Rent price vs tenant stability

7 Replies

Hi BP family, Like to get your take here. One of my 2bd condo should be able to rent out for $1700 according to few sites I've researched. However the next door neighbor in a 1bd asked if I would rent for $1500, and he has been renting this 1bd for past 11yrs and I can call his landlord for reference I think most of us worry about tenant stability but at what cost. While past rental history is good, it cannot dictate the future. I'm still screening other applicants $1700. What would you do here? What's your rule for rent changes? Thanks Henry

Initially rent at market rate to a tenant that satisfies your criteria.  There are no guarantees how long someone will stay.  Give yearly rent increases that are just below market rate.  This keeps your rent moving up with increasing expenses and helps retain your tenant(s).

So he wants to move to your condo with more bedrooms for what he is paying for a 1 bedroom. More space costs more. Good for him not so good for you. I would tell him I have a number of good candidates so you would not cut the rent by$200 /month. See what he says. That isn't a slight difference. Had he offered $25 less and no vacancy period I might consider.

If I have an existing tenant in a unit at less than market I always lean towards keeping their rent lower if it means keeping them inside of the unit. Turnover is a return killer as you have all that rehab cost every turnover. However once it is empty & I need to place someone new in there I am going too shoot for MAXIMUM RENT every time. Not a penny less. 

I would never rent to someone who is attempting to dictate the price.

Also- be careful not to sell yourself short, someone who has lived in the area for 11 years may not be able to appreciate the demand that the community is now commanding...

You need to try for $1700 if that really is the market rent. Sure $1700 to $1500 is only a 12% decrease which doesn't sound like much but what is the difference in your cash flow. That could take you from $400 a month in cashflow down to $200 or a 50% decrease which is pretty significant. Furthermore even if you had a turn at the end of a 1 year lease you will still be ahead $2400 which will cover a month of vacancy as well as any clean up for the turn.

I think your situation provides opportunity for a win-win.  If this Tenant is willing to move in and start the lease ASAP, there is a value to that.  Afterall, 1 month lost in rent ($1,700) would equate to a $141.67 deduction in monthly rent of 12 months ($1,700/12 = $141.67).  So, you may end up with the $1700 per month, but with 1 month lost.

I would offer the Tenant a $50-$75 deduction from market rent with the condition that he moves in ASAP.  This actually puts you ahead of the market rent because you don't have the month lost, and it's a win for him because he gets a discount.  You can raise it on his renewal to the $1700, which won't seem like alot when he is already paying $1,625-$1,650.