Is Average rent per square foot a good indicator for what you can rent your investment property for?

I am often asked what the average rent per square foot is for renting these days. My answer is I don’t know. Some people are confused by this reply and I will explain why I answer this way. When you go to buy a car do you ask what is the average price for a car? If you are looking for a small economy car the price will be higher than you expect and you will be disappointed. If you're looking for a luxury car the average price will be less than you anticipated, either way you won’t have an accurate assessment of what the car you want will cost. 

If you're an investor looking to buy rental property to rent out, and rely on the average cost of rent in “Vancouver” to buy and rent a property, you may be disappointed with what you are able to rent your investment for. Vancouver is a large city and has many different areas and rents vary significantly from one area to the next. Two properties located in the same area can also have vastly different rent based on location, age of the property, and amenities of the building. Two units in the same building can produce different rental rates based on location within the building alone. 

The pandemic has also upended the evaluation of the average cost for rent, as renters were seeking different qualities in a property. Similar to house sales, renters were moving further away from the city or looking for larger spaces, due to working from home. We found this increased suburban prices to be more comparable and created higher interest in two and three bedroom units in the city. 

One major difference with renting to buying is the prices may decrease in an area and or due to economic conditions faster than selling prices fluctuate. When the economy slows down many renters look for a better option elsewhere to reduce their rent, increase the quality of the place they are living in or move to a different location in town. These actions create lower rental rates, and when the economy increases sometimes rent increases rapidly. 

When we provide a quote to a prospective client, we evaluate the comparable current rents in the area at that time, evaluating what the potential rent could be. For this reason we are not so concerned about the “average rent” for a city or region. We don’t provide you an average for your luxury car and end up renting it for an economy price. We want to ensure you have a clear understanding of what rent you can expect for your property.   

Need assistance managing your property? contact us for an evaluation of your needs.

Cartref Properties specializes in managing rental units located within Strata Corporations.

www.cartrefproperties.com