Updated about 6 years ago on . Most recent reply
Leasing at Below Market First Year
So I just purchased my third rental property. My first two properties still have their first tenants. One has been there for 2 years and has already told me they would like to stay a third, and the other tenant has just signed on for a third year. Both units were signed at market value and I have not raised their rents as they have been very good tenants. However, it did take me 30-60 days to find each of them.
So for my third property, a condo/townhouse, which I just bought last week, during the time it took me from getting it on contract to closing, 4 more condos in the same complex popped up for rent. All are the same layout as mine, all include similar updates like mine, all have in-unit laundry like mine, one is asking for $850/month and the rest are asking $950/month, all from different owners/realtors. My expenses are around $880/month (PITI+HOA) since I purchased this with a loan and when I got it on contract I was estimating to get $1000/mo (the rental appraisal came out at $1,100 and my own research told me I could get $1000.)
My question now is, with my expenses at $880/month and a lot of competition at $950/month, what are your thoughts on renting it out for $900/month? I'd basically break-even the first year. I don't expect much for repairs since everything is in good condition. I would like the extra $50-100 a month, however every day that I go vacant I am losing $30 of income. With all the competition, I could be waiting a month or more to rent the unit out, basically eliminating the difference.
Would you rent it at $900/month, and then raise the rent back up to market towards the end of the lease? That way I can look for market rent while having a tenant in the unit.