Investor · San Antonio, TX · Member since 2016 · 8 posts · 0 votes
I have a tenant that has been leasing a $2600/mo home for the past 3 years. Excellent, pays on time, takes care of property. His lease in on a month to month term. He recently lost his job and wants to stay in the home until his kids finish the school year in May. He asked if the rent can be reduced to $1300/mo or he will have to vacate because he can no longer pay bills.
At the same time, I have two single family homes for lease in the same subdivision- $2500 and $2450/mo. All are owned by the same person and have been on the market for 30 days. I will have a fourth home in the next week, also $2400/mo.
I do not think they will rent quickly, as previously it takes about 2 months minimum to find a good tenant.
Some rent better than none? Or have him leave and have 4 vacant homes?
I do not negotiate rent amounts with tenants, I charge and they pay market rent or I find a tenant that can pay. This situation is going to be a downward spiral and unless you are intending to operate as a charity it is time to cut your loses and find a new tenant. If your emotions are taking priority over your business the road ahead for you is going to be a bumpy one. No good deed ever goes unpunished.
The kicker is being unemployed he will not find another place to live. In which case you tell him the rent is $2600 and he had better find a way to pay or be evicted. That should be incentive enough for him to come up with the money. He will find the money but would obviously prefer that you take the loss. Your tenant is manipulating you.
Investor · Haverhill, MA · Member since 2015 · 761 posts · 328 votes
9y
I understand that there would be 4 soon, but I believe the drop from 2600 to 1300 is too much.
Can you even pay all your bills (mort, fees, taxes, insurance...etc on 1300)?
Do you expect the market to get better in May or June timeline ?
When is the rental cycle season for your area?
He sounds like a good tenant, are you willing to use part of the last month rent to supplement the shortage? i.e. 2600 divide by 3 (Mar, Apr, May)....866 or so on top of the 1300 for $2K a month.
Real Estate Agent · Canton, OH · Member since 2017 · 25 posts · 7 votes
9y
I would see if he could possibly meet somewhere in the middle to minimize the damage. But it really depends on your personal situation and how taking $1300 less/mo will effect you. Might be better for you to just take the $1300 until May so you can try to get a tenant lined up in the mean time and be better off than if it were to sit vacant.
I would have a really hard time making him move out and uprooting his kids during the school year like that.
I do not negotiate rent amounts with tenants, I charge and they pay market rent or I find a tenant that can pay. This situation is going to be a downward spiral and unless you are intending to operate as a charity it is time to cut your loses and find a new tenant. If your emotions are taking priority over your business the road ahead for you is going to be a bumpy one. No good deed ever goes unpunished.
The kicker is being unemployed he will not find another place to live. In which case you tell him the rent is $2600 and he had better find a way to pay or be evicted. That should be incentive enough for him to come up with the money. He will find the money but would obviously prefer that you take the loss. Your tenant is manipulating you.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
9y
I am confused are you the owner of all these houses or are you in competition with the other 3 houses? or are you a PM? You could start advertising now so you can cover as soon as the vacancy occurs and make the ability to co-operate with showings a condition of any agreement. That is a big deal a co-operative tenant in showing is a really big help to fill an upcoming vacancy.
As for reduction you need to run your numbers but I would think that really is too much of a reduction. Based on the current competition you are about $300-450 high for 3 months and while your house might be worth more- that is worth considering. How much do you have in security deposit? Anything you do should consider both the deposit and retaining some of that for unpaid rent. Also if you are giving any reduction putting it on the tail end. Are the kids out may 30 or may 10? Prorating May is something you can work with too. In the end for a 3 year tenant I would likely counter. Rent is something friends and family should help the tenant with and how far you go really depends on your situation.
Sounds too me if you decide not to negotiate the unit would sit empty. I'd reduce the rent, and make an amendment that specifically states the move out date of the end of May and make it clear that you will not extend the lease at this rate any longer.
If this was a property that would rent right away id ask him to leave now, but with multiple properties already vacant, I'd agree to lower rent. Take what you can get.
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
9y
Pick up a copy of "getting to yes", its a really good book on negotiation. While I agree with @Thomas S. on the business side of things, I've made it a pet project to get good at negotiating, and its paying off handsomely. Nothing like winning a business arrangement and the other side still likes you to boot. Makes landlording laughably easier when your tenants want to keep you happy.
Johnson City, TN · Member since 2017 · 209 posts · 367 votes
9y
Suppose you decide to not meet his terms and he just quits paying. How long will it take to evict him? What will eviction cost you? What are the chances that he will get another job soon? I don't know about your area but in mine, people that can and will pay 2600 in rent aren't common.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
9y
Moving kids in school districts is a big deal . Time to negotiate . If he could afford that type of rent , he was making a good income . he threw a number out at you . now he may also get another job in the mean time . He may have gotten a severance package , and or unemployment . Any decision he makes will cost him and you . Run some financial models , and come up with a number , end times etc to cover all your bases . Its only about 3 months . 3 times zero = 0 3 times something is more than 0 . Also verify his unemployment .
Investor · San Antonio, TX · Member since 2016 · 8 posts · 0 votes
9y
thanks and I am the list agent for the management company. I also have the listings for the 3 other homes in the same subdivision, owned by the same company.
Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes
9y
You're the listing agent and not the owner,correct? The decision isn't yours to make,it is the rightful owners of the property who must decide whether to get a kick in the teeth or not.Is the owner wealthy and not concerned over the other empty properties you haven't filled yet or are they breathing down your neck to get the rented? Personally I would never accept 1/2 rent because they will get used to your charity like feeding a stray dog and they'll decide to stick around until you evict them.Tell them nicely it's time to downsize into a smaller dwelling before his savings and credit are destroyed.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
9y
Do not negotiate. The first time he misses a payment begin the eviction/termination process. I would assume he would no longer pass your screening requirements. A previous post raised the question "suppose you decide to not meet his terms and he just quits paying?". Well, suppose you decide to meet his terms and he just quits paying? If he has no income and can no longer pay his bills, how long do you think he will be able to afford $1,300/month? Will you lower the rent again in a couple months when he asks? Let him know that you wish him well but he cannot stay in your property if he cannot pay the rent.
Pick up a copy of "getting to yes", its a really good book on negotiation. While I agree with @Thomas S. on the business side of things, I've made it a pet project to get good at negotiating, and its paying off handsomely. Nothing like winning a business arrangement and the other side still likes you to boot. Makes landlording laughably easier when your tenants want to keep you happy.
Just ordered this book, hope your advice is good. Thanks
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
9y
@Kevin Manz - my advice is just that. Mine. However, the guy who wrote that book teaches at the Harvard Business school, so I'd say do what he says over what I say, as he is probably a lot smarter than I am.
From what I've read, the "Zen Master" negotiators get what they want, and leave the other side feeling like it was a "fair deal". Seems that in your case, keeping your tenant at the current rent, AND having him think its "fair" would be a win, correct?
I would see if he could possibly meet somewhere in the middle to minimize the damage. But it really depends on your personal situation and how taking $1300 less/mo will effect you. Might be better for you to just take the $1300 until May so you can try to get a tenant lined up in the mean time and be better off than if it were to sit vacant.
I would have a really hard time making him move out and uprooting his kids during the school year like that.
Another thing to add is it would really depend on the person as well. I like to help people out and be nice, but just make sure you aren't getting walked all over and being used! Because people can and WILL take advantage of you if you let it get out of hand. I don't know all of the details, but this is one exception I would probably make in allowing something like this to happen.
Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes
9y
As someone mentioned above, it is the property owner's decision to make. As the listing agent, I personally would not advise a client to negotiate reduced rent with a tenant who is metaphorically screaming at me that he/she is in financial distress, especially with such a large rent amount at stake. When you cannot afford a particular luxury, it usually means you should not have it at this time. I understand the tenant may have paid on time for several years and may have been a good tenant, but if I provided safe, clean, affordable housing and good customer service during this period, we had an even exchange. I owe you nothing extra just for meeting the terms you signed up for. Look, I get being empathetic and all, but this person is telling you I am in financial distress but they want the property owner to solve that problem. What they really need is a cheaper place to live!
St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
9y
@Alejandro Diaz I think you have to be firm but fair and I agree with @Thomas S. on this one. Your client's tenant says he cannot afford to pay market rent and wants the landlord to take a loss that will be to his benefit. No. This is a business and the asset is for rent at market prices, not cut rates. It is now mid to late February and the tenant is on a month to month lease. if the tenant were to be given notice for March 1 he would be out at the end of March and the unit could be ready for a new occupant in April, which with spring in the air is a time when new tenants will get the idea to move into the place. The timing works.
The tenant is telling you he cannot afford the unit. Tell him that you agree, and he should part amicably. You may find that he discovers reserves that allow him to pay full rate for a while longer. Personally I find it quite cheeky that a tenant should suggest a 50% cut in rent for his convenience. Has he gone to the grocery store and told them he wants 50% off their prices or he will go elsewhere? What do you think their response would be?
Investor · San Antonio, TX · Member since 2016 · 8 posts · 0 votes
9y
If this were the only house that was vacant, then I would immediately telL him to leave. The reason I hesitate to not negotiate, is because I have 3 other properties that are vacant at the moment down the street and they will each take about 3 months to rent.
Palm Bay, FL · Member since 2017 · 2 posts · 1 vote
9y
There may be another option to your current choice of cutting the rent or cutting the renter loose... If the renter has been able to pay $2600/m for the last three years, they may have some other financial accomplishments to be proud of. They may own (free and clear) a nice car, some jewelry or other items of adequate value (or preferably great value) to act as compensation for the lost rent. I'm not suggesting that you open a pawn shop service for wayward tenants, but in this one case, since you're seem to be having difficulty taking direct action against the children's welfare, you might want to barter for the missing cash component of the next three month's rent.
Like others above, I however still confused about why you as the listing agent are burdened with this decision. Eviction vs Rent Forgiveness is an owner decision, as is the acceptance of non-cash valuables in place of part of the rent.
Investor · Dallas, TX · Member since 2016 · 60 posts · 65 votes
9y
This seems to be a hard decision but in reality it's a very easy call. You charge market rent. Your tenant pays market rent. Since you are using external reasons to debate this dilemma it's time to hire a professional property management company to handle your rentals. Last thing you need is more stress or to be taken advantage of. Once you start bending it gets worst.
As a landlord you are going to have vacancies it comes with the process, I would expect a few months of vacancy between tenants.
Investor · San Antonio, TX · Member since 2016 · 8 posts · 0 votes
9y
I do not make the final decision, the owner does. They just asked for my opinion as their agent, therefore I posted here and have received excellent feedback.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
9y
Please post an update and let us know what happens in the end. It is a great help to others to hear the end of your story regardless of how it works out.
Investor · Tampa, FL · Member since 2015 · 293 posts · 175 votes
9y
If you're already missing out on $7500/mo in rents from your other vacants then what's another $2500? If I were you I'd change focus and get all of your houses filled asap...you're already hemorrhaging cash as it is. If this guy can't stay for the full rent then he needs to leave, maybe a cash for keys scenario would work nicely here?
Wholesaler · Los Angeles, CA · Member since 2016 · 276 posts · 181 votes
9y
Reward loyalty with loyalty.
Maybe draw up an agreement with him where he could pay your expenses, (PITI and maintenance) and you wouldn't take any profit.
Or take a small loss for him for a couple months. If he was your tenant for 3 years, he has made you tons of money I'm betting. And in the long run, the recommendations and referrals you would get for reciprocating his loyalty down the road.
Real estate is a people business. Sometimes it's not all about the number at the bottom of the paper.
Wholesaler · Los Angeles, CA · Member since 2016 · 276 posts · 181 votes
9y
Reading all these posts, I'm feeling a little disheartened.
This business isn't about nickel and diming people, and you won't ever grow if you can't cut some slack in the rope now and then--especially to a good loyal tenant who has paid for three years straight and just lost his job.
My two cents
Investor · Dallas, TX · Member since 2016 · 67 posts · 22 votes
9y
Both my mother and grandmother were in Real Estate before me and something that I will always take away from them if you give the tenant an inch, they will take a yard.
In this situation, does he really have any acceptable alternatives? Is he going to have to squeeze him and his kids into a 1 bedroom to get by?
I think the fact that he is a good tenant is a moot point. Doing what you are expected to do shouldn't be rewarded. I think this scenario only works because of the short timeline -- but the last thing you want is him asking for more time come May.
If he is highly likely to regain employment do you think he would be wiling to entertain signing another one year lease?
As in, OK I'll give you this reduction now but if you find new employment you sign a 1 year lease at full market and make that the stipulation.