What to Consider Before Lowering Your Rental Price

Corporate rental prices

It is a question that all landlords eventually ask — when is lowering rental price a good idea?

If you set the price too high, you run the risk of scaring away attractive potential tenants and creating higher turnover rates, keeping your rental vacant longer than necessary.

But if the rental price is too low, you attract otherwise unqualified or undesirable tenants more likely to damage your property or default on their lease.

Low or high, mistakes can cost thousands.

Before you raise, lower, or negotiate rent prices, consider the following:

Compare the Competition

To determine how much you should charge for your rental property, look at other rentals in the immediate neighborhood.

Focus on “comparables” that are as similar to yours as possible. The more comparables you find, the easier it is to decide if adjustments are appropriate.

Doing your homework gives you an advantage over haggling with prospective tenants trying to negotiate rent prices.

Important comparisons include:

·       Location

·       Age of the property

·       Number of bathrooms/bedrooms

·       Square footage

If multiple properties share basic aspects, they are considered comparable. The assumption is that rent prices should be likewise comparable.

Corporate rentals prices

Make Appropriate Adjustments

In a perfect real estate world, you could identify several comparables and simplify the task of setting the lease rate.

But in the real world, no two rental properties are identical. Lowering rental price rates – or even raising them – might be appropriate if there are significant differences in the amenities offered by otherwise-comparable properties.

Factors that can influence rental prices include:

· Specific neighborhood – Crime rate, schools, parks, walkability score, commute time, distance from hospitals and grocery stores, etc.

· Updates – When was the last time the properties were renovated? Are the fixtures and appliances updated and modern?

·   Floor plan – Tenants prefer open floor plans over older railroad-style apartments.

· Interior features – These are the things not typically found on realtor-generated comparable sheets – number/size of closets, storage space, balcony, fireplace, etc.

· Floor level — Upper-floor units are generally preferred. The exception is when the building is a walk-up. Because people dislike carrying groceries up multiple flights of stairs, rent is usually lower for walk-up units above the second floor.

·The View – Conversely, upper-level apartments in buildings with elevators command more rent, especially if the view is pleasant.

·Availability – For new prospective tenants, will the property be available when they need it, or is there a waiting list?

When Lowering Rental Price Rates is the Right Move

The best argument for lower rent is when you are charging more for your property than the neighborhood can bear, especially if you aren’t offering an upgrade over available comparables.

Good tenants are literally worth their weight in gold. If they pay on time, follow your rules, take care of the property, and respect other residents, you should value that positive landlord/tenant relationship.

When good tenants look for reasons to renew…give them one. It’s worth giving them a small rent reduction as a renewal incentive if it retains them as a long-term tenant. Although it slightly reduces your short-term cash flow, it saves you much more in the long run. 

Good tenants make you money, while bad tenants cost you time and money – late/missed payments, property damage, defaults, futile recovery efforts, and unnecessarily-high turnover.

And once a tenant moves out, properties can sit empty for months.

In fact, nearly 60% of vacant rentals stay empty for two months or more, and 1 in 16 remain vacant for over 2 years. Of special relevance, do-it-yourself owner-landlords are more likely to experience longer vacancies.

Alternatives to Lowering Rental Price Agreements

When clients try to negotiate rent prices, what they really want is greater value for their dollar, and that is the key to gaining or retaining their tenancy.

If you are open-minded, you can offer incentives besides lower rent, and you both walk away happy.

For example, you could offer:

·       Free cable/internet

·       Fresh paint

·       Carpet cleaning

·       In-unit washer/dryer

·       Upgraded appliances

The Best Alternative to Lowering Your Rental Price

There will always be housing cycles and outside factors that impact supply and demand within the rental market – the economy, the job market, the time of year, and most recently, the COVID-19 pandemic.

To minimize fluctuations and achieve consistency, find an additional source of well-qualified potential tenants. One way to do that is to branch out into corporate housing. This means serving tenants with very specific needs and who don’t have the time to go the traditional house-hunting route.

This eliminates the hassles of only renting to private individuals.

The reasons listed above for justifying charging fair market value are exactly what corporate tenants are looking for. And they are everything you are looking for in a tenant.

Corporate tenants are typically higher-end, stable, and established. They will pay for convenience and flexibility. Affordability is less of an immediate concern than accessibility. Because you provide more, they expect to pay more.

Corporate Housing by Owner is the bridge between your property and corporate travelers who are looking for turnkey short-term rentals. For more information, contact CHBO TODAY.

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