As a do-it-yourself corporate housing landlord, you may wonder when is the right time to raise your rental rate? Consider this:
First, I was once given this advice: Your rental rate should have nothing to do with your costs, but rather the fair market value of what people would be willing to pay to rent your furnished unit. This means the fair market rate should be carefully weighed against a number of factors:
- Others furnished rentals in your area. Is your rental rate on-par with other, comparably-sized and located properties? You may want to raise it (and possibly lower it) to adjust for industry trends.
- Your amenities. As you know, not all furnished rentals are treated the same. If you offer high-end amenities that appeal to discerning renters, your rental rate should reflect that.
- Extended stays and hotels in the area. Their rates are adjusted constantly and are generally in line with seasonal trends. A business traveler may be willing to stay in a hotel for an extended period of time if the price is right – remember, hotels are your competition in the furnished rental market.
Second, if the market dictates (or when the market recovers) you should consider modest rental increases over time. I once knew a tenant who didn’t raise their rental rate for many years because they were happy with the cash flow. But when they went to sell the unit (as a furnished rental), they had a hard time finding a buyer. Why? A buyer didn’t want to come in and raise the rental rate with a large increase (even though the increase was merited). It would have made that landlord look bad and possibly turn off regular tenants.
With any property, it is important to always stay on top of rental trends in your area, price and re-price your rental property as the market and area dictates, and not let your costs dictate your long-term rental rates.
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