3 Pricing Strategies
Your pricing strategy will determine the annual return on your rental property. Mark it up too high and you may have to wait for a qualified renter. Mark it too low and you leave money on the table.
Three main strategies come to mind when discussing pricing of furnished housing.
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”
1. Quick Price: this price point refers to a mark-down from market value. 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 comparable property. The advantage is the property is not under or over priced and should rent within the 30 days after being showcased to the market unless of course there is too much inventory in the rental pool.
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 prospects and the property is likely to sit for 60 days or more. Any takers it does attract may want only a very 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.
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 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.