My recent article on Tata Group’s innovative $8,000 housing units got me inspired to think of new ways to solve my problems. Right now I’ve got four big ones – four vacant units I really want to fill. I’ve got three risky ideas that might help me fill them. And I really, really need your feedback on these. I haven’t tried any of these yet and your objections (or supportive comments) will help me make up my mind.
Idea #1 – Ditch the credit check
I’ve long thought that the credit check is the least important background check I can perform on prospective tenants. I’ve had many good tenants in the past who had previous financial problems, but were working through them. Often these are the result of a divorce. In addition, right now we’ve got a boatload of people with bad credit who still need a place to live.
I’m also thinking of the many successful businesses who focus on serving people with bad credit. There’s at least one company that promises to help rebuild your credit by selling you a computer with regular monthly payments. No doubt many of their customers default (and lose their computers), but the company makes up for this by charging a hefty premium for its product. Frankly, its computer offer is a horrible deal for anyone with good credit, or the money to pay cash for a computer.
If I do this, I’ll advertise it – otherwise, what’s the point? But as a result, I expect to get many, many prospects with many other problems. This is going to bring some shady people out of the woodwork. To compensate, I’ll have to be extra vigilant with my other background checks. I absolutely will not rent to anyone with a shaky income, bad criminal record, or poor landlord references. A good comprehensive screening service like NTN Online will help me with this.
I’ll also have to make darned clear to these prospects that I will immediately begin eviction proceedings if they miss any rent payments.
Idea #2 – Provide moving assistance
Like eliminating the credit check, this is a way to remove barriers to moving. Many people want to move out of their current apartments, but won’t do it because it’s just too much of a pain. If I can make the move a little bit easier, perhaps I can convince some folks to, well, make the move.
The risk in this is that I won’t be able to do it! As noted before, a reputation for keeping promises is absolutely vital for success in business. I may not be able to personally help with moves depending on what else is going on in my very busy life, so I’ll have to find another resource. I also don’t have an enclosed trailer or pickup truck – just a pretty big SUV.
Idea #3 – Offer a promotion
By “promotion,” I mean a bonus for somebody who rents from me. The traditional promotion for landlords has been a month of free rent. This often attracts prospects who can’t really afford the apartment, and therefore have to be evicted just a couple of months into their tenancy. I would greatly prefer some other kind of bonus, not directly related to the cost of the apartment. My wife suggested gift cards to one of the local department stores.
The second risk of any type of promotion is that the tenant will skip on the unit and take the promotion with him. There is a traditional solution to that, as well – don’t give the tenant his bonus up front, but wait for a few months. The problem with this is that when I tell a prospect “you can’t have the bonus right now, but you’ll get it in three months,” the prospect may think: baloney. He doesn’t know that I keep my promises.
My idea is to give the bonus in three installments, the first coming when the tenant signs the lease, the second and third coming in four-month increments. This way my prospect will have an immediate incentive, and reasons to stay.
While we’re at it
These ideas augment, but don’t replace, the other things I must do to get my apartments rented. I still have to cast a wide net for prospects. I still have to prepare the units well for new tenants. I still have to be organized and prepared.
The problem is, those methods aren’t doing the job any more. Vacancy rates across New Hampshire are way up, and I’m seeing dozens of vacancies. Rents have been mostly stagnant here for years. This in a state that is less affected by the economic downturn than many others. I’ve got to employ some Tata/Apple/Henry Ford thinking here – make a splash, offer something new and necessary, and start winning some of these battles.
Please, please, please let me know what you think of these.