Questions about average rent / unit mix and pulling comps
Sometimes I'll look at a property that has a massive unit mix, like 10 types of 1BRs 10 types of 2BRs etc. All that info is just unwieldily. I like having the average of 1BRs, average of 2BRs. Can I lump them together and just take the averages or I shouldn't do that if there's substantial differences in rent and square footage? The same question goes for pulling comps. Can I pull comps for the averages or do I need to do each unit type on its own?
Thanks
[{"id": "j29109s", "text": "That depends on what you're doing with the information. If you're just trying to get a sense for gross incomes in a building by bedroom type, sure, lump away. If you're trying to comp against other properties, no, don't lump. You'll want to see differences in rent per SF based on size and number of bathrooms. If the guy up the street is getting 3.06 per SF on a 2 Bed with 2 baths and a 1100 SF space, and you're only getting 2.90 per SF on a 2 Bed with 2 baths and a 1050 SF space, yeah, you're gonna want to know that's happening, and you're gonna want to figure out why.", "replies": [{"id": "j29r4ng", "text": "Thanks sailor.\nAny advice on making comps easier when there's a ton of unit types?", "replies": [{"id": "j2ajzm2", "text": "I've found that scatter plots in Excel (or whatever) helps visualize things. Plot rent on the y and size on the x. Then you can put a line on the chart that represents either a target rent per SF or an average; that just helps ground you a little, so that you know roughly where your units are landing.  Bigger units should be below average, smaller above.  A trend line kind of achieves the same thing, but it won't be a constant rent per SF.\n\nWhen you're plotting for comps, you'll need several series, probably Studio, 1 BR and then 2 BR 1 BA and probably 2 BR 2BA, and then if you're dealing with 3+, whatever you've got there.\n\nAs you plot these series, there are going to be differences in rent/SF, but you're looking for big outliers. That's where a trend line makes sense, any points too far off trend should trigger a question mark. I would expect that the 2.90 vs 3.06 example I used would pop, because the size would be very similar, but the asking rents would show a pretty big differential.\n\nRemember that smaller units tend to get a bigger $/SF. A good rule of thumb is to discount .05%  per SF for every SF added. So holding all else constant, a 500 SF unit asking $2000 ($4/SF) should ask about  $2145 ($3.9/SF) if its size was increased to 550 SF. That math would be (4.00 \\* (.9995\\^(50))). That .05% has been shifting lately, and that's a conservative estimate. But it can be useful if you're trying to comp a 1000 SF 2 BR against a 1400 SF 2 BR. The $/SF should never line up, so you have to correct somehow.", "replies": [{"id": "j2fxcas", "text": "This is an awesome post. I'm not familiar with scatter plots but I'll check it out. Thanks.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]