How to Set a Property Rental Price
Setting A Property Rental Price
A Basic Overview
You may be surprised to learn that there is no scientific knowledge or formula needed when setting a Dubai Maria property rental price. In fact, there is no formula for any part of Dubai. It is purely a matter of subjectivity.
Everything, in the first instance of establishing a rental price, is governed by the ‘rule of thumb’, a ‘generality’…and in its crudest form, a ‘best guess’. An educated guess, I admit, but a guess all the same.
Only when the rental price is set and put into the market do you begin to understand if your ‘educated guess’ was a good one or not. The only ‘entity’ that can tell you for certain what your property rental price should be set at…is the rental market itself.
Everything in a ‘free-flowing’ property market is governed by one very basic law of economics, ‘supply & demand’.
Too much supply and not enough demand = LOW Rental Price
Too little supply and too much demand = HIGH Rental Price
How To Make Sure Your ‘Best Guess’ Is A Good One
You could ask a Real Estate Agent but my advice, in the first instance, to ensure an independent and zero conflict of interest answer, is to do it yourself. It’s not difficult and it’s not rocket science, no matter what you might have been told in the past. It’s actually quite simple.
If you know how to use a laptop, Google & have a simple calculator to hand, you’re good to go!
Steps To Take To Establish A Good Property Rental Price
There is a RERA Rental Price Index but in all honesty it is not accurate and does not differentiate between property standards either in a specific building or surrounding area. It is too ‘generic’ to be of value.
The best way to find out what you need to know is to go to the following Property Portals and search for properties in YOUR Apartment Building that are similar to yours in Size, floor plan, standard etc and note their current rental prices
Why Do I Suggest You Undertake These Steps?
Because that’s where everyone else in the professional real estate market get their prices from! It’s as simple as that.
There are a few mitigating ‘grey areas’ like actual data from Dubais Ejari but you will probably not get direct access to it.
Ejari is the office(s) at which ALL Dubai rental contracts should be legally registered.
Once you have a list of properties in your building of similar standard, all you have to do is cross reference the rental prices making sure you only include those listed in the last 30 days or so (Phone the agent to find out if the information is not clearly noted in the search results).
With the recent rental prices you have to hand, add them all together to get a ‘total figure’.
Now, divide the ‘total figure’ by the number of properties you noted.
Total Rent Prices added together = AED 720,000
Total number of properties you noted = 6
720,000 / 6 = AED 120,000
You have just calculated, what is scientifically called, the Average Market Price (AMP) specifically related to your property.
Is The ‘AMP’ The Price You Should Go To Market With?
I would suggest not. Although you now have more ‘independent’ knowledge than you did before, you still do not know how the market is performing and what prices Tenants are actually paying.
It is also doubtful if a Real Estate Agent truly knows these answers either…unless they specifically specialise in your building and have access to verified Ejari rental figures .
What Price Should You Go To Market With?
The best strategy, armed with the information you have, is honesty. Honesty because it will save a whole lot of messing around in the future.
The question is…Is your apartment of a standard to demand a ‘top dollar’ rental price?
If it is… charge an above average rental price. If it isn’t, then it becomes an honesty call.
If you truly know your property is not of the standard of an upgraded property, why go through the pains of potential false viewings and time wasting? No one will rent your property at the price you post if it does not reflect market ‘value’.
What I suggest, with an average standard apartment, is that you go to market with an achievable rental price…A price higher than average but not by too much.
If the price range for your particular unit in your building is for example 120,000 dhs then, if you do not have an upgraded property, choose a price above the average; 125/130,000dhs.
In reality, what really drives a good price for a landlord is how many cheques the landlord demands.
The more flexible the landlord is, generally speaking, the higher rental price can be charged. Never be afraid to drop your price for the right tenant or give in to a little flexibility on payment terms.
False Economy & Bad Business
You do NOT want to be the Landlord that ‘cuts their nose to spite their face’ and try to hold out for the highest possible price.
If your property has not rented out after 1mth, your price is not realistic or your agent is not marketing it properly…and you are now down a months ‘Rent’ that you will never get back.
It is a false economy to enter a market at a price that will NOT attract Tenants. If you have not rented your property after 1mth… unless you change your price…you will lose a 2nd months rental income. It just does not make business sense for a property landlord to try to play against ‘the market’.
If you strategise well, use the right Rental Agent, your property will be rented after 2wks or so in a buoyant market…and you will have maximised your rental income for the market in its current economic cycle.
We hope you found this article useful in terms of setting a property rental price for your property. If you have any comments please feel free to leave them and I will attempt to answer any questions you may have.