methodology
How We Determine a Multi-Family Market Standard Rent
Actual rents convert to Market Standard rents by eliminating variances attributable to tangible elements adding readily identifiable rental value. This includes deductions from, and/or additions to, Actual rents as:
Deductions From Actual Rental Rates
Elements deducted from actual rents when Market Standard rental rate comparisons are required, include:
Electric utilities are included in rents
Furniture is provided by the property as a component of occupancy
A direct-access garage to the apartment unit is standard, or an assigned, enclosed garage is included in rents charged
In-unit washers and dryers are included
A wood-burning or gas fireplace is provided
These tangible elements directly affect rental value based on providing utility over and above base rent. This is in contrast to qualitative desirability of more intangible elements such as attractive finishing detail and amenities. Removal of the tangible element would be expected to result in reduction of the apartment’s rental rate; addition of the element will result in an increased rental rate. Deductions are applied in converting an Actual rent to a Market Standard rent as:
Unit Type/Number of Bedrooms
Characteristic
Studio(1)
1
2
3
4
Electric Utilities
Metering Central(2)
$55
$85
$120
$120
$150
Partially Metered(3)
$45
$70
$80
$90
$100
In-Unit Washer and Dryer(4)
$25
$25
$25
$25
$25
Woodburning/Gas Fireplace
–
$15
$15
$15
$15
Direct Access (to unit) Garage
–
$70
$70
$70
$70
Furnished Unit
$20
$20
$20
$20
$20
Notes
(1) Efficiency apartment unit deductions are assigned the same value as Studio floor plan deductions.
(2)Property pays expense for all electric utility usage.
(3) Property provides air conditioning only. Residents pay individually metered electric expense for heat, lights and plug-ins.
(4) No distinction is attributed to type (stacked, or side-by-side, units), or size (full-size, or three-quarter size) of washer/dryer units. This amenity assumes washers and dryers are included with each apartment, and that apartment rents reflect that advantage.
Additions To Street Rental Rates
When the resident is made responsible for payment of trash collection, water, or sewer charges either through a RUBS (Resident Utilities Billing System), or direct metering, this condition is to the Actual rent, resulting in adjustment to a “Market Standard” rental rate.
Additions to Actual rental rates result from inclusion of water, sewer and trash collection charges paid by residents, as:
Unit Type/Number of Bedrooms
Service
Studio(1)
1
2
3
4
Water
$15
$20
$25
$30
$35
Sewer
$15
$20
$25
$30
$35
Trash Collection
$8
$8
$10
$12
$15
* Studio and efficiency apartment charges apply the same values
Example Market Standard Rent Calculation
A three bedroom apartment renting for $1,000 per month, incorporating a direct access garage, a fireplace and a washer/dryer set would have a Market Standard rent of $890 per month after deducting $110 per month for rent-sensitive characteristics. If the household also pays for water/sewer and trash collection charges the Market Standard rent will add $72, the resulting Market Standard rent – $962 – is calculated as:
Actual Rent
$1,000
Deductions From Rent
Direct Access Garage
$70
Washer and Dryer
$25
Fireplace
$15
$110
Additions To Rent
Water/Sewer Paid By Resident
$60
Trash Collection Paid By Resident
$12
$72
Market Standard Rent
$962
When No Adjustment To Competitive Rents Is Made
Relative characteristics of property improvements and location influence a property’s relative desirability. In combination with quality of property management, these factors dominate property-to-property rental rate variances when all other considerations relating to utility are essentially equal.
Such attractive details as above-standard living rooms ceiling heights, polished granite kitchen counter tops, hardwood floors, ceramic tile kitchen entry flooring, and the presence (or lack) of balconies or patios are not considered in rental rate adjustments. These features are recognized as rent-sensitive extensions of a property’s perceived desirability, but are not assumed to have definitive utilitarian value applicable to rental rate adjustments. Relative values of these recognized desirable characteristics are qualitative, consequently are not treated in the manner of a utilitarian adjustment which has a directly quantifiable effect on rents.