How to determine the optimal market rental rate?
This is one of the hardest things for many landlords & property managers and economically one of the most important ones.
There is no surefire way of finding the optimal rental rate, but there are several ways of getting to a very close number which is all you really do need.
Check the local paper or the internet
Look through the local paper where rentals are advertised or look through some of the sites that offers
online rental listings. Look for similar specs as the unit you are trying to rent out.
Ex. You have a 2 bedroom unit, with one bathroom, free electricity and cable.
Look for 2 bedroom vacancies with one bath in the same area as yours. If you find one that has free electricity but no cable add a little to your estimate since you are also offering free cable.
If you find one with no electricity and no cable add a little more. If you find one with also free internet subtract a little. By using no more than 10-15 minutes you will have a pretty good idea of an approximate rental rate.
Become a 'pretend' renter
This will take a little more time than the other technique, but it will give you a lot of useful information, that you couldn't get otherwise.
This technique is especially useful if you are looking to buy a rental in the area since you will be able to ask the landlords all kinds of questions to validate that you are looking at the right market.
Go visit 10-15 different units in your area. Ask questions such as:
- How long has it been vacant?
- Any reductions in price?
- Is the landlord offering other incentives for new renters indicating a very competitive rental market?
Call local real estate agents or professional property management companies
Call a local real estate agent and tell them you are considering using them as a management company (Which you might very well do in the future). They will sometimes send someone to check out your property/apartment and will get you a very accurate rental estimate.
Check with 2-3 different companies and you will have a extremely good idea of the correct market rate.
See if you can find the statistics for you area
Many states, countries offer statistics on vacancy rates, typical rent etc. Check out the various government websites and use your friend google to find it. This is a very simple but powerful way of finding the right rate. This is also useful if you are looking to buy a rental unit, since you will be able to find the area with the lowest vacancy.
This is not legal advice. Always ensure that you follow applicable Tenancy and Bylaw Regulations.
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