Setting the rent is one of the most important decisions landlords face. In order to run your business efficiently, you should strive to find tenants that are a good fit, while at the same time avoiding long periods of vacancy. There are several ways to price your property with confidence, while avoiding the inherent cost of leaving a property vacant. In addition to the classic methods, this article will introduce a new technique that will change how you think about setting the rent forever: Dynamic Pricing.
The classic methods are as follows.
Understand Your Market
One of the easiest ways to understand the value of your unit is to study similar properties in the same area. You can visit sites like Zillow, Hotpads, and Craigslist to search by zip code and determine how much properties are going for. This method gives you an excellent barometer into the current state of the market, and allows you to compare features and amenities as well.
Consider your features
Renters searching for a new home are looking for listings that are attractive and exciting. Consider the best features of your unit and make sure they stand out when you’re marketing your property. A one bedroom apartment that includes features like a dishwasher or in-unit laundry can command hundreds of dollars more in rent than one without. Make a list of all of the amenities and features you can possibly think of, and consider assigning any unique or “premium” features an additional dollar value. For example, if your unit includes parking in a dense, urban environment where parking is limited, be sure to highlight this amenity and charge an additional $50+/mo. as compared to similar units without parking. Renters understand the value of these amenities (ask anyone who upgrades from no laundry to in-unit, or no-dishwasher to dishwasher etc) and are willing to pay for them.
Renters want to fall in love with a property so that they feel confident in their decision to move. It is your job to market your property in a way that highlights its pros, and avoids cons. Use positive, generous descriptions and keywords to help bring a lively, even emotional feel to your posts. For example, if a kitchen has a skylight, you could say “Kitchen includes skylight.” A better way, however, would be to say something like “Huge skylight over kitchen, provides incredible natural light, allows for indoor plants and even stargazing!” Renters will engage more with posts that try to describe the feeling of living in a unit, and not just list its’ amenities as bullet points.
Photos are key. Take as many flattering photos of the unit as you possibly can. Use a quality camera or filters on your smartphone to deliver the best images to your post. Renters want to see lots of photos before they’ll seriously consider visiting or applying to a unit.
Consider the neighborhood. Be sure to describe the area and any attractions nearby. If your unit is in a city, focus on the surrounding area and highlight the best food, shopping, or venues nearby. If it’s in a less busy area, don’t be afraid to describe the unit as “peaceful, quiet, mellow, just a short drive to….” and so on.
It is widely known that renters, especially in colder markets, prefer to move during the summer. Therefore there is less demand during winter months, making it harder to raise rents and find qualified tenants. You should plan accordingly around this fact. Try to sign leases that expire in the summer, so that you have an easier time finding a new tenant. If the current lease expires in the winter, you can ask tenants to sign extensions that expire in the summer. Also, be sure to contact tenants 60-90 days before their lease expires so that they can sign an extension, or you can start to plan for a vacancy. Typically, you can start showing units 60 days before a tenant is due to move out, so there is plenty of time to line up new renters. Planning ahead will reduce the amount of time your unit is vacant on the market, and in turn reduce the amount of revenue lost during vacancy.
While the above methods for pricing have been used for decades, there is a new technique to ensure that you’re getting the most out of your investment: Dynamic Pricing. Dynamic Pricing allows renters to set the true market value of a property.
Consider this situation: You have a vacancy coming up for a great property in the middle of a hot neighborhood. Your previous tenant has enjoyed the same low rent for years but is finally moving out. You start to think about how much the rent should be so you look around on Zillow, Hotpads etc. You decide to change the rent from $1,750 to $1,900. You create a listing, push it to various sites, and start getting interest from renters…. A LOT of interest. After some showings and an open house, you still have 12 interested parties. How do you decide who to choose? Did you set the rent too low? Are you missing out on potential revenue?
These are questions many landlords face after they receive multiple applications. Genba was built to solve this problem via Dynamic Pricing. Dynamic Pricing allows renters to compete via a transparent bidding process for your property. As renters apply to your unit, Genba’s technology shows them how much demand there is: page views, applications submitted, inquiries etc. on your listing page. The renter is now able to understand how much competition there is for your property and respond accordingly. In days past, renters would often make offers to landlords during an open house or viewing if they felt that competition was strong. This method works sometimes, but lacks transparency and doesn’t allow other renters to make matching or increased offers. Genba’s Offer API lets renters make live offers on a unit, similar to an auction. As offers are made, applicants are updated so that they can decide to match or include a new offer of their own.
Back to the hypothetical unit…. Now, instead of having to choose the best tenant out of 12 qualified applicants, you can let renters compete for your property via bid increments of $25. For example, Applicant 1 views the demand, understands the competition, and decides to offer $25 more per month. The high offer is now $1,925. Applicant 2 sees the high offer of $1,925 and decides to offer an additional $50 per month as she loves the unit and it’s right across from her workplace.
The high offer is now $1,975. By simply allowing renters to compete transparently, you have increased the rent by $75 per month, resulting in $900 in new annual revenue! Dynamic pricing is the most effective way to ensure maximized profit for your business. Stop second guessing your rental pricing and let the market deliver the best price via Genba’s API technology.
Want to learn more about how Genba can change your business? Contact us for more information today!