[If you missed the last live event on rent comps, you can catch the replay here.]
“You can get the cap rate right… and still kill your deal if you miss the rent comps.”
That’s the hard truth I have learned – and seen investors learn the hard way – over and over.
After years as a commercial lender, a multifamily investor, and a consultant to high-net-worth individuals and family offices, one thing is crystal clear:
Nailing rent comps is the second most critical piece in underwriting, right after cap rates.
Why? Because every single line in your pro forma p&l flows from the top-line rent assumptions. Get that wrong, and you are setting yourself up for unpleasant surprises – or worse, real losses.
The Reality: Most Rent Comps Are Misleading
When I review deals, it is often surprising to me how often rent comps are just pulled straight from broker offering memorandums.
Here is a real example: a sponsor compared a 1985 Class C building to 2017 and 2020 Class A properties – inflating projected rents from the start.
This is not just lazy; it is dangerous.
Because small errors at the top-line compound over time… and can derail your entire investment strategy.
Where (and How) to Find Real Comps
You need to go beyond the obvious sources. Brokers, property managers, and listing sites like Apartments.com can be a good start – but they are not enough.
Here is a smarter approach:
- Use multiple sources: Cross-reference free listing sites (Apartments.com, Rentometer) with paid data sources (CoStar, Yardi) and your own/ your property manager’s market knowledge.
- Secret shop: Pretend to be a tenant. Call properties. Tour them. Learn the effective rent, not just the listed rent. See the unit and property condition and amenities.
- Know the lag: Paid data often lags the market – especially in fast-moving environments. In 2021 – 2022, published rents were months behind actual lease rates.
- Validate location carefully: Do not cross major highways, rivers, or other “natural dividers” when pulling comps – renters won’t.
The Art: Reading Between the Lines
True comp analysis is as much art as science. It is not just about matching proximity and size. You also need to look deeper:
- Condition and amenities: A property with a pool, community room, gym, elevators, and clubhouse is not a true comp to one with just laundry facilities.
- Property age, unit count, unit size, condition: A 200-unit 2020 built property is not the same as a 57-unit 1985 built property.
- Tenant incentives: Watch for concessions (like “first month free”) that lower effective rent.
- Local renter behavior: In some markets, people prefer single-family homes over apartments. That affects how you select and adjust comps.
Knowing the micro-market – boots-on-the-ground style – makes all the difference.
In my community, Eric immediately spotted rent inconsistencies on a Kansas City deal others missed – because he knew the neighborhood trends personally.
Actionable Tips to Strengthen Your Rent Comp Analysis
Next time you evaluate rent comps, follow this quick checklist:
✅ Cross-check at least two independent sources
✅ Secret shop at least 2-3 comparable properties
✅ Adjust for major amenity differences
✅ Expand your search radius only if necessary (rural/low density areas)
✅ Look for concessions that impact effective rents
✅ Always map for physical barriers (highways, rivers, etc.)
✅ Lean on local market expertise whenever possible
Why This Matters (More Than Ever)
In today’s market, where margins are tighter and lenders are more cautious, underwriting discipline separates winners from losers.
If you want to protect your downside and set yourself up for success, you cannot afford to shortcut rent comps.
When you master the art and science of rent comp selection, you are not just protecting a deal – you are building a foundation for sustainable, repeatable investing success.
Vessi Kapoulian,
Breaking down multifmaily underwriting one step at a time to create educated and empowered investors