SFH landlords: summer lease renewal COVID discount?

Question

Let's say your SFH (class A/class B) tenant's lease expires May 31 2020. This potential vacancy timing, imo, could prove more difficult than normal to find a new tenant. If you knew the tenant was seriously considering leaving, would you be willing to offer a discounted rate to sign a new lease? If so, how much of a discount? I think a potential vacancy looms large here, and landlords may be prudent to accept a loss for a year in exchange for the safety of having a tenant. Of course this will vary from owner to owner, but I'm curious to hear input on how landlords of BP would handle this conundrum?

I appreciate your input.

Kyle J. · Answer

Of course it varies by market and other factors, but my guess is it won’t be as hard to fill a vacancy as you think (and that’s if your tenant even leaves). I had to fill a vacancy last month and had no problem filling it. I was even able to raise the rent from what the previous tenants were paying.

There’s actually a similar post to yours here where it turned out offering a lowered rent was not needed: https://www.biggerpockets.com/forums/52/topics/826088-renter-changes-mind-and-stay-at-low-rent

Ultimately, if it were me, I would not lower the rent.

Nathan Gesner · Answer

This is highly dependent on your market and your skills as a Landlord. My market is strong for apartments and small homes, so I've actually increased rent rates on some of them. My larger houses are taking a hit so I've decreased rent a little on a couple. Once the people start to wise up to the exaggeration being fed to us and our country opens for business, I think we'll see the market bounce back quick and strong.

I do expect bad things to happen due to the shut-down but I think it's closer to two years away.

Michael Hahn · Answer

Thanks for your reply. I view the end of May as still a bit earlier in this whole Covid ordeal than as the aftermath of it, at least, potentially so. There are talks of multiple waves of the virus, especially if we re-open too early etc. I'm just factoring all this dragging on as a possibility, and of course could be wrong in that sense. Even if that doesn't happen, the end of May seems very early to me if we're talking about someone selling their house bc of covid and renting instead. The way I see it, a 1 month vacancy would roughly equate to a 10% rent discount for a year. I think I have significant risk to have a longer than 1 month vacancy as well.

Stephen J Davis · Answer

I would not discount the rent myself. This sounds like you are afraid that you can't find another renter. I think there will be more renters after the civid response ends. Huge numbers of people will never catch up on their mortgage and want to sell to avoid foreclosure. They will need a place to rent. This will be much like 2008, the Great Recession.

SFH landlords: summer lease renewal COVID discount?

SFH landlords: summer lease renewal COVID discount?

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