Owner Rental Philosophies: Pricing, Tenant Quality, Occupancy, Cash Flow
Have you ever wondered why certain shops, apartments etc. seem to stay vacant longer than similar ones, which may be owned by different owners/landlords? Different owners seem to have different philosophies, perspectives, and points of view, when it comes to key components, including: pricing; tenure quality; occupancy rates; and general cash flow requirements and priorities. While there is no such thing as a ironclad way to manage a particular property, this article will attempt to briefly consider, examine, review, and discuss some of the options/approaches, including pros and cons. and other considerations.
1. Prices: Whenever a property, whether residential or commercial, becomes available/vacant, many decisions must be made by the specific owner as to how best to proceed. Perhaps one of the key considerations is price. It seems many landlords, especially those who own commercial buildings/stores, decide to ask for the highest price they think they can. Because of this, we often witness higher turnover in some places than others. What is often confusing is why they don’t realize, or seem not to care, that, each month, it sits vacant, which means it takes many months, or longer, to make up for that lost rental income. Some believe that it is important to do this, because it will set the level of future rents, and while this may perhaps be true, it will only be true if they do not experience constant turnover and prolonged periods of vacancy! This is even more true when it comes to residential properties. My wife and I own several residential units and are pleased to have among the lowest turnover and vacancy rates. We would prefer to price these units more conservatively and lower and keep high quality dependent tenants!
2. Tenure quality: One of the most expensive parts of owning real estate is finding a new tenant every time we need to. Doing so often requires additional fees, marketing expenses, maintenance/repairs/renovations, and time/trouble! If you find trustworthy tenants, doesn’t it make sense to try to find common ground and a meeting of minds to keep them?
3. Occupation: Those who maximize their occupancy rates often enjoy far less stress and hassle. Carefully considering the above two factors is an important factor, in your best interest!
4. Cash flow: Owning an income property produces the least amount of stress, strain and hassle, and generally the best results, when there is the best possible focus on maintaining the necessary cash flow, to cover monthly expenses, etc.
Owning can be extremely profitable or a nightmare. Focus on the big picture, don’t be greedy, quality and expensive tenants etc and you will maximize your chances in the long run.