Monthly reduction or a month free?
Here is more of a psychological question then financial. The tenant occupying one of my guest units is living at the end of the month (Contract expired.) I've been advertising for almost a month and although there is some traffic, no one shows serious interest. The unit have been rented for $1,300 a month. So here is the question: What would be more effective psychologically, reducing the rent by $100 a month or allowing first month free? Financially, if I go with the 2nd option, I lose $8 a month for the first year in compression to the first option, but I keep the rent at $1,300 not creating a precedent of price reduction. Your thoughts...
#2 Off Topic Contributor
- Real Estate Investor
- the villages, FL
This looks like a 12 month lease you're considering. I'd never give the FIRST month free. How about giving the LAST month free. Then, if he breaks the lease, you didn't lose a month of rent for nothing. It also psychologically will keep your tenant around longer,,,maybe.Rich
Rich, although an interesting idea, I'm not really sure. I've been renting this unit since 1989 (20 years) and another adjacent unit since 1997. Combining both units, I only experienced a lease break once. I will keep it in mind though.
#3 Off Topic Contributor
- Investor
- Viera, FL
Eddie, is this an Bama property or a high end Cali property? Is your target tenant likely to have only a month to month mind or will they be a little more financially sophisticated?
Most folks think very short-term so a free month's rent probably more appealing ..... same premise when people buy a product because vendor offers no payments til next year!! :roll:
Have you done a market study to make sure your rent isn't too high? Rents have dropped pretty substantially in some parts of the country.
My preference is to drop the rent. I've talked to several tenants of the type who know how to balance their checkbook (in short, the type you want), and they are suspicious of the free month's rent. They feel that by the end of the 12 months that the LL will figure out a way to cheat them out of it.
I've tried several different promotions, and all they do is collect calls from deadbeats who hope to get something for nothing. I've never secured a good tenant by offering an inducement. What works for me is pricing so that my place is the best one in its price band.
Sorry about that.I posted an answer on a different thread and it ended up here. I don't know how I did that, but I can picture you guys saying "What?" Because the answer had absolutely nothing to do with this discussion.
Originally posted by Tim Wieneke:
Eddie, is this an Bama property or a high end Cali property? Is your target tenant likely to have only a month to month mind or will they be a little more financially sophisticated?
This is one of the two guest units attached to my won house here in California. I never had it month to month. Always 12 month lease.
Originally posted by P NW:
Have you done a market study to make sure your rent isn't too high? Rents have dropped pretty substantially in some parts of the country.
.
Yes, I have done some study. Most of the similar apartments near by go for $1,100 - $1,400. But they don't offer what I do which is All utilities paid, full digital cable service with premium channels (HBO, Showtime, Etc) and full wireless high speed internet service. Also, many of the other units don't have refrigerator which I do.
What I don't have (and some of the other do) is secured parking garage (I have parking space for two cars but not secured) and I don't have laundry facility.
In my experience, the one month for free option is far more attractive to prospective tenets. In addition, it allows you to keep your rents at the same rate so you wont have to take the lose or try to justify an increase in year two if they choose to stay in the home for a second year. Id be willing to bet this unit will see much more action if you advertise the free month as opposed to a $100 reduction. Also, I would contact the people that have recently looked at the unit and offer the free month to them before i do any advertising.... good chance one of them will jump on it if they were considering it at all after originally checking it out.
Eddie,
If you choose to offer a free month, do as Rich Weese advises and make it the LAST or twelfth month. This gets the tenant aware that they won't get anything free unless they perform for the full term. Oftentimes, those offering first month free end up with a freeloader deadbeat who never pays; you don't want that with units attached to your residence.
My last experience with this was lowering the rent, temporarily.
I have a good low-income tenant who went through some bad times and rather than have him leave as he volunteered to do, I lowered the rent with the understanding that I would raise it again when he got back on his feet.
He was better able to budget that monthly decrease as opposed to a one-time windfall.
Have you thought of placing washer and dryer somewhere where both units can share? I dont know just an idea to defend rent even more.
Originally posted by GamalR:
Have you thought of placing washer and dryer somewhere where both units can share? I dont know just an idea to defend rent even more.
Yes, I have, unfortunately there is really no space for that.
Originally posted by Steve Babiak:
Eddie,
If you choose to offer a free month, do as Rich Weese advises and make it the LAST or twelfth month. This gets the tenant aware that they won't get anything free unless they perform for the full term. Oftentimes, those offering first month free end up with a freeloader deadbeat who never pays; you don't want that with units attached to your residence.
It's not a bad idea, the problem that I have with that is that there is no "instant gratification" as the first month free offers. (Money in my pocket now vs. money in my pocket in 11 months...) As I mentioned before, in twenty years of renting this place, I have only experienced one contract break. This area is one of the most desirable in Los Angeles and this is the first time I'm having problem renting it. I guess it is the economy and the out of control sprouting of apartment buildings here.
Eddie,
It's economic conditions such as we have today that leads people to have that freeloader mentality; if it's not free, they can't afford it!