What is the market rental rate of my investment property? This is the first question on everyone's mind when they are deciding to rent a property. There are many factors involved in putting a rental value on a property. We take into consideration, location, square footage, style, age, amenities and of course, what is the market willing to pay? Another consideration is, "how soon do we have to rent the property before we incur too many costs?" such as another mortgage payment, electric bills, gas bills etc...
Lets for instance take a One Bedroom + Den in Downtown Vancouver, 600 sq/ft in a relatively new building with good amenities (gym, in suite laundry and parking). It is safe to say that you will get $2.00 per sq/ft in a newer building in Vancouver. From this starting point we can then decide what the amenities are worth, if there is a view and extras such as a fireplace and balcony. If the suite offers all the extras you could safely say that you can achieve and extra $0.25 per sq/ft bringing your rental rate up from $1200 to $1350 per month. By listing the suite at $1350 per month you should be able to rent it within the 30-day rental period and not incur the costs of a vacant property.
If you were to list this property at $1450 per month and you lose a month's rent waiting for the right person to come along and rent at the higher rate you are risking vacancy and loss of income. If you lose one month's rent of $1450 it will take over a year to make up the difference than if you chose a more reasonable rental rate of $100 less per month. At a lower rental rate you will receive more interest in the property and could take multiple applications giving you a wide variety of possible tenants to choose from and you may even have an offer higher than the asking rate.
For those investors that are well versed in the real estate sales markets this may seem backwards but when you purchase a property you know that the asking price is always negotiable at some level. Unfortunately, potential tenants set themselves a limit in the rental market and do not even call those listings that are over their budget because they are not aware that rents can also be negotiable. Setting the right rental rate that will achieve the highest return with the quickest turnover is the key to successfully renting a property without the added costs of vacancies.