When should you lower rent to attract qualified tenants? Ever?

General Landlording & Rental Properties
11yFollow

When should you lower rent to attract qualified tenants? Ever?

Lisa Hoyt
Salem, VA · Member since 2015 · 42 posts · 7 votes

Background: My sister lives in MA, has owned a 2 family house for many years. Our mother lived in the apartment for 17, when she moved out sister used a broker to find tenants (when they had to leave - student visa expired) she used another broker to find new tenants who have been a nightmare. Both broker experiences have been horrible. Current tenants lost job and are going back to another state, she is gladly letting them out of their lease, property is available October 1. I live in VA.

Enter Bigger Pockets: I literally stumbled on the BP site a few months ago and though I want to get into the REI game, she is actually in it, so I told her to check out the website and that she could fill the apartment herself using info we learn from BP, and I could help her, remotely, from VA.

What I have done: I have followed all of the suggestions regarding tenant screening and had two showings to qualified parties, neither of whom followed through with process.  I created a wix.com website which is referred to in CL, Postlets, Zillow, etc postings           (www.40auburnst.wix.com/maldenma) (Also - I am not sharing this link as advertising - just to show what I did - mods, please delete if this a violation) which gives a detailed description of property and application process. I manage the inquiries from VA via Google Voice phone number and gmail account, she does the actually showings. I have had inquiries and followed up with approx 60 leads from zillow, 10 from CL, 5 from Trulia, 6 from Hot Pads. Only 10 of those conversations were from people who seemed genuinely qualified ( income 3 x rent, credit score=600+, etc) the rest seem to be relocating from Mars or something because they don't even read stuff like "how much is the rent"($1695/mo) or "No lead paint certificate".

Sister is FREAKING out: What do you suggest for a next move? Lower the rent and change the ads (I have told her that all advice from BP seems to be wait it out, better an empty month then a horrible tenant, esp if you live there too).  The rent seems from all indicators to be perfectly priced, I am afraid that lowering rent will just attract even more lesser qualified people.  She just wants it rented.  (It will show a lot better when empty of all of the, um, "stuff" belonging to current tenants.)

What do the experts suggest? Am I not turning over the right rock to find qualified people at this price point?  Or is it the time of year and too late for the current moving cycle? Any advice from people who have been there, done that would be greatly appreciated.  Also I have researched the legalities in MA (the worst state of all) regarding fair housing compliance, we won't do anything "shady".  Thanks!

0Reply
180 views

Most Popular Reply

Richard C.
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y

I don't agree that lowering the rent results in lower-quality tenants.  The opposite is usually true.

Smart people will try to get the best value they can.  The most apartment for the least money.  Well-qualified tenants have lots of choices, just like well-qualified car buyers can walk into any dealership and buy a car.  So people who will willingly pay at the top of the market for an apartment are usually doing so because they do not have a lot of choices.  Like a car buyer who has to buy at a "buy-here, pay-here" place.

5Reply
See this reply in the discussion

47 Replies

Jump to latestLatest
  • Derreck WellsPro Member
    Specialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
    11y
    Originally posted by @Account Closed:

    No, you need to have a Lead Certificate to rent Section 8 or any other "federal money" agency. Probably State money too. By MA law, you also need to have a Lead Certificate just to rent to a family with children under 7. Since you can't discriminate against families, you basically have to get any rental in MA (bigger than a 1 bedroom) deleaded. 

    However, that just means that it needs to pass a Lead Inspection, not have all the Lead removed. It can be made safe by a licensed deleader and then get a lead cert. 

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    IMO the situation could be improved a lot by 1) advertising that the unit is in an owner occupied building and 2) not having your sister initially show the unit.  That being said, the biggest issue is showing the unit occupied. The applicants are experiencing too much weirdness and bad vibes at one time.  Looking at occupied units is horrible.  Showing up to an appointment to find a reticent landlord showing a unit full of someone else's stuff.  Just yuck.  

    2Reply
  • Derreck WellsPro Member
    Specialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
    11y
    Originally posted by @Lisa Hoyt:

     ... but lead paint is an issue, we state that upfront and they still ask "is there lead paint?"

    There's the "shady" you said you wouldn't do. ↑

    MA Lead Law states that you cannot rent a unit to a family with kids under 7 unless you have a Lead Certificate. MA anti-discrimination laws state that you can't discriminate against families with children under 7 (I'm paraphrasing). Basically, you need to have the unit and any common areas that will be accessed by the tenant deleaded to comply with the laws. This isn't as scary as it seems, there are programs where your sister can get a loan to delead and not have to pay a dime of it back until she sells the house, then repayment comes out of that money. Also, if she pays out of pocket, there are tax credits she can get. MA may have made it mandatory to delead, but they also made it as easy as possible. 

    You can have your sister contact me and I can get her in touch with an inspector. An inspection is the first step in the process. 

    Derreck

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Derreck Wells:
    Originally posted by @Account Closed:

    No, you need to have a Lead Certificate to rent Section 8 or any other "federal money" agency. Probably State money too. By MA law, you also need to have a Lead Certificate just to rent to a family with children under 7. Since you can't discriminate against families, you basically have to get any rental in MA (bigger than a 1 bedroom) deleaded. 

    However, that just means that it needs to pass a Lead Inspection, not have all the Lead removed. It can be made safe by a licensed deleader and then get a lead cert. 

    How much of the "deleading" to get the cert is actually lead paint removal down to the wood?  Or is just proper sealing and paint?  I find it very hard to believe that MA requires S8 properties to be entirely free of lead paint.  I've seen some junky props that passed S8 in NJ, NY, CT and MA and for sure they weren't fully deleaded.

    0Reply
  • Derreck WellsPro Member
    Specialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
    11y
    Originally posted by @Account Closed:

    It doesn't need to be brought down to bare wood, there are different techniques for different components. It just needs to be "made safe" using the right method for that component. Example, if a flat wall with no outside corners has lead paint, it needs to be made intact with no holes in it. The lead paint can stay if it's not loose (cracked, peeling, etc.) and not mouthable. Meaning a kid can't bite it, like on an outside corner. Covering it with a thin sheet of sheetrock is preferable, then it can never be an issue in the future, but usually we just repair and repaint to save the customer money. 

    If you have lead paint and get a lead certificate, the smart move is to preform a "post compliance lead inspection" (PCLI) every time you flip tenants. You don't have to hire a licensed deleader every time, the state usually gives landlords 30 days to fix any issues discovered during the PCLI themselves. There are exceptions, if the tenants destroyed entire walls for instance, but the State really does want to work with landlords to make these units safe.

    0Reply
  • David Trounce
    Virtual Assistant · Sydney, NSW · Member since 2014 · 13 posts · 3 votes
    11y

    Phew, that's a big drop and not likely to attract the kind of tenant you are happy with.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Derreck Wells:
    Originally posted by @Account Closed:

    It doesn't need to be brought down to bare wood, there are different techniques for different components. It just needs to be "made safe" using the right method for that component. Example, if a flat wall with no outside corners has lead paint, it needs to be made intact with no holes in it. The lead paint can stay if it's not loose (cracked, peeling, etc.) and not mouthable. Meaning a kid can't bite it, like on an outside corner. Covering it with a thin sheet of sheetrock is preferable, then it can never be an issue in the future, but usually we just repair and repaint to save the customer money. 

    If you have lead paint and get a lead certificate, the smart move is to preform a "post compliance lead inspection" (PCLI) every time you flip tenants. You don't have to hire a licensed deleader every time, the state usually gives landlords 30 days to fix any issues discovered during the PCLI themselves. There are exceptions, if the tenants destroyed entire walls for instance, but the State really does want to work with landlords to make these units safe.

    Thanks for the additional info about deleading.  I've not yet encountered a circumstance in my markets that required more than correctly done repairs and paint.  Sheetrocking over old lead paint would rarely be an economical solution if the room has doors, windows and trim....which most do.  I'm familiar with lead in old houses as my daughter was diagnosed with high lead levels in the 1990s.  The blood levels had just been brought way down by the EPA so lots of people were testing positive. We lived in downtown Jersey City.  There was no peeling or chipping paint in our rental.  But after testing we discovered the water out of the tap (due to lead solder) and the dust in the yard were at superfund cleanup levels.  It worked out OK.  We stopped using the water for anything but washing and planted grass in the yard.  She's a Shakespearean actor and appears to have minimal brain damage.  :)

    1Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @David Trounce:

    Phew, that's a big drop and not likely to attract the kind of tenant you are happy with.

     Right.  The first 2 calls this afternoon were for Section 8...

    1Reply
  • Tom V.
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    11y

    @Lisa Hoyt

    Two points for your sister:

    1.  I think it is counter-productive to show a unit that is still occupied.  You are going to turn off potential good candidates.  

    Wait for them to move out, make it look as crisp and clean as possible, take good pictures and only then, after a month of marketing in rent-ready shape, should you consider adjusting your price.

    2.  People almost always rent the best unit they can afford.  By lowering the rent, you are unlikely to find a really well qualified tenant who wants a good deal.  Instead, (as you said) you would simply be more likely to attract more people who could just barely afford to rent your place at the lower price point.  

    Market the property well and then find the right tenant.  

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Derreck Wells:
    Originally posted by @Account Closed:

    It doesn't need to be brought down to bare wood, there are different techniques for different components. It just needs to be "made safe" using the right method for that component. Example, if a flat wall with no outside corners has lead paint, it needs to be made intact with no holes in it. The lead paint can stay if it's not loose (cracked, peeling, etc.) and not mouthable. Meaning a kid can't bite it, like on an outside corner. Covering it with a thin sheet of sheetrock is preferable, then it can never be an issue in the future, but usually we just repair and repaint to save the customer money. 

    If you have lead paint and get a lead certificate, the smart move is to preform a "post compliance lead inspection" (PCLI) every time you flip tenants. You don't have to hire a licensed deleader every time, the state usually gives landlords 30 days to fix any issues discovered during the PCLI themselves. There are exceptions, if the tenants destroyed entire walls for instance, but the State really does want to work with landlords to make these units safe.

     Thanks Derreck for your insight, this is exactly why I wanted to post here. She has made note of your contact info.  Your paraphrasing looks to me to be spot on.  She definitely would not prefer to live over a house full of young children, but as long as the current tenants don't have children she is not operating outside of legal limits.  And we have not had any applicants with children who meet the income criteria, Section 8 or not.  

    But in MA, unless I am mistaken, an apartment can't be approved quickly, or deleaded quickly, so she would lose money in the deleading process and then still not have tenants who meet her income requirements, just the future ability to take Section 8 vouchers, not an appealing thought for her.

    I would rather (but too late, rent has been lowered) wait it out, clean up and show a gleaming like new apartment to motivated, qualified people. She is resigned to doing that if the rent lowering doesn't work out.

    We really appreciate people taking the time to add to the conversation. I would love to buy another property in VA and use what I have learned through this experience for my own benefit.

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Tom V.:

    @Lisa Hoyt

    Two points for your sister:

    1.  I think it is counter-productive to show a unit that is still occupied.  You are going to turn off potential good candidates.  

    Wait for them to move out, make it look as crisp and clean as possible, take good pictures and only then, after a month of marketing in rent-ready shape, should you consider adjusting your price.

    2.  People almost always rent the best unit they can afford.  By lowering the rent, you are unlikely to find a really well qualified tenant who wants a good deal.  Instead, (as you said) you would simply be more likely to attract more people who could just barely afford to rent your place at the lower price point.  

    Market the property well and then find the right tenant.  

     Tom, you have just joined "Team Lisa".  Thanks for your comment.

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Lisa Hoyt:

    Lisa:  this looks totally irrational to me.  If a property is properly priced, you don't take an annual loss of $1400 in potential just to avoid a one month vacancy.  Is there any way to help your sister to see that the unit needs to be vacated, cleaned and possibly repaired and painted in order to make it appealing and rent at value?

    0Reply
  • Derreck WellsPro Member
    Specialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
    11y

    Depending on the amount of lead in the unit, the entire process can be done in less then 2 weeks with a waiver on the 10 day notification process. Since the owner would be the only tenant in the building, it shouldn't be a problem to get the waiver. Again, that depends on the amount of lead in the unit. If every window has to be replaced, for example, that could be time consuming if there are 20 windows in the unit.

    0Reply
  • Michael Boyer
    Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
    11y

    As I read this and the replies, the very best thing I could think of for you and your sister right now is actually a different angle. 

    Rather than searching out a tenant, instead do an all out, exhaustive search for a property manager (look into credentials, experience, terms, etc and on this site and online about how to get the best the best one possible). I think you want a property manager that focuses on rental not sales (which may be what you had with a broker).

    Each market is so unique and situation depends on the facts and circumstances. The very best person or property management firm in your area may be the best short term plan. They will know the exact price the market will bear and screen and select tenants for a living.

    This could be a short term solution to reduce stress and get stability.

    Then long term you and or your sister could get a chance to learn more about the property management and landlording process. I would start with simple book like Leigh Robinson's Landlording (about any recent edition, available very affordable used). Then expand out from there to other books.

    0Reply
  • Damion Byros
    Mckinney, TX · Member since 2015 · 86 posts · 11 votes
    11y

    I would say you can use the economy and the area of your property in order to be competition wise more competitive with lower rent based on supply and demand . For instance if you have not been able to rent your property for the last three months and you've really marketed it I think you should lower price to drive demand and get potential tenants because you've got to take into consideration those carrying cost that it's taking out of your pocket when your not have the unit rented out  

    0Reply
  • Luke Montoya
    Investor · Mahomet, IL · Member since 2015 · 3 posts · 0 votes
    11y

    I personally aim to keep my units 5-10 percent under the market rent to attract and keep great tenants.  I have been renting out one townhouse since 2010 with no vacancies or significant tenant issues (two sets of tenants with the latest tenants splitting up recently and one staying with a new friend).  I recently bought a second townhouse and found tenants in two weeks and they moved in the day of closing and no issues thus far.  I attribute this partly to location but partly to keeping the units slightly under the market price also.  (These are also what I would classify as B class properties, so that helps.). However, my priority is ease of the investment over maximum cash since they are out of state (Nashville) and I don't use a management company (I just have a buddy who fixes things for an hourly rate if things break, but that is rare since the units are less than ten years old).  Bottom line is if it was me I would probably lower the asking price.

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Michael Boyer:

    As I read this and the replies, the very best thing I could think of for you and your sister right now is actually a different angle. 

    Rather than searching out a tenant, instead do an all out, exhaustive search for a property manager (look into credentials, experience, terms, etc and on this site and online about how to get the best the best one possible). I think you want a property manager that focuses on rental not sales (which may be what you had with a broker).

    Each market is so unique and situation depends on the facts and circumstances. The very best person or property management firm in your area may be the best short term plan. They will know the exact price the market will bear and screen and select tenants for a living.

    This could be a short term solution to reduce stress and get stability.

    Then long term you and or your sister could get a chance to learn more about the property management and landlording process. I would start with simple book like Leigh Robinson's Landlording (about any recent edition, available very affordable used). Then expand out from there to other books.

     Thanks for the book suggestion Michael, I think you have a good point about a PM who is local, with more (to my zero) experience.  My sister is a good person who works in a social work profession, not in the business world.  She has more short term vision then long term picture - but we are working on that.  

    On my end, I think I have done a very good job (for a beginner) getting people interested at her price point, even qualified ones, but the deal wasn't coming together which is why I reached out for suggestions. I have learned so much from pouring over posts, watching the webinars etc, which is what gave me the courage to post.

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Luke Montoya:

    I personally aim to keep my units 5-10 percent under the market rent to attract and keep great tenants.  I have been renting out one townhouse since 2010 with no vacancies or significant tenant issues (two sets of tenants with the latest tenants splitting up recently and one staying with a new friend).  I recently bought a second townhouse and found tenants in two weeks and they moved in the day of closing and no issues thus far.  I attribute this partly to location but partly to keeping the units slightly under the market price also.  (These are also what I would classify as B class properties, so that helps.). However, my priority is ease of the investment over maximum cash since they are out of state (Nashville) and I don't use a management company (I just have a buddy who fixes things for an hourly rate if things break, but that is rare since the units are less than ten years old).  Bottom line is if it was me I would probably lower the asking price.

     You have a unique situation too, and it is working for you.  The only difference I think, for her, is living in the property.  If she didn't live there I think psychologically it would just be number crunching and be much easier.  PLUS the apartment being occupied (my opinion) greatly diminishes the beauty of the apartment.  She is reading all of these comments too, so we are both learning.  I LOVE that I can help her long distance, similar to your buddy being in a different state.  Technology is our friend, I want to make sure we are using all that we can.  Thanks for your answer.

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Damion Byros:

    I would say you can use the economy and the area of your property in order to be competition wise more competitive with lower rent based on supply and demand . For instance if you have not been able to rent your property for the last three months and you've really marketed it I think you should lower price to drive demand and get potential tenants because you've got to take into consideration those carrying cost that it's taking out of your pocket when your not have the unit rented out  

     (Sigh) I know, it's only been 15 days since we started this, I don't feel like that's been enough time to say that we gave it a good try, which is why I was looking for ieas I might have missed.  Thanks.

    0Reply
  • Lisa Hoyt
    OP
    Salem, VA · Member since 2015 · 42 posts · 7 votes
    11y
    Originally posted by @Account Closed:

    IMO the situation could be improved a lot by 1) advertising that the unit is in an owner occupied building and 2) not having your sister initially show the unit.  That being said, the biggest issue is showing the unit occupied. The applicants are experiencing too much weirdness and bad vibes at one time.  Looking at occupied units is horrible.  Showing up to an appointment to find a reticent landlord showing a unit full of someone else's stuff.  Just yuck.  

     I totally agree.  The ads do say "owner occupied" and she is looking for the right friend to be her "tour guide".  Very good points.  I am glad she will see that someone else shares my opinion.

    0Reply
  • Luke Montoya
    Investor · Mahomet, IL · Member since 2015 · 3 posts · 0 votes
    11y

    You're welcome.  Best of luck.  Just as FYI, I have always been in the situation of finding renters with the place occupied to avoid any vacancy upon turnover.  To me it is economics (i.e., holding all other factors constant, lower price means higher demand which means more tenants to select from which gives a better chance of finding quality tenants). 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free