6. Adjust to demand.
This is the single most important step in pricing your rental property. Surprisingly, it also happens to be the step that most investors overlook. When you are competing for tenants, you need to know how strong the demand is so that you can adjust your strategy accordingly. If you are competing against ten other two-bedroom condos in your neighbourhood, it's essential to know how many of these two-bedroom condos are renting per month. Your strategy will differ depending on the answer to this question.
Naturally, you will have to price far more aggressively in circumstances where only 10 per cent of existing condos were renting out per month than you would if 90 per cent were renting out. To understand the demand in your neighbourhood, calculate the average monthly number of comparable units that have rented out by using three months of historical data. Your Realtor will be able to gather this information for you using their access to the MLS system.
7. Revisit these steps.
The rental market tends to be more fast-paced than the home-buying market. That's why it's important to re-assess your pricing frequently. Personally, I like to go through these steps every two weeks to ensure I stay positioned right. The more often you engage in this exercise, the better off you will be.
Pricing your rental property the right way takes a lot more than guess work. Mastering this skill is essential to your success as a real estate investor. Like all skills, this one takes plenty of practice, but the hard work is surely worth the price.
Freedom Malhotra is an experienced real estate investor and Realtor. He is the founder of Condo Planet, which specializes in Mississauga condos.
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