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How To Research Rental Prices

Millions

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Just wondering how you research rental prices to know when to increase rents.

I have an apartment I rent out in Killarney Calgary. 2 bedroom. Used to go for $1575 per month and 2 years ago I had to reduce it to $1150 when Calgary’s market crashed.

Lease is up in May and I’d like to raise rent as I’m
Currently losing $500 per month.

I’ve checked rentfaster and I think $1350 is doable but unsure with how it is in Calgary at the moment.

How do you guys check rents to make sure you’re not making it too high or too low?
 

Thomas Beyer

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$50-100 higher than at market bottom seems about right. Go higher in a year if market improves. Still plenty of inventory in Calgary amid excess condo inventory.


Sent from my iPhone using myREINspace
 

Thomas Beyer

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Just wondering how you research rental prices to know when to increase rents.

I have an apartment I rent out in Killarney Calgary. 2 bedroom. Used to go for $1575 per month and 2 years ago I had to reduce it to $1150 when Calgary’s market crashed.

Lease is up in May and I’d like to raise rent as I’m
Currently losing $500 per month.

I’ve checked rentfaster and I think $1350 is doable but unsure with how it is in Calgary at the moment.

How do you guys check rents to make sure you’re not making it too high or too low?

How much did you pay for it? What’s it worth today ? $250,000 ?


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 

Tina Myrvang

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Look at the other comparable rental properties in the area. They are the competition, what are they charging.
 

Millions

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Loosing $500 at $1150 means you lost $75.00 at $1575

I would (have) list(ed) that property for sale many moons ago, in fact i wouldn’t have bought a negative cash flow prop.

Get rid of it.

When I was getting $1575, I was cash-flowing around $200+ per month. But then I got hit super hard when the market dropped two years ago. Not only did rent drop $500 per month BUT I also got hit with a special assessment. Basically, it's around $260 per month for 15 years. So it was basically a $750 per month drop overnight.

I wish I had sold it but never saw both of those happening so suddenly. This was a terrible investment made back in 2007, one that made me never buy anything again. But it was bought to live in, not to rent out. Then I ended up moving out a year after buying it rented it out. Market tanked in 2008, then again two years ago so I think I'm stuck with it for 15 years now as no one will likely buy it with a special assessmen attached to itand I'd lose a ton of money to sell
 

Millions

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How much did you pay for it? What’s it worth today ? $250,000 ?


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com

This has been a thorn since the first year when prices collapsed. Bought in 2007 for $255K. Today, I'd say it's "valued' at around $225K BUT with the special assessment attached to it for 15 years, this value is likely dropped to $180K or something like that, which is less than what I owe. I think the special assess works out to around $40K per unit, made up into monthly payments of $250 over 15 years. Only 1 year down so far.
 

Thomas Beyer

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Special assessments improve the asset. As such, value likely not down as much. Is this an older wood walk-up ? Special assessment is for what? Windows, siding, new elevator ? What do comparable condos sell for ?

A $200,000 mortgage at 3% is $500/month in interest only. As such, with over $1100 in income you are not losing, even after $450 condo fees and $100 in prop taxes, you are just paying down the principle in cash, ie shuffling $s from left pocket in your jeans to right one. So break even.

Rents, and also property values, will rise in Calgary, slowly this year then faster in 2019 and 2020 due to higher oil prices, less people able to buy houses (due to tighter mortgage rules) and a new government that will actually care about the economy and not destroy it.

Sit tight.

Buy another one for 180,000 if you can.
 

Cory Sperle

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I would do a comprehensive survey of your area and pretend to be a tenant and check out units, then ask just a hair less than the masses to get a good tenant.
 

Michel Lafleur

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At this stage, if you can afford to hold the property without feeding it too much out of pocket, I'd suggest buckle up & sit tight for the long term.
With mortgage paydown and property appreciation, time is on your side.

If you are paying enough monthly out of pocket to keep this one afloat to the point where its effecting your personal finances...then I'd get creative and sell it ASAP. Sounds like paying Realtor fees, fees to severe your mortgage, and the price you'll get on MLS would be punitive.
Get creative - sell it by way of AFS. Do you know any other investors in this development looking to grow there portfolio? Savvy investor buyers are always buying...as Thomas mentioned above - its a good time to buy more if you can pick them up for mortgage balance around $180k.

Regarding checking out local rents - as suggested above, pretend to be a prospective tenant and investigate what your properties competition are offering. If yours is better, hold out and get the rents it deserves. If yours is average, price yours below average and get tenants in there.
Padmapper.com is an easy tool to look at street rents....just know in advance that the Air BnB/VRBO properties on their will have significantly higher rents than "regular" rentals. Also, many of the properties in a professional management company offer incentives (small deposit, first/last month free, etc) which are not reflected in the advertised monthly rents. And...the ones on there that have been available for a while might be vacant for a reason (rents too high, or they are substandard rentals.) Its also just a tougher time of year to fill vacancies.
 

Millions

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Special assessments improve the asset. As such, value likely not down as much. Is this an older wood walk-up ? Special assessment is for what? Windows, siding, new elevator ? What do comparable condos sell for ?

A $200,000 mortgage at 3% is $500/month in interest only. As such, with over $1100 in income you are not losing, even after $450 condo fees and $100 in prop taxes, you are just paying down the principle in cash, ie shuffling $s from left pocket in your jeans to right one. So break even.

Rents, and also property values, will rise in Calgary, slowly this year then faster in 2019 and 2020 due to higher oil prices, less people able to buy houses (due to tighter mortgage rules) and a new government that will actually care about the economy and not destroy it.

Sit tight.

Buy another one for 180,000 if you can.

Thanks for the advice Thomas. That's a good way of looking at it at this point. The special assessment, around $800K for 24 units, was mainly for something that had to be done (I forget at the moment but was a critical fix to avoid moisture getting into the building) and since they were already working on the building, they want ahead and put a whole new siding (Facade) to update the place, all new balconies, and all new windows.

There was one for sale at $150K last year, which I thought would have been a great buy but don't think I'd qualify for another unit at this moment. You're right though, $180K is likely a good deal, although not quite cash flow due to that $250 month increase in condo fees (now at $650+)

On another note, my tenant just called as she wants to break her lease two months earlier and move into a house with her 2 older kids. So, I can now try "raising" the rent. If I'm not mistaken, she is on the hook if no one moves in right?
 

Thomas Beyer

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.. increase in condo fees (now at $650+) ..

ouch !

.. There was one for sale at $150K last year, which I thought would have been a great buy but don't think I'd qualify for another unit at this moment. You're right though, $180K is likely a good deal,..

yup

.. On another note, my tenant just called as she wants to break her lease two months earlier and move into a house with her 2 older kids. So, I can now try "raising" the rent. If I'm not mistaken, she is on the hook if no one moves in right?

yup
 
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