As a property manager, I dislike rent increasing as much as I dislike firing someone. Those are my personal feelings on the matter. However, I am capable of carrying out instructions from the owners to increase the rent and I do. I also feedback to the them what took place after wards. Before that, we explore the pro and the con...
THE BEGINNING
When we originally rent a property out, that is the time to bring it current with the market. Once in the market place, if priced right, in good condition and can be shown, it will prove itself one way or the other. At some point, it will rent. Mission accomplished and investment protected
COMMON REAL ESTATE FALLACY
Sellers of Real Estate as well as landlords share the following dynamic in common. For sellers, if a place goes under contract too quick or the response is above average, they feel they gave it away or lost money. Same with landlords. If it rents too quick or the response is great, they under-priced it. NOT SO
INTRUDER ALERT
What we are after is a result. It is a calculated one where we send a intelligent deliberate message into the marketplace and we expect and want a reply from our efforts. When we get it, we should finish what we started and not let human nature go wild with regret, doubt or let greed have its way
RETURN ON INVESTMENT
A place that is priced right for rent is one where the tenant or renter is getting good value for their money and that is the skin in the game for them. If one doesn't mesh or meld with the property, establish a connection of roots, then you will have what they call in the business a high turnover. This is a slow eating away of the return on investment and maximum potentials
STEADY RETURN ON INVESTMENT
You actually want the opposite. A long term, steady renter who is happy and where the investment is protected for the short and long term hold. Accomplish that and you have a guaranteed result paying off nicely. Trying to milk a situation, while possible can lead to self-fulfilling problems
MONEY GOING OUT
Your expenses to rent, increase with every vacancy that comes up. During that time, repairs and updates have to be made and lets not forget the loss of revenue while the place stays vacant. Remember, we want money coming in & very little going out. In some cases, a vacancy is also exposed financially
AT RISK
Insurance policies have clauses to the effect that if a home stays vacant for a certain length of time and there is a vandalism or fire, you are not covered. Read the small print. For homes, they become attractive nuisances for homeless, vandals, squatters and random nothing else to do kids
AMPLE ADVANCED NOTICE
Ideally, there are laws and procedures that govern and help to mitigate any losses to the owner and professional property managers practice them when they can. In California, on a month to month tenancy, 30 days notice must be given so that both parties can make a change mitigating their losses
STANDARD OPERATING PROCEDURE
Furthermore, some rental contracts have clauses where the landlord has the right to show it during the notice period and that the tenant must cooperate within reason. Why? So the landlord doesn't have a too much of a pause or loss in between the renting times.
GAIN WITHOUT RISK?
Once someone moves in, everyone involved wants it to work out for the long term. One of the ways to disturb that is to raise rents too soon after someone moves in. Sure, there are reasons to do so but they all come with risk as does any gain.
CONTRAST SPEAKS
Just because you can raise the rent doesn't mean you should. If you have good paying tenants that keep up the property and are good neighbors, what price do you put on that? The only way to appreciate it for many is when they experience the lack of this. The contrast wakes people up. Experience knows this
EVERY CLIENT IS DIFFERENT
I have clients who all think differently in regards to how a rental should be rented and why. That means one way doesn't cover it all but instead, as a professional, I have to carry out each owners instructions but with the understanding we pow-wow and explore all avenues. Here's some examples of that
SCENARIO #1
I have a place that is running at maximum and has been or a while. Tenants pay the rent on time or before time, make little repairs on their own and are very good neighbors. The rents are a little below market but I see the trade-off. The return on investment here exceeds bank or Wall Street promises. The owner wants to raise rents. I spoke against it. We ended up doing so and I had to hear the following
One tenant was barely making ends meet but will forever keep their promise to pay on time every time. However, they are on a pension and are aware that they can get more bang for their buck outside California. The increase wont kill them, but has them thinking these thoughts
SCENARIO #2
I get a call from the owner who relies on me asking me why we don't raise rents on this rental. I remind them of all the repairs needed, that the unit is not a house but a manufactured home and that the tenants are already at their limit. They have been there for years and the return on investment is about a good 8% as it stands. These people cannot afford to pay a penny more. Leave it alone
SCENARIO #3
Beautiful empty home that was just vacated and that was renting for top dollar becomes available. The previous tenant stated that they loved the place and didn't want to move but at this high rent, they would never save any money to buy their own place. The owner raised the rents and they moved
INCOME & OUTCOME PENDING
Now, the owner gets to have their dream of top dollar and we have it on the market in pristine condition empty and sitting. Why? Our target group for this area is specific meaning someone would have to be making $100k to $120k a year to afford it. Meanwhile it sits until we find this renter.
PLUG THOSE LEAKS
There are may more scenarios and each owner has their own beliefs. A rental is a like a small boat that if it develops a tiny leak, the whole boat is in jeopardy or at risk. Leakage in anything is not good. Repair the exposed area and get it sea-worthy (rented out again) and let it sail all the economic seas over time
If it is working....if it is not broken....do not fix it holds here. Of course owners privileges override this
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