Author Topic: How to find what rental market rates actually are?  (Read 837 times)

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Offline brergnat

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How to find what rental market rates actually are?
« on: April 16, 2021, 05:47:32 PM »
Is there a good way to do this besides asking all my neighbors what they pay for their rental homes? I can't really look at rental listing because we know people often negotiate rent down from list prices.

We have been in the same rental home for 6 years. Signed 2 three year leases and our landlord priced the rental below market initially, but then only raised it by $50 at renewal 3 years ago. She now wants to raise it $400/month, a 12.5% increase. She is citing "Zillow Rent Zestimate" as her leveraging piece.

I know our neighbors in a similar home are only paying $3450. Our landlord wants us at $3700.

What is a reasonable compromise here? I know many of you are landlords. We have been amazingly good, low maintenance tenants, in my opinion. Never a late payment in 6 years and we expressed our desire to stay several more years. I feel like our landlord is taking advantage of the market right now.

Offline USCTrojanCPA

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Re: How to find what rental market rates actually are?
« Reply #1 on: April 16, 2021, 06:41:03 PM »
Is there a good way to do this besides asking all my neighbors what they pay for their rental homes? I can't really look at rental listing because we know people often negotiate rent down from list prices.

We have been in the same rental home for 6 years. Signed 2 three year leases and our landlord priced the rental below market initially, but then only raised it by $50 at renewal 3 years ago. She now wants to raise it $400/month, a 12.5% increase. She is citing "Zillow Rent Zestimate" as her leveraging piece.

I know our neighbors in a similar home are only paying $3450. Our landlord wants us at $3700.

What is a reasonable compromise here? I know many of you are landlords. We have been amazingly good, low maintenance tenants, in my opinion. Never a late payment in 6 years and we expressed our desire to stay several more years. I feel like our landlord is taking advantage of the market right now.

If you PM or email your address, I can look up closed MLS rental rates for you to see how your rent aligns with the market.
Martin Mania, CPA
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mmania001@yahoo.com
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Often imitated....Never duplicated!

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Offline eyephone

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Re: How to find what rental market rates actually are?
« Reply #2 on: April 16, 2021, 08:37:00 PM »
Zillow rental

Offline Cornflakes

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Re: How to find what rental market rates actually are?
« Reply #3 on: April 16, 2021, 08:52:16 PM »
Is there a good way to do this besides asking all my neighbors what they pay for their rental homes? I can't really look at rental listing because we know people often negotiate rent down from list prices.

We have been in the same rental home for 6 years. Signed 2 three year leases and our landlord priced the rental below market initially, but then only raised it by $50 at renewal 3 years ago. She now wants to raise it $400/month, a 12.5% increase. She is citing "Zillow Rent Zestimate" as her leveraging piece.

I know our neighbors in a similar home are only paying $3450. Our landlord wants us at $3700.

What is a reasonable compromise here? I know many of you are landlords. We have been amazingly good, low maintenance tenants, in my opinion. Never a late payment in 6 years and we expressed our desire to stay several more years. I feel like our landlord is taking advantage of the market right now.

Consider this hypothetical scenario:
Six years ago the home price where you are renting was $800k and you rented a place at $3200. You currently pay $3300.
Today, the home price has risen to $1M  = 25% increase in value. Say, the rent value increases by 20% only becasue of the house aging. THat will put fair market rent of that house at around $3800. A good and fair number for all parties might be between 3200 and 3800 = 3500.

WHy? If rent was raised to 3800,
Tenant will have moving costs and 3800 rent at comparable home somewhere. Bitter pill to swallow but may be worth it as a protest to landlord tyranny.
Landlord will have re-leasing cost and at least a few days of vacancy for transition. Eating into the profits from increased rent.

At some middle point both parties gain some and lose some.

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Offline Cares

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Re: How to find what rental market rates actually are?
« Reply #4 on: April 17, 2021, 08:27:33 AM »
Rental prices have drastically increased in the last year just the same as home prices have. Supply is clamping down and unfortunately this is the environment we're in. I have clients that were almost going to sign a lease agreement but were "outbid" when someone swooped in offering 1 year prepaid rent and $100 more per month.

Right now a 4BR in Irvine can rent $4200-$4500 so it is not entirely unreasonable to think a 3BR being in the high $3000s. I think the landlord just knows if you vacate then she can easily rent for significantly more.

My rental properties can all rent for $200-$500 more but I simply chose to not raise their rents because they have been excellent tenants to me and never bother me with repairs. They take care of everything and pay on time or early. But you can bet if they ever leave I'm raising it to market rent.

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Offline brergnat

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Re: How to find what rental market rates actually are?
« Reply #5 on: April 17, 2021, 09:54:26 AM »
It is worth noting that my landlord has an identical home that she could not find reliable renters for so she took it off the rental market and lives there 3 months out of the year (she is east coast based). So, if she was really hard up for rental income, she could easily put that one on the market and get market value for it, but she has not done so yet, which leads me to think she is trying to see how far she can go and keep us. I doubt she wants the expense of turning over the home.

Would it be fair for me to counter that we split the difference between FMV and what we are currently paying, as suggested above? We would like to stay a couple more years. I would be wiling to put that in the renewal option clause, that everything year, we continue to split the difference and determine the rental rate that way. So, for example this year at $3550, and next year if FMV is, say $3900,we go up to $3725, and so on. This protects her from under pricing and losing out on potential income while protecting us from future gouging. Seems like we both win here.

Or is it a better move to hone in on a number around $3600 and offer to sign a longer lease? We could do 2-3 years.

Offline brergnat

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Re: How to find what rental market rates actually are?
« Reply #6 on: April 17, 2021, 10:00:25 AM »
Is there a good way to do this besides asking all my neighbors what they pay for their rental homes? I can't really look at rental listing because we know people often negotiate rent down from list prices.

We have been in the same rental home for 6 years. Signed 2 three year leases and our landlord priced the rental below market initially, but then only raised it by $50 at renewal 3 years ago. She now wants to raise it $400/month, a 12.5% increase. She is citing "Zillow Rent Zestimate" as her leveraging piece.

I know our neighbors in a similar home are only paying $3450. Our landlord wants us at $3700.

What is a reasonable compromise here? I know many of you are landlords. We have been amazingly good, low maintenance tenants, in my opinion. Never a late payment in 6 years and we expressed our desire to stay several more years. I feel like our landlord is taking advantage of the market right now.

Consider this hypothetical scenario:
Six years ago the home price where you are renting was $800k and you rented a place at $3200. You currently pay $3300.
Today, the home price has risen to $1M  = 25% increase in value. Say, the rent value increases by 20% only becasue of the house aging. THat will put fair market rent of that house at around $3800. A good and fair number for all parties might be between 3200 and 3800 = 3500.

WHy? If rent was raised to 3800,
Tenant will have moving costs and 3800 rent at comparable home somewhere. Bitter pill to swallow but may be worth it as a protest to landlord tyranny.
Landlord will have re-leasing cost and at least a few days of vacancy for transition. Eating into the profits from increased rent.

At some middle point both parties gain some and lose some.

This is very helpful.

Your hypothetical scenario is actually bang on. She purchasesd the house for $787,000 in 2015 and it is now worth around $1M.

Offline Cares

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Re: How to find what rental market rates actually are?
« Reply #7 on: April 17, 2021, 11:29:20 AM »
Your proposal is too complex and subjective. Better to just agree upon a price and whatever annual increase during the term of your lease.

There's no incentive for the landlord to agree to something structured like that. California is already heavily tenant protection favored. I wouldn't agree to it. I want flexibility to increase rent as I please.

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Offline nosuchreality

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Re: How to find what rental market rates actually are?
« Reply #8 on: April 17, 2021, 01:03:54 PM »
I’d wait for USC’s comps.

The news is full of stories of the drastic increases, but there are practical upper limits.  In addition, much of the increase is driven by gentrifying complexes.

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Offline Cornflakes

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Re: How to find what rental market rates actually are?
« Reply #9 on: April 17, 2021, 01:21:06 PM »
I was once a tenant and my landlord decided to increase my rent by $400 to go from 3400 to 3800. I made a case that let's work out a number that works for both of us. He was naive to not consider my alternatives and stuck to his guns. I gave my intent to move out and signed a new lease with another, smaller place to save a few $ each month as I was looking to buy soon. He immediately came to his senses and was willing to negotiate, it was too late.

He rented out the place at $3700 and incurred a month of vacancy and leasing costs.

Any txn that is not a commodity exchange and human emotions are involved, has to be treated as a gray, not b&w.

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Offline brergnat

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Re: How to find what rental market rates actually are?
« Reply #10 on: April 17, 2021, 01:55:06 PM »
Your proposal is too complex and subjective. Better to just agree upon a price and whatever annual increase during the term of your lease.

There's no incentive for the landlord to agree to something structured like that. California is already heavily tenant protection favored. I wouldn't agree to it. I want flexibility to increase rent as I please.

Noted. Thank you for the advice.

Offline MrCali949

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Re: How to find what rental market rates actually are?
« Reply #11 on: April 17, 2021, 04:44:20 PM »
Doesn't anything over a 10% increase in CA require a 90 day notice? When does your lease expire?

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Offline brergnat

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Re: How to find what rental market rates actually are?
« Reply #12 on: April 17, 2021, 08:16:18 PM »
Doesn't anything over a 10% increase in CA require a 90 day notice? When does your lease expire?

I think that only applies on "month to month" rentals.

Our lease expires June 30.
« Last Edit: April 17, 2021, 08:24:54 PM by brergnat »

 

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