Landlords have one primary goal: keep their units filled. Empty apartments mean a loss in revenue which, eats away at your hard-earned profit. At Ali Safavi Real Estate we’ve worked with a number of investors who struggle, for a number of reasons, to keep capacity.
Here’s two pitfalls for pricing your apartment unit too high or too low
Let’s be honest, the life of a landlord is all about getting the right price for each unit. Setting the monthly rent too low or too high can cause long term consequences that are best left avoided. Set your rent too high and the apartment can sit empty for months. Sure, perhaps eventually you will find someone who is willing to match your price, but is the months of uncertainty and loss of income worth the wait? Maybe?
At Ali Safavi Real Estate we feel it’s important to be as honest as possible with yourself in terms of what you’re selling. Let’s say the market price for your unit is $1,500 for a one bedroom. It can be dangerous to set pricing on that value alone. Perhaps there are a slew of newer buildings in the area. What are their prices like? In other words, what are you competing against? Especially in Los Angeles, a lot of apartment buildings are quite old (maybe yours is too). Chipped paint, broken elevators, cockroaches, these are all deterrents for good tenants – especially when a shinier option is right up the block. However, some areas of town are so in demand that you can ask for (and get) sky high prices. It really comes down to how long you can afford to have empty units affecting your bottom line.
On the flip side, getting too creative with your incentives and discounts can get you in a whole new world of trouble. Investors working with Ali Safavi Real Estate often want to offer perks, like first month free, to stand out among the crowd. While this can definitely be an attention-grabbing headline, it can have unintended consequences. Renters are always looking for the best deal they can afford, and often they are pushing the limits of their pocketbook. By artificially lowering the price, some renters may get the impression that your unit is now within their price range. You may be thinking, “who cares, the unit is filled.” But, what happens six months from now when the financial realities finally catch up to the tenant and you’re getting an email about how they can’t afford rent?
This isn’t to say you should never offer incentives or take a chance on increasing the rent. We just want you to be aware of the potential hazards of each so that you can plan accordingly.