I saw a lot of new landlords trying to put below market rent in hope of attracting good tenants? It's actually a bad idea, why?
1. Below market rent makes your property suspicious. Renters may think there is something wrong with your house and some of them won't even bother checking.
2. Below market rent will definitely attract renters who otherwise can't afford higher rent, especially in desirable neighborhood.
3. Less money in pocket for maintenance. In a long run, deferred maintenance will make your property lose value in BIG way.
4. Below market rent makes your property and properties in your neighborhood less valuable. By lowering your rent by $50 bucks a month, it's $570 loss a year given 5% vacancy. In an area where CAP is 6%, you just made your house $9500 less in value. Think $9500 is small money? If you have 10 units, your asset decreases by $95000! In such tight market, if you try to refinance or open a credit line but hit LTV limit, you will regret a lot by not renting at market price.
Unless there is very high vacancy, I will always try to rent at market rent or slightly above market rent for well maintained unit. I never had problem filling in the unit in short period of time. The key is to well advertise your unit by well taken pictures, detailed descriptions, features, but definitely not by lower price!
1. Below market rent makes your property suspicious. Renters may think there is something wrong with your house and some of them won't even bother checking.
2. Below market rent will definitely attract renters who otherwise can't afford higher rent, especially in desirable neighborhood.
3. Less money in pocket for maintenance. In a long run, deferred maintenance will make your property lose value in BIG way.
4. Below market rent makes your property and properties in your neighborhood less valuable. By lowering your rent by $50 bucks a month, it's $570 loss a year given 5% vacancy. In an area where CAP is 6%, you just made your house $9500 less in value. Think $9500 is small money? If you have 10 units, your asset decreases by $95000! In such tight market, if you try to refinance or open a credit line but hit LTV limit, you will regret a lot by not renting at market price.
Unless there is very high vacancy, I will always try to rent at market rent or slightly above market rent for well maintained unit. I never had problem filling in the unit in short period of time. The key is to well advertise your unit by well taken pictures, detailed descriptions, features, but definitely not by lower price!
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