Wife and I keep going back and forth on this… Her mother has been renting for 30+ years in the neighborhood and she says to try and rent it for 650 a month… The paneling however is old, carpet is old, and the front room has cracked sheetrock in several places… I’m thinking as is this place should only rent for 575 or so… We have someone interested that has family living across the street in two different houses… She said also she will be bringing her stove, frig, washer and dryer… That alone i should discount the rent??? i haven’t purchased any of these yet either…
Any ideas??
thanks I’m thinking i would rather have someone in my house that thinks they are getting a decent deal and would likely remain for many years due to family being near…
An important consideration for you before you pull the trigger on a purchase is what fair market rent will be before you contemplate discounting the rent because they might wind up being long-term renters. It’s great that they could potentially stay put for a long time; that would solve the problem of having to periodically deal with the issues of vacancy and screening new tenants.
Something else you should think about, though, is doing some remodeling to repair the damages that are there now. You don’t want to be a Slum Lord – and a property in disrepair will continue to deteriorate. Something else to consider is that a property that has multiple structural defects – regardless of how minor – can cause a tenant to have little regard for the condition of the property. If you don’t care enough about the condition of the property to worry about holes in the sheetrock, why would your tenant have any qualms about possibly adding to it or doing something worse?
I would recommend you put a little cash into the property and make it presentable. Ensure that you’ll have positive cash flow. If you want to discount the rent slightly (and it won’t cause your property to have negative cashflow) that’s your prerogative. But do make sure it’s worth living in. It’ll pay off in the long run. Properties in poor condition don’t attract quality tenants and bad tenants cause more trouble than they’re worth.
Peter’s right on here. You can go a little bit below market rent to give your tenants the feel that they’re getting a good deal. You don’t want to put them in there at a rate really below market rent like he states because it can take a long time to get the rent back up to a normal level. Slightly below market rent should drastically cut down your vacancies (a lot of times people simply look at the bottom line of what they’ll be paying each month rather than factor in property condition and other issues), but you don’t want it to take years to get your rent back to normal levels. Some states have laws about how much and how quickly you can raise rents.
Like the other guys said, you need to find out what the market is there. Most might disagree, but I myself would fix any problems the house has cosmetically or otherwise before I rented it out. This will get you more rent, happier tenants and a less likelyhood that things will need to be fixed anytime soon. I usually don’t rent out anything that I would not live in myself…but that’s just me.
Be careful in discounting the rent because the tenant is bringing appliances. You don’t want to end up “buying” their appliances from them through the rent reductions.
What I mean is, if you are discounting $100 per month because they are bringing their appliances, it is the same as if you were paying them $100 per month for their appliances. If they stay there 1 year, you will lose $1,200. If they stay there 3 years, you will lose $3,600. In the end of the day, you will be “paying” for those appliances without getting them.
IMO, if you rent out a house with ‘carpet that’s old, paneling that’s old,’ etc, you’re going to attract tenants that don’t mind living in a ratty place who are liable to trash it further. This could be a lose/lose situation.
Fix it and rent near the top of the market. You’ll attact a better tenant who cares what the home looks like and will (hopefully) keep it that way. :cool