Hiring the Right Legal Aid at the Right Time

Buying a new home, or selling your home for that matter, can be an extremely stressful task. Knowing how and what to negotiate, handling any surprises brought on by the other party, preparing and reviewing legal documents, understanding how to interpret those documents; it’s a lot to take on. Typically, this is why hiring a real estate professional to help with the process makes so much sense. But you may also want to consider bringing legal aid on board early in the process. Frequently, Canadian Home buyers wait until a deal is done to bring in legal aid; they will typically sign on the dotted line first before taking the agreement to a lawyer who then registers the deed, does a title search, and handles the transfer of funds. We all know that legal aid is required for this process, but we usually ignore bringing on the aid until the very last minute, as we all want to keep our legal fees at a minimum. With that said, hiring the right legal aid early in the home-buying process can actually save you time, risk and money.

Buying or selling a home is possibly the largest transaction you will ever make. A good lawyer or paralegal can ensure that the transaction is done right, and that all of your legal rights and protections as a buyer or a seller are adhered to. Having legal aid early in the process can make a world of difference at the end of the day. People can be sneaky, don’t ever forget that. If the other party has a lawyer right from the start, their lawyer may include fine print or tricky wording that can put you in a bind once the documents are signed. If you are armed with your own legal aid, they will have the knowledge required to thoroughly comb through the agreement and pin point any clauses or wording that would put you in a bad situation.

On this note, a lawyer can also re-word and adjust aspects of the agreement in your favor. For example, a standard wording in a purchase agreement would be “conditional on financing”. However, a better wording would be “the offer is conditional on the purchaser receiving the financing he/she desires”. This will give you the option to opt out if the bank isn’t able to offer you fair financing rates. Otherwise, you may be forced into an agreement at a financing rate that you are not comfortable with.

If you plan on investing in a pre-construction development condominium, then the right legal aid will be especially important. These types of purchases can be very lucrative, but are typically riddled with fine print, added charges and catches that the average home buyer won’t notice. Agreements related to pre-condo development can often run 30-50 pages in length, and can also present some very tricky wording. For example, builders will often offer incentive to invest in their projects. One such incentive may be the builder offering to waive maintenance fees for a certain amount of time. However, the agreement itself will actually offer a rebate that would equate to what the builder thinks will be the amount that you would have paid in maintenance. What’s more is that buyers may also be surprised when their final purchase price equates to a much larger amount then they had initially thought. Builders can add on charges related to warranty protection, occupancy delays, property taxes, landscaping, development charges, and a whole lot more. A good legal aid can work around this by requesting to cap the closing costs, giving you a much more accurate idea of the final number.

Some real estate companies will offer you an experienced real estate lawyer at no extra cost, provided you close the deal with them. If this isn’t being offered, then you’d be wise to seek the help yourself. Your real estate professional will likely be able to recommend you a suitable lawyer in any case. It is generally recommended that whoever you hire should spend 90% of their time working within Real Estate. The last thing you want is to hire a “jack of all trades” who may miss important points throughout the legal proceedings. A lawyer who spends the majority of their time working in Real Estate related matters will be able to handle your needs with ease. Pricing can range greatly, but choosing the “cheapest” option won’t necessarily be your best move. This s a complicated transaction and skimping out on your legal aid may cost you more than hiring the right help from the start.

If you have any questions or concerns, please reach out to CMG Toronto for the best that the city has to offer.

Landlords Beware of “Tenant Friendly” Board

A few weeks ago we looked at the subject of evicting a dreaded Tenant From Hell. It’s unfortunate, but many landlords find themselves in the horrible predicament of signing a deal with a tenant who at first seems like a model example, but later turns out to be a nightmare. Many landlords have understandably labeled these individuals as “professional tenants”. But do people like this really exist? Are they really that bad? Or are the landlords simply looking at the situations through a distorted lens? While the landlord/tenant relationship is very complex, and points can be argued on either side of the fence, it is true that these “professional tenants” exist…and they milk their landlords and milk the system for all it’s worth. How about an example? Funny you should ask.

Just this past September there was an article published on CBC News that highlighted precisely such a case. Robin Ennis, a Toronto landlord claimed she had been conned by a “professional tenant” who had been living in her high end Yorkville home since July of this year, and hasn’t paid a cent in rent. The story reads like a landlord horror novel, and is unfortunately 100% real. The tenant in question is a 62 year old man named James Regan. And James has a very thorough understanding of the Landlord and Tenant Boards rules and regulations. The matter is currently in the process of being heard by the board, but this is 4 months into the rental agreement, and Robin hasn’t seen a single penny of rent. James on the other hand, is not attending his first rodeo; he had a similar dispute at the board earlier this year relating to another property that he was occupying. The board ordered his eviction, but only after months of unpaid rent: “Regan appealed that eviction and lost in Ontario Superior Court, a process that took eight months, during which he lived rent-free in the condo near Old Mill Road and Bloor Street West.”.

Even at the time of eviction (a second eviction that finally was enforced on June 29th2016), he never paid any of the money he owed. Rent was $3200 a month, and James had compiled a whopping $25, 000 in back rent that court documents show he never paid. James was too busy setting his sights on his next victim; Robin.

Robin met with James on June 30th 2016, the very next day after his eviction. Robin has a second-floor apartment in her home on Avenue Road, and James showed up well dressed, well groomed and polite. Now, Robin may have jumped the gun a little, or perhaps she was simply fooled by James’ façade.  Robin and James signed an agreement prior to Robin doing her due diligence. She had intended to, but she took James’ word as he promised to pay first and last month’s rent, provide proof of insurance, as well as credit and criminal background checks. Robin’s mistake was not requesting these documents prior to signing the agreement.

The very next day, Friday July 1st, James showed up unannounced with the perfect story to get the key. He claimed that he had valuable art that was in urgent need of storage. Robin’s second mistake was entrusting James, who she hardly knew, and providing the keys. Needless to say, James never gave them back. By July 2nd, he had already completed his move into the apartment. Robin, at this point, confronted James for the first and last month’s rent, at which point James reportedly showed his true colors.

It wasn’t until Sept 8th that Robin had finally received her first hearing by the board. However, the matter had to be pushed back as James claimed he never received the proper documentation in the mail; he knew very well how to play the system by claiming he was never served with the notice of the hearing.  The next hearing is in November, 5 months after James initially moved into the apartment.

Once the case is finally heard, the first step is often for the board to order payment of rent, but tenants typically default. Months can pass before the board finally orders an eviction notice, which can also be immediately appealed. Tenants cannot legally be evicted until an appeal in the decision is made. By the time all is said and done, it can be 8-9 months into the agreement with thousands upon thousands of dollars in unpaid rent that may or may not ever be paid.

To read the entire story, click here.

So there you have it. Professional tenants exist, and they will make your landlord experience a living hell. Your best bet is to follow a rigid screening process with zero room for exceptions. Better yet, work with a professional management company, like CMG Toronto, who are privy to these types of tenants, and understand the importance of the screening process.

What Should you Know About Renting your Condo in Toronto

Renting out a condo unit in Toronto, or any other city for that matter, can be an incredibly lucrative endeavor. Whether you’re using it as a side income, or if you’re main goal is simply to have someone else pay down the mortgage while you wait for the property to build up equity, the chances are you’ll come out on top at the end of the day. With that said, it’s not a cake walk. There are a few things you should know prior to jumping into this venture.

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

For starters, you’ll need to familiarize yourself with the Residential Tenancy Act (RTA) as well as the Condominium Act. You have specific responsibilities under both pieces of legislation as a landlord and owner of a condominium. The RTA outlines the laws related to most landlord and tenant situations; you’ll want to be aware of the rules and guidelines set forth in the act that apply to both your tenant as well as yourself. The Condominium Act outlines additional rules that apply to the rental of condominiums, as there are corporation guidelines that must be adhered to. Here are a few examples:

You Must Keep your Condominium Corporation Informed

Once you’ve found a tenant, the corporation needs to be made aware. You’ll need to inform the corporation of your intent to rent out the unit by giving a written notice within 20 days of the tenancy starting. The notice must include your tenant’s full legal name(s), your full legal name, your current residing address, and the amount that you will be charging the tenant monthly. The same rule applies once you are ready to stop the tenancy; you’ll need to provide notice to the corporation within 20 days of the tenancy ending.

Don’t Forget About your Condo Fees

Condos come with condominium contribution fees, most commonly known simply as Condo Fees. When writing up your lease, it should clearly state whether or not the tenant is responsible for paying the condo fees. Failing to pay your condo fees will land you in hot water, so you’ll want to factor this in when writing up the agreement and deciding on the monthly amount to charge. If you are renting out your unit, and the condo fees go unpaid, the corporation can enforce the tenant’s rental charges to be paid to the corporation instead of you, to cover the lost fees.

Be Aware of the Condo Bylaws

A responsible tenant will be aware of the condo bylaws, and they will make sure that the tenant is also aware. The bylaws should be outlined in the lease agreement, and your tenant should also be given access to a copy of the bylaws.

The Condominium Corporation Can Ask for a Security Deposit

The mortgage may be yours, but the building itself is the corporations. In anticipation of potential damages that your tenant may cause to the common grounds, your corporation may ask you for a security deposit to cover them. The maximum deposit they can ask for is the equivalent of one month’s rent.

How Long Should the Lease Agreement Tie Down the Tenant?

Leases are typically based on a 12 month commitment. You can request first and last month’s rent up front. Once the 12 months are up, the agreement is typically moved to a “month to month” basis. Once the tenant is month to month, they are required to provide you with 60 days’ notice if they intend to move out.

What About Pets?

You are perfectly within your rights to place a “no pets” clause on your agreement. With that said, it’s not enforceable by law. You can choose not to rent to a tenant who has pets, but if that tenant lies on the application, and you find out later that they have pets, you are not legally entitled to evict. For better or for worse, you’re stuck.

For a complete list of details, you should review both acts with a fine tuned comb. These are of course just a handful of key points, while there are far too many guidelines to cover in one post. Learning all of these rules and regulations can be a massive headache. If you have the time and commitment to learn on your own, great! You’re a gem. Typically, working with a real estate professional is your best bet. A professional can make sure all guidelines are adhered to, draft up legal documents, post your listings on MLS, and determine the right price point for your property. What’s more is that they can drastically minimize the risk of you ending up with a tenant from hell by going through a vigorous screening process. CMG is here to help make your rental process easy and lucrative.

So You Want to Buy Pre-Construction?

If you’re in the market for a pre-construction condo purchase, you’ll want to make sure you do your research first. Pre-condo purchases can be hit or miss, and it’s very important to cross your T’s and dot your I’s throughout the process. A well thought out and properly executed purchase, can be a very lucrative endeavor. On the flip side, there are plenty of horror stories related to pre-construction purchases. So what are the ins and outs? What do you need to know? Here are some points to be aware of when considering such a purchase:

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

Positives:

Let’s start with the good stuff. There is a reason why investors swarm by the dozens when a new project development is announced. Pre-construction units typically come at much lower prices VS standard re-sale units. This is largely due to the risks associated with buying pre-condo, which we’ll touch on in the “Negatives” section of this post. But the thing to remember is that buying pre condo will cost you much less than a general re-sale unit, and the best part: once the unit is registered and available for resale, it will likely have seen a massive increase in equity. This is why so many investors partake in pre-construction purchases. Many of them intend to sell the property as soon as it’s registered. Others intend to rent out the unit while sitting on the equity and making a monthly income. But this is also a nice option for a first time home buyer, as the prospect of a large increase in equity over a short period of time can be very enticing.

You’ll also be given a cooling off period that will allow you to reassess your purchase, and get your finances in order; you have 10 days after giving the initial down payment to reconsider your offer. This can be a big positive for those of us who make impulsive decisions.

Another positive is the fact that you’ll be the first one to inhabit the unit. This is a brand new unit, so you don’t have to worry about wear and tear that goes unnoticed in the screening process. You are the first owner, meaning all new appliances and designs. What’s more is that you may be given the opportunity to customize certain aspects of the unit, differentiating it from the other units in the building. In turn, this will aid your resale value when you’re ready to sell.

Negatives:

Ok, on to the bad. The biggest issue with pre-construction: time delays! If you need a place to live now, you can forget pre-construction. Time delays are a common occurrence, and can last anywhere from 6 months to a few years. More importantly, sometimes a project is called off all together. This is rare, but it is a risk associated with pre-condo.

On the subject of down payment, you will require a full 20%. Now, this can actually be viewed as a positive or a negative; on the down side, a resale unit can have you paying as little as 5% up front; on the positive side, a bigger down payment means a smaller mortgage which ultimately saves you interest charges, gives you a smaller monthly fee to maintain, and it also allows you to avoid the CMHC Fees associated with deposits that are less than 20%. Moreover, the 20% down payment is typically broken into smaller incremental payments, which gives you more time to source the entire 20%. These incremental payments are referred to as a deposit structure. You will generally be paying something like 3-5K up front, with the balance of the initial 5% in 30 days, another 5% in 90 days, another 5% in 180 days and the final 5% at occupancy (the day you move in).

Lastly, the big negative tied into pre-condo is something often referred to as Phantom Rent. There is a period of time in which you can officially move into the unit, however the building itself is not yet registered, and as a result, you do not yet own the unit. This is referred to as Interim Occupancy.  Interim occupancy can last as short as a few months, or as long as a few years, and you are required by law to pay the occupancy fees. These fees are calculated to be more or less what your mortgage payments will be once the unit is officially yours, but the issue is this: those occupancy fees do not go towards your mortgage. Hence the term “Phantom Rent”.

So, pre-condo purchases can be a very smart investment. With that said, do yourself a favor and work with a professional when considering such a purchase. Be aware of the good, the bad and the ugly. CMG Toronto can help!

Do I Need Landlord Insurance?

The short answer is yes! Of course you need landlord insurance. But the long answer is a little more complicated. Landlords operate at different levels; some rent out an entire space, some are simply subletting a room, some rent out year around, and some rent out for only a certain number of weeks in the year. If you fall into the latter category and only rent out a room for a few weeks in the year, than you should be fine to disregard landlord insurance; you’ll very likely be covered through your homeowners insurance. However, if you rent out on more than just an occasional basis, then you’d be making a big mistake by neglecting to invest in landlord insurance.

Why isn’t my Homeowners Insurance enough?

The homeowners’ insurance company does not take rented space into account when they issue your policy. So under the circumstance that you need to make a claim due to your tenant’s neglect of the property, it may not be covered. If you are simply subletting a room, however, you do have an option to endorse your homeowner’s policy with “unit rented to others” coverage. This would be in replacement of buying a separate landlord policy. But if you are renting out an entire space, this won’t suffice.

When do I need a separate Landlord Insurance Policy?

In short: if you don’t live in the same space as your tenant, you’ll want a separate policy. Renting out an entire condo? Get a policy. Renting out an entire house? Get a policy. Renting out an apartment space? You guessed it: get a policy! You should know that you are not legally obligated to own a policy, the way you are car insurance for example, but failing to purchase one is a risky move. You run the risk of financial loss due to fire damage, flood damage, severe weather damages and more. For example, let’s say a fire breaks loose on your rental property due to a strike of lightening. The situation may be an extremely rare occurrence, but on the off chance that it happens, you may be faced with damage exceeding $100 000 that you will now have to cover out of your own pocket. This is just one, farfetched scenario, but there are countless instances in which a good landlord insurance policy can cover your rear end. A good policy will give you peace of mind knowing that your rental unit is covered on the off chance that it becomes uninhabitable due to circumstances beyond your control.

There are many different types of important coverage that you can request in your policy. The exact coverage would depend on the insurance company that you are dealing with, and the options that they present. Some important options to include are as follows:

Property Damage:If your property endures damage due to storm, fire, theft, vandalism or tenant damage (always remember to screen your tenants) this will cover you. The important aspect to cover here is to ensure that you are covered for the entire cost of your property in the rare event of a total loss.

Liability Insurance:  Equally as important as property damage coverage, liability insurance will protect you against liability claims and lawsuits. Renting out a space can be very risky without this coverage, as any tenant or visitor who injures themselves in your property can hold you accountable. Bodily injury claims on your property will ding you with a ton of legal costs i.e. funeral costs, medical payments, settlement costs etc.and this coverage will help with many of those costs.  Moreover, this coverage will protect you if you are found to be responsible for any damage to the tenants’ property.

Loss of Income: Finally, you’ll want to make sure that loss of income coverage is included. If your property becomes uninhabitable due to a covered loss i.e. fire, this coverage will reimburse you for all of the “lost rent” you’ve incurred while the unit is being repaired to livable standards.

In addition, you can buy “optional coverage” that extends beyond what we’ve covered here. What you wish to add, is entirely up to you. Some popular add ons are employer liability insurance, landlord contents insurance, and rent guarantee insurance.

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

What’s the Bottom Line?

Landlord insurance doesn’t have to be costly. There are policies that run for as little as $500 a year, or less. To protect your biggest investment, that’s money well spent. Working with a property management company will ensure that you have the best options, and are given the best policy. CMG is one of the most trusted names in Toronto. If you have questions or concerns, reach out today and let our team of professionals guide you through the process.

How to Properly Screen a Potential Tenant

We all know that potential tenants can be crafty. Any landlord who’s been in the game for long enough has likely experienced this first hand. If you’re a new landlord, you’ve probably heard the horror stories of fully suited tenants who speak well and present themselves professionally who actually turn out to be complete and utter nightmares. Of course by the time you figure this out, it’s too late;the tenant is already living in your space and giving you trouble. So how do you minimize the risk of choosing a bad tenant? How do you tell when someone is simply putting on a show? Understanding the importance of the screening process can give you a significant advantage over a crafty Tenant from Hell.

Important Processes:

First and foremost, you should start by having every potential tenant fill out an application form. There are many sample forms available online, like this one. Alternatively, you can request a sample rental application from your local real estate association, or create your own personalized application using a Microsoft Office template. The application should cover financial information, employment information and personal information. Be sure the application states that a full criminal background check and credit check will be required, and that the tenant is authorizing a check into his or her financial, employment and personal history.

Next, you’ll want to go ahead and run acredit check. You can request it directly from the tenant, asking them to cover the cost, or you can incur the cost yourself; your call. It’s not mandatory that the potential tenant complies, but remember that you are the one in power. If they put up a stink, they are likely trying to hide their bad credit score.

Once the credit check clears out, it’s time for the Background check. Companies like Sterling Talent Solutions are able to offer an employee background check for a fee, and companies like Screening Works are able to offer online tenant screening, background checks and Criminal Reports. Typically, all you’ll need is the tenant’s Social Security number.

Ok, so the credit check and background check look clean. Now what? Now it’s time for you to contact the tenant’s previous landlords as well as their employer. Past landlords will be able to give you insights into whether or not the tenant was timely with their monthly payments and respectful of the property. Contacting the employer will give you peace of mind knowing that the tenant has a steady and reliable source of income.

So the previous landlord gave a glowing testimonial, and the employer has verified that the tenant has steady, reliable work. Great! You’re almost at the finish line. With that said, don’t assumeall is well. Now comes the really important part: Interview the Tenant. Interviewing the tenant will give you insights into the tenants personality, and will allow you to pinpoint any potential deal breakers that the screening process may have missed. Here are some crucial questions to ask:

  1. Are you aware that we will require first and last months’ rent? Will this be an issue? Their answer will allow you to gauge if the tenant understands the arrangement and is OK with the monthly payments.
  2. Why are you moving?If they say something like “my last landlord was horrible!” than you may have a problem tenant on your hands. However, this isn’t a given. Ask follow up questions and use your best judgment
  3. When are you looking to move? The sooner you fill the space, the sooner you gain a revenue stream.
  4. Are you a smoker? You’ll want to lay ground rules for smokers based on your comfort level.
  5. How many vehicles do you have? How frustrating would it be if you finalized everything and then found out that the tenant has more vehicles than you can accommodate?
  6. How long do you intend to rent the property for? Long term is always better for a landlord, as it limits the amount of times you have to go through the process of finding a new tenant.
  7. Do you have any pets? Although a “no pet’s” clause is technically unenforceable, if a pet is a make or break for you, you can choose not to rent to a tenant with pets.
  8. Have you ever been evicted? If the answer is “yes”, that’s a red flag. Still, ask follow up questions. There are always exceptions to the rule.
  9. How many people will be living in the apartment? Overcrowding a space can only result in unwanted wear and tear on your property.
  10. Do you have any questions for me? This will allow you to gauge where the tenants head is at, and the questions they ask can provide insight into how the tenant intends to treat your space.

Following these steps will limit the likelihood of you ending up with a bad tenant. Use your instincts when screening, and if you start to get a bad feeling, don’t be afraid to walk away. There are plenty of potential tenants out there! Ideally, you should hire a management company like CMG Toronto to handle these processes for you. Let the professionals do what they do best!

Fooled by the Tenant From Hell: Time to Evict?

The Tenant/Landlord relationship is a complex beast. In a perfect world, tenants wouldn’t have to worry about bad landlords, and landlords wouldn’t have to worry about bad tenants. Alas, no such world exists, and as a landlord, you may find yourself renting to the dreaded “tenant from hell”.  Potential tenants can be crafty, and if you haven’t done your due diligence in exploring the tenants’credit checks and referrals, then you’re running a major risk. So what do you do when your tenant stops paying rent? What do you do when they start to treat your property with a lack of respect? When they start treating your other tenants with a lack of respect? If your tenant has exhausted the opportunities you’ve given them to adjust, then you’re final solution may be to evict the client.

Ontario is one of the most bureaucratic regions in the world when it comes to landlord/tenant relationship management.  Red tape and legislation arms tenants with some pretty powerful ammo. Of course, tenants feel that landlords have all the power. Neither side is entirely right or entirely wrong. It’s never easy to manage a relationship where funds are exchanged for a living space; it’s a complex agreement to say the least. With that said, it’s important to know the process for eviction if you are a landlord who needs to get rid of a bad tenant. But first, you’ll have to be aware of legitimate reasons to evict, as listed by the Ontario Residential Tenancy Act (RTA). The RTA lists a surprisingly large amount of potential reasons to evict.These are the most common:

Non-Payment:

The most common and obvious reason to evict: tenant has stopped paying rent. This can mean that they are one day late, one month late, one dollar short, etc.

Persistent Late Payment:

Here’s another obvious one, but the surprising part is that there aren’t really any guidelines related to this. It’s up to the Landlord and Tenant Board to determine if the tenant “persistently” fails to pay the full amount by the due date.

Illegal Activities:

If the tenant uses the unit for illegal activity, such as drug dealing or prostitution, then you have the right to evict.

Constant Disturbances:

For example, if the tenant is excessively loud and consistently disturbs the landlord or other tenants in the building, than you can potentially evict.

Undue Damage:

You can evict if the tenant has caused excessive damage that can be attributed to much more than normal “wear and tear”.

The list goes on.

Despite an imperfect system, if your tenant is violating any of the reasons outlined in the RTA, you do have the right to evict. It may take longer than you’d like, and cost more than you’d like, but it may be necessary. This is the process:

  • The landlord must first send a written notice a certain number of days prior to the date that they would like the tenant to move out. Typically, the written notice will have a name starting with Notice to End Your Tenancy, with a certain number at the top i.e. N4, N5, N6, N7, N8, N12 or N13.
  • The notice must indicate the reason for eviction, and it must be in line with the RTA.
  • The number of days prior to asking the tenant to move out is in direct correlation with the reason for eviction. For example, if the reason is non-payment, it is 14 days. If the reason is persistent late payment, it is 60 days etc. Please refer to the RTA for all of the scenarios.
  • After the necessary time frame has been given to the tenant, if the problem persists and the tenant is still occupying the unit, the landlord must apply to the Landlord and Tenant Board for a hearing. This will cost the landlord $170.
  • If the landlord wins his or her case at the hearing, he or she will need a copy from the board, which may take another 5 days.
  • At this stage, the landlord must file an “eviction order” with the county Sheriff, who then arranges the physical eviction.

The whole process can be rather lengthy in the mind of a landlord. On average, it takes around 90 days. In some instances, it may take longer depending on the reason for eviction, postponed hearings, or if the tenant has made claims against the landlord regarding harassment, or non-maintenance of the rental premises. In this case, the landlord may be faced with even more legal fees. On top of this, a Landlord may be faced with legal fees related to obtaining any past due monies that are owed.

In the end, the process can be heart breaking, wallet breaking, tedious and exhausting. Your best bet as a landlord, is to extensively research any candidate that you may consider for your rental space. Do your due diligence, and with any luck, these problem tenants will be few and far between.

Landlord Pricing Strategy: How Should I Price My Property?

As a landlord, determining the best monthly price for your property can be tricky. Price point means everything;it will directly correlate to how quickly you find a tenant, the quality of tenant, and your return on investment. Here are some factors to take into account when determining a price point:

How much your property costs to carry doesn’t matter:

Ok, it matters to you. I get that. But the point to take into account here is this: the rental market isn’t concerned with your costs. You may have fitted your rental property with impressive kitchen and bathroom upgrades, beautiful new appliances and extra closets and storage space. These upgrades may have cost you a pretty penny, tempting you to raise the price point well above the average rental space in your area. Now, you may be thinking that these upgrades justify an additional, let’s say $400 a month, over the average rental unit cost in your area. Renters won’t see it that way. The upgrades are nice, and they may be attractive, but renters are typically renting because they cannot yet afford to buy. So these upgrades won’t justify an extra $400 a month in your potential tenants’ minds. By taking this route, you’ve narrowed down the market drastically, which will likely result in long vacancy’s. What’s important to keep in mind is this: those upgrades will still yield a strong return on investment when you are prepared to sell the property, so the monthly rental fees may not be that important in generating a return.

Upgrades can still justify a slight increase in monthly costs:

At the risk of sounding contradictory, it’s still a good idea to price your property slightly higher than the average cost in the area if you’ve fitted the space with some costly upgrades. The right rental price does correlate directly to how desirable the unit is. It’s a fine line to walk, but there is always a “right” price point to put on your property based on the area as well as the quality of the space. For example, if you see rental units with minimal upgrades, poor window views, set on the first floor going for $1200 a month, you shouldn’t feel the need to match that if you have nice upgrades, beautiful views from the window, and a higher floor level. View, updates, square footage, layout, floor level, extra windows, storage space and/or balconies are all important aspects that can justify a slight increase in price…just not a $400 a month increase.

Understand your specific market:

Monitor other rental properties in the area. What price points are they going for? How do they compare to your unit? Understand how many rental units are available in your market, which ones are filling up, and which ones are staying vacant. Check out online ads, local newspapers and free classifieds to understand your competition. An even better idea would be to check out these units in person, allowing you insights to compare properties. Monitor how many landlords are offering rental incentives to attract tenants; if you see an abundance of landlords offering incentives, this may indicate an overly saturated market, meaning you may need to lower your desired asking price.

Don’t underprice your property:

Underpricing your property will have two affects: an overabundance of rental applications, and an overabundance of poor quality tenants.  Remember, this isn’t a liquidation sale. You’re in this to make money, and to do it as easily as possible. Having a wealth of rental applications isn’t necessarily a good thing. It’s a lot of headache, and takes a ton of time to sift through. By the time you get to an application from someone who you may deem to be a quality tenant, they will likely have moved on. Some landlords underprice as a way to create a bidding war. That’s not a bidding war that you want. How will a handful of poor quality tenants, who don’t want to pay much to begin with, result in a positive outcome for you, the landlord? They’ll never bid the price you want, and you’ll end up taking a lower monthly amount than you had hoped for, along with the lower quality of client that comes with it.

Don’t overprice your property:

In addition to upgrades, some landlords overprice their property in hopes that it will give them wiggle room to negotiate. In theory, that’s a great idea. In practice, it rarely works. You’ll end up with minimal applicants, and long vacancies. The ultimate goal is to fill the unit fast; every vacant month is money out of your pocket. Tenants who can afford the higher end rental amounts are typically very selective, and securing a rental agreement with this audience can be a tricky and lengthy process.

For most tenants, price point is the ultimate factor. But remember, they are still people who want a high quality of life. Price is important, but it’s not the only factor. As a landlord, listen to the market and be strategic in determining the monthly price.