Should I lower rent if I am getting lots of interest but haven't been able to land?

Question

I'm an out of state investor and I purchased a duplex in May (Fayetteville Arkansas next to the college). I hired a PM to help find the tenants and do showings. We were not getting a ton of leads and I quickly realized the PM just posts on Zillow and waits so I started hustling on FB market place and commenting on other people's post in the local Facebook groups.

Lot of junk applications but did start to grab quality tenants. We have had a lot of applications and several showings but haven't been able to land it to no fault of the house. Everyone seems to likes the property, sometimes they want something bigger, found something furnished, something closer to school... etc...

My question is, as a very impatient first timer, is I'm considering lowering the price but I'm getting solid leads with my current price. I would still be cash flow + but I'm just unsure if I have had unfortunate luck and if lowering $75 -$100 would really make a difference.

Any advice or thoughts would be appreciated!

Alecia Loveless · Answer

@Sean Pedeflous I think psychologically $25 can be a big game changer. I tend to get more action and have more success if something is marketed at $775 instead of $800 or $1475 instead of $1500.

Ryan Blackstone · Answer

@Sean Pedeflous I actually pulled up the property you own. You are not going to do well if you don't get it rented before Aug 1. I do think you can get the rent you are asking, but you are going to have to do it per bedroom. @Jonathan Boyd has one there and his PM is doing a great job doing it by the bedroom. However, if you want one lease, then I would suggest dropping to $1,550 PM me or Jon if you want more details. I am a broker helping people buy. Jon, is a local investor. @Holly Hamilton has a ton of great local insight as well.

Greg Scott · Answer

There are only three reasons a property doesn't rent.

1) The price is too high. (Which is what you are thinking.)  But, I would not look at making a $100/mo reduction.  Go small, $25 at first.  You can always lower it next week.

2) There is a problem with the property.  You talked about location and size, but how are the things you can control?  Does it have good curb appeal?  Is everything in good repair?

3) Poor marketing / sales.  You seem to have addressed the marketing problem with your property manager, but how are they responding to prospective tenants?  Have a friend call posing as a prospect and have them tell you what happened.

We are in the peak leasing season.  If you do not rent it out within two weeks, one of these is the problem.

Holly Hamilton · Answer

Hey Sean, How about a little insight from a self-managing landlord in Fayetteville? Zillow listings and applications work very well in this area. Your listing looks great and the price is good for the Farmington area. Continue the quick responses within Zillow, those convert the best. I would not drop the price, but increase awareness. UofA kids aren't back yet and shopping for students should be picking up in the next few weeks. Locally, FB is an excellent way to reach more potential renters, I'd start with the "NWA Rentals" group and "University of Arkansas Parents"

Agree with the other comments that you need a better PM, if you don't mind the part of the work you're currently doing, you could leverage a local investor to help you show properties.

Nathan Gesner · Answer

Facebook wants agents to pay for marketing, so you have to advertise from a personal page.

I agree that the quality of leads from Facebook is extremely low. The easier it is for people to find a rental, the more likely you are to end up with a bunch of gawkers.

Susan H. · Answer

@Sean Pedeflous

Like Holly, I'm a self-managing landlord in Fayetteville. And as Greg said, we're in peak leasing season.

How does the rent on this unit compare to the first unit in quality and rent price? You mentioned you consider this unit to be "nicer." Why do you think so?

If you'd like to message me the address (or the link on Zillow for the available unit), I'd be happy to share some ideas with you. ~Susan

Adam Michael Andrews · Answer

You should have an honest conversation with your manager about expectations around lease-up time. Since you don’t hold out on pricing or quality, there is no reason why you should have vacancies longer than the area average. Mention that you originally agreed to the fee with a marketing component that is not being delivered on. If you’re happy doing your own marketing, you should get a fee reduction for that. You’re currently paying for it twice- once with money, and again with your time.

Nathan Gesner · Answer

I would consider looking for another PM. Marketing only on Zillow is amateurish, which indicates they may be lacking skills in other areas.

If your unit rents for $1,000 a month, you are losing more than that because of utilities. Let's say it's $1,100 to sit vacant for one month. If you drop your price $50, that's a loss of $600 a year, which is 50% less than you lose sitting vacant. I would make your drop significant enough that it attracts attention.

I also recommend really studying the market. If yours isn't renting, it's possibly priced to high compared to the competition.

Michael Smythe · Answer

@Sean Pedeflous we mostly agree with @Greg Scott, the reasons properties don't rent:

1) Lack of proper marketing exposure--- How many places can you advertise the property?

2) Lack/lag of response to prospects--- How quickly and consistently are prospects responded to and followed up with?

3) Price is too high for prospect perception of property value--- Prospects are only willing to pay so much for what a property is. So, either adjust the price or improve the property.

@Nathan Gesner is also correct. We advertise properties on at least 20 websites as well as the MLS, so other agents are exposed to it. Zillow is #1, but we get a decent number of leads from others.***FYI: we've tried advertising on FB Marketplace, but kept getting banned as we posted too many properties. FB doesn't seem to want PMCs posting rentals. Also, the prospects we did get, were pretty much a waste of time.

If you're going to drop the rent, we recommend doing as percentage, NOT specific dollar amount. We usually target 5%.

Sean Pedeflous · Answer

Thanks @Ryan Blackstone. I just PM'd you too. Where did you get the $1550 number from and why Aug 1... because of school starting? That would be a $145 dollar drop from what I just rented the first unit out last month?

Should I lower rent if I am getting lots of interest but haven't been able to land?

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