A property manager is conducting a market analysis to determine the optimal rental rate for a vacant two-bedroom apartment. The manager identifies three comparable properties. Comparable A rented for $1,800/month and has a recently renovated kitchen. Comparable B rented for $1,700/month and includes in-unit laundry. Comparable C rented for $1,650/month and has an older kitchen and no in-unit laundry. The subject property has an older kitchen but does include in-unit laundry. What is the MOST appropriate estimated rental rate for the subject property?
- A$1,800/month
- B$1,750/month
- C$1,700/month
- D$1,600/month
Show answer & explanationAnswer & explanation
Correct answer: C. $1,700/month
The subject property has an older kitchen (like C, less than A) but in-unit laundry (like B, more than C). Comparable B ($1,700) has in-unit laundry and a standard kitchen. The subject is most similar to B, making $1,700 the most appropriate estimate. If we assume a renovated kitchen adds ~ $100 and in-unit laundry adds ~ $50: C ($1650) + $50 (for in-unit laundry) = $1700. A ($1800) - $100 (for older kitchen) = $1700. B is already $1700 with similar features.
Why the other options are wrong
- A. This is too high, as the subject property has an older kitchen, unlike Comparable A.
- B. This is a plausible distractor, but $1,700 is a more direct match to Comparable B's features.
- D. This is too low, as the subject property has in-unit laundry, which is a significant amenity not present in Comparable C.
Comparative Market Analysis (CMA) for Rentals
A method used by property managers to estimate the optimal rental value of a property by comparing it to similar recently rented properties in the same market, adjusting for differences in features and amenities.
- Compares subject property to 'comps'.
- Adjusts for differences in features (e.g., renovations, amenities).
- Aims to find the highest achievable rent while minimizing vacancy.
Memory trick: Compare the features, adjust the price, for the perfect rent, be precise!