Real estate sales and single family rental markets tend to counterbalance each other. When the sales market is “soft”, rental homes will usually be in higher demand and market times are shorter as a result. Conversely, when the sales market is performing well, as it is at the moment, rental properties move more slowly. Therefore landlords and property managers have to find ways to stimulate interest and be aggressive in their strategy to secure tenants quickly. In a market like Hampton Roads, where average rent is $1400+ for a quality rental, buying becomes a viable alternative for well qualified prospects.
RENT REDUCTIONS - The low hanging fruit in any effort to get a tenant quickly is aggressive pricing. Tenants are shopping to get the best bang for their rental buck. Generally the lower priced of two similar properties will rent more quickly. Landlords often make the mistake of pricing the property at or above the market initially to test the water. After a period of little activity they relent and lower the price, expecting a quick result. The danger in this strategy is that properties become “stale” in the MLS, leading prospects to question condition and move that home to the bottom of their list of potentials. They may assume the property is inferior in some way and look at more recently listed properties first. The moral of the pricing story is to be aggressive early in the marketing cycle if you’re trying to get results, not later when interest has waned.
REDUCING INITIAL COSTS – It’s expensive to relocate. Utility deposits, security deposits, pet deposits, rent, and moving and/or storage expenses all put a strain on the prospective tenant’s budget. Two of the more effective techniques are discounting the first rent installment or reducing the amount required for security deposit. You will see these strategies used frequently in multi-family communities. Discounting rent isn’t as expensive as it might seem at first, since a $1500/mo rental home loses $50 of income each day it sits empty. If a rent discount gets the home occupied more quickly, the landlord can realize a net gain. Discounting security deposits can be tricky, since the landlord is essentially giving away some “insurance” against tenant damages at the end of the lease. Most property managers would advise against reducing deposits. However, very well qualified applicants with good references and credit history have demonstrated they are responsible in their conduct, so reducing deposit could make sense for those prospects.
FLEXIBILITY OF TERMS – Everyone likes to feel as though they have some leverage in a negotiation, and offering flexibility on the length of lease, due dates for rent, and/or number and type of pets, can induce prospects to take a closer look at your property. Larger homes tend to attract families, and those with school aged children will be sensitive to being displaced during the school year. Offering shorter or longer leases to coincide with their desired turnover date can put you in a better position to get a commitment from them. Roughly 60% of all tenants have a pet – so you instantly triple the pool of available renters by allowing pets in your investment property. Flexible payment dates can sometimes help for tenants whose income stream doesn’t sync well with the traditional “due on the first day of the month” model. Questioning prospects and paying close attention to their responses might help craft a leasing arrangement that provides the landlord a quicker result and the tenant a more attractive deal.
INCREASING FINDERS FEE – Managed properties are normally listed in the MLS and available for any agent to show. Showing rental properties can be a lot of work, so agents naturally want to get the best return for their time. Offering a higher finder’s fee is a good way to induce more showings and encourage other agents to aggressively market your property.
OFFER THE OUTGOING TENANT AN INCENTIVE – Properties are frequently marketed while the outgoing tenant is still in residence. Realistically, the departing tenant has nothing to gain from helping you re-rent the unit. The marketing process is just another of many inconveniences associated with their move. Providing incentives to those tenants to be flexible in allowing access and promoting the property when showings occur can speed re-rental and generate goodwill in the transition process. Incentives of this type can take a number of forms – so it’s best to consult your property manager and brainstorm the options.
Marketing costs and incentives should be given careful consideration, especially in a slower rental market. The property managers at TREG understand the practicality of adjusting marketing strategies and pricing to adapt to market conditions, as well as the value of building strong relationships that foster cooperation with owners and tenants alike. If you own investment property and would like to have a pro in your corner, call TREG Property Management at 757-512-7225.