When do you drop the “asking price” of your rental?

22 Replies

Currently trying to get my first investment property rented. I’ve had a lot of interest, but most of the applicants who have made serious steps to apply have been real “winners”. Note my infamous chicken post. Thanks to the conversations from that post I’ve tightened up my processes, and pre-screening has become a breeze. But now I’m stuck at the worst time of year with a rental I NEED to get rented because I close on my next investment in Feb, and need this property off my debt to income to float 3 mortgages (the rental, my current home turned live in flip that will become a rental in June, and a new live in flip that I’m closing on in Feb and doing a lease back until the end of May). The only comp, because this is a 1/2 acre property out of city limits with no HOA, was in the same neighborhood and rented for $1600. Mine has better upgrades and lawn care included for $1650. At what point do you just “cheap sale” rent it? Do you have a threshold of how low you can go? Cost? Cost + $$? Any and all advice is appreciated! It’s for lease by owner (my DBA name is what applicants see).

1/2 off first month’s rent can be a good way to attract attention and set your place apart from the competition.

@Shaun Hatton thank you! I’ve considering doing this as well, however my partner read something on BP about never accepting a lower amount for the first months rent, something about setting a precedent, but he may have misunderstood. Regardless, because of that he wanted to offer 1/2 off 2nd months rent, which just doesn’t have as good of a marketing ring to it. I dropped it $50 and have two applicants now. 🙏🏼 one checks out, or I think I’ll try your method. Thank you!

I have red both your posts - it really sounds like you need a good property manager. Why are you trying to do this on your own?

If you have a lot of interest and showings but no appilcations, that could mean the rent is too high compared to others in the area. The last rental I purchased had a similar situation. I lowered the rent by $50 and we got several applications. This year, we raised it back up by $50 and it rented in 2 weeks. 

If 90-days go by and you still don't have anything, lowering the rent would be something to consider. Just don't get desperate and lease it up to anyone. There is nothing wrong with lowering the rent.

Don't over think it. It's supply/demand. If you have tons of people viewing it, price is too low. If you only have a few people, price is too high. Adjust accordingly. 

Rural properties are much more difficulty to fill only because you are drawing from a much smaller pool of tenants. You need to be patient due to this reality. Vacancies will be longer. If your rent is at market then the rent is not the problem The problem is that the right applicant is not in the pool yet. Be patient or you will end up attracting lesser quality applicants with a below market rent.

@Alyssa K.

Money talks-- lower the rent to $1595.      We see houses in our neighborhood  that are $$$ and they just sit.. and sit.. whereas ours are rented quickly to a higher quality tenant.

Think of how much this vacancy has cost you! I'd much rather have lower rent, and someone in there quickly vs. letting it sit a few weeks/months for someone to pay more. 

@Alyssa K. You can always negotiate a lower price. The reason you're not getting qualified applicants is because there is very, very little demand this time of year. Market value is market value. Lowering the price will not increase the amount of qualified tenant applications. 

@Alyssa K. What I do is after 2 weeks, I do a move in special (half off first month's rent). Then if I don't have a tenant after two more weeks I drop the price.

Originally posted by @Michael Craig Piesnikowski:

@Alyssa K. You can always negotiate a lower price. The reason you're not getting qualified applicants is because there is very, very little demand this time of year. Market value is market value. Lowering the price will not increase the amount of qualified tenant applications. 

 I agree 100% that this time of year sucks tremendously. But I disagree about pricing. There are qualified tenants at every price point, and lowering the price will bring them in. As you say, the market is always right, if only for that month.

@Johann Jells if what @Alyssa K. is saying is true and her property is priced at market value then that is where the price should be set. By lowering your rent you are devaluing your property - good luck trying to get it back to where it should be.

I was in this exact same situation last year at this exact time, I lowered the price and the application rate stayed the same. The tenants who who ended up renting it out beginning in the first  of February would have paid original asking price had I held pricing (because that is market value). The only time you should lower list price is if it is not at market value.

Now if you are the only $1,650 house in a market where people pay no more than $1,400 for rent then you are not at market value.

@Alyssa K. glad to hear you got some applicants after lowering the price! You'll have to let us know what happens with these two. Best of luck!

@Alyssa K. one idea is December rent free with January rent and deposit paid. This is really no different than giving them the second month free, because you are getting a months rent. Most likely the property will sit vacant for the rest of December anyways, so you are really not out anything. In fact, the advantage is the tenant takes over utilities and it is occupied (vacant homes are a risk). 

I would also consider dropping rent. If you hold out for $1650 and it means one extra month of vacancy, then you lost $1650. Put that in perspective over the course of a year it works out to $137.50 per month. Subtract that from $1650 and your monthly rent now became $1512.50! You would be better to let it go fast at $1550. That is what I would do.

Originally posted by @Michael Craig Piesnikowski:

@Johann Jells if what @Alyssa K. is saying is true and her property is priced at market value then that is where the price should be set. By lowering your rent you are devaluing your property - good luck trying to get it back to where it should be.

 I guess we differ in the definition of market value. To me it's the value the market is willing to pay, at that particular time. Not what you think it should be worth, or what you could get for it in June. "Getting it back where it should be" seems a meaningless concept to me.

@Johann Jells very short term thinking to price your property value at the worst time of the year.

@Alyssa K.

Grateful reader of the chicken post here! I've got to agree with everyone else -- move the rent down a bit.

Three statistics that I keep on repeating to new landlords: the USA has a 62.9% homeownership rate. The median homeowner's net worth is $195,400. The median tenant's net worth is $5,400.

Cheap rentals are better earners than expensive rentals -- that's just the way it is. I don't know if you know this, but average rent in the USA is $1405/month...but median rent is $895/month.

Put these numbers in front of your brother. I'm sure your $1650 property is nicer than the one down the road for $1600. But there are far fewer takers for higher-end rentals than lower-end rentals, especially SFR on "1/2 acre of property outside city limits." There's a limited number of people with the bread and the desire to live in a place like your brother's who also don't have the determination to save up for a down payment on a slightly cheaper property.

@Alyssa K. I would listen to the market. Rerun comps and be competitive with what else is for lease. Best of luck with your rental!
@Joe Splitrock Do the math... Three months at $1650 is $4,950. Dropping the price $100 only costs you $1,200. Drop it $200 and you're still only losing HALF of what you lose by letting it sit for three months. Don't stick with a mistake because you took a long time making it.
Originally posted by @Michael Craig Piesnikowski:

@Johann Jells very short term thinking to price your property value at the worst time of the year.

I'm pricing my rent for the time of year, it has little overall effect on the value of a multifamily. If I were trying to sell or refi a SFR, I could see the rental price effecting the appraisal somewhat. But I'm not. I'm maximizing cashflow, and holding out for months to get an aspirational price does not do that, it simply loses you money.

Tenants do not give a hoot about your obligation or comps.  Their strategy is get the lowest price. Here in Silicon Valley where rent for apartments 2/1+ were <$4K a month.  Since few can afford to move in. Rental market is relatively slow. A few 100s new units causing a surplus. I have seen brand new apartments advertise for first month rent for free. Second month at lower (3000-3500). This is winter do you know anyone motivated to move at year end unless they got evicted.

You need to get the peoples attention with low rent. Reduce, reduce. 

@Alyssa K. You can offer a gift certificate to somewhere cool if they sign lease ASAP. That way you don't lower the rent price, but you offer an incentive.
@Alyssa K. Whatever you do, make sure your lease renews in the spring or summer. I made a mistake of starting g the year lease in the winter...which means it renews in the winter. Turnover is better in warm month, perhaps just after school ends.

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