Rent Equals What Market Will Bear

Rent Is Based Upon What The Market Will Bear. Not What You Want or Need

I just got off the phone with a property owner who ended up having to tell that we really can’t help her and try to get her to contact other companies. She became extremely, extremely agitated with me. So she had submitted, gone through her website and requested that we do evaluation. We let her know how much warrant she can get per month.

I spend time actually valuing the property to typically give a range of “This is the lowest amount that I think you’re going to get. This is highest amount that I think you can possibly get, and this is the range number that I think it’s probably going to land on.” And then I’ll even go so far to actually suggest that they should start with this number and be prepared to strategically lower as needed.

She came very angry because she’s on a fixed income; according to her, the only money she has coming in social security, and I guess she had relied upon the rents that she expected this property get to supplement her income. All very sad things. But I spent a lot of time on her on the phone, probably about 30, 40 minutes. She kept grilling me on this and getting more and more upset that I would tell her this is the amount of rent that she can get. She even mentioned that this isn’t fair. I do understand her stance and I was trying to be sympathetic, but these are now things that an investor can really approach an investment on, on a want/need basis.

An investor deals in, this is what you can get. We charge the most rent that the market would bear and that’s how much we’re going to get. We’re not going to get more nor are we going to get less. Just because you have a mortgage payment to make, just because you have all these other things going in your life, doesn’t mean that a tenant is going to care, so there seems to be a disconnect.

This is kind of a common thing; it’s just not isolated with this owner. We get contacted all the time by property owners that’ll basically kind of tell us, “This is my mortgage payment.” That does not matter to us when we’re valuing the property. We’re looking at what else has rented in the area that’s similar to your property, pulling up the comparables that we call Comps, and typically what’s rented and the rates in the last six months. That’s how we get an idea of what we think your property can be rented for.

Note, we are a pretty good company, so we’re actually going to get you more rent than I think some of the competition would, that’s why we do like to come in high. We’re just a marketing machine and we’re constantly answering our phones and we’re doing all the things that’ll get a property rented for more than we would typically expect. We kind of know that going in when we’re giving you the evaluation, and that’s why we give a range. If you were to use our company, we’re expecting to get the higher end of that range. If you were to go it yourself, we would think you’d get the lower end of the range.

So if you’re going to invest in real estate, it is paramount that you actually think as an investor. You were going to get what the market would bear. It does not matter what other factors, how much you want, how much you need. if your property’s not going to pull that enough rent to support itself, then it’s not going to pull enough rent to support itself.

I’m Joe White and I’m here answering your real estate questions. Good luck!!!


Joe White

Joe White is a Philadelphia Property Manager and Real Estate Broker. He is the owner of Grow Property Management and has been involved in the management, sales and purchases of Philadelphia area rental investment properties since 2008. He is an author and works as a real estate investment consultant and construction manager.

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