The first thing you need to know is your competition. Be it commercial, residential or multi-family you must have information to compete. Commercial, you will need to search the resources of websites like www.loopnet.com , Heartland MLS, www.costar.com , and www.xceligent.com The only draw back is you will need to be a subscriber and perhaps a real estate agent to get that info.
Residential, Multifamily and even commercial can be evaluated by comparing the following criteria.
- Size or Square Footage
- Amenities or Features
- Highest and Best Use
Residential rental rates are often regulated more by the economics of the property location. We have learned from experience, if the rent is more than 35% of a tenant’s gross income, they will not be able to pay the rent consistently and will fall behind. Most of the tenants we see in lower income areas are single moms with children. Their income is rarely over $10. per hour and usually much less
At $9. per hour, they only qualify for $504. per month in rent. They cannot rent a $700. per month house and still have enough money left over for food, clothing, transportation, entertainment, Christmas and Birthday presents and most of the time, the entertainment and presents get purchased before the rent gets paid.
Commercial is a bit trickier, there are some back ways into some of the commercial sites, but many commercial property ads are posted to public sites like Craigslist and Backpage also. Most Commercial Brokers post listings to their websites and many use regional sites too. Depending on where you are, a Google search for “commercial property listings” or “office space for lease” may bring you to some local or regional sites. You will need to define your search by also indicating an area or city.
While it is easy to find ads, it is harder to know how that property differs from your rental property. Many of these sites allow you to search by size, location or number of bedrooms. So now you have your location, size and some basic competition information. Now you must weed out the rest. The really high ones are someone who either has a significantly better product, doesn’t know the market or more likely paid way too much for something and have an unrealistic idea of what it should rent for.
Many ads are misleading, in the Kansas City market it is common to see an ad for a property in Hyde Park, Waldo or Brookside that is actually outside of the advertised area, but they are using that as a keyword to attract interest. You will need knowledge of the area and a good mapping program like www.mapquest.com to single out the cheaters.
Amenities and features: In residential there is seldom much here other than providing or not providing appliances, perhaps the inclusion of some utilities in the rent or exceptional properties that offer access to some highly desired attribute like a gym or campus nearby. In Commercial they can be vastly different from a full service lease where even the office cleaning is included to corporate suites and high speed internet access. CAM or Common Area Maintenance can cause a great difference in the actual monthly cost of a commercial space. If the tenant is responsible for some or all of the maintenance then the actual rent is relevant to that cost.
Condition: I see the word rehabbed or remodeled all the time, it usually means they cleaned the carpet and painted over the stains on the walls. In most ads they will provide pictures, but they are often misleading showing only the best points of the property. Once you have narrowed down your search you will have to actually go and familiarize yourself with the completion’s properties.
Pride often gets in the way, you must face reality if you are the highest priced competitor in the market you probably have an unrealistic idea of what the rent should be. There are many ways to recapture your lost rent. Offering a reduction in the rent for the first portion of the lease term will often drive interest in your property. Using a graduated lease can help you fill a vacancy and progressively get you back to where you wanted to be. Never, Never, Never waive or delay the payment of the deposit! You will not get it.
Highest and best use usually relates only to commercial real estate, a lessee looking for 30,000 square ft. of warehouse will not likely pay the same as a lessee looking for 30,000 sq. ft. of office space. Retail and office space are often interchangeable, you may need to negotiate your price based on the lessee’s intended use. If you can fill a vacancy, you will often do better in the long run to be flexible and negotiate the terms.