By Freedom Malhotra
Pricing a rental property is more complicated than most investors understand, especially if you want to get it right.
We've all heard stories about what a neighbour or another investor was able to rent their unit for. If they could get that rent, you should be able to get the same, right? Unfortunately, that's just not true. In fact, that type of logic can run you into some big trouble as a landlord.
No matter how intelligent and sophisticated investors can be, it's easy for many of them to forget that the real estate past does not equal the real estate future. The rental market is no exception to this rule. The rents you charged yesterday have no bearing on the rent you can expect to charge tomorrow.
Big cities like Toronto
can experience significant fluctuations in inventory from week to week. To succeed as a landlord you need to know how to read the market and adapt your pricing accordingly. This often entails revisiting your strategy several times in a month to make sure you're staying competitive and on top of your game.
Here are the seven essential steps that I use to price rental properties so they rent quickly and for the highest dollar.
1. Think like a tenant.
Successful landlords are able to put themselves into their tenants’ shoes and consider what's most important to them. Since the tenants are your customers, your capacity to attract and retain them depends on your appreciation for what they value. Thinking like your tenant will also help you to purchase the ideal real estate investment as well.
2. Know your strengths and weaknesses.
To compete for the best tenants, it's essential to identify what your property has to offer and what distinguishes it from your competition. Once you have committed to thinking like a tenant, it's easier to be objective when it comes to determining the strengths and weaknesses of your rental property.
For example, if you are renting a two-bedroom condo that's ideal for families with kids, it's important that you highlight its strengths in your advertising copy. Perhaps you should stress that it’s spacious with lots of storage capacity, that the building has a swimming pool and that it's situated near good schools. Of course, you should avoid making things up. Being honest is the best policy for long-term success.
Knowing your weaknesses will also help you be realistic in terms of positioning your property. If you know that there's another rental property that is better than yours in many respects, it makes no sense to price your unit at the same price point or higher.
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