Do I absolutely need to reduce my rent during slow season?

Question

Hi everyone,

I just recently bought a condo and would like to put it on the market for rent soon. I had a discussion with my agent about what rent to charge. He was trying to convince me that because December is usually the slow rental season due to the holidays, I would face a lot of challenges finding a tenant if I don't lower my rent. Not that I don't trust my agent (he is a nice guy), but when I was buying, he kept telling me all these good things about the property and that I would have to go above the seller's asking price to win (I ended up going below by $10k and still made the deal.) Now I am about to rent it out and he started telling me all these negative factors and that I would have to charge less than normal in order to be competitive. I am not asking for a unrealistic amount since I already did a lot of analysis myself on what is currently available and how much similar units were rented out in the past three months in my area. My thinking is that you can't analyze the market by only looking at the demand but not the supply. You may get a lot more demand during the hot season, but you also get a lot of competitors which creates pressure on how much you can actually charge. Whereas during the slow season fewer people are moving, but the supply is also very low. When we looked at the database together, the inventory for my area is low and there is really not any units out there right now that are identical to mine. In this case, do I absolutely have to reduce rent just because the market is slowing down? My concern is that if I sign a 1-year lease now, I'm gonna have the same issue every year when the lease is up and if the tenant doesn't renew. I'm kind of stuck in this slow season because I bought the property at this time of the year?

If anyone can provide any insight or past experience on this it will be greatly appreciated.

(My property is located in the NYC metro area so there are usually lots of rental activities. My unit is a small apartment in a new building with 24hr-doorman, parking, gym, pool, etc. The only competing unit in this area now is an apartment of similar size in a 30-year old building with a small gym but nothing else. However, that unit is 8 min closer to the subway station by walk than my unit. My agent told me to charge just $50 higher and my unit will be a much better deal. However, during normal time, the rent for my unit is at least $100 to $150 higher than the other unit because they are actually not that similar and don't really target the same kind of tenants.)

Andy Luick · Answer

You'll always get some great advice here.  If you have the time, shoot a decent video of the place and stage it a little bit.  If you don't have the voice for it...try to find a film/radio student to do the voice for you.  I don't rent single family anymore....totally and strictly shared housing for me now for a whole variety of reasons which you might consider if this is a 2-bedroom unit.  I'm blessed with a radio type of voice so the video work for me;

If this is your only unit, give yourself some time to rent it out yourself and save the commission.  NYC is a pretty hot rental market...always is....and people are always transitioning there so December is never slow.  Just like Atlanta.....we get tons of calls and emails every day for our program and time of year doesn't matter.

Agents are like contractors, not all are good at everything.....the one you buy with isn't necessarily the one you sell or rent with.  Everyone has their specialty and what they stink at!

Pretend to be a renter for a weekend and go check out competing units BEFORE you even list yours to see what the competion really is.  If there are any open houses in your area for condo or apartments....go check those out to.  Get ideas for accent walls and light fixtures.  Upgrade the unit with some higher end remote fans...I just got one from a japanese company for about $200 that's awesome and contemporary....looks like a plane prop.  I usually swap an outlet in the bedrooms now or kitchen for one with a built in USB charger...these run about $30.  I also like to upgrade kitchen and bath faucets.  You'd be amazed at what renters notice.  In your market, you'll have renters who really wish they could be buyers.....the closer your unit reflects something current.....the better bait you have for a better qualiity renter.  Luck!

Curtis Bidwell · Answer

1. NYC is a hot market. Put it out at your preferred price and see if you get a hit.  If not, lower it incrementally until you do. The market will let you know what it will accept.

2. Go MTM and avoid the it pitfalls of a lease.  Encourage longevity by prorating deposit based on how long they stay (no refund prior to 6 months, 50% 7-12 months, fully refundable after 1 yr).

3. Start with 6 or 18mo lease.

Jerry W. · Answer

@Brian C., welcome to BP.  First make your next lease for 6 months so it comes up for renewal in the summer or see if you can get an 18 month lease.  I set all my leases to come due in summer.  Only problem with that is if I get 5 or 10 come empty at once getting rehab or painting/cleaning done is horrible.  As to dropping your price go ahead and try at your target amount, if it doesn't rent then drop your price.  This is the worst time to rent however.

JD Martin · Answer

This is exactly what I do. Anything leased after October 1 but before the spring will be a partial year. I give the tenants the option to renew for an additional year at the same rate, with both party's approval (mine and theirs), to circumvent the less than one-year term.

I don't believe in dropping prices unless you are overpriced to begin with. If you are priced appropriately for the market (I try to be a few dollars below anyway), and you are getting good traffic, if the place won't rent it will be for some other reason than price. The trick is being sure you are appropriately priced for the market. A lot of landlords kid themselves into thinking they are renting at the right price because they see other places for rent at the same price when they do a 30 second Craigslist check, yet fail to see that those places have more amenities, better neighborhoods, bigger houses. One thing I have learned is that everyone, almost without exception, thinks they own gold when they are selling and that they hold gold when they are buying.

Marcia Maynard · Answer

In certain markets, units will rent easily no matter the time of year. People need to move when they need to move and sometimes that is during the holidays.  You are spot on with your observation that when supply is low, you will have an advantage. In fact, according to a TED talk I recently viewed, people are more apt to make a decision and do it easier and faster when they have fewer choices. Offer it at fair market rate. Screen well and don't rent to terrorists. :-)

Ryan Dossey · Answer

I would charge fair market rent for the property. Sounds like your agent is trying to keep things easy for himself lol.

Put it on postlets. If you don't get any action you're priced to high.

Pro tip...

Sign a 13-14 month lease so you're not leasing over Christmas again!

Jeff B. · Answer

@Jd Martin spot on buddy.  There's market rent, low rent, high rent but the question is what's the right rent given the unit, the amenities, the neighborhood?  IMO, fluctuating rents for the same unit sends a BAD message.

Jeremy Dolan · Answer

Charge what you think is right, the market will respond regardless. It is a difficult time for you to rent in December, but the odds will even out. My only advice is to try to start with a 6 mo lease so that you don't end up finishing your 1 year lease at the same time period next year.

John Casmon · Answer

Think this will vary a bit by market and clientele. I'm going through something similar as one of my tenants is buying a home and the unit will be available Jan. 1. We're looking to sublet their current lease or get a new lease. For a new lease, we'll shoot for market rent, but want to have a 15 or 18 month lease. Not many people are purposefully looking to move in Dec and Jan, but the ones who are usually have limited options.

Chris K. · Answer

If it makes you feel better I had to bite the bullet and drop my price last week. Got a decent applicant a few days ago that should be moving in later this week. I wont' cashflow as much but I would have lost more keeping it empty.

Do I absolutely need to reduce my rent during slow season?

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