Drop
Posted on June 4, 2008 - Filed Under Business |
After nearly 6 weeks of advertising, some interest is finally being shown in the available rental.
At first the rent was increased a little bit to see if the cashflow situation could be improved. The feedback from those who did respond was that the market is saturated with great rentals. A common question confronting them was “Do I rent the house with the garage or with the great kitchen?”
Judging by the lack of response, the garage always won.
After a few weeks the rent was dropped to the previous rate. And once again, the response was lukewarm.
Entering month two: time to get it renting. Maybe someone could fill the spot after a few more months of searching. But the mortgage has to get paid.
So a small cut was made. Suddenly the phone became flurried with activity.
With any luck, there will be a nibble real soon.
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First, I'd like to give a huge "THANKS" to my good bud Engineer X, his so-called preferred blog nick-name.
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4 Responses to “Drop”
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Yeah, definitely getting it rented now for a lower rate is better than getting it rented later for possibly more. Glad to hear your phone is ringing!
Keep your rent $50 to $75 below market, and you will minimize vacancies. Your phone will ring off the hook, and tenants will be less motivated to move (the inertia caused by rent savings). Tenants will call you less often for fear of you waking up and raising the rent.
Losing $50 a month over a year is much less expensive than losing even one month’s rent on one of your units. Plan for slightly below market rents when you analyze prospective purchases, and you should be successful.
@Trisha and Another Investor: I’m thinking of giving that model a shot. I’d love nothing more than to keep a bunch of tenants long term.
But I think a balance needs to be struck between keeping tenants forever versus turn-over. I was wondering if two or three years for turn-over would be good. Of course it depends on market conditions at the time.
Turnover is expensive. Rent loss and rehab costs add up quickly. Paint every two to three years and carpet every four to five years are nothing to sneeze at.
I have one tenant that has been in his house 10 years. He can’t buy because of some IRS issues. The exterior of the house is well kept, and I have never had a complaint from the HOA. In 10 years, all he has ever asked for is a new A/C unit to replace the 25 year old original unit when it died. I have a career military tenant that has been in his house since ir was new, five and a half years ago. He has been posted overseas several times for long stretches, but each time he elects to keep the house. He is $55 under market, and all I have ever done to the house was an A/C service before the latest posting.
Don’t get greedy with the rent and you will have steady tenants who think they have an interest in the property to the extent the rent is below market.