zoning for a new apartment building, etc.

5. Use “rent per square foot”

Whenever possible use square footage as a benchmark for searching rent comps. This allows you to encapsulate into a single number all the subjective variables of rent, and provides you with a basis for comparison across different units, locations, amenities, and so forth.

6. Check your local apartment or rental-housing association

These are great resources for research. They may provide information about local rent levels – past, present, and future. This is especially important for real-estate investors and developers.

Making sure your property is renting at (or close to) fair market rent is as much of an art as it is a science.  However, with the 6 tips for setting rents along with good current and historical rental data and a thorough understanding of the local market and market conditions, you can set rents with confidence!

Top Markets for Multifamily Development

Top Markets for Multifamily Development 

Research firms CoStar and MFP look at busiest markets for new apartment construction as a percentage of existing inventory.

Population is growing quickly in all of the cities where developers are planning to build the newest apartments, according to CoStar data. In addition, development can be a long, slow process. In many of these cities, the number of apartments completed over the last year is much lower than the number of apartments that developers have announced they plan to build.

  1. Miami

Building cranes still tower over downtown Miami—the busiest market in the U.S. for the planned development of multifamily housing. Immigration has kept the population of Miami growing, and that has kept developers busy planning new projects.

Miami is number one on CoStar’s list of markets with more than 50,000 units with the highest share of apartments under construction as a percentage of existing inventory.

Developers had 16,777 new units of multifamily housing in some phase of the development process in Miami in the third quarter of 2018, according to CoStar. That works out to 11.4 percent of the current inventory.

Research firm MPF counts 9,656 new rental apartments under construction in the Miami-Miami Beach-Kendell, Fla. metro area. (MPF only counts apartments that are physically under construction, instead of counting projects that have been announced, but may still be arranging their financing or building permits.) That’s equal to 3.3 percent of the inventory across the broader metro area.

  1. Salt Lake City

Salt Lake City is friendly to business and relatively inexpensive compared to many cities. That has kept its economy strong, helping to make the city number two on CoStar’s list of top markets for new development.

Developers had 6,527 new units of multifamily housing in some phase of the development process in Salt Lake City in the third quarter of 2018, according to CoStar. That works out to 9.9 percent of the current inventory.

MPF counts 3,237 new rental apartments under construction in the Salt Lake City-Ogden-Clearfield, Utah metro area. That’s equal to 3.1 percent of the inventory across the broader metro area.

  1. Nashville, Tenn.

Good schools, as well as jobs created by looser regulation and lower taxes, continue to draw new residents to Nashville, Tenn

Developers had 10,220 new units of multifamily housing in some phase of the development process in Nashville in the third quarter of 2018, according to CoStar. That works out to 8.7 percent of the current inventory.

MPF counts 5,329 new rental apartments under construction in the Nashville-Murfreesboro-Franklin metro area. That’s equal to 3.6 percent of the inventory across the broader metro area.

  1. Boston

Smaller cities in the Southern and Western U.S. dominate CoStar’s list of top markets for new development, but there are a few exceptions.

Developers had 17,707 new units of multifamily housing in some phase of the development process in Boston in the third quarter of 2018, according to CoStar. That works out to 8.6 percent of the current inventory.

But only a few of these planned apartments have actually broken ground. MPF counted far fewer new rental apartments under construction in the Boston metro area, equal to just 1.9 percent of the inventory across the broader metro area. The difference between MPF and CoStar shows how long it can take for a planned project to be approved by local officials and actually start construction.

  1. Jacksonville, Fla.

Jacksonville, Fla. is number five on CoStar’s list of top markets for new development.

Developers had 6,906 new units of multifamily housing in some phase of the development process in Jacksonville, Fla. in the third quarter of 2018, according to CoStar. That works out to 8.2 percent of the current inventory.

MPF counts 3,988 new rental apartments under construction in the Jacksonville metro area. That’s equal to 3.5 percent of the inventory across the broader metro area.

  1. Seattle

A booming tech economy has kept developers interested in building apartments in Seattle, perhaps too interested. “The volume of new supply has dampened rent growth,” says Greg Willett, chief economist with RealPage Inc., a provider of property management software and services.

Seattle is the only city on CoStar’s list of top cities for new development where rents fell over the year the ended in the third quarter on 2018. It is number five on CoStar’s list of top markets for new development.

Developers had 24,388 new units of multifamily housing in some phase of the development process in Seattle in the third quarter of 2018, according to CoStar. That works out to 7.7 percent of the current inventory.

MPF counts 15,986 new rental apartments under construction in the Seattle metro area. That’s equal to 4.8 percent of the inventory across the broader metro area, making it tie with Charlotte, N.C. for number three on MPF’s list of top markets for new construction.

  1. Denver

Education is the chief driver of the strong demand for new apartments in Denver, which is number seven on CoStar’s list of top markets for new development.

Developers had 16,699 new units of multifamily housing in some phase of the development process in Denver in the third quarter of 2018, according to CoStar. That works out to 7.1 percent of the current inventory.

MPF counts 12,624 new rental apartments under construction in the Denver-Aurora-Lakewood metro area. That’s equal to 4.4 percent of the inventory across the broader metro area, making it number seven on MPF’s list of top markets for new construction.

  1. East Bay, Calif.

Just across the Bay from San Francisco, developers are busy in towns like Oakland and Berkeley, Calif. The area is number eight on CoStar’s list of top markets for new development.

Developers had 11,632 new units of multifamily housing in some phase of the development process in the East Bay in the third quarter of 2018, according to CoStar. That works out to 7.0 percent of the current inventory.

MPF counts 6,936 new rental apartments under construction in the Oakland-Hayward-Berkeley metro area. That’s equal to 3.4 percent of the inventory across the metro area.

  1. Charlotte, N.C.

Charlotte is number nine on CoStar’s list of top markets for new development.

Developers had 11,065 new units of multifamily housing in some phase of the development process in Charlotte in the third quarter of 2018, according to CoStar. That works out to 6.8 percent of the current inventory.

MPF counts 8,634 new rental apartments under construction in the Charlotte-Concord-Gastonia metro area. That’s equal to 4.8 percent of the inventory across the broader metro area, making it tied with Seattle for number three on MPF’s list of top markets for new construction.

  1. Austin, Texas

Austin is number 10 on CoStar’s list of top markets for new development.

Developers had 13,991 new units of multifamily housing in some phase of the development process in Austin in the third quarter of 2018, according to CoStar. That works out to 6.7 percent of the current inventory.

MPF counts 10,282 new rental apartments under construction in the Austin-Round Rock metro area. That’s equal to 4.3 percent of the inventory across the broader metro area, making it number eight on MPF’s list of top markets for new construction.