4 Reasons Why Less Can Be More For A Landlord
Strange as it sounds it can often be a good idea for a Landlord to accept a slightly lower rent and in fact many experienced Landlords will often purposefully put their properties onto the rental market at a figure a little lower than market rent. There are 4 main reasons why this can be a good strategy.
Time is Money
Advertising at a lower price guarantees that your property will receive more interest as it will stand out from any similar properties being advertised. An empty property obviously results in no rental income but in addition also means that the Landlord is then left with the responsibility for paying the Council Tax and Utilities.
Lets look at an example of a property which should have a rental value of £750 pcm. ‘Landlord A’ puts it on the market for £750 and after two weeks and a few viewings finds a tenant ready to move in 3 weeks later meaning he starts to receive rent 5 weeks after putting the property onto the market. ’Landlord B’ decides to put her property on the market for £700 pcm making it the best value property of its type. She receives many viewings within the first few days and quickly secures tenants who given the amount of competition for the property are prepared to move in just 10 days later meaning that she starts receiving rent just 2 weeks after putting it onto the market. During the course of the 12 months ‘Landlord B’ only receives £80 less rent due to the fact that her tenants were able to move in sooner.
When a tenant feels they are getting a good deal they are likely to stay in the property for longer. The flip side is also true in that if a tenant feels they are paying top money for a property and that they might be able to get better value elsewhere than they are much more likely to look to move on at the end of their initial contract. Of course a change of tenant means expense to a Landlord in terms of a void period and the cost of finding their next tenants.
Sometimes Landlords have a misperception that they need to put a premium price on their property to attract quality tenants and that if they price lower they may somehow end up with less desirable tenants. This doesn’t work this way in practice and in fact the opposite is more likely to be the case. Which Landlord do you think has a better chance of getting good tenants- ‘Landlord A’ who has one interested party after 2 weeks or ‘Landlord B’ who after 3 days of viewings had 3 interested sets of tenants and had to make a choice on who they felt would be best for the property?
Landlords that price their properties a little lower than market rate normally find that their maintenance costs are lower than average. There are two main reasons for this; firstly if the tenants stay for the long term then they will normally take on a greater sense of ownership of the property and deal with little jobs as they crop up themselves. The second reason is that if tenants feel they are getting a good deal they are generally more likely to take good care of the property as they in turn feel like they are being looked after. The opposite of this is often seen when a Landlord imposes a large rent increase onto a tenant at renewal and the tenant pays this due to them really not wanting to move. In these situations you often then see that a lot more problems are reported and requests for the Landlord to redecorate etc are made as the tenants feel that with paying an extra rent they should be entitled to something more!
So there you go- asking for a lower rent can often be a shrewd pricing strategy for Landlords to take. It won’t work for everyone and of course the correct rent to ask for is very much dependent on type of property, area, size and how busy the market is. Its something I wanted to write about though as I’ve met many Landlords over the years who adopt this strategy and it is striking that so many of them are experienced Landlords with large numbers of properties, suggesting that it is an approach that is definitely working for them.
CLICK HERE TO READ 7 KEY QUESTIONS TO ASK YOUR LETTING AGENT.