What To Do When Landlords Refuse to Lower Their Asking Price

What To Do When Landlords Refuse to Lower Their Asking Price

Brad LarsenPro Member
Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes

Hello All - here is a good topic for discussion.  In our business as a property management company, we have decided to take a hard look at a new policy of what to do with Landlords who refuse to lower the rental asking price of their home.  

As a company, we showcase vacant and move in ready single family homes under professional management for individual landlords.  We provide every single channel for marketing we can come up with, we include videos, we include Matterport 3D tours (when appropriate), and we have in house professional photography (seriously - a full time person on the payroll doing nothing but pics / video).  

So, IMO - it's not US as we have done everything we possibly can to market the homes.  Again, this is a vacant and made ready home that could be occupied at a moment's notice.   

We also send our landlords a marketing & activity update every Monday that includes 7 ideas on what they can do to get their home rented faster (which were ALL presented from prior to listing) as a refresher course.  The first being - reduce the asking price! 

In our experience, every home will rent for the right price.  In rentals, it's ONLY price.  I feel we can rent a crack house next to a grave yard sitting on a railroad track for the right price.  

Our dilemma is working with owners who flat out REFUSE to lower their asking price even after being vacant 60+ days, seeing the feedback or lack of activity, listening to our portfolio managers when they communicate that the only option is a price adjustment.....but yet they refuse to lower the asking price.

OK - the PM haters out there will say this should be OUR decision......that once that PM Agreement is signed.......We "own" that home.  In reality, that does not work.  We are agents of the Landlord and have to work with them on getting their permission for major things such as price adjustments.  

TO THE POINT:  We are adopting a cancellation policy.  At 90 days vacant on the market - we are sending our landlord a 30 day notice of termination.  At 120 days vacant on the market - we are cancelling services.  (There are always exceptions of course)

We are now putting this in writing to the owners from day one.  We are unsure if this is a wise policy, but we also feel that if owners are unwilling to listen to us, or simply do not understand how much they are losing with a vacancy, we are simply not a good fit for them.....and they us.

We are about to fire two landlords this week that if I told you their situation, you would shake your head and fire them too!  Thoughts from the masses?   

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Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y

I would have a written example , showing numbers on a spread sheet . Numbers dont lie . Also explain to them how moving costs a tenant money , security deposits etc , and that after 1 year they raise the rent .   

Some landlords think , if I lower the rent on a $1200 a month house by $100 they are losing $1200 a year . But if that house is vacant for 3 months they have lost $3600 that year . And 3 months can turn to 4 ,5 or 6 

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  • Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    I would have a written example , showing numbers on a spread sheet . Numbers dont lie . Also explain to them how moving costs a tenant money , security deposits etc , and that after 1 year they raise the rent .   

    Some landlords think , if I lower the rent on a $1200 a month house by $100 they are losing $1200 a year . But if that house is vacant for 3 months they have lost $3600 that year . And 3 months can turn to 4 ,5 or 6 

  • Crane Missouri · Member since 2019 · 60 posts · 34 votes
    7y

    You are contradicting yourself. You cannot say you work for the landlord and turn around and fire them. Besides lower rent have you looked at local amenities to have the property become more appealing or competitive in other ways. Is everyone else offering to cover the water sewer trash while you don't and still have the same rent price? There are a 1k ways to make a house competitive without lower the "rent" number. Have you taken the time to meet and talk to the Landlord one on one and determine the reason for not wanting to lower the prices? You should be able to sell the rent price to the landlord just as much as to the potential tenant. Just my feedback.

  • Brad LarsenPro Member
    OP
    Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
    7y

    @Justin Larese Not a bad few points....and to answer your questions, short of paying their mortgage for them....we have done everything possible for these landlords to get their homes rented.  What other local amenities are you referring to?  This is a SF home in a regular San Antonio neighborhood.  Water / sewer / trash?  Please tell me what other 1,000 ways you would help market or make this home more attractive when 1) The landlord will not put any money into the home (despite our pleadings) and 2) The landlord will not reduce the asking price.  I honestly want your feedback under these two stipulations. 

    @Matthew Paul  You sparked me with an example...here goes:  New "investor" landlord.  Buys a home in the $250k range.  Moves out and hires us to market / manage the home.  It needs atleast $5k in improvements - communicated to him over and over and over.  It is $150 to $300 over priced from the nearest comparative home.  After 3 months of being vacant with near ZERO activity in a neighborhood that is solid (and us asking for price decreases every week) - the landlord made one concession and wanted us to install $200 worth of landscaping to boost curb appeal.  No price decreases - now at 100+ days on the market.  

    A lot of other investors on this forum can't wait for this investor to go into foreclosure!  I see no reason to ride that sinking ship to the bottom.  

    Thanks for the feedback from both of you.  We are honestly looking for ways to get thru to these landlords and I do like the spreadsheet technique.  We use something similar with laid out numbers they see every week.  But a spreadsheet may be more striking.  Thanks again!

  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Every PM I know has it in their contract that they set the rental rate not the owner.

  • Crane Missouri · Member since 2019 · 60 posts · 34 votes
    7y

    Brad thanks for the specifics, helps visualize your situation rather than guessing. Some areas will cover tenant utilities, so your landlord gets his asking price for rent, but the overprice is offset by paying some utilities. Certain locations you have opportunities to throw in a monthly bus/subway passes to tenants, or local pool or gym. If he's as stubborn as you have implied give him a final notice and part ways. Or take Russels advice and grab him by the balls and set the price that's competitive and get a tenant lined up. 

  • Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    7y

    @Brad Larsen I am not a PM, but I handle the lease ups for a pretty large property management company here in CT. Set the expectation upfront with your clients before you sign them on that you will be dictating what the monthly rent will be for a given listing. 

    At times there will be a give and take and in those situations I would just ask them what improvements they are willing to do to the unit to command the higher rent and let the conversation play out from there. 

    Also, some owners do not have as good of an understanding of how vacancies hurt buy and hold real estate investments as you would think. They are just focused on the monthly rental amount and lose the bigger picture. So in those cases, it may be worth explaining how the numbers work. 

    If they understand, and still keep the rent amount higher than it should be then you have a decision to make. I probably wouldn't ditch a client over it though.

  • Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    @Brad Larsen how are you collecting your fee for filling the property when you cancel service? It takes a lot of your time, money, and resources to list these rentals. I think it's a great idea for existing customers! But I would clarify the cost to list the property at their terms.

    I agree that some people are unreasonable in their expectations and this is easily a conversation that I am sure you have when onboarding clients.

  • Brad LarsenPro Member
    OP
    Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
    7y

    @Russell Brazil  Thanks for the feedback.  We would be happy to work with clients who allow us to set their rental price.  When you find someone like that in the San Antonio or Austin market - please send them our way!

    @Frank Geiger  Good feedback as you may have touched on a really good point to implement.  We get "paid" when the home rents.  We could charge management fees during the vacancy time - but even that does not motivate some owners.   They just see a bill racking up with no income.  Remember, this is at the START of a new PM Client.  You and I have the same line of thinking because we understand the numbers and are rationale.  Our dilemma is getting the irrational and often brand new reluctant landlord to understand this.  We hope this 30 day notice of cancellation technique would wake them up.  What choice do we have?  If we let it ride and rent their home after 6 months, they won't have money for repairs or won't make them.  It's a window into the mind of how a client will behave.  Thanks again! 

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    @Brad Larsen this is a good discussion. We had the worst rental market in history last year. For the first time ever, I saw homes sit vacant for up to six months. Absolutely unheard of.

    I am trying to develop a more systematic approach with owners that includes speaking with the owner directly and encouraging rent reductions every 7 - 14 days depending on the situation. If the home sits vacant for two weeks then I could forward the owner a reminder of my rent-reduction policy and what they can expect to see (e.g. $100 rent reduction every two weeks or 5% every week or whatever). If it's explained in writing up front then I think owners would be less likely to fight me on it. If you have a written policy like that, I would love to see a copy of how you're handling this.

    @Russell Brazil my state requires me to have a written agreement that includes the rental rate. My agreement includes a range but it's based on a healthy market. When the market stagnates like it did last year, I was forced to drop below the minimums on quite a few homes. That meant I had to contact those owners and get permission in writing. Ridiculous, but that's my reality.

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  • Real Estate Agent · San Marcos San Antonio, Austin · Member since 2015 · 28 posts · 18 votes
    7y

    @Brad Larsen I completely disagree with Justin. A major problem with some landlords is they think short-term vs. long-term. I call it stepping over dollars to pick up pennies. If he refuses to view and understand the numbers and accept the realities of the market you may just need to part ways.

  • Real Estate Agent · San Antonio, TX · Member since 2017 · 523 posts · 362 votes
    7y

    @Brad Larsen I know how you feel my friend from my somewhat brief experience in PM it really is tough to be in a place like that. I feel like you already know deep down what you should do but you want to be validated. Well here it is I agree with what you are saying my friend. That new policy is spot on and honestly a little bit lenient in my opinion. If after 60 days of no activity and the owners aren't willing to do something that's when I would send out the 30 day cancellation notice. @Matthew Paul brought up a great point and I would say is the best way to deal with it. Money talks especially in this situation. @Justin Larese brought up some great points that I was honestly going to ask myself but after reading your response with how the landlord is you should seriously just cut ties. One mindset shift that truly changed the way I did things was the 80/20 principal. I'm sure you are familiar with this but it is so critical especially in the PM area of real estate. It sounds like this guy is part of the group that takes up 80% of your time and stress, but only brings in 20% of the profit so to speak. From reading your replies you have a great head on your shoulders and I believe you have made the right decision. Now just go out and do it my friend and make sure you set your expectations up front! Good luck!

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Matthew Paul:

    I would have a written example , showing numbers on a spread sheet . Numbers dont lie . Also explain to them how moving costs a tenant money , security deposits etc , and that after 1 year they raise the rent .   

    Some landlords think , if I lower the rent on a $1200 a month house by $100 they are losing $1200 a year . But if that house is vacant for 3 months they have lost $3600 that year . And 3 months can turn to 4 ,5 or 6 

    Ya I could never figure out why landlords cant do basic math..  

  • Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    I currently self manage but isn’t this stuff discussed before you being hired to manage the property? Ex.... someone contacts you and wants to rent their super average property for well above market rent. You explain to them that it probably is not possible. They don’t want to budge... you politely inform them that you don’t think you’ll be able to work with them...? Also, write into a clause that if unrented for x amount of days asking price will be dropped by x% ...?

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    VACANCY and TURN OVER KILL Landlords bottom line  most just dont realize it up front.

    Same thing why a house is not usually selling its price  its price 90% of the time

  • Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Jay Hinrichs.  Definitely turnover and vacancy are killers.  Most of my tenants average about 4-5 years with me.  I don't usually get complete market rate, but it's filled with people of my choosing.  I choose my tenants, they don't choose me.  I'm stressing if I don't have a solid contract on an empty house after 2 weeks.  It just doesn't happen (the me).

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Alan Grobmeier:

    @Jay Hinrichs.  Definitely turnover and vacancy are killers.  Most of my tenants average about 4-5 years with me.  I don't usually get complete market rate, but it's filled with people of my choosing.  I choose my tenants, they don't choose me.  I'm stressing if I don't have a solid contract on an empty house after 2 weeks.  It just doesn't happen (the me).

    I kind of get it for the MF  if they are position for a sale or some other refi and they need to hold out for highest rents to make their numbers look good.

    but for mom and pop  just like Mathew stated above 2 months turns into 3 or 4.. and bye bye 3 to 5k you will NEVER get back.

    take you 30 to 50 months just to get even     even if you got the higher rent which you probably wont.

    its double whammy I have seen people do this for 25 to 50 bucks its crazy in my mind. 

  • Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Brad Larsen:

    Hello All - here is a good topic for discussion.  In our business as a property management company, we have decided to take a hard look at a new policy of what to do with Landlords who refuse to lower the rental asking price of their home.  

    As a company, we showcase vacant and move in ready single family homes under professional management for individual landlords.  We provide every single channel for marketing we can come up with, we include videos, we include Matterport 3D tours (when appropriate), and we have in house professional photography (seriously - a full time person on the payroll doing nothing but pics / video).  

    So, IMO - it's not US as we have done everything we possibly can to market the homes.  Again, this is a vacant and made ready home that could be occupied at a moment's notice.   

    We also send our landlords a marketing & activity update every Monday that includes 7 ideas on what they can do to get their home rented faster (which were ALL presented from prior to listing) as a refresher course.  The first being - reduce the asking price! 

    In our experience, every home will rent for the right price.  In rentals, it's ONLY price.  I feel we can rent a crack house next to a grave yard sitting on a railroad track for the right price.  

    Our dilemma is working with owners who flat out REFUSE to lower their asking price even after being vacant 60+ days, seeing the feedback or lack of activity, listening to our portfolio managers when they communicate that the only option is a price adjustment.....but yet they refuse to lower the asking price.

    OK - the PM haters out there will say this should be OUR decision......that once that PM Agreement is signed.......We "own" that home.  In reality, that does not work.  We are agents of the Landlord and have to work with them on getting their permission for major things such as price adjustments.  

    TO THE POINT:  We are adopting a cancellation policy.  At 90 days vacant on the market - we are sending our landlord a 30 day notice of termination.  At 120 days vacant on the market - we are cancelling services.  (There are always exceptions of course)

    We are now putting this in writing to the owners from day one.  We are unsure if this is a wise policy, but we also feel that if owners are unwilling to listen to us, or simply do not understand how much they are losing with a vacancy, we are simply not a good fit for them.....and they us.

    We are about to fire two landlords this week that if I told you their situation, you would shake your head and fire them too!  Thoughts from the masses?   

    Brad,

    I commend you for the extensive marketing effort your company is doing.

    And it makes sense for you to fire clients who are not listening to your advice.

    Life is too short to spend it on clients who will just waste your time. Move on to landlords who are more realistic and reasonable. 

  • Tony WooldridgePro Member
    Rental Property Investor · Walla Walla, WA · Member since 2016 · 480 posts · 346 votes
    7y

    @Brad Larsen, Good post, which has stimulated a lot of good thought!  Thanks.  Full disclosure, I have very minimal PM experience compared to your's but after reading through the thread, I think I might have an idea!  Like everything, it requires work.  Won't solve your current problem but may alleviate it from happening again in the future. Similar to what our colleague, @Matthew Paul, mentioned above. When bringing in new clientele especially, make a side by side comparison of two property owners (one that gets it, and one that doesn't) and present this to them so they have something tangible in front of them instead of just telling them your verbal experiences with past problems.  Thanks for allowing me to share, sincerely hope you find a win/win of dealing with this.  Best of luck to you in your future!

    @Nathan Gesner, extremely curious about your "For the first time ever, I saw homes sit vacant for up to six months." statement.  It begs the question, what happened?  Did a major employer leave?  Have you dove into the issue to figure what the underlying problem really is/was?  The reason I ask, depending on the reason as to why this happened can be a GR8 learning lesson for us all!  However, with that said, I do realize RE is local but none the less was wondering if you figured out why this happened?  Thanks ahead of time.  Here is to wishing you nothing but GR8 success in your future.

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    7y

    We have found the "stubborn" owners with rental rates are equally or even more stubborn with maintenance costs.   For us as a management company our vacancy rate is our "thing" its like our pride and joy..  and if we have an owner or 2 thats ruining it we will definitely fire that client.  I brought up maintenance because it goes hand in hand with your vacancy rate and rental rate.  Properties with higher rent have pickier tenants who demand better service with maintenance and will move out and find a better deal after there lease is up, if you don't live up to there standards..    

    My advice is this.. or statement rather..    Property managers shouldn't "work for" the owners...   it should be thought of more as an equal partnership.  You both bring something to the table, you both are entrepreneurs and business owners.  It's equal...  if anything the client needs you more than you need them. They came to you because you know exactly what you are doing.  If they aren't willing to listen to your advice on a simple rental rate then they will never be a good client.  

    What if I went to my dentist and said   "you work for me..   lets pull this tooth my way.."     ???  

  • Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    As an active landlord I am constantly keeping an eye on and evaluating the market and knowing my market rent. I adjust accordingly.

    If and when I want to turn the reigns over to a property manager, and pay them a huge chunk of my profits, I will be damned if I wouldn't expect them to know the market and price accordingly. I would also find it very difficult to work with a landlord who would not appreciate my expertise.

    I think I would just point out to them that because they are unwilling to budge- they have made all of the competing properties much more attractive. They are effectively marketing their competitors!

    I am looking at some units in my market that have set the ceiling artificially high- 1 building, 4 renovated units on the market for 148 days! God I LOVE them!

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    @Tony Wooldridge I'm in Wyoming which is heavily dependent on the energy industry. The Obama administration essentially shut everything down back in 2015. In 2016-2017 we saw a lot of oil-field workers give up on jobs coming back and they moved to other states. Then one of our largest mid-level employers dumped 100 positions last year which hit pretty hard. Most of our jobs are entry-level or service-industry which makes it almost impossible for a family to afford renting a house and even apartments can be tough in the winter when tourists aren't flowing through.

    It's very market specific so the only lesson others can glean from it is to know what drives your market and watch carefully for the changes. We knew what was causing the shortage but that didn't make it any easier or provide any solutions.

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  • Rental Property Investor · Huntsville, AL · Member since 2013 · 419 posts · 323 votes
    7y

    I see a different story in my market. PM listed homes tend to be $200-$300 higher and stay on market 3-6 months.  Maybe I could get another $50-$100 a month? But my rentals have a turnaround time as little as a day, a month at the most.  I'm also not paying someone 10% to tell me my business either. I normalize the rent anyways through rent increases over the years. 

  • Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    Agree @Mike S., the long terms in my market are all realtor/management.

  • Property Manager · Chattanooga, TN · Member since 2018 · 179 posts · 92 votes
    7y

    @Mike S. I would be willing to bet that those PMs are also battling this situation to some degree. 

  • Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    I skipped a few posts so...sorry if I state something already said.

    I self-manage. I like the income.

    But, if I did have a PM company, I would want one like yours, that put the desires of the client first. I would get annoyed with any company, PM or a lawn service, that didn't have that mentality. Few businesses can get away with anything less. 

    No soup for you!!!

    I don't think what you are considering is unreasonable at all. A bad fit is a bad fit. That said, I would suggest you work really hard towards educating your clients on the front end before taking that action. If they still don't want to listen well, are you supposed to sit around and carry a loss from their stubbornness forever? The other option is a contract where you get paid if it rents or not!!! But nobody wants that deal either do they? I say they don't get it both ways.

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