(Newswire.net — April 30, 2019) — Nowadays, the housing market can be insanely competitive. That’s why more landlords and property companies are finding themselves in sticky situations when it comes time to lease to new tenants.
Larger apartment buildings have low occupancy rates, smaller buildings with fewer amenities are struggling to compete, and many building owners are flirting with deals, specials, and rent credits to get new residents to sign on. While it may be tempting to toss out a deal here and there to entice tenants, it’s often a mixed bag. Here’s why.
It might attract the wrong tenants
At the end of the day, the landlord-tenant relationship is just that: a relationship. If it isn’t working for one party, chances are it likely isn’t working for the other. Especially when it comes to smaller properties, finding the right tenant who respects their living space and causes minimal problems is paramount. Unfortunately, while deals are a great way to help you find a pool of applicants, they aren’t always so great for finding the right ones.
If a prospective tenant’s primary focus is the deal you’re offering, be it a free month or waived security deposit, it could be an indicator that they’re not in the best financial position, even if their credit report might say otherwise. If you find yourself with a tenant who signed on for an easy deal but cannot consistently pay their rent each month, then you’re losing money and possibly facing a costly eviction process.
Even if you have what seems to be a cut-and-dry case, there’s always the possibility that you won’t recoup your legal fees. Consider that before offering any crazy specials.
It’s often “lost money”
Many landlords are pricing units lower and lower to remain competitive, particularly in larger markets. So on top of regular maintenance, the occasional repairs, and a potentially fiscally irresponsible tenant, many building owners have difficulties turning a profit on their rental properties.
Plus, if you’re an independent owner, you’ve likely considered making some key upgrades to increase equity and give your property that added bit of curb appeal. If you’re offering consistent specials coupled with lower rent, you can just about say goodbye to that new Everdrain™ roofing you’ve been eyeing.
When it comes to rental deals, the reality is that it’s simply money you’re giving away. While there’s a great deal of emotional investment in the real estate market, especially if your property is one you’ve personally worked on, the bottom line is that rental properties aren’t just fun, passive income ventures. They’re businesses in and of themselves. That means you need to think not just like a landlord, but like a business owner to succeed. A deal might not get you there.
Alternatives that work
Though it might seem as though even considering offering a deal could spell the doom of your income property, there are plenty of alternatives that will better appeal to tenants while still securing your bottom line.
First, you can consider a free rental application. While many properties use this non-refundable application fee as a way to make a quick buck, offering a free application fee shows that you’re truly committed to finding the right tenant for your building without coming across as though you’re scamming them out of that fee.
Another alternative is offering or sponsoring community events. Whether these are potlucks for your tenants or movie nights where you provide the food, it’s still a bit of a “freebie” that serves a greater purpose. It gives you a chance to deepen your relationships with your tenants while also providing them with a fun social outlet.
For the real estate market, deals are a risky prospect. On one hand, they can get tenants into a unit quickly. On the other hand, they have a lot of potential to hurt your income streams. Always make sure that, if you’re going to offer a deal, it’s a smart one. If you’re thinking like a business owner, you’re already one step ahead.