Rental Market Analysis
How to determine the rental amount for your investment property
OVERVIEW & PURPOSE
Determining appropriate monthly rental amounts to charge your tenants, ensures your unit will be filled in a timely manner while allowing you enough cashflow to cover your expenses.
Factors of Consideration
You have heard it before in regards to Real Estate, Location, Location, Location. It’s also true for your investment property. Picking the right city in the desirable neighbourhood all go into determining if the tenants in that area are willing and able to pay your price. Typically a cities population that earns a higher income can also afford higher rents. Unfortunately, buying in those cities will also come at a premium, keep a lookout for deals( a good Realtor can help with this).
How many bedrooms and bathrooms is a paramount component of the market analysis, as having a specific number of these in a unit will be in more demand than others. With some research you could find out what is in the largest demand in the city you wish to invest in. Having central air conditioning, a garage or large backyard are all motivating factors which can contribute to pricing the unit . Updating to current desirable trends in finishings will also add perceived value to the place increasing its potential for income such as;
An emotional reaction begins the moment a potential applicant arrives at the property. If the home or building has been well maintained and nicely landscaped a desirability factor will carry through the rest of the tour. A sloppy first impression will sour the applicant and you may not get them back no matter how fantastic the interior is. Once inside, the home should appear fresh, clean, bright and spacious. A coat of paint is one of the best return on your investment of time and money you can make.
Checking out the local rental market should be the last stop before setting the price and hitting the post now button. A collection of several of the top local rental sites will give you a up-to-date price guide. At the moment we are using Facebook, Kijiji and Zumper as valuable resources . I search by neighbourhood, type of home - Single family or Multi-family, and the amount of bedrooms and bathrooms. When I've found a close match to these criteria, I will look at what's included with other similar rentals and aesthetics. How does your rental stand up to what's out there, if the property we are about to post holds up to all these factors, I feel comfortable pricing mine on the higher end of the average. A trip around the neighbourhood can also give you an idea of how many rentals are close by.
One time when posting a brand new build, we took a drive around and noticed 11 other rentals similar to ours in a two block radius. With that knowledge we realized we had to drop our price several hundred dollars due to a lack of demand at the time.
Comparing your unit against others in the same area will give you valuable insight on the pricing of the property and I have attempted to give you the criteria of that comparison. If you have done your job right when advertising your upcoming vacancy you should be pleased with your results. If you are still unsure of what to charge and what to include with the rent, hiring a professional property management company can also be a valuable resource.
Glenn Brown is owner of My Rental Unit property management and has enjoyed success with multiple unit investing.