Some homeowners are in the business of land-lording because they have to be, not because they want to be. They can differ from investor-type clients who usually anticipate and plan for losses and out-of-pocket costs. Things like expenses for advertising, repairs, preventative maintenance and of course, regular updates to keep their investments in peak condition. This ensures they stay competitive in the rental market and add maximum value to their portfolio.
Unintentional landlords may need extra guidance so that they consider the long-term investment losses and costs that can result from everyday decisions. But getting some owners to make regular reductions to their asking price on a marketed home, can be tougher than dieting during the holidays!
Reductions are key to finding tenants, even small ones help
Many owners struggle with reducing their asking price, even when faced with dismal interest. Stephanie Clark Property Management clients are provided a weekly report showcasing the successes and failures of their marketing campaign and includes targeted advice based on our expertise to make changes and hopefully have more success the next week. Our report includes the number of inquiries and showings as well as feedback from any showings. Showing feedback is very valuable, offering owners an unvarnished glimpse into why shoppers are not moving forward with renting after seeing their home in person. It may be price concerns, looks, amenities, location, disrepair or style.
What if the math ain’t mathin’?
Owners can be stubborn when their home fails to attract interest at the advertised rate – which many times is their “desired” rent price. It’s ok to linger at a price if you have a tenant in place paying rent while you market your home, but once a home is vacant, holding out for a specific price point results in a daily loss that adds up very quickly. Experiencing vacancy loss can be a daunting prospect, but it’s even more frightening when you calculate it by the day!!
Some landlords can’t fathom accepting a monthly rental price that doesn’t meet or exceed their mortgage payment and other monthly costs like insurance, HOA/COA dues, repairs and of course, the services of a property manager – EVEN an awesome one. Every owner I’ve ever met (including me) wants their rent achieved to cover all of their expenses PLUS a bit of profit. Unfortunately, this doesn’t always equal what the housing market will allow on any given year.
Vacancy loss occurs every day that your home is vacant/unrented
Failing to reduce your monthly asking price to procure a tenant more quickly can add up to a much greater YEARLY loss for owners. A home priced at $2,000 a month loses approximately $66 a day. This does not include advertising costs, lawn maintenance and utilities. That brings your loss up to about $76 per-day. That’s $532 per-week and $2,128 per-month. WOWZERS! Check this out: Vacancy Loss Charted
Price changes send out notifications in search engines!
We encourage our clients to lower pricing at least $25 a week to increase interest, refresh listings, send out notifications to shoppers using search engines, and hopefully encourage more prospective tenants to request a tour of the home and hopefully to fall in love with it and move forward to rent.
There is no guarantee, but by lowering the price, you will usually quickly see that interest increases noticeably, or even significantly depending on the size of your reduction. Larger reductions can result in MORE frenzied interest. Ideally you want to see several showings a week, at least.
Remember, just like in a sale, your rental home is only worth what prospective tenants shopping at that moment are willing to pay for it, not what you “need” or “want” it to be worth. Markets fluctuate from year-to-year and sometimes by season. Many things can impact the local rental market and the national rental market. It may be high or low mortgage interest rates, military rotations, the health of local industries or even a global pandemic.
$ + – % = # Do the math on vacancy loss $ + – % = #
When owners are on the fence about about lowering price or starting over with a new marketing plan, I find it helps to bring the DAILY loss to their attention. Most folks don’t realize how quickly it adds up until they see it in red ink. In addition to not having rent coming in, and incurring expenses like upkeep, utilities and advertising costs, homes that sit vacant can develop maintenance concerns which also cost $$$.
It’s far better to have a well-qualified tenant that pays a little lower rent than you were hoping for than to have a vacant home, sitting for an extended period of time. But remember, it’s ALWAYS better to have vacancy loss than to rush to an unqualified tenant into a lease just to achieve a higher rate. That higher rate comes with a higher risk for default later down the road that could be far greater than a simple rent loss. Think damages, court costs, attorney fees in ADDITION to vacancy loss.
Some losses may be tax deductible, but vacancy loss ain’t one of ’em. Invest your money in tax deductible expenses, like preventative maintenance and updating your home to keep it marketable. These expenses also ADD value, unlike vacancy loss which adds no value at all to your home.
That’s all I have today, now think it over and drop that price a bit to get a well-qualified tenant in your home!
Always, if you have questions, I’ve got answers!
Mary K. @ Stephanie Clark Property Management
Tags: Investment, Property Management, Rental Home, Vacancy Loss, Virginia Beach