Before my wife and I started buying rental properties, we were given some great advice from a friend. Our friend told us that other than buying right, minimizing vacancy was the key to success. He then gave us the following strategy.
- Always price your property equal to that of an inferior property. If potential renters views both properties and both are equally priced, yours will rent first. Even if other properties are comparable to yours and priced higher, you will still win. Price your property so that it becomes the best value and you will have more choice when picking tenants. You will also have fewer vacancies.
- If you don’t find a new tenant right away, lower your price weekly until you find the sweet spot. This will help you rent the property out faster and also make sure you aren’t left with a vacant property. For example, let’s say you have a property that you think should rent for $1500. In the first week you get some interest but no one who signs on the dotted line. Lower the rent by $25 to $1475. If another week goes by lower it to $1450 and keep lowering it weekly until the property rents. Even if you have to lower your price four times over four weeks to $1400. It is way better to lose $100 a month for 12 months, costing you $1200 than it is to let the property sit vacant for two months and lose $2800. Don’t get married to what you think the property should rent for, rent it for what the market allows. Also, make sure that when you lower the price, you put the words “PRICE REDUCED” as the first two words in the ad. Doing so attracts significant attention.
Our friend left us with one final word of advice, “It is better to subsidize a property by $100 a month for a year than it is to let it sit vacant for even the shortest time. Vacancy kills landlords.”
