What to do in a slow rent market?

Question

In my area there are a ton of house for sale or for rent. What should i be doing about getting a tenant into my rental? Lower the rent, waive the deposit/ last month. Some income is better than no income... No??? Need ideas soon...

Account Closed · Answer

Unfortunately, I am in the same kind of market.

All you can do is have the best property in its price band. In this market, that means that you have to drop your price until yours is the best best one for the money.

The other problem (at least in my area) is that many of the workers have lost their jobs and moved away. I get applicants but they are lower life forms than whale poop. It's better to have a place vacant than to rent to human sludge that will tear your place up and not pay rent while you struggle to get them evicted.

Around here, we are just digging in and getting through it. The bad market won't last forever.

In the meantime, clean your place up spotless and get creative with your ad writing. You'll have to lower rent until you are getting calls. Then, be really careful who you rent to.

Will Barnard · Answer

What to do in a slow rent market? - Buy and flip!  :)

Michael Rossi · Answer

...or is it EXACTLY as simple as the 50% Rule.  This downturn is EXACTLY why the 50% Rule is accurate.  Remember, the 50% Rule is meant to describe expenses over a period of time and a number of rentals.

How long ago were we inundated with newbies proclaiming that their expenses were no where near 50% (although proven to be  wrong in EVERY SINGLE CASE).  I wonder how their expenses are now, with rents down and expenses up?  Furthermore, I can recall a time just a few months ago when the amateurs were proclaiming that rents always go up.  Remember those ignorant investors who told us that they would buy break even properties and the wait for the rent to bring them to profitability!  OUCH!

By the way, I'm not married to the 50% Rule if the decades-long rental business fundamentally changes due to political change.  It's time to face the possibility that the socialists will DESTROY the rental business by drastically increasing expenses and fundamentally changing this business.  If so, we've got to be smart enough to exit the business early and move on to something that will be profitable under a socialist government - like being a local Socialist Party Leader or providing train service to your local Concentration Camp (or whatever it might be)!

I'm not turning this into a political thread, just pointing out that change IS occurring, right now, before our very eyes.  Smart business people are paying attention and constantly evaluating the effect on their business.  Please note that this isn't a tactical (day to day) evaluation, it's a strategic evaluation (long term).  What will changing political realities do to your business and how should you respond?  Don't be married to a business or a strategy within that business.

Just to set the record straight, I'm not saying that any of this has occurred YET.  So far, there is no effect here in Ohio.  The rental market is very good and none of the socialist policies are yet in effect.  That may be about to change.

My advice - stay awake and look at the REALITY of the situation!

Account Closed · Answer

Similar circumstances here. What is a really nice unit, the newest tenant complemented us on the best shape they saw, but the reality is we dropped our price from 535, rented 18 months ago, to 465 now on an all tile, clean little 2-bedroom unit.

One year lease, really nice good tenants who we believe will take care of the place and pay on time.

We dropped it low and fast as we are going into December, and December is not a good month to rent except to the evicted, and after Xmas doesn't pick up till mid-January.

Thats a 13% drop in rent but had only three weeks empty and avoided the dreaded three-four month empty draw.

As far as a price war, we couldn't care less. We are not in business to co-suffer with other competitors and now we are in basic survival mode.

We have an edge as we have no mortgages, good, clean places and we will use that edge to minimize the impact on our business.

Hope this doesn't  last too much longer but we are aren't very optimistic at the moment.

In the meantime, it is survival of the fittest, economically fittest.

Account Closed · Answer

Do not waive the deposit. That will only attract people who are a problem later. Better to keep the place vacant and in good shape then to have a non-paying tenant who is destroying the place nightly.

If you put an ad in the paper advertising the place at $1.00 a month you would have a line. Hence you suddenly have a different problem, who to pick.

Hence it is a pricing or more correctly a value issue. People like clean, functional and value from a landlord that is not a nightmare (fair and firm is fine).

John Corey

Mark N.A · Answer

Lynn --

I'm seeing the exact same thing here with students.

However, the luxury centers (unless gated) are growing favored as one-stop shopping centers for mobile bandits to prey on students.

Several years ago Durham built several large student luxury centers.  These high-density centers have subsequently degraded into government-subsidized low-income ghettos.

Oh, and don't forget the municipal revenue enhancement opportunities as hundreds of drunk students drive back from the bars past police checkpoints.  And if the drunk students choose to ride the bus, our municipality now awards $50 'vomit tickets' including clean-up chores.

And as for the rich parents who bought their children houses to live in and can't sell at inflated profits, I wish them all the 'joy' I have experienced as a student landlord.

Justin Y · Answer

Could do a lease option with your house

Lynn Z · Answer

I'm in South Carolna and today on the front page of our newspaper there was a four page spread with pictures of the mega student warehouse rentals out by our stadium.  There are 5 "chains" that provide furniture, clubhouse, sauna, rec room, shuttle transportation to class and local bars, etc. etc. all for around $450 a person.  With utilities (all new construction) that means students can rent for around $525 each.

As local independents with 1 bedroom to 4 bedroom rentals this is a tough competitive market.  I don't see good things in the future for the independent landlord.  Same thing happened when the chain bookstores came on the scene a put the independents under in a few years.

At least the parents have stopped buying the best properties up for their student/children and hosue them at home owner property tax rates for years.
Some of them can't sell those purchases now.

Mark N.A · Answer

If expenses stay the same (or rise) and rents go DOWN (which is happening anecdotally), then those who based their buying-decision on the 50% Rule find out they PAID TOO MUCH.

That's why solely utilizing that great rule ain't so simple any more.

As far as learning an exciting new career in the coming economy, I'm studying to become a Party Apparatchik.  Stay tuned for my new books, CDs and Mentoring/Coaching Services!.....

Remember our motto:  "A bureaucrat is a person who cuts red tape sideways."

Mark N.A · Answer

I'm seeing a lousy rental market where I'm at, too.  So this may all be a strong sign of impending overall DEFLATION.

Suddenly it ain't so simple as the old reliable '50% Rule'.

Now you gotta understand your local demographics, neighborhoods, markets,  politics, long-term employment trends and probably global warming, too.

So now I have to add economists, meteorologists and pollsters to my team.......

What to do in a slow rent market?

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