Hold strong or Drop Price? Marketing strategy questions

Hold strong or Drop Price? Marketing strategy questions

Nick LittletonPro Member
Bellingham WA and Nashville, TN · Member since 2021 · 12 posts · 6 votes

I know it's December/January which is not an ideal time to neither sell or rent. Private landlords in the neighborhood that we invested in are renting their SFH at $2950, but they listed them in August/September. We finally had our house built and are trying to market it for that same price, but have had 0 bites so far. It also doesn't help that another investor that purchased 14 houses cash in the same area is undercutting everyone else and renting for $2550 through a property management company. So now that everyone knows the backstory - what would be some strategies that any of you have utilized to stand out and stay competitive? We have come to the realization that we will more than likely have to drop our initial price in order to stay competitive, but is there anything else or other marketing strategies that anyone else out there has used to say hey, pay more here, it's worth it because of X Y or Z.

Besides dropping the monthly rent some these are some other ideas we are thinking of, feel free to comment on any of these ideas.  We've toyed the idea of including internet and/or cable in the rent, but then that could get messy unless you pay for the most expensive package available, which doesn't sound ideal.  We have also thought about advertising that we are private land lords as opposed to a large property management, but we also don't want to get taken advantage of. We are currently just marketing online, but are going to purchase a for rent sign and print some flyers off to pair them with the rental application - has this been an effective method for any of you?


Any and all advise is much appreciated, and my wife and I both thank you in advance.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Nick Littleton:

Drop your price. Keeping the high price but adding more benefits is just a money shuffle.

Is the PM "under-cutting" your prices or are you priced too high? You've had "zero interest" which indicates it's priced too high. I suspect the PM just knows the market better than you and they are pushing realistic prices based on what the market supports. Demand is typically lower in winter months, particularly around the holidays, so a wise investor/PM will lower the price to keep occupancy rates up and then bump rates higher in the summer months. If you reduced your price $500 a month on a six-month lease, you will make more money than if you sit vacant for one month. Then you can bump your rates up and get on a summer-summer lease cycle.

Advertising that you are a private owner instead of a PM? That can bite you, as well. A lot of bad renters prefer working with private landlords because they are pushovers with non-existent or weak policies to deal with bad renters. Many Tenants prefer working with professional property managers that provide better services, more responsive maintenance, have a proven track record, and are beholden to a higher power (real estate commission).

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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    3y

    Nick,

    Depending on how much equity you have in the home you could always do a Bridge loan until the home sells. If you need the cash/equity now a bridge loan is great to gain access and still allow the home to sit on MLS.

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Nick Littleton:

    Drop your price. Keeping the high price but adding more benefits is just a money shuffle.

    Is the PM "under-cutting" your prices or are you priced too high? You've had "zero interest" which indicates it's priced too high. I suspect the PM just knows the market better than you and they are pushing realistic prices based on what the market supports. Demand is typically lower in winter months, particularly around the holidays, so a wise investor/PM will lower the price to keep occupancy rates up and then bump rates higher in the summer months. If you reduced your price $500 a month on a six-month lease, you will make more money than if you sit vacant for one month. Then you can bump your rates up and get on a summer-summer lease cycle.

    Advertising that you are a private owner instead of a PM? That can bite you, as well. A lot of bad renters prefer working with private landlords because they are pushovers with non-existent or weak policies to deal with bad renters. Many Tenants prefer working with professional property managers that provide better services, more responsive maintenance, have a proven track record, and are beholden to a higher power (real estate commission).

    The DIY Landlord Book4.7248 Reviews
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    Pull the listing, take new photos and relisting it at a slightly lower price.  I know my PM doesn't push the rent prices and lists them slightly below market value.

    Ask yourself if you list it for $200 a month less than it is currently rented for vs leaving it vacant for another month, at the end of the year are you further ahead or behind?  Also look at the units to see what those include-are utilities extra or included?  Many tenants don't look at that and just look at the list price, so listing it for $1200 and them paying $200 in utilities to them seems better than renting it for $1400 including utilities.

  • Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
    3y

    Sounds like your unit is priced too high - and not by a little bit. 

    If you're trying for 2950 and they are at 2550 you are priced 15% more than they are. So why would a tenant go with you? Most tenants are looking for affordability. They don't care about the extras - they want the basic stuff that's clean, functions and looks decent enough. 

    Only things that have helped me rent for more were basically more updated and cleaner units. One of my properties is a duplex - there is another one just down the street - literally 5 or 6 houses down. I rent for $50 more a month than they do per unit - despite having less parking. Why? Their unit is nasty, old, dirty, although bigger. Mine's cleaner and more updated. 

    As a tenant - why would I pay more for a private landlord? Also I don't think paying for utilities is a good idea unless you are forced to due to units not being on separate meters. Lots of people likely look at the price of the unit or even filter search results by price. Good chance you get filtered out since your price is higher, although you include internet. 

    Washer and dryers are one thing that comes up from time to time. Here in the south it's common to provide the hook-ups only. Other places may benefit from providing a washer and dryer. Expect some maintenance calls from this stuff though and try to get cheaper/used equipment. That's the one idea I have - that may be good for $25-50/month. I can't imagine anything will get you remotely close to $500 unless you have more beds/baths. 

    The demand is also a lot lower in the winter. I think you have 2 options - lower your price and rent it out. Or wait until early next year when people start getting their tax returns back and hope for the best. You'll likely still have to lower your rent. 

  • Investor · 93465 40475, 40403 · Member since 2022 · 19 posts · 5 votes
    3y

    Have you thought about  maybe do a "rent to own strategy" that the extra 15% you are asking for rent could be used as a "down" by the tenant for purchase of the property in the future? That may give you an edge over the other properties and if the tenant decides not to purchase after a fixed term you maybe at that time can reprice the rent???? 

  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    3y

    People always think there is some secret trick you can do to sell or rent a property for over market price. There isn't. If you are priced too high, no one will care that you are paying for cable. If you want to rent the place, drop the price and screen tenants appropriately. The market is speaking and you are hearing it, but you don't want to believe what it's saying. Trust me, you aren't alone! In most places, the market is soft and winter is not awesome for LTR vacancies. 

    Trust me- lowering your rent so that it reflects reality will put an end to your stress and be much less expensive that two more months of vacancy. 

    Best of luck!

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Nick Littleton

    This will be a continuing trend in 2023- not only on LTR but STR's as well.

    You really don’t have any other option but to lower your price.

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  • Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Like you said, it's the worst time to sell or rent. You should hold strong until Feb/March when demand picks back up, stay competitive with price as well. If you can, price alittle bit under what everyone else is priced at. 

  • Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    3y

    Everyone wants a deal, at least not getting ripped off, including your prospective tenants. You are essentially asking how can I rip someone off and trick them into paying more than what they should.

    Sellers also like to think that there is going to be one person who thinks their house is worth more than everyone else on the street, because of ______ (insert "nice tree", "great sunsets", "how close it is to XYZ" or any other irrelevant feature)

    Buyers are not stupid and neither are renters. If you have a great deal, they will find you, no matter how bad your marketing is!

  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    get ready for more of this with the recession.

    Either drop your proce or offer something else of value.

  • Member since 2022 · 21 posts · 11 votes
    3y

    How about keeping the monthly price where it is, but offer a $1700 first month's rent (move-in special) with a year lease or a $1000 (first month's rent) move-in special with a 2-yr lease.

  • Real Estate Broker · Seattle, WA · Member since 2020 · 62 posts · 33 votes
    3y

    You may want to consider switching your target renter.

    Do you have the option of furnishing the unit? If so, maybe consider contractors like traveling nurses who can afford to pay a bit more, albeit on a shorter term lease. That could buy you some time before selling once the market heats up again. 

    As an investor-friendly agent and investor myself, I know what you're going through! Happy to answer any other questions you may have! 

  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    What is your TOTAL REI and financial picture?

    1.  In previous posts you have 10 acres tied to your primary house.   
    2.    What is your monthly payment including property taxes and insurance on this property?    
    3.  What is this property?  What is the neighborhood like?   Example 3/2 in new Subdivision.  Subdivision is 50% built out.   In top school district.  Or,  It’s a 2/1 waterfront property in a tourist area.  
    4.  How do your jobs look?   What is your outlook on the market?    

    Scenario1:  Life is good.  Monthly payment with property tax and insurance is $2,300 and you can eat it for a year.  Just leave on the market as both for sale and a rental.   

    Scenario 2.  You’re uncomfortable with your jobs and the economy and can’t keep making the payments for a year.   Put everything up for sale.  Put more hooks in the water.   Subdivide the 10 acres and put say two lots up for sale and your primary value and the new house.  Good time to cash out gains no tax on your 2 year primary.     

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Nick Littleton

    What did you end up doing?

    7e investments53 Reviews
  • Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes
    3y

    It sucks that you're in this predicament but I have heard of multiple landlords that are having to lower their prices. Hard to compete with other properties that are that much cheaper.

  • Nick LittletonPro Member
    OP
    Bellingham WA and Nashville, TN · Member since 2021 · 12 posts · 6 votes
    3y

    @Chris Seveney We ended up lowering the price down to compete, and we upgraded some amenities in the house for ours to stand out a bit more (IE fancy blinds, a permanent TV wall mount, an oversized washer/dryer, and a sliding glass shower door).  We have received more inquires about it now, but nothing has stuck.  I really like @Jose Fernandez 's idea, thank you for that suggestion. If nothing sticks within the next week or so, we might have a Move in special deal if the lease is signed before February.

    @Marcela Hoag I like that idea a lot! Unfortunately the house isn't close to any hospitals, and I am trying to cash out refinance the house so I need someone on a 12 month lease to help the financing.

  • Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
    3y

    @Nick Littleton

    It's always price versus like-kind. Same with selling. As others have mentioned, look at like-kind for comparison. Garage vs no garage. Newer inside versus dated. Bright inside versus dark. I look on Craigslist and Rent.com for comparisons, and goto open houses. If everyone offering discounted 1st month's you need to do that as well imo. At the end of the day, like you said, your lender is just going to care about consistently collected rent. I like to improve to market of materials used, but limit amenities as much as possible to keep rent lower to tenant. If they want super duper cable, they can buy it. The flipper and builders in my town paint all the walls light gray, white trim, use a grayish vinyl planking through most of the house, install white cabs, ss appliances, have nicer countertops, and use brushed nickel or bronze a lot. There is no secret, its a rinse and repeat scenario. Play the role of renter, or have a friend do it and let them know why they would or would not choose you.

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