Rent Increase

Is Your Rental Property Under Market? (Benefits And Drawbacks)

One of the clearest drawbacks to this question is that you are making less money per month on your rental by being under market. Another easy answer is that when you have a lower price, you will have a lot more people interested in your unit giving you a wider selection in terms of your tenants.

Now, asking for and receiving high doesn’t mean you won’t get a long term tenant or quality tenant. You can always get the full package but are more likely to attain that with a competitive price.

Asking for lower rent not only increases the odds of find a quality tenant but it usually increases the longevity of tenant. As a rule, long term tenants cost you less through repairs and loss of income during a vacancy.

The benefit of having a lower price is subject to the law of diminishing returns. You gain most of the benefit of being under market when you are just below market. You can’t avoid losing tenants to job transfers, loss of employment or increasing the size or needs of their family. You can prevent a tenant from finding a new property that is similar in qualities or amenities for the same or better price.

Keeping prices too low can also have some negative affects besides the fact that your investment is under performing. Tenants will inevitably connect their low rent to their requests for repairs and a lot of long term tenants don’t report repairs. This is not always a problem but there are many repairs that need to take place to maintain the properties in good conditions and to prevent problems from getting larger. Additionally, your rental property should turn over every 7 to 10 years. 

The longer a property is rented, the more likely there will be a much larger cost the rehab the unit.

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