Zillow Releases a Zestimate for Monthly Rent

About 10 days ago Zillow released an interesting addition to their software, they now offer a Zestimate on the amount of rents a property will fetch.  For specifics see Zillow’s Official Blog Post about it. If you have been following the blog for a while you may remember a previous post on how I feel about Zillow’s Property Value accuracy.

Since I have a small sample size of raw data I figured I would compare 20 of my rentals, actual rent to Zillow’s estimated rent.

As you can see some results seem to be pretty close, and others have a huge gap.  Pricing rentals is more of an art then a science.  Tenants do not do “appraisals” before they rent a house and some situations will cause price gaps (eg: if a tenant has been in a property for 10+ years, it is safe to say they are probably paying under market rent).

Like in property values, Zillow does a bad job of estimating the rent on some of the funky properties:

  • The duplex I own that gets $1,000/mo and $650/mo for a total of $1,650.  Zillow did acknowledge the property was a duplex but still estimated rent to be $1,156.  I assume they are basing this on what they think a similar sized single family residence will fetch.
  • The property that I rent for $725 is a condo in a pretty rough complex (I think this is the only property I might not have bought if I could get a ‘do-over’).  Zillow estimated rent to be $905.  I am probably a bit under market because I wanted a good tenant on this one, but I assume they are basing rent on other condos in nicer complexes.
  • Lastly, the property I rent for $2,000 has some additions, although they are permitted on and on title.  I have no clue why Zillow came up with only $1,337 for rent for this property?

What they could do to improve the service?

  • I would prefer if they provided more of a range, market rent is $1,150 – $1,250.
  • It would be great if they could provide comps with actual addresses that explain how they are determining the value.  The reason I like this feature is I can eliminate the houses that don’t match mine.  The 1990 built that is rented for $1,750 is not comparable to my 1950′s built house.

In conclusion, this will probably be another value I take into account when doing my pricing procedure (see my blog post on, How I Price My Rentals).  The values they provide seem to be lower then actual market value, 14/20 of the properties Zillow provided a lower value.  None of these fancy services beat actually driving the neighborhoods and doing a little old fashion hard-work.

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5 Responses to “ Zillow Releases a Zestimate for Monthly Rent ”

  1. [...] Zillow Creates Program For Estimating Monthly Rent Posted by: liz | Category: Real Estate Investing [...]

  2. Bilgefisher says:

    A cleaned up house will demand higher rent than an ugly house. Zillow cannot estimate that, nor should they try. Rentometer has its flaws as well.

    I think ultimately having credit reporting agencies allow rental payments be included could create a large database to mine for information.

    Till then, asking other landlords in the area and tracking rental listings is about the only way.

    Jason

  3. Bruce May says:

    I haven’t gone into Zillow to explore this, but there may be a way for you to show your actual rents. This will correctly drive their data for your area and help you in return.

  4. Great idea about providing a range for the properties and maybe having a scale for how accurate they feel the data is (not sure how they would do this – maybe the range would be smaller if felt it more accurate and wider if not as accurate).

    Anyway, great post. Thank you for sharing your actual data with what they provide.

  5. Steve,

    I think this is a good tool for investors, I was just reading Patrick Killelea’s post about home buying safety guide and he mentions a lot about comparing rents vs price (“how much more would it cost you to borrow the money versus the rent”).

    I think zillow will always be a little off with their zestimates, but the way it gives instant answers of people need to give them idea, is powerful

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