Mathew: All right, everybody. Matthew Whitaker, welcome evernest in Little Rock. Today we’re going to talk about, “How much should I charge for rent for my Little Rock house?” So, if you have a house in Little Rock, you’re trying to figure out how much it should rent for, this video should help you. So first thing, I’m here with Victoria Wilbanks. Sorry, I forgot to introduce you. She runs our Little Rock office. Say hi.
Mathew: All right, cool. So, I’m Matthew Whitaker. I work at the corporate office. Let’s talk about…we’re going to talk about three things. We’re going to talk about class. We’re going to talk about how to find comps, and then we’re going to talk about how seasonality affects the real market. So, are you prepared?
Mathew: Good. Okay, good. Let’s do it. All right, let’s talk about class. So why don’t you talk about the class for a minute?
Victoria: Yeah. So there’s going to be three classes of houses here in Little Rock, A, B, and C. A class is going to be more of your upper income, your better areas and really about 1500 and above is really what rent’s going to be here for that A class. More in your West Little Rock area, that area. And then your B class is going to be more of your middle income. About your $800 to $1,200 a month house. Just kind of your general family housing. And then you’re going to have your C classes, which are going to be more of like your lower-income areas, your smaller houses, older houses, Southwest Little Rock area, if you’re familiar with that, maybe subsidy housing and that kind of thing.
Mathew: So the first thing you need to decide is where does your house fit into the classes. And so you also need to be prepared. Each class has its own credit risk, has its own kind of profile of tenant that’s going to going to live there. So you need to understand class. The next thing we’re going to talk about is comps. Let’s talk first…I’m going go in reverse order here. Talk about when we look at a house, why don’t you tell us what’s the first thing that we look at in terms of the rental price?
Victoria: So a big deal is like one, how big the house is and the condition of the house and area of course too. So, you know, a three-bedroom, one-bath house is going to be really different than like a five-bedroom, three-bath house obviously. So that’s going to be one big thing. Another thing, area. So is it in West Little Rock, which is a super sought after, maybe Hillcrest which is another super sought after area. Is it in Southwest Little Rock where most of your section A might be or your smaller houses and that kind of thing? We’re going to look at all of that. And then also, what condition is it in? Does it need some work? Is it outdated? Is it completely updated? Those all are going to go into the pricing of the house.
Matthew: And I always call this price and product. A lot of people call it condition, but the price needs to match the product, which, what goes into the product, the class, the area. What is the house, whether it has any kind of what we call white elephant issues. So in the same neighborhood, if one house is on a busier street, it’ll probably rent for less than a house that’s back in the neighborhood. So understanding the price as it relates to the product is super important. The next thing we have is, we have two different things that I think kind of help us price the house that I would like to talk about. One is kind of the inventory of what we have in our own realm portfolio. Can you talk a little bit about that?
Victoria: So a lot of times we’ll get owners that call us that say, hey, this is where my house is, or I’m looking at investing in this area and I’m able to say, oh, we actually have a house in that same neighborhood or around the block or something like that. So we always can give you the information on well we have a house that rented for this six months ago or we have a house that rented two years ago like this in this neighborhood or whatever it might be. That way that you have a better understanding of what that house can rent for.
Mathew: Yup. And then the other thing we have is what we call a rent range report.
Victoria: So we actually have access to this, I guess a lot of data, I guess is a good way to put it, what other comps are in the neighborhood. So just as like you were buying a house, hey, this is the comps for this neighborhood, same thing with rentals. Even though it might not be our…we might not manage that property there, we can always look and see what another house that’s maybe from a different property manager or a self-managed house can rent for in that neighborhood.
Mathew: Yeah. One of the benefits of us is we have access to data that a lot of other people don’t have. The last thing I want to talk about with under the comps is that renting is way different from buying a house. And so we want to put ourselves in the renter’s shoes and talk about how does a renter look at a house and kind of for us it’s like a snapshot in time. Can you talk a little bit about that?
Victoria: Yeah. So as we’re buying houses, so you’re the buyer, you’re looking at what the other houses in the neighborhood have sold for. As a renter, they’re looking at what’s available right now in the neighborhood and what it’s listed for. So a renter’s not going to look at what a house rented for for six months ago. They’re looking at what’s available in the neighborhood right now. So example, there’s three houses for rent in the neighborhood. They’re all three-bedroom, two-bath and one’s at 1200, one’s at 1500 and one’s at 1300. That renter’s probably going to look at the lower two because he’s getting the same product for a lower price.
Mathew: It’s very much like buying is very historical data looking. Renting is very here and now snapshot in time. If I have let’s say $1,500 in my pocket to spend on renting a house, what are my options and I’m going to choose the best option. So it’s interesting to think of it through the eyes of a tenant or a renter versus thinking of it from a sales perspective, which most owners get into trouble doing that. The last thing I want to talk just briefly is seasonality. Can you tell me how seasonality affects it?
Victoria: So obviously renting and leasing houses is super busy in the summer. If you think about it, people are wanting to move in the summer. It’s not anywhere near Christmas. So obviously your winter months are going to be a little less busy. And so, therefore, your rents tend to go a little bit lower in the winter because not as many people are looking for houses. And they’re saving money for Christmas, they don’t have as much money to move. So summer is really when you’re going to get your higher rents for your properties and it’s going to rent faster historically. And then in the winter, you’re going to get your lower rents and might stay on the market a little longer.
Mathew: Yeah. I mean, this is back to economics 101, supply and demand. There is more demand for rental housing during the summer season because it fits into the natural flow of life. Kids get out of college, kids get out of school, people move. It’s just kind of seasonality affects this business.
So I’m Matthew Whitaker, I’m here with Victoria Wilbanks here in Little Rock, Arkansas. If they want to find out more about, you know, maybe their house, how would they get in touch with you?
Victoria: Absolutely. You can call our office number. It’s 501-232-0676. And if you push extension 3 that gets you to the owner’s line and then that’ll get you to me.
Mathew: Yup. All you have to do is ask for her. Thanks so much for watching.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.