3. Evaluate your competition.
If you're renting a two-bedroom condo, you should pull up information on every two-bedroom condo you're competing against in your neighbourhood. Remember to compare apples to apples. For instance, it makes no sense to compare your unit to a two-bedroom condo that is twice as large as yours. Once you have the right information at your fingertips, it's time to think like a tenant again and assess the strengths and weakness of each and every property in your particular market.
Does your competition have more or less square footage than your rental property? Is it situated in a better or worse location? How is the layout? Does it have better or worse upgrades? These are just some of the many questions you should ask yourself when evaluating where your property ranks against the competition.
4. Establish a tentative price point.
Once you know your competition and how well your rental property compares to what is out there, you can estimate what rent to expect. For example, if the properties with better features are priced at $1,700 per month and the properties with worse features are priced at $1,600, you can expect to price your property somewhere in between.
5. Check in on historical data.
Many investors misuse historical data. They inaccurately assume that because a similar property rented for a certain price 30 days ago that they can expect the same rent too. The market does not work that way. What units rented for in the past is irrelevant to a prospective tenant who is evaluating his options from what is available today.
Nonetheless, the past can help us gauge whether we are off track. With respect to pricing, it's helpful to take a look at what other comparable rental properties have been renting for in the last 60 days. For instance, a tentative price point of $1,650 per month seems reasonable when comparable properties have been renting for between $1,575 and $1,725. However, a tentative price point of $1,900 would trigger a red flag and prompt a re-evaluation of all steps taken to this point.
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