We see them all the time houses for rent 2, 3, 4 and 5 months and sometimes even longer. Some landlords are holding out for the "big bucks". I have heard the same thing on many occasions, oh,"I've got to have 'x' amount of money per month to rent this place. I'm looking for the big bucks."
I think that depending on the individual situation, sometimes this thinking can be a little short sighted in the current market we are in. In our area of Brevard County Florida vacancies are up this year by over 12%, to a total of about 15%.
There are some competitively priced properties for rent. Not to mention apartment buildings that are offering low and no security deposits. And a free month's rent (typically given at the end of the lease term).
If a house is listed for rent at $1200 a month and it takes the owner 4 months to get a tenant, the landlord/owner has just lost $4,800 to earn his $14,400 for the year. So, his rent would be $9600.*
Take the same rental and charge $900. Typically (mind you, I said typically), because it is more affordable, it will rent more quickly. Let's say it takes just one month for a tenant to move in. You have lost $900 to get that $10,800. (of course, we are assuming that the house in is good condtion for a new tenant to move in). In this situation his rent would be $9900.*
In my opinion it is always better to get a tenant in sooner, rather than later, provided you have picked a well qualified tenant that suits your screening criteria, and you have not forfeited your good judgement in putting that tenant in TOO quickly.
The house is not sitting empty for several months time. This is a concern today, as we are hearing about more situations where theives are entering vacant houses at night stealing a/c units, appliances, cabinets, flooring and even stripping the copper wiring out of the walls.
Remember, some insurance companies will not cover rentals that are vacant for over a period of 30 days.
So, consider carefully when pricing your rental to put it on the market. Make sure that your rent is in line or below market rent for your area. Nothing wrong with making your rental a good deal.
Over the past 13 years in being a landlord I have found that tenants stay longer if the rent is affordable and in line or a hair below market rent. Don't get me wrong, as the market headed up my rents went up by $25 to $50 per month, each year. I have had tenants that have stayed with me for 5 years and a couple that are going on 8 to 10 years.
If you make the rent too high, tenants are going to move. They will move to save several hundred dollars a month. For me, I have seen that often times the higher the rent amount the shorter the term of the tenant.
VACANCIES CAN EAT AWAY AT YOUR CASH FLOW. NOT TO MENTION,WHEN THE TENANT MOVES THERE ARE ALWAYS FIX UP EXPENSES AND REPAIRS COSTS WHICH CREATE MORE DOWN TIME.
*I have tried to keep this as simple as possible, as I used these figurse for illustation purposes only. I understand that landlords/owners must pay their mortgage payments, taxes, insurance, assessments, repairs, maintenance, etc out of these monies.
In this post I am stating my opinions from my experiences in being a landlord/owner in Brevard County Florida. Your experiences in a different part of the country may vary.
This article is authored by Sandy Shores, Melbourne FL REALTOR.
South Brevard County, Florida Space Coast.
that for you
Sandy - This is good fundamental knowledge that every landlord or prospective landlord needs to understand. You cannot assume 100% occupancy. Even in high-demand areas, charging more than the going rate is risky and can lead to the situation you describe. Whether selling or renting, the market sets the price.
Hi Sandy, This is great information. I have seen those signs too. Unfortunately for landlords in nearby Fort Collins, the City ordinance prohibits more than 3 unrelated parties to rent a house. So, a four bedroom house, in a College town with traditionally higher rents, may sit vacant waiting for a family, instead of students whose parents can afford 1/4 of the rent....The Ordinance was passed to "protect property values",. I agree with you in those cases the Landlord is going to have to lower the rent so that the house does not sit vacant for another 3 months.
Erik, As landlords we must be cautious in what we are doing and where we are pricing our rentals. It is imperative that we know exactly what the market is doing. Over pricing can come back to bite you in the butt.
Hey Mary, How was your weekend? Well that's interesting information - how does the city find out that more than 3 unrelated parties are renting? I can't really say that I disagree with it though - as a landlord I don't really care to rent to people that are unrelated. I want to know that one person (typically the one that signs the lease) can handle the entire rent on their own. I don't want 3 or 4 separate checks for a percentage of the rent owed between them. It can be a real hassle. I hope you have a great week!
Hey, Well, I think that is probably going to turn out to be good news for you - that someone else got the listing. Unfortunately, I don't think that those owners will get their rent regardless of market conditions. If it's over market - I'm with you, I think it will sit - indefinitely! Sometimes it works out for the best for us when we don't get a property. Take care.
Hi, Sandy. Here in Jupiter, I can't keep a rental listed for more than a couple weeks. Landlords are getting asking price... I wish I had 20 of them!
Hey Colleen, Wow! Not here. If they aren't priced exactly at market or below here, they sit forever. Sometimes they still sit forever. Lucky for you, there. We currently have an overabundance of rentals on the market. Thanks for sharing - I appreciate it. Hope that you are well!
Another well reasoned post. I am always impressed with your knowledge and expertise, especially in the area of landlord-tenant programs. I am sure that anyone reading this as a landlord could do worse than to look at their focus.
thanks for your reply. I had an awesoome weekend! Hope you did too. i think the City finds out when the next door neighbors complain... then the Landlord is in trouble. I never owned any property within the City limits - and agree, 3 or 4 rent checks is ridiculous.
Hey Fred, You are so very kind. I love that fact that you come to visit me here all the time on my site. I don't really know what I would do without you! Thanks for being you!
Hey Miss Mary, So glad to hear that you are doing well and had an awesome weekend! AHHHHHHHHHHHHHHH... I know about that one.....the neighbor complaining - been there, done that - have had the neighbors complain about my tenants before.....can't blame the neighbor. SO TRUE - that, indeed, is a very effective way for the city to find out - LOL. Take care and I'll talk to you soon!
You make a good point about how the better priced rentals tend to stay occupied longer. I've got several properties in the $800 price range that have been occupied for years. In my experience the properties with the higher rents around $1500 or so tend to take longer to fill and the tenants don't seem to stay as long usually about a year then they move on. If possible on the higher priced rentals I try and the get the tenants to do a lease option so a portion of their monthly payment will go toward the downpayment on the house once they're able to qualify for a loan.
The smartest strategy seems to be to price it competitively and keep the house full. Rental owner forget to figure in the cost of a vacancy if they are inexperienced.
Hi Justin, I agree - here around the $750 to $850 range seem to stay occupied longer. In my experience, people that can afford to pay $1500 in rent often times don't have to rent. They eventually move on to buy. Thanks for the input. How are things going there?
Hi Jean, I agree - competitive pricing is so important! Good to keep the houses full (as long as you're not undercutting yourself as a landlord). On my personal rentals I usually have at least one house that is in transition at any given time - tenant moving in or out. But try to make the down time on it is short as possible. I hope that you are doing well! I enjoy having you here!
No doubt. 2 months or so of vacancy to eat up the entire year's profit from the rental. Better to have the rent a little lower and get it occupied than hold out and see it sit vacant for months.
The different experiences of the agents here really bring home the fact that real estate is extremely localized. One area may rent fast, two blocks away may take forever.
Hey Rob, I couldn't agree with you more. So very true. But some people are so stubborn about it, they like to hold out for top dollar. It just doesn't make mathematical sense, does it?
Hi Brian, Real estate is very localized...you are correct. It is funny how areas differ so much. And it is ever changing, also!