The United States house vacancy number is at this moment the largest it has ever been, at eleven percent. This is not at all what we estimated when the real estate market collapsed and mortgage companies began going out of business in record quantity.
Then, the thought was that property owners would actually reap benefits, because citizens who were not able to acquire homes because of the mortgage disorder, would as a substitute, rent. After all, everybody has to reside somewhere right?
We were not expecting the housing crash to cause an overall financial collapse, but that is what resulted. Many of the persons who would generally be our occupants are either unemployed or underemployed. While they cannot afford an apartment, they have many other possibilities. They may lease a room in a friend s residence, share an unit or even move back in with mother and father.
All of these awful trends are installing a colossal quantity of pressure on property owners. To a much larger amount than formerly, we are in exact competition with each other to find occupants who will agree to our residential lease agreement. So what are our possibilities?
2 hazardous paths:
The most obvious paths are both dangerous and destructive in the long run.
1 is to just wish for the best using the I must rent this frame of mind. Let us say you really want a thousand dollars for the rental apartment. You could announce your For Rent signage at that amount, pray that the financial system will quickly be on the upswing, and handle the short term economic losses. Of course, the predicament at this point is that you will have those losses. Remember that nobody ultimately can predict when employment will be on the upswing.
An alternative option is to lower the rent. You can offer the unit at nine hundred dollars instead of a thousand dollars for every month. Chances are you will witness an upswing in potential occupants who would like to investigate the unit. When you do this, you go into a rent battle with the competing property owners in the region. Rent wars lower the value of your buildings in the long term, along with the properties of all your competition. You can also end up trapped with below market rental prices a few years from now when the economy gets better.
I don t really like either of these notions and would much favor an method that let me keep rental prices at the existing rate, while finding many more potential occupants. (I prefer to lower the rent than sit on my hands and wish for the best.)
The answer is flexibility in dealing with possible occupants.
To enlarge my pool of occupants and have a residential lease agreement signed, I will have to be more adaptable in what I allow occupants.
Here are a few samples:
I will definitely enable shorter lease provisions, and I might suggest a step lease for a renter who complains at the rent. What s a step lease? It is one that begins at a lesser rent, which goes up after a certain cycle of time. The step may even include a clause that the renter can opt out of the lease (and vacate the apartment without being penalized at the end of the 6 month period if he does not want to pay the rent increase.
I will be more adaptable about letting occupants to own small animals. Of course, they will have to pay a bigger damage deposit.
I may allow the occupants to pay the damage deposit over a cycle of many months.
I will be looser on credit standards.
That last sentence deserves some additional comment. I anticipate that before this decline is over, many more tenants will have crummy FICO scores than just a few years ago. These tenants need a place to live and many of them will have funds. It makes sense to try and find a way to rent to them.
However, I would not let a renter with a crummy FICO score spread out his damage deposit over many months. I will also execute all other background checks (employment, criminal, and tenant history).
That brings up a bigger point about flexibility. If I am going to deal with occupants who have a streak of not paying their bills, I will have to make darn sure they pay my rent, or at the very least don t stay in the apartment as a non paying renter.
So when I sit down with one of these prospects, we ll have a very serious conversation about money, to wit:
Every cent of the rent is due at the 1st of the month.
The late fee goes into effect on the 4th.
The eviction notice goes out on the 8th.
If they then pack up and go by the 15th, leaving the place broom clean, I will return their entire security deposit. If not, we go to court.
There might be quite a few eviction notices, because we are in tough times and I m targeting some more risky people. I will also continue to enforce my very long, detailed list of renter rules.
Author Resource:
Stirling Gardner is a writer and property management expert. He consults for http://www.EZLandlordForms.com - your best online resource for a state specific residential lease agreement or rental lease.
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