Reducing rent to place a tenant?
Member since 2019 · 144 posts · 46 votes
Reducing rent to place a tenant?
Most Popular Reply
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
2y@michele Velaquez, you bought a place because you anticipated just $50 cashflow?
How do you define "cash-flow"? Are you including budgeting 10-15% total for capital expenses, vacancy, and maintenance? If you are defining cash-flow as just meeting your hard costs like mortgage, taxes, insurance, PM, etc then that isn't good at all.
Are there any changes you can make to get the rent you planned? Adding a washer/dryer instead of just hookups. Allowing pets with additional pet rent and pet deposit. There are lots of possibilities.
70 Replies
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
The rental market slows at this time of the year AND is slower this month than same time last year.
So, you can either lower your rent for less rent each month or let it sit vacant and lose much more.
Logical Property Management4.9453 Reviews - Investor · Simi Valley, CA · Member since 2019 · 46 posts · 35 votes2y
@Michele Velazquez the extra $50/month could be off putting. When I clicked on the Zillow listing the AC is blank. If I'm going thru a lot of listings I'd skip any that weren't easy to know if air conditioning is central. Have the PM take a moment and click YES for AC.
- Houston, TX · Member since 2015 · 261 posts · 170 votes2y
my two cents.. You need answers from your property manager as to why they are not leasing since according to the PM they "rent all day for the price." The answer is not to just drop $25 a week until they lease.That is a crappy strategy since they get it leased but its at your detriment. Demand they send you data that supported their original lease range and understand how they arrived to that number. Finally, I too do not know why you would invest 3 timezones away. Were you familiar with the area before? Did you visit the area before you purchased? How did you find this particular PM? I have many questions..
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Michael Smythe:
The rental market slows at this time of the year AND is slower this month than same time last year.
So, you can either lower your rent for less rent each month or let it sit vacant and lose much more.
Got it
- Member since 2019 · 144 posts · 46 votes2yI couldn't agree more and I am feeling so frustrated
Quote from @Vicky L.:
@Michele Velazquez the extra $50/month could be off putting. When I clicked on the Zillow listing the AC is blank. If I'm going thru a lot of listings I'd skip any that weren't easy to know if air conditioning is central. Have the PM take a moment and click YES for AC.
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Gustavo Delgado:
my two cents.. You need answers from your property manager as to why they are not leasing since according to the PM they "rent all day for the price." The answer is not to just drop $25 a week until they lease.That is a crappy strategy since they get it leased but its at your detriment. Demand they send you data that supported their original lease range and understand how they arrived to that number. Finally, I too do not know why you would invest 3 timezones away. Were you familiar with the area before? Did you visit the area before you purchased? How did you find this particular PM? I have many questions..
I live in California and cannot afford to invest here. That's why. Thanks for your concern though but these questions aren't helpful now since I already own 8 units
- Laveen, AZ · Member since 2016 · 584 posts · 528 votes2y
Quote from @Michele Velazquez:
I am relatively new to investing. I have 2 quadplexes in Atlanta being managed by a PM since I am in California. I bought these units because the PM said the rent in the area was $1250 and they believe I could get between $1250-$1275 a month per unit. So I bought these units assuming these numbers as that would make me cashflow. However, the unit has been on the market for one month and now they are saying to lower the rent $25 every week. My question is, how low do I go? Do I go down past $1200 where I won't cash flow every month but it's better than no tenant? I would love to hear feedback from the seasoned investors. Thank you.
If your PM put just a generic lockbox on there, they're not tracking when the property is accessed. Make sure they do AGENT ONLY showings. This way you don't end up with squatters you have to evict
Can you share your cash flow calculations? You said you bought a 4 unit building for 150k....that's 150k/door right?
As for your listing there's a blury picture, and they have a more birds eye view. They don't look very good. You want a professional photographer
Also consider fees your PM charges. I see right off top there's 50/mo for a protection plan. So from the tenant perspective rent is 1275. If they charge other fees like administrative fees etc, require renters insurance, and competitors don't charge these fees or have mandatory plans, you may be less competitive.
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Rodney Sums:
Quote from @Michele Velazquez:
I am relatively new to investing. I have 2 quadplexes in Atlanta being managed by a PM since I am in California. I bought these units because the PM said the rent in the area was $1250 and they believe I could get between $1250-$1275 a month per unit. So I bought these units assuming these numbers as that would make me cashflow. However, the unit has been on the market for one month and now they are saying to lower the rent $25 every week. My question is, how low do I go? Do I go down past $1200 where I won't cash flow every month but it's better than no tenant? I would love to hear feedback from the seasoned investors. Thank you.
If your PM put just a generic lockbox on there, they're not tracking when the property is accessed. Make sure they do AGENT ONLY showings. This way you don't end up with squatters you have to evict
Can you share your cash flow calculations? You said you bought a 4 unit building for 150k....that's 150k/door right?
As for your listing there's a blury picture, and they have a more birds eye view. They don't look very good. You want a professional photographer
Also consider fees your PM charges. I see right off top there's 50/mo for a protection plan. So from the tenant perspective rent is 1275. If they charge other fees like administrative fees etc, require renters insurance, and competitors don't charge these fees or have mandatory plans, you may be less competitive.
I can't have any say in what they do. They only do lockbox :(
I used the calculator here to determine cash flow months ago. My mortgage is $917 and the PM told me I could get $1295 when I bought it.
They didn't give me an option to do the professional photographer. And they won't let me opt out of the $50 fee they are charging the tenant. I feel so irritated!
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Michele Velazquez
If the difference in $50 per month will not make you cash flow then this was not a good investment in the first place.
Are you setting aside money for Capex repairs?
I'd try lowering to break even for now because it is very hard to make up even one months lost rent in a 12 month period.
You can always do a small yearly bump in rent to get back to even or a small amount of cashflow.
- Real Estate Agent · Austin, TX · Member since 2014 · 3 posts · 1 vote2y
Make sure they get you onto Zillow. Z started charging fees to brokers last year and some brokerages opt out. For you that means no Zillow presence, It's critical to have your rental on that platform (in my opinion).
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
drop the rent hard, not gradually. Do it now when the best tenants (the folks with their stuff together) are looking for the next month. Towards the end of the month you are going to get less prepared tenants. Thats not awful but its better to go now.
Pay for facebook ads when you go on facebook, pay for premium ads when you go on zillow. I bet your PM didn't do this to "minimize your expenses" Oy.
Apartments.com is a bit of a scam now for premium but it works--if you are going to do it do each unit as separate properties.
FYI 1250 rent on buying for 135 a unit is promising, but doesn't guarantee cash flow positive at all. And you answered another question that your mortgage is "under 3750". True expenses are PITI then maintenance and capex reserves and vacancy--which you are already being hit with. Really doesn't matter for this conversation but I was left in a little doubt about the cash flow.
All the expenses above, even taken together, are less than half a month of vacancy, so I'd be agressive. You can raise rents at some point, pet fees maybe other stuff but its hard to crawl out from under multiple vacant months.
So, get it stable, then get it good.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
@John Underwood only thing I would tweak to the good advice you gave is that "break even" at this point is a potential pitfall for her. She needs to lower the rent to what it will rent for....the market doesn't care about her expenses...
- Member since 2019 · 144 posts · 46 votes2y
Quote from @John Underwood:
@Michele Velazquez
If the difference in $50 per month will not make you cash flow then this was not a good investment in the first place.
Are you setting aside money for Capex repairs?
I'd try lowering to break even for now because it is very hard to make up even one months lost rent in a 12 month period.
You can always do a small yearly bump in rent to get back to even or a small amount of cashflow.
That's not what I was saying. When I bought the units the PM said I could easily get $1295. After factoring vacancy, maintenance, etc. I could easily cash flow. What I was asking is do I keep dropping it even to $1100 and just keep going down.
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Andy Smith:
Make sure they get you onto Zillow. Z started charging fees to brokers last year and some brokerages opt out. For you that means no Zillow presence, It's critical to have your rental on that platform (in my opinion).
We are on zillow, I think zillow group is just different
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Jonathan R McLaughlin:
drop the rent hard, not gradually. Do it now when the best tenants (the folks with their stuff together) are looking for the next month. Towards the end of the month you are going to get less prepared tenants. Thats not awful but its better to go now.
Pay for facebook ads when you go on facebook, pay for premium ads when you go on zillow. I bet your PM didn't do this to "minimize your expenses" Oy.
Apartments.com is a bit of a scam now for premium but it works--if you are going to do it do each unit as separate properties.
FYI 1250 rent on buying for 135 a unit is promising, but doesn't guarantee cash flow positive at all. And you answered another question that your mortgage is "under 3750". True expenses are PITI then maintenance and capex reserves and vacancy--which you are already being hit with. Really doesn't matter for this conversation but I was left in a little doubt about the cash flow.
All the expenses above, even taken together, are less than half a month of vacancy, so I'd be agressive. You can raise rents at some point, pet fees maybe other stuff but its hard to crawl out from under multiple vacant months.
So, get it stable, then get it good.
The problem is, I can't do the advertising, they do. They said they don't do Facebook
I am not sure I understand this? "FYI 1250 rent on buying for 135 a unit is promising, but doesn't guarantee cash flow positive at all. And you answered another question that your mortgage is "under 3750". True expenses are PITI then maintenance and capex reserves and vacancy--which you are already being hit with. Really doesn't matter for this conversation but I was left in a little doubt about the cash flow."
In the calculator when I bought, I entered vacancy rate, maintenance, and PM fees. My goal (although it seems that everyone thinks I am dumb for it) was to buy a property that may not cash flow a ton yet since it is hard in Atlanta, but that would in the near future and then would also appreciate.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
I don't think its dumb at all, and its usually the best path to success. And these days the paydown is a good return. For the numbers, we are (I am) probably getting tripped up by different use of wording, though happy to look at numbers privately if you wish, feel free to PM.
There is nothing that says you can't do an ad and post it, you can refer them to the pm either directly or after you talk. Craigslist, etc. its easy.
I don't know your options for the area or the standards for PMs, but any pm that isn't advertising on facebook seems borderline negligent. Just sayin. And them collecting a $50 fee from the tenant? Yikes. Sounds like they suck.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Facebook Marketplace has replaced Craigslist as the source with the most fraud.
Logical Property Management4.9453 Reviews - Member since 2019 · 144 posts · 46 votes2ySo does that mean you don’t recommend posting there? Now so they fraud your i if you post a listing?
Quote from @Michael Smythe:
Facebook Marketplace has replaced Craigslist as the source with the most fraud.
- 2yCorey ConklinPro MemberInvestor · Member since 2021 · 129 posts · 209 votes
Quote from @Michele Velazquez:
Quote from @Bill B.:
The one month of vacancy already cost you 8.5% (more than $100/mo). If you’re still vacant in another month you could have started $200/mo lower and been in the same place.
You’re problem is either advertising (bad locations to advertise chosen or bad text/pictures) or price, you can only fix one without changing PMs.
So is your answer that it is better to keep lowering my rent no matter how much because it costs less than a vacancy? I don't know what the problem is to be honest. The location seems ok, the PM said they rent " all day" for the price. They advertised on all the major platforms and had a great amount of leads but no applications. one thing I don't like and I don't know if it is normal, is they just put it on a lockbox. They don't check on the property while it is being listed or meet any tenants to show the property. I am attaching a photo of the leads? I don't know I should change PM's, I just signed with them not too long ago but they sure charge a lot of fees and have underdelivered in placing tenants.
Using a lock box in lieu of doing in person showings is becoming a lot more common. PM's are squeezed hard by investors to keep costs low and this is a way they can do it. Unfortunately it seems to increase vacancy and the risk of placing bad tenants. This is an overlooked question when hiring a PM that I'm sure you now know to ask.
I wish you luck in getting the properties filled!
- Laveen, AZ · Member since 2016 · 584 posts · 528 votes2y
Quote from @Michele Velazquez:
Quote from @Rodney Sums:
Quote from @Michele Velazquez:
I am relatively new to investing. I have 2 quadplexes in Atlanta being managed by a PM since I am in California. I bought these units because the PM said the rent in the area was $1250 and they believe I could get between $1250-$1275 a month per unit. So I bought these units assuming these numbers as that would make me cashflow. However, the unit has been on the market for one month and now they are saying to lower the rent $25 every week. My question is, how low do I go? Do I go down past $1200 where I won't cash flow every month but it's better than no tenant? I would love to hear feedback from the seasoned investors. Thank you.
If your PM put just a generic lockbox on there, they're not tracking when the property is accessed. Make sure they do AGENT ONLY showings. This way you don't end up with squatters you have to evict
Can you share your cash flow calculations? You said you bought a 4 unit building for 150k....that's 150k/door right?
As for your listing there's a blury picture, and they have a more birds eye view. They don't look very good. You want a professional photographer
Also consider fees your PM charges. I see right off top there's 50/mo for a protection plan. So from the tenant perspective rent is 1275. If they charge other fees like administrative fees etc, require renters insurance, and competitors don't charge these fees or have mandatory plans, you may be less competitive.
I can't have any say in what they do. They only do lockbox :(
I used the calculator here to determine cash flow months ago. My mortgage is $917 and the PM told me I could get $1295 when I bought it.
They didn't give me an option to do the professional photographer. And they won't let me opt out of the $50 fee they are charging the tenant. I feel so irritated!
You can certainly have a say if you work with them or not though 😀
Have you looked at comparable units nearby to see how long they're listed? What the asking rent is?
Your agent should also be able to show you comparables that have come off market recently so you can see what they closed at and how long they were listed for.
cash flow vs appreciation argument:
You'll see a variety of different perspectives and arguments here on whether it's wise to have low to negative cash flow in anticipation of appreciation. All the people who banked on appreciation in recent years can say how correct they were and how it's not always about cash flow. People who bought prior to crashes and were bleeding money for years or lost the property may have a different perspective.
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Corey Conklin:
Quote from @Michele Velazquez:
Quote from @Bill B.:
The one month of vacancy already cost you 8.5% (more than $100/mo). If you’re still vacant in another month you could have started $200/mo lower and been in the same place.
You’re problem is either advertising (bad locations to advertise chosen or bad text/pictures) or price, you can only fix one without changing PMs.
So is your answer that it is better to keep lowering my rent no matter how much because it costs less than a vacancy? I don't know what the problem is to be honest. The location seems ok, the PM said they rent " all day" for the price. They advertised on all the major platforms and had a great amount of leads but no applications. one thing I don't like and I don't know if it is normal, is they just put it on a lockbox. They don't check on the property while it is being listed or meet any tenants to show the property. I am attaching a photo of the leads? I don't know I should change PM's, I just signed with them not too long ago but they sure charge a lot of fees and have underdelivered in placing tenants.
Using a lock box in lieu of doing in person showings is becoming a lot more common. PM's are squeezed hard by investors to keep costs low and this is a way they can do it. Unfortunately it seems to increase vacancy and the risk of placing bad tenants. This is an overlooked question when hiring a PM that I'm sure you now know to ask.
I wish you luck in getting the properties filled!
Actually this is all a learning curve for me and I did not know to ask that. But I do now!
- Real Estate Agent · Commerce CIty, CO · Member since 2018 · 127 posts · 78 votes2y
You're property manager sucks, get rid of them and self manage. Also, you probably shouldn't have purchased.
- Investor · Member since 2020 · 80 posts · 71 votes2y
Looking at the Zillow listing, it looks like almost 300 people have reached out. I usually get a tenant by the time ~35 people reach out! I'm not sure if it is the PM, but constant and frequent communication to interested tenants is the only way to get someone in. If it's not working with the PM, it could very well be them.
Other items:
1. Comparable rentals are priced higher than yours. Yours should not be sitting vacant.
2. Pictures for comparable rentals look better than yours. It doesn't look like anything was done to the pictures to make it appear more desirable and it ends up looking dingy. Have you painted the unit?
If it were me, I would ask the PM pointed questions around how they're marketing and how quickly they respond to interested tenants. I would personally also consider replacing them for someone more "motivated". Good luck.
- Member since 2019 · 144 posts · 46 votes2y
Quote from @Jason Cacioppo:
You're property manager sucks, get rid of them and self manage. Also, you probably shouldn't have purchased.
I definitely should have purchased. It cash flows and will appreciate.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.