Plenty of rent estimate tools are available online but is Zillow rent estimate reliable? Let’s take a closer look at what the tool offers to real estate investors.
An Investor’s Guide to Zillow Rent Estimate
Investing in real estate comes with different rewards and benefits. It really depends on the type of investment strategy one prefers. Let’s take house flipping for example. Real estate investors look for the best possible deals on undervalued properties to fix and flip to make a profit. They consider not just the amount of money used to purchase the property (which includes both actual property price and all the other expenses that go along with it) but also how much it will cost to improve it. They need to factor in costs for all the repairs, upgrades, marketing, and when necessary, agent commissions, to ensure they get a good return on investment.
People who want to make money off of investment properties through rentals can choose between traditional long-term rentals and short-term vacation rentals. For both types of rentals, investors need to conduct extensive research and market studies to get the right information needed to come up with accurate estimates on pricing and profit.
The process entails learning how to find rental comps and sifting through market data. It also involves using different types of real estate investment tools such as a rental income calculator and rent estimator like the Zillow rent estimate tool.
How Zillow Started
In 2006, former Microsoft execs Rich Barton and Lloyd Frink came up with the idea of creating a massive real estate database to make available to the public online. Their goal was to enable regular folks to make searching for properties across the US a lot easier using different filters (prices, property types, property size, number of bedrooms and bathrooms, among others). With a little ingenuity, significant resources, and a lot of hard work, they launched one of the most popular online real estate databases known today.
More than a decade and a half later, Zillow continues to empower people as they find for-sale and rental properties that help them in their journey.
Zillow’s Rent Zestimate Tool
Zillow, an already established brand and a popular household name in the real estate industry, continues to innovate and look for ways to increase its value and worth. One of its key features is the Zillow rent estimate tool, or Rent Zestimate as they call it. The tool simply allows users to determine how much a property is worth using comparable properties and market data available to the public. It was officially launched in 2011 with information and data on 90 million houses across the country. Since then, the company’s expanded its reach to more than 100 million properties in the US.
How Does It Work?
As an automated home valuation tool, the Zillow rent estimate tool depends highly on information found on public listings and user-submitted data. It gives users access to relevant information and facts about a property, its location, and market conditions.
The website uses proprietary algorithms to incorporate different data from brokers and the MLS. Some of the data included are:
- Property location
- Size
- Number of bedrooms
- Number of bathrooms
- Comparable prices
- Prior sales records
- Tax assessments
With the above stats, along with a few others, Zillow is able to come up with estimated home values for different property types in several US markets.
How to Use the Rent Zestimate
Potential investors who wish to use the Zillow rental estimate tool can easily log on to the website and create their accounts. Don’t worry, it’s free. It is recommended to use your real name as Zillow verifies the identities of people who claim homes on their platform.
Homeowners who intend to sell can easily locate and claim their properties by typing in their address. They can then compare their homes to other similar properties in the area to get an idea of how much they can sell their homes for. Looking at other real estate comps can help them on how to estimate their property’s current market value, especially when they look at the recent sales prices of similar property types in their location.
Sellers also use the tool to see how their properties fare against the others that are currently listed on the market and recently sold ones and see how they can improve their chances of making a sale. They can take whatever information they can get their hands on and use it to market and advertise their property.
There’s also the “Make Me Move” feature for those who are considering selling their property but do not want to actively market their homes. The feature allows potential buyers to make offers on the property that owners can entertain or reject. It actually works as a good pre-sale interest check to see how much traffic and offers they can get before they go all out.
On the other hand, buyers use the Zillow rent estimate tool to check home affordability in specific real estate markets. A real estate investor in search of an investment property can use Zestimate to see if the property prices are within their budget and in line with their investment goals. They can also use it to check property tax rates to see if investing in that particular location is worth it or not.
Zillow Rent Estimate: How Accurate Is It?
When it comes to property valuation tools like the Zestimate, accuracy makes all the difference between a successful investment and one that is not. Zillow may be a popular choice for countless users but its accuracy is highly debatable.
Zillow’s chief analytics officer and chief economist, Stan Humphries, claims that the Zillow rent estimate tool was created to give people a starting point in determining property values. The keywords here are “starting point.”
However, admittedly, he also said that their algorithms do not possess extensive knowledge about a specific property, unlike the homeowners. This is in no way meant to take away credit from the company. What it means is that homeowners share the responsibility of providing accurate information for everyone by updating their property’s information. That’s why the system allows homeowners to edit property facts and information on Zillow. Based on the updates made, the system will then update the Zestimate accordingly.
So unless homeowners and sellers provide the most accurate and up-to-date information about their properties, there is a large chance that Zillow users are getting outdated data in their property searches.
Mashvisor: Filling in the Gaps for Real Estate Investors
The Zillow rent estimate tool serves its purpose well, which is to give users a good starting point when buying or selling a home. However, industry experts still recommend pairing it with professional information and comparative market analysis.
Mashvisor is a great tool to help real estate investors and professionals fill in the gaps. Here are several ways the company serves investors:
Real Estate Agent Directory
In the real estate industry, the words no man is an island could not be any truer. No amount of hard work will ever replace the values that collaboration and teamwork bring to any real estate transaction.
If you think that you can make a real estate transaction happen all on your own, you’re only fooling yourself. A successful real estate deal is made possible by different individuals working together to achieve one goal: to close a deal. The entire process will involve not just the buyer and the seller but also the lenders, insurance providers, contractors, inspectors, legal professionals, and most importantly, trustworthy and credible real estate agents.
Industry experts and professionals highly recommend working with local real estate agents with extensive experience and vast knowledge about the local real estate scene. Such individuals know the local market conditions, where the best deals are, what the current ongoing fair market values are, and a whole lot more.
Mashvisor provides a massive real estate agent directory for nearly every market across all 50 states in the country. The directory feature is especially helpful for out-of-town and out-of-state investors looking for investment opportunities beyond their backyards. Mashvisor subscribers can access a long list of reputable and trusted local real estate professionals that can help walk them through the process and guide them every step of the way. Partnering with these individuals increases the chances of investing success.
Mashvisor users benefit from the directory and other equally valuable products. Start your 7-day free trial with Mashvisor now and see how it has changed the lives of thousands of investors.
Real Estate Heat Map
One of the best features Mashvisor offers its subscribers is its real estate heat map. The heatmap tool helps investors locate the hottest real estate markets worth looking into throughout the country. Any investor worth his salt knows that location makes or breaks the deal.
The real estate heat map allows investors to pinpoint a location where there are affordable properties that generate high rental income and good cash on cash return. Users can analyze neighborhood data in multiple areas in a given market using a cash on cash return calculator.
Mashvisor’s heat map analysis tool shows the reds, greens, and everything in between that indicates a market’s profitability. It uses filters such as listing prices, rental income, Airbnb occupancy rate (for those interested in purchasing vacation rental properties), and return on investment.
Investors should take note, though, that when it comes to return on investment, Mashvisor’s heat map focuses on the most important ROI metric, which is cash on cash return. Simply put, cash on cash return is the amount of net operating income (NOI) made in a year divided by the total amount of cash initially invested in the property. Using the cash on cash return filter, the map will highlight in green the areas with the best cash on cash return rates.
Another thing potential short-term rental property investors should also take note of is the Airbnb occupancy rate filter. The filter shows areas in a neighborhood where occupancy rates for vacation rental properties are high and which ones to avoid. The Airbnb occupancy rate determines how often a property is booked versus how long it’s been listed on the platform. The higher the occupancy rate, the more likely it is to get booked frequently. The more bookings a property gets, the bigger the average Airbnb income.
One of Mashvisor’s best features is the Real Estate Heat Map, which allows investors to find affordable properties that generate high rental income and cash on cash return.
Investment Property Calculator
Lastly, Mashvisor provides one of the best investment property calculators available online today. The tool packs so much punch that it lets investors perform investment property analysis, locate the right properties that match their criteria, and help them come up with the most accurate numbers needed to see if an investment is worth pushing for.
Mashvisor’s investment property calculator helps investors perform a thorough neighborhood data analysis using the most up-to-date information available. However, this is only half of the work. Once you’ve found the right neighborhood to invest in, the next step is to find the right investment property.
The calculator includes a property finder feature that lets users locate properties that align with their criteria. Each property can be analyzed using essential investment property information, such as rental expenses, rental income, cash flow, cap rate, and real estate comps, among others. In addition, the rental calculator also gives investors recommendations for the most optimal rental strategy based on the analysis results.
The Verdict
While Zillow is a great real estate site and the Zillow rent estimate tool does serve its purpose, relying on it solely will not lead to the most informed decision-making. It is an excellent starting point but it should be supplemented with professional information and comparative market analysis. The good thing about it is investors can turn to excellent alternatives that have more to offer.
A website like Mashvisor doesn’t just provide users easy property searching capabilities but allows them to quickly and accurately analyze data across all real estate markets in the US. Investors who want more bang for their buck will find Mashvisor a worthy investment to help them make the most out of their business venture.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.