Never too high, never too low
You probably already realize that there’s a delicate balance to be achieved in pricing your rental units to ensure long term profitability. You don’t want to charge too much for rent, because it will make it more difficult to fill vacancies and will cause an increase in tenant turnover when leases are up. Turnover costs you money, as does having a unit sit vacant. At the same time, you don’t want to charge too little and leave money on the table — or worse, lose money on a unit or property.
Know the lay of the land
Research the rental price of comparable units in the area, and price your unit(s) accordingly. Also consider the current vacancy rates in your market. If vacancies are high, you may have to set pricing a little lower than you would like, to avoid having the property sitting empty for too long. On the other hand, if there are very few rentals available, it could be a sign that your neighbourhood is in high demand, and you could get away with charging more.
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Promote your point of difference
Determine if your property has a desirable feature or amenity that most people would be willing to pay more for. Such amenities might be premium appliances and fixtures, or close proximity to transit hubs, parks, mall, gyms, etc. You may even consider making your property pet-friendly if feasible, as many people will consider paying higher rent if it means that their furry family members will be accepted too. Once you have established what that special something you have to offer is, be sure to promote it heavily in all of your listings and advertisements. You may even find ways to reach audiences that place significant importance on that feature or amenity.
Re-evaluate pricing periodically
Ensure that you are maximizing your profits by revisiting your pricing at every lease renewal or expiration. Your goal should be to steadily increase rent over time without being greedy and thus creating costly tenant turnover. If you do increase rent for an existing tenant, be sure to explain the reason why — like covering rising energy costs, property tax increases, etc.
Now that you have set the profitable price, here are a couple of additional tips, to ensure that you are keeping as much money in your pocket as possible:
Find good tenants
Remember that a large part of remaining profitable is finding and signing good tenants. By good tenants, we mean ones that pay on time, won’t cause major damage and most of all, won’t cause you legal headaches and fees.
Optimize your operations
The right property management software is like having a small army of tireless workers at your disposal, allowing you to cut costs while still maintaining a high standard of professional, personal service. Such a system has the capability to automate time-consuming manual processes, especially in the area of accounting, and enables tenants to pay rent online, often automatically each month, greatly reducing the instances of late payments and the work you or your staff has to do to chase those payments down.
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Follow these simple and actionable pieces of advice and you will be well on your way to optimizing the profitability of your rental units.
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