Letting time can be a daunting time for property owners: after all, every day that the property is empty for costs you money. But making a decision in haste will just make things worse: not only might the tenant applicant be less-than-suitable, but the property owner could settle for below market rent.
Here are some pointers on how to avoid that panic from affecting your investment.
Allow enough time for marketing
First of all, make sure you allow enough time for marketing the property. While many landlords will happily sign up the first applicant at the first open home, the experienced investor takes a more savvy approach. They’ll start promoting the property within the 21 day notice period (for a periodic tenancy), and then stick to their goal of finding the A1 tenant.
Standing firm isn’t always easy, especially when the feedback from tenants isn’t what you expected.
Unexpected feedback can cause a panic reaction
It’s not unusual for tenants to try tactics such as saying “the asking rent seems very high”, or “there’s a lot of property to rent at the moment, we’re also looking at three other properties.”
The panic reaction sets in because many landlords aren’t skilled negotiators, or because they’re not up to speed on market rent. This lack of confidence can mean that landlords get thrown off balance very easily, whether the tenant feedback is correct or not.
That’s why it’s so important that landlords allow enough time for marketing their rental property. The first seven days provide a good initiation as to what the market rent is in the area. Just like when you’re selling a house, sellers don’t get genuine market feedback till the property is listed. So be prepared to listen to feedback from prospective tenants at open homes, and add this to your existing knowledge of market rents before you start negotiating with tenants.
What’s the best negotiation counter-tactic a landlord can use? Knowledge!
If the landlord isn’t adequately informed on the market rent for the property, self-doubt can undermine the asking rent.
As in any business, you need to know what your product is worth to the buyer. If you don’t know the price of your rental property, then your tenants will certainly tell you.
Be informed on market rent in your area
The number one thing you need to know is what the market rents are in your area. That way, you can accurately assess feedback from prospective tenants. So when the tenants view the property, be sure to have the facts at your fingertips.
There is nothing more powerful than being able to point out to a prospective tenant what comparable properties have been rented for. Providing prospective tenants with market evidence negates any rent objections.
Even then, there can be other things which skew the feedback, and you need to be aware of these so that you can factor them into your negotiations.
Other factors affecting tenant feedback
There are a number of short-term factors which could affect the letting of your property, such as:
- Weather: Bad weather is highly likely to affect the number of people attending open homes, and responding to your advertisements. Don’t attempt to review your asking rent as a result of open homes during a period of bad weather.
- Important local events: imagine holding an open home in Mt Eden when the All Blacks are playing a game at Eden Park. This could have a big influence on open homes that day, and the poor open home attendance has nothing to do with the asking rent. You need to be aware of such events happening in the area.
Of course, you have no control over the weather and local events, but by allowing enough time for letting your property, these factors have less of an impact. That’s why it’s so important to use that three week notice period to best effect, so that you can find that A1 tenant.
There’s another factor that can affect a tenant’s feedback too:
- Unqualified prospects: An unqualified prospect is a tenant who’s only just started looking at properties and doesn’t yet have a feel for market rents and quality of stock. That’s why an important part of the tenant application process is to ask them how long they’ve been looking for a property. That way you can soon spot if you’re getting negative feedback from an unqualified tenant.
At the other end of the spectrum, you may be having the opposite dilemma of numerous applicants wanting to pay the advertised price – what do you do then?
What if the feedback from tenant applicants exceeds your expectations?
Sometimes you might get feedback from tenants that makes achieving market rent almost too easy.
For example, say you have ten couples wanting to secure a tenancy at the advertised price: what should you do then?
If that happens, there’s a good chance that your asking rent is too low. You need to do more homework on the market rents and increase the rental price.
Armed with knowledge of market rents and other factors affecting tenant feedback (weather, local events and unqualified prospects), you’ll be in a far stronger negotiating position to achieve market rent at letting time.
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