Determining your rental rate is one of the most important decisions you’ll make as a property manager or landlord. The rent you set impacts the amount of profit you make, how long your rental sits on the market unoccupied, and how harshly potential tenants judge your property during viewings. Needless to say, setting the right rental rate is paramount for success as a landlord. If you’re struggling to find the right price to tag onto your rental, we’re here to help! We’ve come up with five important factors to consider when setting the rent for your property.
It’s common knowledge that location is one of the most important factors when it comes to real estate. Owning property in a prime spot almost always works to your advantage when it comes to setting rent! Is your property located in a walkable community? Is it within close proximity to schools, shopping and other recreational options? Is it easily accessed by public transit? These are all questions to ask when assessing the location of your rental property. Since most tenants like living close to essential amenities like grocery stores and shopping centres, they’ll be willing to pay more rent for easy access to these conveniences. So, the more the community and location of your rental has to offer your potential tenants, the more you’ll be able to charge for rent.
2. Size and modernity
Size is another important factor to consider when setting rent. When on the hunt for a home most tenants are usually looking for tons of space. So, a rental property with a high square footage is a lot more desirable than a small home with limited living space. You should also consider how modern your space is. These days, tenants are on the market for open-concept homes stocked with up-to-date stainless-steel appliances. If your property features an older dishwasher, microwave or stove, then you may want to consider setting a lower rental rate.
3. Neighbouring properties
When setting rent, you want to strike a balance between making a profit and being competitive in the market. That’s why it’s essential to know the rent being charged by neighbouring properties in the community. To gather accurate information about competing rentals in the area, we suggest you research similar listings and see how your rental stacks up. So, for example, if you’re renting out a one-bedroom apartment in Greenhill, check online to see what other one-bedroom apartments in that neighbourhood are going for. You can also talk to other landlords or property managers who are willing to disclose their rental information. This way, you’ll be able to charge the appropriate amount of rent and be competitive in the market.
4. Your expenses
Making a profit is the end goal when renting out your property. To ensure you pocket some money from your monthly rental income, you’ll have to factor in your monthly expenses. Take into consideration things like your monthly mortgage payments, property taxes, property management fees, as well as home insurance and management costs. When setting your rent, ensure that the amount you charge is able to cover all your expenses and a little more.
5. The housing markets
Last but not least, the housing market. As you know, housing market conditions fluctuate from time-to-time. At times, when property prices are unreasonably high, it’s better for people to rent rather than buy a home – you’ll want to take advantage of these conditions. You should also adjust your rental rate to accommodate for seasonal changes in the market. For example, people tend to avoid moving during the winter months and as a result of this, things slow down dramatically for the rental housing market. In a situation like this, you should lower your rent to increase the chances of attracting tenants.
The rent you set for your property determines how successful you’ll be in the rental housing market. So, it’s important that you get it right on the first go. With our helpful tips, we’re sure you’ll be able to set a competitive yet profitable rental rate with ease.
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To be a successful real estate investor, you need to know how to spot a good investment, how to work with contractors, find good tenants and much more. However, the most important skill to have in your repertoire is negotiation. Investors who are good negotiators have a significantly easier experience when it comes to real estate investing. Since negotiation is such a crucial part of being a real estate investor, we’re sharing five essential tips that’ll help you master this skill in no time!
1. Do your research
Every good negotiator knows that knowledge is power, and negotiations tend to favour the negotiator with the most information. So, when hammering out a deal for an investment property, never come to the table without first doing your research. Know about the property, the builder, the neighbourhood, and the real estate market as a whole. It also helps to know a bit about the person you’re negotiating with. Find out their motives for selling the property and what they want out of the deal. These pieces of information will help you make an educated and appropriate offer or counter offer.
2. Build rapport
In business, people tend to favour people they know and like. That’s why building rapport and maintaining good relationships is an important part of real estate investing. As an investor, it’s your job to make sure the seller likes you and feels comfortable doing business with you. During your interactions with the seller, practice active listening and put yourself in their shoes. This way they’ll be more willing to compromise and meet you halfway when negotiating.
3. Be fair
Negotiation isn’t about winning, rather, it’s about finding a balance. Expert negotiators know that a successful negotiation experience is one where everyone walks away satisfied. When investing in real estate, come to the table with a fair offer – anything below this can ruin the chance of negotiation. When sellers are lowballed for their property, they tend to take offence and may not be willing to reason with you or hear your counteroffers. So, get rid of your “winning” mentality and approach negotiation like a problem solver – offering the best solution/offer for all parties involved.
4. Get comfortable with silence
To become an expert negotiator, you’ve got to get comfortable with silence – regardless of how awkward it is. Silence gives the impression of dissatisfaction, which lets the seller know that further negotiation is required. Silence can also lead to concession – a price drop, better-negotiating terms etc. and the person that breaks the awkward silence is usually the one to concede.
5. Know when to walk away
As previously mentioned, negotiation is about fairness and finding the appropriate offer/solution for everyone involved. With that being said, you’ve got to know when to walk away from a negotiation that is one-sided. If the seller refuses to compromise, and the asking price is out of your budget, it’s better to find a new investment property than to break the bank.
Mastering the art of negotiation is a must for every real estate investor, and with these helpful tips, you’ll be negotiating like a pro in no-time!
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As more people look for a safe place to put their money, the housing market is becoming an increasingly viable option. This is due to the fact that real estate generally increases in value over time, so people can trust that they’ll make a good return on investment. However, before you join the flock of people eager to become property owners, here are a few things you should consider.
1. Income stability
Investing in real estate is a huge financial commitment and it can take some time before you start earning returns. For these reasons, a stable income is a necessity when venturing into real estate. Before purchasing a property, you’ll want to assess your finances. Are you currently operating with surplus funds? How stable is your income? What are the chances that your income will remain the same or grow within the next six months? These are all questions that will help you determine if you can afford to become a property owner. This will also help you determine whether or not you can survive the sometimes-challenging period between the purchase and the sale/lease of your property. If you’re in good financial standing and have a secure source of income, you may be ready to start investing in real estate.
2. Your credit score
It’s common knowledge that most people will need to secure a mortgage to become property owners. However, before you apply for a mortgage, you’ll want to make sure you have a favourable credit score – a minimum of 640. Your credit score determines the type of mortgage you’ll be approved for and the amount of interest you’ll be required to pay. A few points up or down on your credit score can make thousands of dollars of difference in your yearly interest payment.
3. The state of the real estate market
Before investing in real estate, you’ve got to do your research! Track the housing prices in your city/area of interest. Are they going up or down? If real estate prices are on the decline and there is a surplus of properties, that means a buyer’s market and a great time to make a purchase. On the other hand, if prices are on the rise and there are more potential buyers than property on the market, then it may not be the best time to invest. Knowing the current and forecasted state of the real estate market will help you invest at the right time, thus increasing your chances of success.
4. Types of property
Just as there are different sectors of the real estate industry, there are different types of real estate property. You can invest in everything from residential to retail and commercial real estate, and each come with their pros and cons. For example, owning residential property is the safest bet when it comes to real estate investing. Since shelter is a basic need, you’re more likely to find tenants for your property – allowing you to generate rental income. Before venturing into real estate, you should have an understanding of the types of property available, as well as their benefits and drawbacks. This way you’ll know what you’re in for when you choose to invest.
Real estate investing can be a rewarding venture, and that’s especially true when you take these four key points into consideration before making a purchase.
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Investing in real estate can be a tricky venture, especially when you don’t know what anyone is talking about. When you’re new to real estate investing, it seems like everyone in the industry is speaking an entirely different language, and this can be quite an intimidating experience. So, to help you feel more confident about your venture into property investing, we’ve broken down the most common real-estate investment terms in our beginner-friendly glossary.
- Appreciation: An increase in the value of an investment property over time. Appreciation can be caused by a number of different factors including a decrease in supply, an increase in demand and even inflation.
- Buyer’s market: This is a situation in the real estate market where the demand for investment properties is lower than the supply. Here, buyers can benefit from low property prices.
- Capital expenditure: Capital expenditures refer to the purchases, improvements and renovations that extend the life of an investment property. These include renovating the kitchen, finishing the basement etc.
- Capitalization rate: Capitalization rate, or cap rate, is a formula used to determine the value of a rental property. It is found by dividing the net operating income by the current value of the investment property.
- Cash flow: This refers to the amount of money a property owner earns from an investment property at the end of each month. It’s the rental income generated versus the monthly maintenance expenses.
- Cash on cash return: This is the ratio of the annual cash flow generated by your investment property to the amount of cash invested in it. Cash on cash return is expressed as a percentage and allows investors to assess the cash flow from their income-generating rental properties.
- Equity: Equity is the difference between the current market value of a rental/investment property and the amount an owner owes on the property’s mortgage. As the property owner pays the mortgage off over time, their equity stake in the rental property grows.
- Leasing fee: This is the money paid to a property manager when they sign a lease with a new tenant.
- Long-term rental: Also known as a traditional rental, these are properties bought with the intention of renting them out to tenants for long periods of time.
- Net operating income (NOI): Net operating income is the income generated from an investment property after deducting property expenses. These expenses include property taxes, utilities etc.
- Rental property: This is a property that is given to occupants/tenants for use in exchange for a monthly payment (rent) to the property owner.
- Rental income: Rental income is the money paid by tenants to the property owner for periodic use of their property.
- Seller’s market: A seller’s market is one where the demand for investment property exceeds the supply. In this case, properties on the market have higher price tags which benefit sellers.
- Short-term rental: Short term rentals are properties that are rented out for a short period of time. These can also be referred to as vacation rentals.
- Turnkey property: A turnkey property is a home or apartment that has been purchased, renovated and is now ready to be rented out or sold to another investor.
Real-estate investing is significantly easier when you know what everyone is talking about, and these 15 terms are a great place to start when familiarizing yourself with the real estate industry.
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