- Joined
- Oct 10, 2007
- Messages
- 601
How do you determine what the rent should be and be comfortable with your decision?
I think most investors will not have the same answer to this question.
I am again faced with this dilemma and will try to go over all of the numbers and assumptions in describing this case.
Condo townhouse in Hamilton with B-rate tenants and properties.
The asking rent is $1250 plus utilities.
All expenses (mortgage, insurance, condo fees, property tax, property management, vacancies and maintenance) come to around $900-1000. The property is cash-flow positive.
The problem is not finding tenants for that price. Some landlords are even pushing it to $1325 ( with higher vacancy).
The problem is with keeping quality tenants for longer than one year. Usually they relocate to another place to buy or for cheaper.
In my experience a tenant who is leaving means few things:
1. One to two months vacancy between tenants - ( the places to do not show at their best when a B-tenant is the occupant, they show much better empty, clean and sometimes staged) - Average lost revenue $1250-2500
2. Extra cost. Cleaning, and small renovation or just paint touch up. Average cost $500-600
3. Tenant Finding fee (half month rent) or if doing my self Time to advertise and show the place, find and move new tenants - priceless, but let's say $650
Every time a tenant leaves in one of those townhouses the real cost is somewhere over $2000, plus stress and extra work.
This is Ontario and we do not have security deposits to offset some of the cost.
And here is the dilemma: What would you do if you have an A+ tenant, who rented it for a year @1250, who always pays on time, keeps the place spotless, communicates like a pro and it is the perfect tenant in every way, but now can only pay $1150 and will stay for few more years?
Do you let that tenant go and look for another tenant or do you continue to enjoy the worry-free property with somewhat reduced, but still positive cash-flow.
In my experience the best tenants are who stay the longest, pay their rent on time and communicate promptly when issues arise.
Would you take your chance with finding a new tenant for the higher rent, knowing that you may be vacant again in one year?
Or would you stay with the current tenant and pay from your pocket for the stress-less, worry-less work-less investment?
You will take a financial hit in both cases and the simple math shows that you will pay less today if you keep the tenant at a reduced rent.
I am on the other hand happy to see another tenant go this month, will happily clean and renovate and re-rent to someone else at market rent. So this is not by any means a blanket strategy to keep tenants by reducing rents. Bu a strategic move to keep the best.
What is your take on this?
I've heard phrases like "My properties are always full and my prices are always above average!" Anyone agreeing with that statement care to analyze their numbers and renting strategies? I am always open to learning.
Please share your experience and logic in similar situations.
I think most investors will not have the same answer to this question.
I am again faced with this dilemma and will try to go over all of the numbers and assumptions in describing this case.
Condo townhouse in Hamilton with B-rate tenants and properties.
The asking rent is $1250 plus utilities.
All expenses (mortgage, insurance, condo fees, property tax, property management, vacancies and maintenance) come to around $900-1000. The property is cash-flow positive.
The problem is not finding tenants for that price. Some landlords are even pushing it to $1325 ( with higher vacancy).
The problem is with keeping quality tenants for longer than one year. Usually they relocate to another place to buy or for cheaper.
In my experience a tenant who is leaving means few things:
1. One to two months vacancy between tenants - ( the places to do not show at their best when a B-tenant is the occupant, they show much better empty, clean and sometimes staged) - Average lost revenue $1250-2500
2. Extra cost. Cleaning, and small renovation or just paint touch up. Average cost $500-600
3. Tenant Finding fee (half month rent) or if doing my self Time to advertise and show the place, find and move new tenants - priceless, but let's say $650
Every time a tenant leaves in one of those townhouses the real cost is somewhere over $2000, plus stress and extra work.
This is Ontario and we do not have security deposits to offset some of the cost.
And here is the dilemma: What would you do if you have an A+ tenant, who rented it for a year @1250, who always pays on time, keeps the place spotless, communicates like a pro and it is the perfect tenant in every way, but now can only pay $1150 and will stay for few more years?
Do you let that tenant go and look for another tenant or do you continue to enjoy the worry-free property with somewhat reduced, but still positive cash-flow.
In my experience the best tenants are who stay the longest, pay their rent on time and communicate promptly when issues arise.
Would you take your chance with finding a new tenant for the higher rent, knowing that you may be vacant again in one year?
Or would you stay with the current tenant and pay from your pocket for the stress-less, worry-less work-less investment?
You will take a financial hit in both cases and the simple math shows that you will pay less today if you keep the tenant at a reduced rent.
I am on the other hand happy to see another tenant go this month, will happily clean and renovate and re-rent to someone else at market rent. So this is not by any means a blanket strategy to keep tenants by reducing rents. Bu a strategic move to keep the best.
What is your take on this?
I've heard phrases like "My properties are always full and my prices are always above average!" Anyone agreeing with that statement care to analyze their numbers and renting strategies? I am always open to learning.
Please share your experience and logic in similar situations.