There are pros and cons to lowering the rent to secure a good long-term tenant. As a landlord, you know that the biggest hassle you will experience is dealing with a bad tenant. Good, long-term tenants are pure gold in the landlord business. That said, don’t go so low on your rent that you end up losing money. Some risk, some reward should be the goal.
Calculating the Minimum Rental Price to Stay Profitable
When you are considering how low you can go, you need to gain an understanding of all your expenses, so you can ensure you are at least breaking even. Consider your mortgage, taxes, and insurance, as well as a budget for any repairs or recurring maintenance you need to do on the property.
Downside of Lower Rents
Aside from the obvious, making less money, you also run the risk of attracting tenants who can’t afford much rent. This might be ok, but you risk finding tenants that don’t have secure employment and might not be able to make rent on a couple of occasions. To get good tenants, the rent should be high enough that they have secure employment to always pay the bills.
If tenants have been recommended to you because of their excellent payment history and ability to take care of the property they live in, consider negotiating the cost of the rent. In normal circumstances, you probably set your rent price a little higher than you need so you can make some profit. It’s ok to lose profit margins for the right long-term tenant. You will cash in down the road when you go to sell the property and it is in pristine condition.
Rent prices should always be negotiable. That said, be sure you don’t discriminate against any certain demographic because you think they can’t pay rent. The decision you have to make is if you want to come down on rent because you have a great long-term tenant lined up.