How do most landlords determine their apartment prices? While we don’t come from the property management side, we’ve noticed a couple of trends in how landlords price apartments. Generally, landlords seem to fall into four types (though realistically, there is always some overlap).
1) Meticulous Market Analyzer
These are generally large luxury high-rise managers who own multiple buildings. They watch what other landlords are doing and try to follow up on the newest trends and incentives (months free, gift cards, pay-by-credit card, etc.). They may have their own on-site leasing agents, but also use other brokers to advertise. They’re willing to try new marketing strategies or complex rent deals. Of course, not all high-rise managers fall into this category, but we’ve found that most no-fee luxury high-rises are competitively priced (you might not get the BEST deal, but you probably aren’t being ripped off completely). Some of these companies are publicly traded, so they’re more open to free months (marketing budget) rather than lower rent (top-line revenues).
2) Leave it to the Exclusive Brokers
Many landlords get help from exclusive brokers who market (and sometimes price) their properties. These are generally small to medium-sized landlords (though some large buildings also fall into this category). The broker might do a competitive analysis to find based on the number of rooms, size, amenities, etc. Most importantly, they’ll heavily market the property (sometimes, people do take the first apartment offered).
3) We’ll Keep Prices the Same
A lot of landlords just keep the price the same (or raise it slightly) when a tenant leaves. Why change what works? They tend to lower the rent in increments of $25 – $100 when the unit sits on the market for a while. As long as the unit is being seen and marketed, there is a small chance someone rents the unit out. While luxury high-rises are decently homogeneous, a lot of walk-ups and brownstones aren’t. A garden might be worth $400/month to one person, and worth $0 to another. There might be someone in the world who’s looking for a bathroom inside a kitchen (and would be willing to pay a premium for it). Sometimes, this pricing mechanism causes strange quirks – such as similar units in a building having different apartment prices because one was on the market longer.
4) My (Mortgage + Maintenance) * X Variable
Finally, there are some single-unit landlords who don’t price competitively, but relative to their costs. They plan to rent out their units to cover their mortgage or maintenance. Many times, these units just sit on the market for a long time until the landlord finally caves and lowers the price. Other times, landlords who paid off their mortgage might rent it out at maintenance (as long as the tenant is solid and takes care of the apartment). Prices in this category could be very odd-ball (and the units are generally extremely hard to find + by referral only).
Editor’s Note: We updated this article to enhance readability.
