Later In That First Week

That first week I learned about my very first assignment. I was to work on a rent comparability study. It is exactly as it sounds, an assignment to research market rents in a certain area. Usually the study is commissioned when a buyer, seller or managment company wants to see where they stack up compared to other market rate properties in the area.

A rent comp study does require a decent amount of research. It is crucial to touch base with managers and owners of the market area to find out what their asking rents are and what is included when a tenant pays this rent. It is very important to compare apples to apples, so you need to make adjustments to compensate for amenities that the subject or comparables have.

One of the first major rules you will learn in classes is that in your grid you never adjust the subject. You always adjust the comparables. If your subject property is $900/mo. but includes heat, hot water and a parking garage and your comparables are $700/mo. but all utilities are paid by the tenant you must make an adjustment in that comparable because the subject property would be superior. As the appraiser, you may decide that heat and hot water are worth $100/mo., and garage parking might be worth $80.00/mo. you would add these to the rent of the comparable to make it more comparable to the subject.

What people consider the worth of, say, a washer and dryer in the unit will very by market, and it is the appraiser's job to figure all this out by asking questions of various property managers and owners. You can conduct a paired analysis to see how much higher a tenant will pay in a certain area to have this amenity. It is also important to see the properties, both the subject and the comparables, so early in my second week I was on the road. I traveled to the market, photographed our subject and talked to the property manager and then moved on to the comparables. The purpose of this is to see, not only the comparable, but the neighborhood that the comparable is listed in.

Talking to locals who are aware of the market, and seeing all the properties give you a clear picture of the market area. Since it was my first week, I didn't make any adjustments, but did do the research and photographing of the comparables. It was an interesting experience!

Coming up next, The Experience of Travel