3 Pricing Strategies
Your pricing strategy will determine your annual return on your furnished rental. Mark it up too high and you may have to wait for a qualified renter. Basically, the higher the rent, the shorter the stay.
Three main strategies come to mind when discussing pricing of furnished housing.
1. Quick Price: this price point refers to a slight mark-down from what the market will pay. The advantage is that the place will rent quickly and you as an owner or property agent will have several prospects who may want to rent it so you can be choosy. Often this strategy will provide the most consistent annual yield with little or no un-rented time and more often a long term lease.
2. Market Price: this price point is what the market will commonly pay for a comparable property. The advantage is the property is not under or over priced and should rent within the first month after being showcased to the market.
3. Select Price: this price point is at the highest-end of the scale. There are many reasons why a homeowner may choose this strategy. If an owner has recently done a lot of upgrading, has high quality furnishings and amenities or the property is especially beautiful even waterfront the owner will feel the place is worth the higher price. The disadvantage here is that there will be fewer takers and the property is likely to sit for 60 days or more which is typical of luxury rentals. Any takers it does attract may want only a short-term rental – like summer holidays shrinking the annual return. Use this strategy only if you will not be adversely affected financially while the property sits waiting for a renter or if you plan on using the place yourself during the down time. High end properties do not attract as many prospects so you will not have the power of being too choosy.
The best strategy of course is “correct pricing” which the market will see as fair and full of value. While at first it may not be apparent what the correct price is – the market will soon tell you. If you have begun marketing your suite and there are only a few calls and lost of questions, your price may be high. If you have had 2-3 viewings and no one has decided to take it that is usually a red flag that your property is priced too high for what is offered.
A property that is offering good value and priced right rents after the first or second showing.