Lowering rent to keep a good tenant?

Question

I have a very excellent tenant that has lived at my property for the last 4 years. She has been excellent, never paid rent late once and took good care of my property. She called me earlier this week and stated her husband and her been seperated awhile now. She has always been the bread winner while he was jobless when they first applied. She told me she needs to start looking elsewhere because she been over budget for awhile now.

They were paying $4500/month for a large house here in Los Angeles. She told me her budget was more $3,800 now. I told her i might have some wiggle room and can do $4,000/mo for a new 1 year lease and we can re-evaluate later where we are at. She is now going decide. I was essentially breaking even on the property at $4,500/mo and now will be slightly negative each month.

Would you guys do the same to keep an excellent tenant? The way I saw it was that a 1 month vacancy will be almost the same as a 1 year price reduction so figure better keep someone who hasn't been a headache and been great this whole time.

Jim Johnson · Answer

Given the history, I'd look at this less as a rent decision and more as a risk management call.

A tenant with a clean 4-year track record — on-time payments, takes care of the property — carries a lot of value that's hard to replace. I don't treat that the same as starting over with someone new.

If I'm dropping from against vacancy, turn costs and the uncertainty of the next tenant. One bad replacement or a longer vacancy can easily cost more than that difference.

The part I'd focus on is whether $4,000 is actually sustainable for her not just a temporary stretch. If it's still tight, it could be just delay the issue.

Structuring it as a 1-year reset with a clear re-evaluation point is usually how I'd handle it — it keeps a strong tenant in place while giving me a defined window to reassess.

In situations like this, I tend to lean toward stability over pushing for max rent, as long as the numbers make sends on both sides.

Richard F. · Answer

Just because she is telling you "her budget" is $3800, no way would I drop the rent based on the story alone. Give her a new application to complete, and run a full current background check so you can re-evaluate her actual circumstances. If no divorce or final decree is filed, require contact info for the husband, who, if you had him sign the original agreement with her, is still on the hook. Remind her of that fact.

Otherwise, offer to let her out early without penalty as long as she removes all rubbish and personal property and leaves it very clean. Then you can market the property during the prime moving months of the year and attract top prospects.

Otherwise, offer to let her out early without penalty as long as she removes all rubbish and personal property and leaves it very clean. Then you can market the property during the prime moving months of the year and attract top prospects.

Kamil Lysik · Answer

You're thinking about this exactly right — and the math backs you up.

One month vacancy in LA at $4,500 = $4,500 lost. Plus turnover costs: cleaning, repairs, listing, showing, screening — easily another $1,000-2,000. So you're looking at $5,500-6,500 in real costs to find someone new.

Your price reduction = $500/month x 12 = $6,000/year. Almost identical — but with zero vacancy risk, zero turnover headache, and a tenant you already know pays on time and takes care of the property.

In LA market especially, a reliable long-term tenant is genuinely rare. The risk of getting someone worse — or worse, an eviction situation — far outweighs $500/month.

One thing I'd add: put the new terms in writing with a clear clause that rent returns to market rate after 12 months pending review. Protects you both and sets clear expectations.

You made the right call

Mohammed Rahman · Answer

I agree with Richard. A good long-term tenant who pays on time and takes care of the place is genuinely not easy to replace.

That said, I’d slow things down just a bit before locking anything in. A change in budget is understandable, but it’s still worth getting a fresh look at the full picture before you adjust rent. Even a quick updated application or financial check can help confirm where things really stand before you commit to a lower rate.

Also, if her husband was on the original lease, it may be worth double-checking the legal responsibility there before you renegotiate anything. Sometimes there’s still shared liability that people don’t immediately think about in a separation situation.

If the numbers don’t make sense to hold at a reduced rent long-term, another option could be offering a clean early exit agreement if she needs it, assuming the property is left in good condition. That gives you a chance to re-market and potentially reset at full rent when demand is stronger.

Either way, I’d just make sure everything is clearly written out and agreed to before anything changes. That keeps it clean and protects both sides going forward.

Drew Sygit · Answer

When did you start running a charity?

As others have posted, you should be trying to run your rental like a business.

QUESTIONS:

1) What is current market rent?

2) When is the last time you raised rent?

3) When is the last time you inspected the property?

4) How much do you estimate it would cost to prep for a new tenant?

5) What are local Days On Market (DOM) to find a new tenant?

6) Total of new tenant prep cost + potential DOM vacancy losses?

7) Divide amount from #6 above by the $700 rent discount the tenant wants to better understand how long it would take you to be further ahead by getting a new tenant paying market rent.

John Underwood · Answer

Breaking even or negative are both not good.

You need to treat it as a business.

How hard will it be to rerent at a higher rate?

You will likely loose a month or more rent while getting it ready to relist and finding a good tenant.

So you just need to decide what meets your goals.

Could the lady get a roommate to make the rent affordable?

Marc Winter · Answer

@David P.,

Real estate is an investing business, and as such we must remember:  PAST RESULTS ARE NOT A GUARANTEE OF FUTURE PERFORMANCE.

Not busting bubbles here, but keep in mind what's been accelerating over the last 4 years regarding middle management corporate type positions in the $100--200k range:  AI is decimating that sector.

Do all the spread sheet projections you want, but know that a paper profit is a 'best-guess' projection, based on past performance, and the info/data you currently have at hand.

There is no easy call here:  you pay your money, you take your chances. Hope for the best, prepare for the worst.  Good luck.

David P. · Answer

As of today I told her the best I can do is $3,950 for 1 year and removing her husband off the lease. I will do this as an addendum to the original lease so that way is will default back to the original terms after 1 year. By then I told her we can revisit and see where she is at. She said thank you and will proceed with that. I have visited the property over the years and it has been spotless. They haven't had any calls or issues or complaints. She also typically paid rent either before the 1st or on the 1st and never a few days late. She makes good incomes 150k+/year and still working at Nike corporate. I could chance it like everyone says and do a good screening but I think the fact she is has been excellent otherwise I can handle the loss for awhile.

I also own the property next door which has an identical unit that I tried to rent out earlier this year. I started it out at $5,500/mo and after 2 months of price drops ended up exactly at $4,500/mo. I notice for this higher price and larger size houses (2300sqft) it is a smaller niche and takes little longer to find the right people.

Caleb Brown · Answer

That's a big hit. If the rental market is still moving there I would not reduce the rent that drastic. Yes the tenant has been good but other ones are out there. Stinks but you aren't a charity. Maybe get a temperature check on the market, what's available then decide

Theresa Harris · Answer

What is market rent for the home and what will a vacancy cost you?

Lowering rent to keep a good tenant?

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