Your tenant doesn’t care.

I hear this comment all the time from fellow rental property investors, clients, and even other property managers. It goes something like this; “But I can’t reduce my rent, it won’t cover my mortgage!” Or comments like this; “We need to get $2000 per month rent, because my mortgage is $1800!” That’s great, and it’s very, very important to ensure that your revenue property is going to cash flow (I preach this ad nauseum), but I can guarantee you a couple things;

1. Your tenant doesn’t give a crap about how much you pay the bank on a monthly basis. Not their concern! In fact, chances are good that they don’t even know what a mortgage is!

A vacant property doesn’t cash flow.

1. A vacant property is not going to cash flow very well! If your asking rent isn’t at fair market value, you’ve either got to find a sucker to rent your place for over and above the market rent, or sit vacant for several months until you finally decide that being vacant isn’t really worth it. This might work in an extremely tight market like downtown Vancouver where people get desperate and grab anything they can find, even if it’s overpriced, but it won’t work forever and in most balanced markets, as markets change…always!

The market will set your rental rate.

Just remember, nobody cares about the size of your monthly mortgage payment, and it really has no bearing on what your rental rates should be. Just because you bought a house for $1.5m in Vancouver with a $1.2m mortgage doesn’t mean that you can charge $6000 per month to cover your costs! The real estate rental market will ultimately decide what your rental rate should be.

If you’re interested in having your rental rates evaluated, please reach out to our property management company.

Chris Stepchuk

Aug 20, 2017