Would you decrease monthly rent in order to keep a great tenant?

Question

Good Morning BP,

I have a wonderful tenant who has been with me for 8 months now and just reached out to me yesterday that she has to move May 1 as the rent is a littler higher than she would like to be paying ($625 + 2x$25/pet Fee= $675 total)

The particular unit was a BRRR and has had a lot of very nice updates, I have refinanced, pulled all of my initial investment out, and is now INF% Cash on Cash and still has 30% Equity and is cash flowing $200/month after all PITI, expenses, cap expenditures, property management, etc.

The Question is, do I offer to reduce the rent to maybe $625/month in order to keep the tenant for a longer term lease?

Would love to hear your thoughts.

Bryan O. · Answer

@Cassidy Burns what is market rent for the area? If it's $650, then a $25 haircut for a great tenant that saves you more than $25/month in repair costs and headache is worth it. I will allow tenants that save me money by reduced damage cost to be slightly below market.

Joel Florek · Answer

@Cassidy Burns Make sure you think of every dollar as 12. If you reduce by $50 you are reducing by $600. What does $600 buy you? Over 2 years that is $1200? I can do a lot with $1200... When I first started I was way too nice in keeping rents low. Now I push rents and inevitably have those who move out. But I also have a lot more cashflow and can be more proactive in making upgrades to other units who are able to pay higher prices. Your the one that has to sleep with the decision but if you can fill the unit fast I would go get someone new.

Jay Hinrichs · Answer

well as usual I would take the contrarian view point as I viewed many of my rentals as a sort of charity.. I have been known to forgive rent when its to cold and the heat bill to high.

and I would NEVER raise rent as long as the tenants paid on time and did not call me with a bunch of honey do's :).

but if you can lock her into say a 3 year lease at that rate I would do that in heart beat..

she moves out its vacant a month that's 650 lost you will never get back.. you probably have to do some work to it.. etc etc..

Of course if you think she is just playing you.. then what ever but these are such small dollars I personally would choose for hassle factor over 50 bucks a month just the fact I had to take my time to re rent it would not be worth it.. but that's me the reverse landlord..

James Klopp · Answer

No, Id get a new tenant. I have had a tenant almost 10 years and I wouldn't do it for them either. I don't believe I would classify a tenant as wonderful if they were leaving in 8 months. That would go into my pain in the razbollo category. I usually dont see turn around for 2-3 years. Depends were you are and what you have I guess.

Cassidy Burns · Answer

@Bryan O. market rent for a 2 bed/1 bath is $600/month. I had rent set for $625 and then she has 2 small kittens so it is $25/month per cat for the pet fees!

Cassidy Burns · Answer

Hi Everyone thanks for the great advice. I really appreciate it.

Jeremy Paschedag · Answer

I agree with what both of the others have said. If you give in to this, then what will you give into next? What I try to do is apply the same rules to all of my tenants. I don't want one to come to me and say why did I give so and so a break and not them. What ever your policies are, they should be for all of your tenants. If you were ever sued, it's possible that preferential treatment could be brought to light. None of your actions should be personal. It's just business.

However, this is your business. You run it like you want.

Thomas S. · Answer

Never...if they can not afford market rent they are not a good tennat.

You are either operating a business or a charity. Hobby landlords do not concern themselves with profit and usually supplement their tenants rent.

It is your choice as to whether you wish to operate as a business or a charity. If your choice is to operate as a charity you should not be asking our opinion regarding this tenant.

Would you decrease monthly rent in order to keep a great tenant?

Would you decrease monthly rent in order to keep a great tenant?

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