I have a condo rented walking distance to classes at University of Utah. It is in a small 12 unit condo complex. The rental is 2 bedroom, 1 Bath, 837sq ft. I have had it rented at $1400 for the last year to two college students that have never missed a payment and have zero issues with them. They texted me yesterday telling me that they were interested in possibly renewing the lease for another year but were wanting to know if I could renegotiate the price of rent. I know when I listed the unit last I started high asking for $1400 and was somewhat shocked when these two students/parents were eager to rent. I have contacted a local PM and they told me that they actually have two units in my building rented for $1250. I did a rent analysis on RentoMeter and based on the last 12 months, within a .75 mile radius average rent is $1355. So....would you drop rent and keep tenants, or tell them no and HOPE to keep your tenants?
I would not lower rent but if they sign a multi year lease maybe you can freeze their price so when the rents do go up they will be paying lower then everyone.
@Zachary Bellinghausen . It’s just a negotiating tactic. Say you’ll keep rent the same at 1400 and see what they say. If they then want to move, I’d offer 1350 and that’s my final offer. 50 bucks is nothing compared to the cost of rerenting it
I agree with @Caleb Heimsoth . $1400, $1350 if they tell you they are leaving. I would agree to this only because you appear to be above market and they are worthwhile tenants.
Do not offer a multi year lease it is no guarantee they will stay.
I disagree with the other 2 Gentlemen.
You stated above that you started high & was surprised you got it, you've already won, Knock the rent down to $1300, their more than likely gonna be happy & you're still getting $50 more per month than the other units in the building. These are good, trouble free tenants, that is worth $100 decrease right there, & again you're still $50 over what others are getting.
But my opinion is worth exactly what you paid for it... Nada!!
Getting $50 more is OK but getting $100 more is better. Good trouble free tenants might be worth offering a $50 reduction. Considering tenants dislike moving as much as landlords like to see them move my guess is you could still get $1400. Try negotiating, only when necessary, before you give away profits.
I would not lower the rent. They were OK with it at $1400 and they should still be OK with it at $1400. The odds of them moving to save such a small amount of money is slim. Call their bluff.
Being students, multi-year might not be of interest to them anyways depending on how much school they have left.
@Zachary Bellinghausen One of the biggest expenses of a landlord is turnover. If the tenants are good, low-maintenance tenants, I wouldn’t have a problem dropping the rent a little. A big factor, of course, is your cash flow. If you landed a good deal and that 1400 is throwing off 300-350 cash flow, then you have room to move. If your cf is 150/mo or less, then you’ll have to determine what you can stomach.
Tell them that wanting to discuss the rental price came just at the right time! Say that you were planning to increase the rent to 1500 but since they have been so easy to work with you can delay a price rent for at least another year.
I agree with @Martin Maloney ; trouble free tenents are worth their weight in gold. If you know you are slightly higher than market already and the tenants have given you zero problems, I'd give them a break on rent to keep them....turning over tenants is a huge hassle and its expensive. I wouldn't go below market, but I'd do whatever I could to keep good tenants in place and prevent turnover.
Consider the cost of turnover. Spread that out over 12 months and perhaps I would lower it if you're indeed above market and these are indeed solid tenants.
They probably don't want to move but college students can probably move easily. They probably know they're paying above market and they look forward to thinking they figured out a way to get a better deal by moving. Think about how you'd feel if you shopped around for something and got a better deal. You'd probably feel like it was an achievement to be proud of.
So, unless there is some reason that yours is different, I'd give serious consideration to lowering.
Are they at the end of their lease?
If so, you could increase rent with and addendum or new contract if they want to. Be careful with rising the rent more than it is allowed within you state regulations, if that applies.
Other things to watch is the risk of having some vacancy and ultimately added cost to you at the end. If they are good tenants, I would negotiate with them. A good start will be between your current rent and the "average", shooting for a mid range. Unless your unit is way better than the comps and you feel is going to fill-up quickly, then yes, go ahead and keep your rent as it is or even raise it. Again be careful with having too much vacancy.
You knew your rent was high to begin with.
NEVER CUT THE RENT!!! EVER!!!
You're just setting the stage. Now they are in charge. And dumb college kids aren't really in a position to negotiate anything. They won't move over 50 bucks. And you can't define market rent to within a few tens of dollars. Every house and every location is a bit different. "Market" rent is only an average number. That means some are lower, and some are HIGHER. Nobody can put an exact number to the dollar on your property.
If they are good tenants AND you're already getting the high end of market rate, then I would consider not raising it for another year. Be reasonable and be willing to work with people, but you gotta have lines that don't get crossed. Lowering rent is one of them.
@Zachary Bellinghausen . No, we raise the rent on every single property every year.
Remember it’s going to cost them a lot more to move. I would kindly decline. Maybe put in an upgrade if needed.
@Zachary Bellinghausen I would resist decreasing the rent if it all possible. Have you considered an upgrade or giving them something intangible that they would want? That would allow you to pay a fixed price, and keep the rent the same. Best of luck!
Whats the rental market like out there now and how closely is your rental cycle tied to the academic year? If there are a lot of units currently available and it doesn’t look like you’ll get 1400 again anytime soon you may want to offer a month free at the end of a 2 year lease or something like that... To be honest I did this back in 2009 with my NYC landlord, they raised rent at a time when I could get a larger place for a few hundred less per month... needless to say the women wasn’t happy, but took 150 off my rent for a year, I moved after that and she was stuck with the vacancy for about 15 months...
Think the various options through.
If you leave it at $1400 and they leave, could you rent it for $1,400 again? Maybe, but it may take some time. One month of vacancy will cost you more than $1,400 which means you would have been better off giving the current tenants a $100 deduction.
If you drop it to $1300 you will still be close to market rate and your total loss is less than a month's rent. Not bad.
Drop it to $1350 and your loss is only half a month's rent, which is even better. You get to keep the good tenants and avoid the unknowns.
I would drop it. However, I would tell them the costs are going up and you can't do more than a $50 reduction in monthly rent. It will cost them more than $600 to move so they will probably stay.
Typically you should be raising rent on a lease renewal. If they are good tenants, explain what the increase would be, and then offer to forgo the increase as a compromise.
I think the big issue that most people are overlooking is that these are students......no matter what they are not going to be long term tenants......and they move pretty easy..... I move just about every year in college and I could pack most of my stuff in short time and dump the furniture and be gone in a matter of a couple of hours.
There are units in the SAME building for $1250...... very easy to move and save $150/month...assuming the units are near identical. So the market in YOUR building is $1250....again assuming they are the same units. The MARKET set your rent.... your building market says you are high....you local analysis says you are high.......
The typical principles for basically short term student rentals don't necessarily apply the same as a "normal" SFR. On a "normal" SFR I would probably not agree to any rent reduction and as most have stated its usually an increase.
For great low maintenance student tenants (not very common)..... that will be moving pretty soon no matter what.... I'd drop it to $1350...... that's $600 less a YEAR..... they move and I'm vacant a couple of weeks and its a wash already.....plus turnover costs for cleaning it etc etc....... not worth it....they are probably moving next year anyway, why eat that cost now?
I would not approach this situation the same as I would for a "normal" SFR rental. Drop it $50 and call it a day.
maybe ask the tenants if you could do $1,400 but put in a new fridge or some new appliances as a thank you for staying with. I see on facebook marketplace very nice used appliances going for $100-$200
Give them $25 off which will 'cost' you $300 for the year. If you go as high as $50 a month, then you might want to offer them $500 off the 12th month's rent instead.
I’d offer $1350, but 2 or 3 years. That way you are getting something (zero vacancy) in return for your concession.
drop rent a little, maybe 50, since you are above market and they know they can rent elsewhere cheaper. but counter on terms. Anything. Ask them to upgrade something small in the house or at least lock in a longer lease.
The illusion of choice. Would you guys like me to cut the price of rent to 1350? Or sign on for the next two years so that I won’t raise rent on you from 1400 to 1500 due to inflation? Either way you win.