Did you know that overpricing your properties can have severe consequences? In this thought-provoking video, Roel van de Ven sheds light on why accurately pricing your properties is essential. Get insights into Tenants perception, the negative impact on property visibility, and the challenges you might face when trying to Lease an overpriced property. Watch now and ensure you’re not leaving money on the table!
Why you should stop overpricing your properties!
Time of the Video· 9mins
Summary
In this video, Roel van de Ven discusses the importance of pricing rental properties correctly to attract high-quality tenants and minimize vacancy periods. It emphasizes that overpricing a property can lead to longer market times, increased carrying costs, and potentially attracting less desirable tenants. The article advises analyzing comparable active listings, recently rented properties, and average market days to determine an appropriate pricing strategy. It suggests pricing slightly below market value to attract the best tenants quickly. The video provides examples of properties that were overpriced and took longer to rent, resulting in significant lost rental income. It also offers tips on setting prices at common search filter thresholds for better visibility.
Sections
Introduction
The video introduces the topic of property management and states that overpricing properties is a common mistake made by landlords and realtors. It emphasizes the importance of pricing correctly to avoid extended market times and associated costs.
Factors to Consider in Pricing
The video outlines three key factors to consider when pricing a rental property: 1) currently active listings to understand competition, 2) recently rented properties to gauge market demand, and 3) average days on market to identify accepted and rejected price points.
Examples of Overpricing
The video provides several examples of properties that were overpriced, resulting in extended market times and significant lost rental income. It highlights the financial impact of overpricing and the importance of pricing correctly from the start.
Attracting High-Quality Tenants
The video discusses the concept of ‘A-class’ tenants with good credit, income, and rental history. It suggests that pricing slightly below market value can attract these desirable tenants, who have more options and are seeking good deals. Overpricing may lead to attracting less desirable ‘B-class’ or ‘C-class’ tenants.
Pricing Strategy Tips
The video offers tips for effective pricing strategies, such as setting prices at common search filter thresholds (e.g., $2000, $3000) for better visibility. It also advises being flexible and adjusting prices quickly if a property is not generating interest.
Action Items
- Analyze comparable active listings, recently rented properties, and average days on market to determine an appropriate pricing strategy.
- Consider pricing slightly below market value to attract high-quality ‘A-class’ tenants quickly.
- Set prices at common search filter thresholds (e.g., $2000, $3000) for better visibility.
- Be prepared to adjust prices quickly if a property is not generating interest within a reasonable timeframe (e.g., 2 weeks).
- Avoid overpricing properties to minimize extended market times and associated carrying costs.
Transcript
- Roel van de Ven 00:00Hello there and welcome to our very first episode of the do’s and don’t of property management. Where we share some of our tips and guidance on how to successfully manage a rental property, particularly for the long term.
Roel van de Ven 00:16
And today I wanted to kick start us off with one of the biggest mistakes I see landlords and realtors as well do is over pricing properties. It is very expensive to keep a property on the market and as they say, time is money.
Roel van de Ven 00:31
Well, in real estate, it really is. The longer you keep it on there, you got your carrying cost, but also the attraction of the property reduces by every single day. So the properties on the market for a long period of time, it becomes a very difficult to move because ultimately people think there’s something wrong with the property, even if it isn’t, it was just overpriced.
Roel van de Ven 00:51
And so it’s very important to price correctly. Now, there’s a few things here that I want to share with you and I want to show you as well on why it is so important to price it correctly and why I think it’s absolutely stupid to overprice.
Roel van de Ven 01:04
It’s as simple as that. So without further ado, I’m going to dive right in. So when we look at pricing a property, there’s a few things we look at. We look at what’s currently active on the market. That gives us a good idea on what we’re competing against in terms of cosmetics, in terms of looks, but also in terms of price points.
Roel van de Ven 01:22
And then we look at what has been rented over here in the last three months and that gives us a really good idea on what people are willing to pay for it because it’s an important point. Price is dictated by the market and not by the owner.
Roel van de Ven 01:37
So the owner can want anything they want or what the property costs. It really doesn’t matter. It’s irrelevant. The market decides on the price. That’s an important point. I hope you get that. Cool. Then the last thing that we look at here is the average days on market, which you can find it in the last column.
Roel van de Ven 01:55
And the average days on market gives us a really good indicator on what price was accepted. accepted by the market and which price wasn’t. So you can have a look at, hey, we want to mix and we want to kind of benchmark against these guys because they’ve done really well and they moved the property quickly.
Roel van de Ven 02:12
And we want to look at the properties that have been sitting there for a long time. Why is that the case? Was it because of pricing? Was it because of cosmetics? Was it because of location? All of these things we will take a look at and that’s how you decide on your pricing strategy and how to position your property properly into the market.
Roel van de Ven 02:31
So what not to do? I want to start off with that right over here. So here is a great example of what not to do. These guys put it on for $4 ,400 and end up closing it for literally almost a grand less $3 ,500, 127 days on the market.
Roel van de Ven 02:50
You know, anything above 45 days on the market means you’ve done something wrong. For, you know, typically we try to, even in a softened market, we try to focus on moving properties within two weeks.
Roel van de Ven 03:04
Anything longer than that, you really want to be proactive and start changing things and understanding why you’re not getting the traction. It might be cosmetics, it might be the way you presented your property, and most, 9 out of 10 times, it’s pricing.
Roel van de Ven 03:20
So another example here. These guys put it for $3700 and a half to end up closing at $3500, 114 days on market. I mean, at this price point, it costs you around $100 a day, yeah, to keep this property in terms of losing out on rent, which means that you’ve literally given up $11 ,300 on potential rent just by being on the market for that long.
Roel van de Ven 03:46
And for what? A $250 difference? It just doesn’t make sense, in my opinion. Why not just start at $3500 and move the property within one month? Or even $3400 and move the property in, let’s say, two weeks?
Roel van de Ven 04:01
You’ve just got a great deal. And there’s a couple of things here that happens when you price the property fairly or even slightly below market, because when you look at the rental market, tenants have the freedom to obviously choose.
Roel van de Ven 04:14
So I call them my A -class tenant. The guys that have good credit, and girls, obviously, they have good credit, good income, a solid background clean, pay on time, those type of people that look after your property, that’s what you want to have.
Roel van de Ven 04:32
- So they have a choice to literally look out and everybody will accept them. So they’re looking for great deals and great properties because they get multiple applications and they know they’re going to be accepted.Roel van de Ven 04:44
If you have a B -class or even C -class type of property, maybe you’re overpriced, you’re attracting the type of tenants that wouldn’t be able to go into one of those A -class. deals and that your a -class tenants do.
Roel van de Ven 04:59
You tend to get your your second tier of tenants applying to the property and I found this to be extremely true. When you price the property well, you get great applications coming in. When you price the property badly or if you’ve got cosmetics problems, you know, maybe the property isn’t ready, maybe you didn’t hire a professional photographer and you’re not positioning property well, you really get your class B even C lower end tenants that wouldn’t be accepted elsewhere but they’re trying to move into your property because they don’t mind paying a premium as they’re not accepted anywhere else.
Roel van de Ven 05:36
So that’s my philosophy and I’ve seen this happen time in time out on a daily basis so I wanted to share that with you guys. Another example here, so they put it for four grants or a little bit more than that.
Roel van de Ven 05:50
absolutely did not accept that price and they end up closing it for $3500, 77 days on market. That is way too long. These guys actually did pretty okay in one month, so this won $143 and they were accepted for $4200 and I want to see if there’s any good example here, oh here you go, 12 days.
Roel van de Ven 06:14
So, you see these guys at $3900 and they closed in $3900 and that is absolutely perfect, that’s probably a really nice looking property, renovated I’m sure and they closed it in 12 days. Another example here, you can see they listed for the right price, they closed it at the right price.
Roel van de Ven 06:32
Now, here’s another thing that I want to share while I’m on this topic. This is, these guys actually overpriced but then dropped it pretty quickly because they got an offer in and closed in 16 days. So, it can happen but it’s not the norm.
Roel van de Ven 06:46
One thing I want to show you here, $3900 is a great price to advertise because a lot of people what they do is, and $4200 is not, so what they do is they put on filters. So, they’ll say hey, I want to maximum $4000 or less or maximum $5000 and less, so there’s these grades, $4000, $3000, $2000, $2000, those are kind of your go -to, so try to watch out with, you know, positioning your property at let’s say 2050, that’s a bad price to put it at.
Roel van de Ven 07:17
Rather put it at $2000 or slightly below $1990 if you want or $1950 because you will get a lot more views and people filtering out some of those rentals and yours popping up. It’s a small little nugget that really helps a lot.
Roel van de Ven 07:37
And that’s it from me today. I think, I hope you learned something. The most important part of today, if there’s anything to take away with, is really evaluate you’ll market well and price your property proper.
Roel van de Ven 07:53
If you can go even slightly below and you’re able to afford it as an owner, I understand you have obviously overheads, carrying costs, et cetera, but if the numbers make sense, I guarantee you it really will make sense to be more aggressive on your pricing to attract those A -class tenants.
Roel van de Ven 08:11
It will stay long in your property, look after your property, timely payments, and it will cost you a lot less money than if you’re trying to shoot for the moon.