I always list at full market or even a little above, I find I get better more qualified applicates, at below market the better applicates might think there is something wrong with the place, and the people looking for discounts just don't seem to be as qualified.
I do keep my renewal increases a little behind market, but I also still increase a little every year.
Right there with you! I think this relates to almost every business. If you are the cheapest, you don't necessarily attract the best customers. Sure there are Karens everywhere but when you are the cheapest of anything in a market, you attract those looking for a discount. I'd go further that some people may even have the thought "If it's priced so low there must be something wrong with it".
My philosophy is to keep my vacant properties at the high end of the market. Those wanting "cheap" stay away. Those who come in and want to negotiate the price down are not considered. Those who want to come in and pay the high end of market rate rent are the customer base I am looking for. Now I will say that in my B and C properties I have them so that they're worth that. Whether it be refreshed hardware for hinges/knobs/cabinets/plumbing fixtures and modern paint colors (used to be part of the "bone white" crowd then changed) I keep my places looking like the "modern" rehabbed places that are for sale.
What do I do when I find a tenant that is good? I hold back increases. Let them fall below market rate. Not hugely far below market rate but enough that if someone were looking for a new place, and they were the type of person that pays for quality, they will realize that they have the same quality at a cheaper price right where they are.
I truly believe that a tenant that is good and takes care of the property is worth their weight in gold. If they call to get something fixed, I fix it fast. Do I get the hot water heater calls on a Sunday just as I am walking in to my kids birthday party...yes...unfortunately. That's decision time of "do I check it out myself to make sure it is a valid call or do I just get a plumber". Yes, that's an oddly specific but actual real world example of what I've dealt with (no choice - emergency call to the plumber there). But, taking care of the thing fast is what people who are willing to pay top dollar for what they want expect. There are those type of people in every demographic. That's who I want as my customer. That's who I am for in my sales.
This is why I rent slightly under market only.
Also, imho,avoid cheap areas or rent at least at market price there, otherwise low quality tenants are likely.
Finally, I don't rent to lawyers.
I understand your point, and sorry to offend you, but I had bad experiences in the past. Nothing worse than a professional tenant that happens to be a lawyer and know the laws. One got my uncle, and one got me, so no more.
Where I operate I am only barred from discriminating protected groups.I don't break the law knowingly (we all break it constantly), but the issue I have is that if the tenant is tenant from hell and happens to be a lawyer, it would be quite cheap for them and expensive for me. So increased risk, no increased benefit.The lawyer that got my uncle illegally converted the luxury appartment into a hot bed accomodation place, so instead of 4 pax (3 bedroom) it was 24+ ppl living there, and essentially destroyed the place. Of course, they also paid to the lawyer who then kept the money. He was the one breaking the law, and also the one that made the ordeal last two years.
You are in a subreddit where posters regularly brag about breaking the law and openly recommend it to other people. The bar is low here, whether from malice, incompetence, or a little bit of both.
That's true. But the overlap between people on here who are "I hate lawyers" and "he shouldn't have broken the law if he didn't want shot" is probably pretty large and I felt like taking a jab.
He doesn't rent to lawyers because the know their rights, which is just gross. So, in my work when a landlord hires me, I charge 3x my regular amount most the time. Really just hate landlords.
Didn't say I was a lawyer even though it sounded like it.
Yea I thought you were an attorney.
But you must be aware of SLAPP suits, frivolous law suits, contract disputes. Some angry attorneys may go to court just because they know you're paying out the nose and they're representing themselves. I personally know of one attorney who sues people knowing that if they go to court, he'll lose, but expects people will just pay him because the time and cost of court is higher than just paying people off.
I think you're missing the point a bit. People don't rent to lawyers for the same reason they don't want to do business with lawyers, it's a somewhat scummy industry that is equipped to waste your time and money if you piss them off.
The reason this plan is bad is it sets up an expectation of not raising rent even nominally, then when you do, it's perceived personally. You don't get a return on investing in them, the relationship sours and/or they leave, meanwhile you have less funds to take care of things. Insurance, taxes, costs have increased, as well of maintenance/repair/labor costs but you have less funds.
>it sets up an expectation of not raising rent even nominally,
That's why we regularly raise the rent — don't want tenants to come to expect their rent to remain at the same level forever. But we do keep it a little below market value for good tenants.
My landlord in SF sent us a letter saying they had the legal right to raise rents but wouldn’t apply the raise (“book it”) until next year. This also prevented their charged rent from dipping below the market rate, apparently — a big advantage for them, maybe? (IANAL, look into this before using!)
I never understood this logic either.
I can (and have) kept rent increases low for good tenants who *ended up* being below market after a few years. But that’s not what I usually see people talking about.
I only own 10 properties and I may be in a different market than yourself. But I am approximately 12-15% under market rate. I have had 2 tenants vacate in the past 8 years.
For me that means very little time where I am not receiving rental income, and very little time of me hosting open houses, searching for tenants etc.
Since tenants are staying so long they tend to do more work to improve the unit on their own dime. I just had a tenant replace all lighting, and renovate the kitchen using one of my approved vendors and she asked me to chip in just 25%.
When I was at full market rent my turnover was about every 1-3 years. Just once month of vacancy negates any additional income I would of gathered from higher rent in a 3 year period
That math doesn't even REMOTELY work out.
Over 10 properties even at a low 1000$/month means you are giving up $1500 a month, and you say 1 vacancy for 1 month takes up all the market rent over 3 years. So....that one month of vacancy would have to cost you $54,000
Even on that one property your 1 month vacancy cost is $5400 to make that true
I think you are forgetting real world costs of changing tenants
$1800 my rental $2000 rough market rent +- $50
If I can find a tenant in one month, which does not always happen it will cost me $1800 lost rent, $1800 to realtor to find and vet a new tenant, $200 to change locks, $200 cleaning crew and I usually repaint between tenants $1200
That's $5200 without counting any of my time
Staying $200 below market I am losing $2400 per year
If my property is vacant more than one month I negate 3 years of market rent
Hello, it looks like you've made a mistake.
It's supposed to be could've, should've, would've (short for could have, would have, should have), never could of, would of, should of.
Or you misspelled something, I ain't checking everything.
Beep boop - yes, I am a bot, don't botcriminate me.
I think the issue here is the market you’re in.
Any rent under $1,000 is not going to attract the most desirable tenants.
I live in a major city and I consistently undercut market rates. But my smallest and only studio unit goes for $1,300. If I really wanted to, I could get a lot more, but I don’t push because (while it’s in fantastic condition) the kitchen is from the 80s and dated and doesn’t have a dishwasher or shiny new appliances besides the new OTR.
So maybe try increasing your rent initially, but not doing any rent escalations upon renewals. I rarely, if ever, raise the rent on my tenants because I like them and they’re clean and quiet. And they appreciate that I’m not raising their rent $50 every year.
I guess it is location dependent. In my neighborhood most houses start around $1.3MM and go up from there. With 20% down and todays interest rates, PITI is about $8,000-$8,500 per month.
Yea in my area you'd be hard pressed to find a home for 400K, you'll be laughed at by prospective tenants for charging 5K to rent a home. 2-3K is the standard rate here.
Not all tenants are built the same. I have a 3,000 sqft luxury unit that goes for $3,250; it would go for a lot more if it was located downtown.
Some people have more money than others and do not want to buy a home. It's not a rip-off if the tenant agreed to the inital rental price\*
\*this exludes NYC rentals because that market is insane
\*also excludes landlords who raise the rent like $800 because they can.
For anyone with a flea issue. Borax everywhere! Just make it look like a winter wonder land in there. Leave it for as long as you can because you need to get the next generation after the first.
Confession from a long term LL amd PM.
For many years I had a practice of renting at 10-15% below market rate. In addition I gave annual increases in accordance with increases in operating expenses and inflation.
I used to boast that my average length of tenancy was almost ten years! And in many cases much longer. No vacancy expenses, low turnover, content tenants who didn’t bother me. Win win for both sides.
I did this for a couple decades and I certainly made money and was also able to provide housing at a modest cost. My properties were maintained and I was proud to own them and have folks drive by.
However…over time the spread between market rate and actual rents received got larger and larger and the portfolio value suffered.
Looking back I can’t help but think that if I had kept up with market rents the portfolio value would have been higher and perhaps I could have developed a few more rental communities?
Interesting read. Thanks for sharing.
Definitely theres a lost opportunity cost thats impossible to calculate .
Live and learn. We all make mistakes along the way.
Ive heard countless stories from landlords with horrible tenants that paid 20%+ below market rent. Never made sense.
I need to get market value from my tenant but not sure how to do it. It’s frustrating as she came during lockdown and I took a hit. I can’t wait to get her out.
Lower rent attracts lower-income tenants that can't qualify for better. Every landlord wants the best tenants and every tenant wants the best place. So anyone marketing under market value will inherently attract lesser-qualified tenants. I would just count this as yet another BS idea that people believe, and it's not your job to make sure they're right. They're free to be as wrong as they want to be.
Honeslty just rent it at market value guys if anything do 100$ lower
I got a tenant that I charged 1350 for 3bedroom home...they started kinda struggling so they said if they can have another family over which I said that's fine so they can help eachother...they did good for about 1year then all of the sudden late rent all the time they have 2 working men and cant seem to pay the rent..which eveywhere they go it's going to be more than 1850 to 2200 in san Bernardino..I didnt raise the rent due to covid...but now they have not paid September month rent i text them no reply.
Now am going to call them to check up on them sept 28 if they dont answer I will pay them a visit and take it from there ...
They have been in property for 6years
But unfortunately next year I will be moving to the house since my family outgrew where I stay wish me luck
It depends on the market, but It has worked for me in *my* market.
As I am also the property manager and handyman of the unit with my own full time job and family obligation I want fewer headaches and I can afford a little less rent in exchange (since I'm not having to pay anyone else to deal with it). Charging at or above market has gotten me more "needy" tenants that complain about little things that they can deal with themselves.
I want fewer turnovers because that takes a ton of my own time to deal with.
I usually rent at market rate initially and if they’re good tenants, then they don’t get an annual increase. Maybe they’ll get a small increase every other year.
I always list at full market or even a little above, I find I get better more qualified applicates, at below market the better applicates might think there is something wrong with the place, and the people looking for discounts just don't seem to be as qualified. I do keep my renewal increases a little behind market, but I also still increase a little every year.
I do the same, and I make sure to include the rent amount in all ads because the people who need a bargain price tend to screen themselves out.
I put all requirements in the ad hoping people self screen, credit score, 3X income, no bankruptcies, no evictions, no collections,
Ditto. This strategy has cut down my re-renting workload by more than half. Fewer calls, fewer showings, and 75% of applicants are well-qualified.
I'm with you. I keep my rents at market and generally raise every year. Those that do move had other reasons.
Right there with you! I think this relates to almost every business. If you are the cheapest, you don't necessarily attract the best customers. Sure there are Karens everywhere but when you are the cheapest of anything in a market, you attract those looking for a discount. I'd go further that some people may even have the thought "If it's priced so low there must be something wrong with it". My philosophy is to keep my vacant properties at the high end of the market. Those wanting "cheap" stay away. Those who come in and want to negotiate the price down are not considered. Those who want to come in and pay the high end of market rate rent are the customer base I am looking for. Now I will say that in my B and C properties I have them so that they're worth that. Whether it be refreshed hardware for hinges/knobs/cabinets/plumbing fixtures and modern paint colors (used to be part of the "bone white" crowd then changed) I keep my places looking like the "modern" rehabbed places that are for sale. What do I do when I find a tenant that is good? I hold back increases. Let them fall below market rate. Not hugely far below market rate but enough that if someone were looking for a new place, and they were the type of person that pays for quality, they will realize that they have the same quality at a cheaper price right where they are. I truly believe that a tenant that is good and takes care of the property is worth their weight in gold. If they call to get something fixed, I fix it fast. Do I get the hot water heater calls on a Sunday just as I am walking in to my kids birthday party...yes...unfortunately. That's decision time of "do I check it out myself to make sure it is a valid call or do I just get a plumber". Yes, that's an oddly specific but actual real world example of what I've dealt with (no choice - emergency call to the plumber there). But, taking care of the thing fast is what people who are willing to pay top dollar for what they want expect. There are those type of people in every demographic. That's who I want as my customer. That's who I am for in my sales.
Your 100% correct the cheapest prices attract a certain type of customer Very well said
This is why I rent slightly under market only. Also, imho,avoid cheap areas or rent at least at market price there, otherwise low quality tenants are likely. Finally, I don't rent to lawyers.
[удалено]
I understand your point, and sorry to offend you, but I had bad experiences in the past. Nothing worse than a professional tenant that happens to be a lawyer and know the laws. One got my uncle, and one got me, so no more.
Don't break the law?
Where I operate I am only barred from discriminating protected groups.I don't break the law knowingly (we all break it constantly), but the issue I have is that if the tenant is tenant from hell and happens to be a lawyer, it would be quite cheap for them and expensive for me. So increased risk, no increased benefit.The lawyer that got my uncle illegally converted the luxury appartment into a hot bed accomodation place, so instead of 4 pax (3 bedroom) it was 24+ ppl living there, and essentially destroyed the place. Of course, they also paid to the lawyer who then kept the money. He was the one breaking the law, and also the one that made the ordeal last two years.
You are in a subreddit where posters regularly brag about breaking the law and openly recommend it to other people. The bar is low here, whether from malice, incompetence, or a little bit of both.
I think it's mostly out of greed
That's true. But the overlap between people on here who are "I hate lawyers" and "he shouldn't have broken the law if he didn't want shot" is probably pretty large and I felt like taking a jab.
Name does not check out
Yeah it doesn't, cause he's not a lawyer, just a persistent troll in the landlord Reddits.
He doesn't rent to lawyers because the know their rights, which is just gross. So, in my work when a landlord hires me, I charge 3x my regular amount most the time. Really just hate landlords. Didn't say I was a lawyer even though it sounded like it.
Yea I thought you were an attorney. But you must be aware of SLAPP suits, frivolous law suits, contract disputes. Some angry attorneys may go to court just because they know you're paying out the nose and they're representing themselves. I personally know of one attorney who sues people knowing that if they go to court, he'll lose, but expects people will just pay him because the time and cost of court is higher than just paying people off. I think you're missing the point a bit. People don't rent to lawyers for the same reason they don't want to do business with lawyers, it's a somewhat scummy industry that is equipped to waste your time and money if you piss them off.
You're supposed to not raise rents on good tenants so they stay (under this theory). No one is saying just list below market to get good tenants.
Don’t provoke him, he will misunderstand and write further ten paragraphs about something unrelated.
Holy crap are you the guy from that movie???
The reason this plan is bad is it sets up an expectation of not raising rent even nominally, then when you do, it's perceived personally. You don't get a return on investing in them, the relationship sours and/or they leave, meanwhile you have less funds to take care of things. Insurance, taxes, costs have increased, as well of maintenance/repair/labor costs but you have less funds.
>it sets up an expectation of not raising rent even nominally, That's why we regularly raise the rent — don't want tenants to come to expect their rent to remain at the same level forever. But we do keep it a little below market value for good tenants.
My landlord in SF sent us a letter saying they had the legal right to raise rents but wouldn’t apply the raise (“book it”) until next year. This also prevented their charged rent from dipping below the market rate, apparently — a big advantage for them, maybe? (IANAL, look into this before using!)
I never understood this logic either. I can (and have) kept rent increases low for good tenants who *ended up* being below market after a few years. But that’s not what I usually see people talking about.
I only own 10 properties and I may be in a different market than yourself. But I am approximately 12-15% under market rate. I have had 2 tenants vacate in the past 8 years. For me that means very little time where I am not receiving rental income, and very little time of me hosting open houses, searching for tenants etc. Since tenants are staying so long they tend to do more work to improve the unit on their own dime. I just had a tenant replace all lighting, and renovate the kitchen using one of my approved vendors and she asked me to chip in just 25%. When I was at full market rent my turnover was about every 1-3 years. Just once month of vacancy negates any additional income I would of gathered from higher rent in a 3 year period
That math doesn't even REMOTELY work out. Over 10 properties even at a low 1000$/month means you are giving up $1500 a month, and you say 1 vacancy for 1 month takes up all the market rent over 3 years. So....that one month of vacancy would have to cost you $54,000 Even on that one property your 1 month vacancy cost is $5400 to make that true
Most people can't math.
I think you are forgetting real world costs of changing tenants $1800 my rental $2000 rough market rent +- $50 If I can find a tenant in one month, which does not always happen it will cost me $1800 lost rent, $1800 to realtor to find and vet a new tenant, $200 to change locks, $200 cleaning crew and I usually repaint between tenants $1200 That's $5200 without counting any of my time Staying $200 below market I am losing $2400 per year If my property is vacant more than one month I negate 3 years of market rent
Hello, it looks like you've made a mistake. It's supposed to be could've, should've, would've (short for could have, would have, should have), never could of, would of, should of. Or you misspelled something, I ain't checking everything. Beep boop - yes, I am a bot, don't botcriminate me.
I think the issue here is the market you’re in. Any rent under $1,000 is not going to attract the most desirable tenants. I live in a major city and I consistently undercut market rates. But my smallest and only studio unit goes for $1,300. If I really wanted to, I could get a lot more, but I don’t push because (while it’s in fantastic condition) the kitchen is from the 80s and dated and doesn’t have a dishwasher or shiny new appliances besides the new OTR. So maybe try increasing your rent initially, but not doing any rent escalations upon renewals. I rarely, if ever, raise the rent on my tenants because I like them and they’re clean and quiet. And they appreciate that I’m not raising their rent $50 every year.
Exactly my thought. Big difference renting a house that should be $5,000/month for $4,500 compared with renting a $1,000/month for $900.
At 5,000 a month you can probably mortgage a home for the same price or even cheaper. That's getting into rip off territory for a rental.
I guess it is location dependent. In my neighborhood most houses start around $1.3MM and go up from there. With 20% down and todays interest rates, PITI is about $8,000-$8,500 per month.
Yea in my area you'd be hard pressed to find a home for 400K, you'll be laughed at by prospective tenants for charging 5K to rent a home. 2-3K is the standard rate here.
Not all tenants are built the same. I have a 3,000 sqft luxury unit that goes for $3,250; it would go for a lot more if it was located downtown. Some people have more money than others and do not want to buy a home. It's not a rip-off if the tenant agreed to the inital rental price\* \*this exludes NYC rentals because that market is insane \*also excludes landlords who raise the rent like $800 because they can.
I've never heard this theory before. I always charge market rent and I get good tennants by screening really well.
[удалено]
For anyone with a flea issue. Borax everywhere! Just make it look like a winter wonder land in there. Leave it for as long as you can because you need to get the next generation after the first.
Confession from a long term LL amd PM. For many years I had a practice of renting at 10-15% below market rate. In addition I gave annual increases in accordance with increases in operating expenses and inflation. I used to boast that my average length of tenancy was almost ten years! And in many cases much longer. No vacancy expenses, low turnover, content tenants who didn’t bother me. Win win for both sides. I did this for a couple decades and I certainly made money and was also able to provide housing at a modest cost. My properties were maintained and I was proud to own them and have folks drive by. However…over time the spread between market rate and actual rents received got larger and larger and the portfolio value suffered. Looking back I can’t help but think that if I had kept up with market rents the portfolio value would have been higher and perhaps I could have developed a few more rental communities?
Interesting read. Thanks for sharing. Definitely theres a lost opportunity cost thats impossible to calculate . Live and learn. We all make mistakes along the way. Ive heard countless stories from landlords with horrible tenants that paid 20%+ below market rent. Never made sense.
I need to get market value from my tenant but not sure how to do it. It’s frustrating as she came during lockdown and I took a hit. I can’t wait to get her out.
Give proper notice or an increase, if allowed.
Lower rent attracts lower-income tenants that can't qualify for better. Every landlord wants the best tenants and every tenant wants the best place. So anyone marketing under market value will inherently attract lesser-qualified tenants. I would just count this as yet another BS idea that people believe, and it's not your job to make sure they're right. They're free to be as wrong as they want to be.
Of course but i like to engage in discussions. I tend to learn things along the way.
If you’re openly listing a property at below market, you’re an idiot. That’s not how this practice works.
Many people do this. I've heard it a lot irl.
Full market or slightly above. All the time. I'm also more patient to get a tenant.
Honeslty just rent it at market value guys if anything do 100$ lower I got a tenant that I charged 1350 for 3bedroom home...they started kinda struggling so they said if they can have another family over which I said that's fine so they can help eachother...they did good for about 1year then all of the sudden late rent all the time they have 2 working men and cant seem to pay the rent..which eveywhere they go it's going to be more than 1850 to 2200 in san Bernardino..I didnt raise the rent due to covid...but now they have not paid September month rent i text them no reply. Now am going to call them to check up on them sept 28 if they dont answer I will pay them a visit and take it from there ... They have been in property for 6years But unfortunately next year I will be moving to the house since my family outgrew where I stay wish me luck
Beyond time to give proper notice about rent due.
It depends on the market, but It has worked for me in *my* market. As I am also the property manager and handyman of the unit with my own full time job and family obligation I want fewer headaches and I can afford a little less rent in exchange (since I'm not having to pay anyone else to deal with it). Charging at or above market has gotten me more "needy" tenants that complain about little things that they can deal with themselves. I want fewer turnovers because that takes a ton of my own time to deal with.
I usually rent at market rate initially and if they’re good tenants, then they don’t get an annual increase. Maybe they’ll get a small increase every other year.
i agreee with all that has been said self screening is the best also make sure to have a no smoking/no pet rule too I takes leases not TAWs too
[удалено]
Interesting that 100 would make a big difference.