Do You Keep Up with Market Rents?
According to a Rent.com survey, as many as 80% of property managers across the U.S. over the last couple of years have raised rents. Have you raised rents this year? Mom and Pop landlords often mistakenly charge lower than market rent. When I mentioned this on MrLandlord’s Facebook page, a landlord responded: “I’d rather be slightly lower than market than have a vacancy. Making up for a month of lost rent takes a long time even if you’re getting more rent monthly.”
Tons of landlords are losing way too much of their potential profits by charging lower-than-market rents because they are scared of vacancies.
What hurts the cash flow even more is one who will not raise the rent in fear of having a vacancy.
My response: I hear that excuse often from Mom and Pop landlords. However, I think it is important for landlords to learn how to fill their vacancies faster. Tons of landlords are losing way too much of their potential profits charging lower than market rents because they are scared of vacancies. What hurts the cash flow, even more, is that usually, the same landlord that keeps their rent lower than market is the same one who will not raise the rent during the tenancy out of fear of having a vacancy, so they lose even more in potential profits which can become significant over time.
How Lean is Your Real Estate Operation?
My colleague, Walter Wofford, who recently taught at the National Landlord Convention, runs a LEAN real estate operation. Below, I’ll let him give you an example of what I mean in his own words.
“I have a lean organization. Not that I’m lean; my organization is lean. I try to build processes. I got tired of answering the phone. My phone has rung four times in the last five minutes. I’m just a small operator, and so to put systems in place is critical for me. We use signs in our business, good-looking signs, and it drives people to our website. There is no phone number on it. When they go to our site, I take the time (by video) to tell people how they can be qualified. If they know they can’t be qualified, then they’re wasting my time. Both of my sons are property managers and I asked them, ‘How much of your staff’s time is wasted showing prospective homeowners or residents houses when they don’t qualify?’ The immediate answer was 90% of my staff’s time. I don’t have that staff. I can’t do that.
If prospects can’t follow directions, they’re not going to get a house from me. They go to my site and there is a video that tells them what to do and we’ll use Podio to process it. We’ll use virtual assistants and the like, but we don’t show them houses. We’re selling the dream of homeownership, not a particular house. The dialogue sometimes goes like this:
Them: “I want to see your house.”
Me: “I’m sorry, but you can’t see my house. I don’t have time to go show you a house unless
you get qualified.”
Them: “How do I get qualified?”
Me: “Go watch the video.”
Them: “You mean I have to watch a twenty-minute video?”
Me: “Only if you want a house.”
Walter Wofford has been in the real estate game for over 34 years and shares tons of strategies to show landlords how to do less and make MORE!
Lease Origination Fee
There are many fees which professional property managers charge residents that mom and pop landlords miss out on. A frequent contributor to the Q&A forum and regular attendee of our Landlord Conventions recently shared last week how he decided to try one of the ideas he had heard at a Convention. He was astounded by how much money he may have been losing out on over the years. The landlord shares the story below:
“How much money have I lost?? I’ve heard about the lease origination fee a little bit, but never gave it much thought until this last convention. The lease origination fee actually made it to my to-do list. I threw it out there today through a text when someone was asking about the total to move in. I told them the rent, security deposit and the $100 lease origination fee. He asked me, through text, about half hour later why the fee was so high and that he’s never had one that high.
Okay, two things: 1) The first feedback said that it was too high, 2) HE’S HAD THEM BEFORE!!! So my dumpiest rental has an interested party that has HAD origination fees in the past on apartments, and the potential resident just thought mine was high. Okay, fair enough. I’ll drop them a bit in the future, but they’re on the menu to stay!
In the discussion on our Forum that followed this landlord’s revelation, not to my surprise, another landlord questioned whether he thought it was a good idea or not.
My Response: I will continue to encourage landlords to get out of their own little “do-it-all-yourself” landlording world and visit apartment communities or even professional property management companies that manage single family rentals in your area. Go and actually witness their leasing process and the fees they charge. If you take time to do this one simple exercise, many of you will be utterly amazed at the amount of additional money they collect as simply standard operating procedure. Am I saying that you need to charge all the same fees? Not necessarily, but at least know what your competition is charging and intelligently consider your options. Also be sure to check state laws regarding the legality of charging fees, because in a few states, like Massachusetts, some fees are not allowed. That’s another reason why it’s suggested to study what successful and established professional property managers are charging during the leasing process.
That’s just smart business; instead of simply saying in theory how “you” would respond. Stop looking at things only through your limited landlord lens and truly see what others are doing and how their customers respond. Good for the landlord who tried the idea and kept his mind (and notebook) open to new ideas. And most importantly, for applying and “integrating” the idea into his menu (his rental business system).
Is Your Asking Price for Rent Too Low?
There are several ways and website tools to help determine comparable rent prices in your area.
For example, here are just a few websites that you may find helpful:
Provide a zip code or address to find local properties that are available to rent.
- RentBits – Track average rental rates for the last 14 months via the Rentbits directory.
- Rentometer – Rentometer is the easy way to compare your rent with other local properties.
- Zillow – Zillow offers “Rent Zestimate” data that can be found by entering any address into their search.
- Ziply – Enter an address to find out a property’s projected rent amount and assess the marketability of the property by examining crime rate, school ratings, demographics, and more.