I still have no tenant in place, and my unit has been vacant for over a month now. Five weeks to be exact.
Of course I'm dealing with a vacancy at the exact time that my mortgage payment has gone up (due to increased property taxes) and the building inspector has mandated about $1,000 of maintenance expenses. I also took the opportunity to remodel the bathroom and have the carpets cleaned.
I've run through the slush money in my business checking account, and if I don't get somebody to pay a deposit by the end of this month, I'm going to have to take the mortgage payment out of reserves!
I still get calls daily, but people are either unqualified ("how many felonies is too many?") or are looking for something bigger/cheaper or they seem interested but never follow through with an application.
I've considered waiving the deposit requirement in exchange for a (markedly) higher rent payment. I've also considered lowering the rent if I don't get somebody in there soon. I'm showing it again this afternoon. Please let this person rent my unit!!!
June 23, 2009
Still No Tenant - Cash Getting Tight
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I would give them the option of the large deposit or the waived deposit with the markedly higher rent payment. That will make people think they are getting a deal (or at least they'll get a feeling of power from having some options), and may spark interest from someone who has trouble getting a large sum together at once. And within a few months (depending on the figures involved) you'll have the amount of the deposit on board, anyway.
NEVER waive or lower a deposit. You will just attract the wrong type of tenant. If your showings have declined and people object to the price before looking at the unit, your rent is too high. Rents go down when unemployment goes up and the economy is weak. Drop your rent in $25 increments every few days to a week until the unit rents.
can you rely on family members to help out until the unit is rented?
I might give the option to pay the deposit out over two or three months rather than waiving it altogether because you might want an incentive for tenants to keep the place in good condition, even if you've more than covered the cost in higher rents. But I don't see much of a problem with lowering it--might not be a bad tenant, just one without a lot of upfront reserves.
But I would first try lowering the rent just a little bit. I just signed a lease on a new apartment at $50 per month below the original asking price and it felt like a steal to me (even though I logically know that it wasn't).
Or try a move-in special. Hike the rent up 25 a month or so but make the first month half off.
I like the idea of paying the deposit over a period of time. One classic reason people rent is that they have trouble saving (in this economy anyone with a big chunk of change is likely trying to buy for the $8k from the govt!)
I wouldn't waive the deposit except for a special situation (someone with an 815 credit score, no criminal, with twice the required income -- maybe).
Agree the rent is probably too high.
What we did to get one of our houses rented was run a special - 1/2 off first months rent - it rented almost immediately! Maybe give that a try?
I agree with everyone else. Get creative without lowering your standards. You might find good tennants that just need some flexibility if everything else pans out.
This is no time to draw a line in the sand.
As others have said, I wouldn't recommend lowering your deposit requirements.
Have you called those who didn't rent from you, and asked what they didn't like about it? You can gain a lot of insight that way if you can swallow your pride.
The market may very well be telling you that your rent is too high. Have you researched what other rents in the area are?
Don't go without a deposit. If it stays unrented, will this affect your decision to buy the townhouse nearby to rent out?
What is the possibility of lowering the rent? How will that affect the cash flow rate of return on the property?
Don't go without the security deposit. That would be a HUGE mistake. You may regret it big time.
The bottom line here is that the rent you want is too high. Lower it by 50 or 100, ideally enough to change the first or second digit.
If one unit unrented is affecting you this markedly, consider if you have 2 or more units unrented. You're obviously not handling this business as well as you should be -- probably because you think you can always lean on your family to pay for your poor decisions.
All good ideas! I particularly like the move in specials.
Based on the level of interest I've had, I don't think the rent is too high - although I'm certainly not opposed to lowering it if I need to.
The people who haven't liked the unit are those I expected not to like it. It's a 50 year old duplex after all, and occassionally I'll get some preppy college kids or somebody who is in the mood to save money but is used to living in much nicer places. After visiting, they realize they like the amenities of their 5 year old apartment building better than saving a couple hundred dollars.
I've got two parties who say they want it now, and both are ok with the rent and deposit. We'll see if I can actually close the deal!
@ Anon - I have sufficient cash flow from other properties right now to deal with this vacancy indefinitey - and even if I had to dip into reserves I can pay myself "rent" for over a year before I hit the bottom.
@ LAL - The vacancy I have isn't at the duplex that's right next door to my new planned purchase, so it won't affect my decision to move forward with the purchase. If I WAS dealing with a prolonged vacancy in the other duplex, I may in fact be hesitant to pick up the property next door.
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