With Sinistar, you have full control over the price of your accommodation for each rental. However, there are steps to maximize your income and limit your losses.
The 5 steps below will help you set a price for your accommodation.
If your price does not cover all your expenses, you will lose money renting your place out. Start by totalling all your expenses related to your home and its rental.
Your total expenses are your break-even point, meaning the amount at which you start to make a profit. You should know it so you don’t end up in the red.
Of course, you must include expenses that are related to the accommodation itself. For example:
Electricity, heating and high-speed Internet must be included in your rental price.
To host disaster victims, your accommodation must be fully furnished and equipped. This generates extra expenses like:
A quality sofa can easily last 10 years. If you just bought one for $2,000, you could add approximately $17/month to your total expenses to offset your purchase. To arrive at this amount, you must calculate $2,000 ÷ 10 years ÷ 12 months.
Very few temporary accommodations are rented 100% of the time. To prevent off-peak periods from eating into your profits, it’s better to plan ahead.
The proportion of time that the place is vacant is called the “vacancy rate”. For housing rented on a yearly basis, you can estimate it at 25%. In other words, expect your accommodation to be vacant 1 week out of 4 (or 3 months per year).
This means that over a month, you must reach your break-even point in 3 weeks instead of 4.
By dividing your break-even point by 3, you get a weekly price floor. Multiply it by 4 to know your monthly price floor. You will need it to do the next step.
Say your break-even point is $2,000/month. To reach this amount in only 3 weeks of renting, you must charge $667 a week (i.e., $2,000 ÷ 3 weeks). If the accommodation was rented for a full month (or 4 weeks), you would then earn $2,6/month ($667 X 4).
Now is the time to add your profit margin!
We recommend aiming for 7 to 20% of your monthly price floor. You can use this minimum and maximum to establish your price range.
Here’s what you get with a price floor of $2,668/month:
It allows you to adjust to demand. Indeed, the number of housing requests on Sinistar fluctuates over time. For example, there may be more in the spring, when snowmelt causes flooding. Or in the winter, when house fires are on the rise due to the use of space heaters and to overloaded electrical circuits.
When there is plenty of accommodation available, price is often a deciding factor. To make your bid more competitive, you can then lower your profit margin. When demand spikes again, you can increase your price.
When you rent through Sinistar, a service fee is deducted from the total amount of the contract. To prevent this fee from eating into your profits, adjust your price range accordingly.
Say the service fee is 3% for a given rental offer. If your minimum price were $2,855/month, it would now be $2,941/month ($2,855 + 3%). And if your maximum price were $3,202, it would now be $3,298/month ($3,202 + 3%).
Great! You now have a definitive price range. Now, how do you know what price to ask for when? For this, you have to follow the market.
Setting your price based on the market keeps you competitive. And it allows you to make the most of your rentals and income.
The Sinistar platform offers you several ways to follow changes in market prices.
The Sinistar platform suggests a minimum monthly price based on:
The minimum suggested price appears when the platform asks you to set the price of your accommodation. That is, when you create your ad and every time you bid on a hosting contract.
If your minimum price (calculated in Step 4) is lower than that suggested by Sinistar, you can increase it. You will then make more profit while remaining competitive.
You’ll soon be able to see other hosts’ quotes on the rentals offers you receive. This will allow you to:
Soon Sinistar will include a dynamic pricing tool on its platform. These tools show you market trends in your sector.
Keep an eye out!