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You asked, and Scott McGillivray’s answered! Read on for the first Q&A from our “Ask Scott” series, where the income property professional weighs in on your most pressing real estate related questions.
HGTV Canada Facebook fan Cindy asked, “We are nearly completed renovating our rental property in rural Alberta. How do we set the rental price? There are not many rental properties in my neighbourhood to help me gauge what I should charge. We have a five bedroom, with two full baths, and a large kitchen. It’s two stories, about 2,000 square feet, in a rural setting.”
This is a great question, because the best way to gauge what your rental price should be begins with checking out the comps in the area. From there you can determine what advantages or disadvantages your place may have in comparison, and set your price accordingly. But without those comps it can be tricky.
Without knowing your property or the market it’s in, I can’t tell you what to list it at. However, I do have a few suggestions that could help.
Neighbourhood Comps
Even if there aren’t many comparables in your area, I would still encourage you to try and find something – anything! Even if there are only one or two other rentals nearby it will still help. Something is better than nothing.
Cost
One of the most important things to consider is how much it costs you to run the house, and how much you want to cash flow on top of it. Consider the mortgage payment, property taxes, insurance, maintenance, and anything else you pay out. In order to make money you’ve got to command more than that number in rent. Given that you’re also renovating the property, take those costs, and any costs associated with borrowing, into account.
Demand
The price you can command will always be directly related to the demand. If there aren’t a lot of other rentals nearby it probably means that there isn’t much demand. But this can also be a good thing – it means you have a monopoly on the marketplace.
Location
Renting in rural areas is definitely tougher than renting in urban ones where the tenant pool is larger. However, rural rentals often tend to appeal to families. That’s good news for you, because based on your description of the house, it’s very family friendly. The large kitchen and the fact that there are 2 full bathrooms are particularly nice features.
Co-own a rental? Read Scott’s tips for ensuring running a joint income property goes smoothly.
Number of Bedrooms
When it comes to bedrooms the real sweet spot is 3-4. Once you have more than four bedrooms it’s not really going to make a difference in terms of the amount you can charge. In fact, it can sometimes deter people a little bit because they don’t know what to do with all the space. They think they’re paying for something they won’t use. I would recommend staging the 5th bedroom as a home office for your rental listing.
Features and Amenities
People want value for their money, so play up as many of the features and amenities that you can. “Large family-style kitchen” is a good one, as are the five appliances (dishwashers and laundry always add a little extra value).
Season
As a general rule, the demand for rental properties is highest in the summer. People hate moving in the winter, so sometimes you can get away with charging just a little bit more in the warmer months. It may not apply to your place given that the demand might be low, but it’s worth keeping in mind if you’re listing it in the spring or summer.
Get Some Advice
The best advice will come from people who know the area and know the market. If there aren’t many other landlords in the area, speak to a real estate agent. Even if they don’t deal in rentals they might still be able to offer valuable insight into what people are looking for, and what they expect for certain prices.
Read the Signs
Once you’ve chosen a price and listed the rental, you should be able to tell fairly quickly if it’s priced appropriately. If you get a ton of inquiries right away, there’s a good chance you’ve priced it on the low side. Likewise if you don’t get any inquiries after a few days, you may have priced it too high. Or if you get people who come to check it out but they never fill out an application, they may not see the value for the price. Pay attention, read the signs, and adjust accordingly.
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