In the last 5 months I lost 4 good-paying tenants in my highest priced units when they were laid off of their jobs. I didn’t know the circumstances at the time they gave their notice, and didn’t bother to ask. I chalked it up to typical turnover. I also lost 4 not-so great payors at the same time. My current vacancy rate is 25%. My experience prior to fall 2008 is 8%.
I did my usual fix-up and put them back on the market at the previous tenant’s rental rate. I didn’t understand my error until mid-November.
All these units continue to sit empty, and I’ve lost $12k to vacancy so far (small potatoes, really, but straight out of MY pocket) and spent another $4k in fix-up because I didn’t ask my exiting tenants the right questions: “Why are we losing you?” and “What can we do to help you stay in your home? It’s expensive to move!” I’m sure there are a few more good ones for an exit survey, but those are the obvious two.
I’ve never had such dialog with my tenants before, but I can see the need is there.
I need to be the best option at a very attractive price because the rental market has changed drastically in a very short period of time. People are highly price sensitive right now, for good reason!
In response, I’ve now reduced the advertised rents $50-100/mo and I’ve quadrupled the number of calls I’m getting. And this is in December, a notoriously slow time. I expect to get them rented fairly quickly after the holidays. I’ve been a landlord for 14 years and have never reduced rent. I guess there’s a first time for everything.
Some of the obvious lessons I’ve learned from this recent experience (certainly not comprehensive):
track your marketing response & keep a pulse on your market
when you see a change in conditions (and you’ll know because you’re tracking your marketing and listening to your tenants!), be prepared to change the way you do business
keep your ear to the ground and know your tenants’ financial business so you can jump in before it’s too late
don’t be afraid to reduce payments and rework notes/rents in order to salvage a good relationship. (Maybe Jeff Bennett can elaborate on this one)
5)Stay on top of collections/evictions. If you’re going to lose someone anyway, better do it sooner rather than later, on YOUR schedule.
- Get notes and liens (i.e. car titles) for back rent or deposits. Ryan Needler opened my eyes to this strategy.
Hopefully this post can get the ball rolling with others’ good ideas about how they’ve adapted their business or the changes they’re seeing and how they’re preparing to cope.
Happy Holidays to all!