What price can I get for my rental property? Can I always be at the top of the market? No.
What price can I get for my rental property? Can you always be at the top of the market? No.
Clients are always asking, what price can I get for my rental property?.
The only true answer is “what the market will pay for it”.
With rental prices landlords are limited to what the current rental market conditions are and what the market will pay for your property. Every landlord want’s as much renta for their property as they can obtain. The problem with this scenario is it may not match what the current rental market conditions are. If a landlord wants to rent their unit for $2000 and renters are not willing to pay these prices the unit will sit vacant until either the landord adjusts their expectations or the market conditions change.
The rental market rates often take a long time to adjust either up or down. When there is a shortage of supply compared to demand the rates wil increase. When there is an abundance of supply compared to demand the prices will decrease. Covid created a market of less supply of product rapidly increasing rental rates. In the past two years due to manuy factors the supply has increased compared to the demand creating a decrease in rental rates.
A landlord and tenant relationship has a built in conflict for what the rent should be. Landlords want the highest payable rent and tenants want the lowest rent possible.
Both of these options are not possible at the same time. If the tenant rents a property and the economy causes rents to increase while the landlord is in a lease agreement which restricts their ability to raise the rent, the tenant would be in a market where they are paying below market rent. In this situation we see tenants stay in the properties they are renting as moving would cause an increase in their rent being paid. If the market declines after a tenant signs an agreement they may be in a situation where they are paying more than the current market rent. When the rental market rates decrease this will cause tenants to seek new places to live for various reasons. Tenants move to decrease their costs, improve the quality of property or change the location due to work or other reasons.
When rents are increasing landlords prefer tenants to vacate the property with the intention of re-renting the property at a higher rate. When rents are decreasing, landlords want the tenants to stay to prevent vacancies. Both parties have opposing veiw points to the benefits of their situation.
If the landlord is not able to have their property always rented for the maximum the market will pay for it, what can they do?.
What is the average length of tenancy? Rental properties have and always will be a transitional type of housing, meaning that most people renting stay for short periods of time in one location before moving. Cartref Properties tenancies have an average of 27.6 months per tenancy. This means that most people move somewhere between two and three years when renting a property.
Turnover offers the landlord the opportunity to re-rent the property at the higher rent when the rents are increasing or decreasing. When rent is decreasing sometimes this is a good time to take it off the market temporarily and renovate the property. During this time renovation costs generally are less expensive as it oftens coincides with a slower time in the economy. For these reasons turnover can be a good thing for landlords especially in BC where there are restrictions on the rent increase amounts permitted. When tenants stay in properties longer than three years you will find the rent is often lower than the current market rent. This creates the illusion landlords are losing money. When they rented the property it was acceptable though outside factors including taxes, utiliitites and other costs may have increased making it less profitable for the landlord.
When rents are increased it also makes it less affordable for tenants if they need to move. When rent are on a decline tenant willtake advantage of this opportunit to improve their financial situation. Often in times of rental rate decre3ases tenant will ask for the rent to be decreased and landlord will decline. Landlords only want to increase rents, not decrease them. It may be in the landlord’s best interest to consider a tenant’s request to reduce the rent. When rents are declining it means there is greater supply. This often leads to multiple months of vacancy only for the unit to be rented at the rate the current tenant requested. Isit better to have one two or five months of vacancy instead of a $200 rent reduction.
The rental rate is always what the market will pay.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
