When you first put your investment on the market in order to attract a tenant, you need to price it well. Pricing your property either too high or too low can lead to disaster. It is important to try and price your property based on what the market dictates for rentals. If your price is off, you may run into any of the following problems:
- You don’t attract any serious applicants – you may find that you get substantial foot traffic, but never get any serious rental applications. This can occur whether you price too high or too low. When it’s priced too high, people won’t even consider it. When it is priced low, it may discourage them as they could wonder if there is something wrong with it that isn’t being revealed in a rental ad.
- Tenants expect too much from you – if you don’t plan on providing luxury services as a landlord and can’t respond to their every need at the drop of a hat, then you shouldn’t price your units that way. If you offer an average residential property with higher than average prices, it tells your prospective tenants something.
- Tenants find rent increases unaffordable – if you start your rental at a higher than average amount, tenants may not be able to afford routine rent increases. It could push your unit out of a tenant’s budget at the end of the lease. You don’t want to have to find a new tenant at the end of every lease term, so don’t make it inevitable.
With all of the above in mind, appropriate market pricing is very important. There are many different factors you need to take into account when pricing your units. Wonder what some of those are? Check out our post on how to price your rental property.