How To Set the Rent Price For Your Rental Unit
Originally blogged here.
Deciding on your property’s rent price is a little more complicated than at first glance. Luckily, there are plenty of resources and online guides (like this one) to help you maximize your property’s potential.
Be Flexible
We use a simple metric that helps us decide whether the rental price is to high: showings. If you haven’t had a showing within the first week or two, it is highly likely your rent is to high. The same logic applied for the inverse (if you have multiple showing requests, it is likely you’ve priced your unit to low!)
It is important to go back and double check your rent pricing assumptions weekly. Unit vacancies can vary weekly, and it is possible the market was recently flooded with similar, lower priced units. You should continually monitor other postings on rental websites to get a better idea of the current market dynamics. Be flexible with your pricing, as rental markets have a tendency to change quickly!
Optimize Your Rent Price, Don’t Maximize
Unfortunately, rent prices aren’t static — they fluctuate depending on the time of year, weekly market vacancy fluctuation and even weather! Luckily, it’s very easy to take a litmus test of your local rental market simply by posting ads and waiting for results. One of the biggest mistakes most landlords make, is trying to maximize the amount of yearly rent.
The higher the price, the higher the profits… right? That statement is true, but it doesn’t take into account the time spent vacant. If you’re holding out for a $1800 rent price for 30 days, when you’ve had offers at $1700, you’re losing out on $1800 of rent for the first month spent vacant, vs $1200 in lost potential rent from taking a slightly lower offer. It’s much better to have your unit occupied vs. maximizing the yearly rent price!
It’s All About Timing
Most households move during the summer months. This translates to higher turnovers, and higher rents (there’s more demand relative to other times of year). If you can, make sure your leases expire in the summer months to capitalize on this opportunity. If you sign a lease in the winter months, try to push for a 3–6 month extension, or make the lease 15–18 months long.
Make sure you give yourself plenty of time to advertise and show your unit prior to your current tenant moving out. When your existing lease is 100 days or so from expiring, reach out to your tenant to see if they are interested in renewing. If not, this gives you ample time to begin the advertising and tenant screening process. Remember: time spent vacant = lost revenues.
Make Beautiful Rental Ads (and List Everywhere)
The more leads, the more negotiation power you have, which can help yield a higher rent price. We’ve created a guide on how to get more leads by creating beautiful rental ads (click here). Make sure you have lots of photos and highly detailed description.
It’s important to list to as many listing sites as possible (maximizing your ad’s reach). Alternatively, you could use our platform, which automatically lists your ads on multiple sites for you :).
Minimize Turnover With Price Expectations
Turnovers cost money. Not only will you lose potential rent if your unit isn’t occupied immediately, you will also need to touch up your unit, risk moving damage and lose valuable administrative time (advertising, sifting through applications, leasing, giving keys, fielding questions etc.) The saying “a bird in the hand is greater than two in the bush” applies here. Unless you believe you can get a significantly higher rent price, it’s better to be flexible with your existing tenant.
One idea used by one of our clients is to offer a long-term incentive through pricing expectations. If the tenant signs on for a 2 year lease, you can offer them $100 off their rent payment in the second year, or promise no rental increase for the second year.
Remember: Happy Tenants = Happy Landlord
Questions
Feel free to email with any questions at hello@yuhu.io.
