If it makes sense in the market and keeps tenants in your property, lowering the rent on your investment property is worthwhile thinking about. As this case study shows, reducing the rent to remain competitive, particularly if you haven’t been able to find a tenant for a while, can help you lease your property in a challenging market.
As our Taylors Insight: Should You Ever Decrease The Rent On Your Investment Property? suggests, reducing rent may be worth considering to remain competitive in the current market, counter a long period of vacancy or keep excellent tenants in your property.
The following case studies illustrate how reduced rent marketing strategies helped lease vacant properties in a tough market.
Case Study 1
When Taylors Property Management Specialists first advertised a Woollahra apartment in early August 2018, it had been marketed professionally to stand out in a tough market at a price that was indicative at the time (refer to our The Importance Of Your Rental Property Standing Out In A Tough Market Insight). Furthermore, the apartment was in an over 55s complex, and thereby a reduced target audience brought an additional challenge.
Mindful of the difficulty in leasing properties in the $900+ per week price range at this point in time, the landlord listened to Marco’s advice and agreed to reduce the rent by $50 per week to be more competitive. The price was reduced on the web and the Taylors team conducted numerous home opens, doing everything possible to lease the property.
After ten weeks, the property remained vacant. Despite all his efforts, the desired level of enquiry and suitable applicants were not being achieved. Marco was concerned about the financial impact the landlord would incur from loss of rent over an extended vacancy period vs a property being leased quickly at a reduced rent for a 12 month period. Marco expressed his concerns to the owner and they agreed to trial a ‘price by negotiation range’ that was $680 to $730 per week. Although approximately $200 per week less than originally advertised, it was a reflection of the current market and therefore a reduction the landlord was willing to trial.
The trial marketing strategy commenced on a Friday afternoon and by the Monday afternoon, we had received more enquiries than we had previously, had arranged two private inspections and received a suitable application. By the Wednesday morning, we had conducted due diligence on the application and despite the lower end of the price range offered of $680, we secured the new tenant for $700 per week on a 12 month lease commencing the following week.
Case Study 2
When the owners of a 2 bedroom/2 bathroom modern apartment in a Maroubra security complex decided to move out of their property and re-let it through Taylors, the October 2018 market was very competitive. Not only were there a number of similar apartments in Sydney’s Eastern beaches available for rent, but there were lower than average potential tenants looking at properties.
When our client had previously rented out their property in 2017, we had been able to achieve $720 per week in rent for them. It was therefore understandable that given 12 months had passed, the client instructed Client Relationship Specialist, Stephen Todarello, to commence the advertising campaign at an increase of $30 per week.
After the first week on market, there had been no enquiry. The owner was strongly advised to reduce the rent to remain competitive and increase the likelihood of the property being leased more quickly. With both Stephen and the landlord being concerned about the financial impact of an extended vacancy period, the landlord agreed to decrease the rent the following week to $720 per week, the same rate as it had been over 12 months ago.
Again, even with a professional advertising campaign and regular home opens, there was minimal interest in the apartment and no applications had received. Unlike previous years, there had not been a substantial increase in demand for beachside apartments as summer approached. Stephen was listening to the market and the owner listened to Stephen. It was agreed to gradually reduce the rent over the remaining four week premium listing period, to a minimum of $650 to $670 per week, an amount that was financially viable for the owner in the long term.
When the rent was advertised at $670 per week, a strong application was received by a potential tenant in mid November, offering $650 per week. The owner and Stephen both agreed to accept the offer, resulting in the property being leased, the tenant signing a 12 month lease and moving in two weeks later.
If you’re looking for an experienced property manager who will help you deciding if a rent decrease is the right decision for your investment property, contact our team of specialists today.