## June 23, 2013

### Zillow Rent Zestimate versus Rentometer

I've talked about using Rentometer in the past.   Its an easy website to look up rents in your neighborhood.   I think its a great tool for landlords to get data to know how to set your own rents.

Zillow has also started publishing their own rent estimates.  Or as they call it a Rent Zestimate.   They explain What is a Rent Zestimate on their site.    I decided to compare the Rentometer numbers with the Zillow Rent Zestimates.

To do a comparison I just pulled up the numbers on Rentometer and Zillow for three of our rental properties.  I'll label the properties A, B and C.   The three properties are all single family homes.  A and C are in our local area but about 25 miles apart in different cities while property B is in another state.

Here is the data on our three properties:

 A B C actual \$1,100 \$1,000 \$1,080 Rentometer med \$1,095 \$875 \$903 mean \$1,097 \$932 \$930 20th \$963 \$775 \$850 80th \$1,238 \$1,073 \$1,100 Zillow zestimate \$1,323 \$1,124 \$1,174 \$1,200 \$989 \$892 \$1,500 \$1,300 \$1,300

The Rentometer numbers give median rent, mean rents and also the figures for the bottom 20% threshold and the top 80% threshold.  So for example with property A the cheapest 20% of the market is at \$963 or less, the middle is at \$1,095 and the most expensive are over \$1,238.   The Zillow numbers give the Zestimate and then their estimated range of rents.

Difference from Actual

If I just look at the Rentometer median rent and the Zillow Zestimate figures and then compare those to the actual rents we can see how far off the basic estimates are from my rents.

 A B C avg rento 0.5% 13% 16% 9.8% zillow 20% 12% 9% 13.8%

The Rentometer numbers are closer.   For property A its only off by 0.5% or \$5.   The worst for Rentometer is off by 16%.    Zillow is off by at least 9% and as high as 20%.

For property A the Rentometer number is almost spot on but Zillow is way off.   I got about equal but opposite results with property B with Zillow high by 12% and Rentometer low by 13%.  Then on property C again Rentometer is low but off by a bit more and Zillow is high by a bit.   Looking at it property by property its basically a tie between Zillow and Rentometer.   Rentometer wins one, Zillow wins one, and they're tied on the other.   However for the one pproperty A the Zillow estimate is far off while Rentometer was almost exact.

Overall comparing the actual rents to the basic estimates of median rent on Rentometer and the Zestimate from Zillow, I'd give Rentometer a slight edge.  But my sample size of 3 houses is far too low to draw any meaningful conclusions.

Accuracy and Data sources

Zillow lists the accuracy of their Rent Zestimates for the major metropolitan areas.     Generally speaking they are within 20% of the rent price around 80% of the time.  And in most markets they are within 10% of the actual around 50-60% of the time. Their median errors are in the 7-10% ranges typically.   Zillow uses a 'secret formula' to devise their rent Zestimate numbers.   That means they look at rent values but then run it through an algorithm to come up with an estimated rent value for your property based on the nature of your property.  I assume they use basic stats like square footage of the house, size of the lot and number of bedrooms and bathrooms.   They may use other info like crime statistics or demographics, but I have no idea... their formula is a 'secret'.  Zillow should be more useful then assuming that their figures are accurate.   But they're still off by 10% or more around half the time so it doesn't seem particularly precise.

Rentometer polls rents in the neighborhood.   They start with actual rents from nearby rentals.   I can't find any data on Rentometers accuracy but they're really just reporting actual numbers so I assume their actual numbers should be correct.    They only look at your address and the number of bedrooms.   This is kind of crude really.   They would give the same results for a 5000 sq ft. penthouse condo with 3 bedrooms and 3 baths as they would for a 1200 sq ft 3 bedroom apartment in the basement of the building next door.

Which one is Better?

I wouldn't say that one or the other is necessarily 'better'.   They are different.    It depends on the situation.   In general I'd look at both and use them each as data points but keep in mind their limitations.

I wrote about how to set your rent in the past.   One of the best resources is manual searching of comparable listings on Craigslist.   Don't just stop with the quick and rough estimates from Zillow or Rentometer.   They are really only ballpark figures.   I think that spending the extra time to research rent rates is important.

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