PM experts reveal their top tips for tackling the unpleasant ‘reducing the rent’ conversation with landlords.
RE/MAX WA managing director Geoff Baldwin said landlords too frequently avoid adjusting their property’s rent when it is vacant or soon-to-be vacant.
“It is very common for owners of rental properties to insist on their property manager finding new tenants who will pay the same or even higher rent than the vacating tenant. However, this can often be a false economy,” Mr Baldwin said.
Letting the ‘third party’ carry the conversation
LJ Hooker head of property management Amy Sanderson said PMs need to start getting tenants to tell them what they would pay for a property.
“Then, when you go back to the owner, rather than going, ‘No one wanted it, you need to drop the price’, you can go back and say, ‘We had six people through; I didn’t get any applications so I rang them all back and I have got so-and-so who said they would pay $600 for it. What would you like me to do?” she said.
“From a client’s point of view, they believe that as agents all we do is tell them an amazing price, sign them up and then we just batter them down to get a deal done. That is what the general public think we do.
“Even if we know it is overpriced and we need to drop it, we need to work on how we articulate that and getting third-party feedback, and someone who would actually pay that price, is the way to go.
“It is a positive rather than a negative, and as property managers we seem to always go on the negative and then we wonder why we hit brick walls,” she added.
Arming yourself with comparable and informative research
Real+ business manager Heidi Walkinshaw said the subject of rental reductions can be a touchy topic for your clients, but it is a topic that must be dealt with in a “firm but gentle manner”.
“When speaking with a landlord regarding a rental reduction it’s best to arm yourself with any comparable properties in the area so that you are well informed,” she told RPM.
“Let them know the state of the current market and give any feedback from any prospective tenants that have come through as well as recommendations for improvements that may assist in securing a tenant sooner.”
Also speaking to RPM, Ireviloution managing director Jo-Anne Oliveri said PMs should supply the property owner with factual data so they can make an informed decision about whether to decrease the rent.
"Property managers should analyse the number of 'real' online listing views against the number of enquiries, the numbers of properties available against the number of enquirers in general, compare the listing to other similar listings currently being advertised (especially those that have been advertised since the property was originally listed) and provide an overview on general comments made by prospective tenants and enquirers."
Explaining why prolonged vacancy is not the best option
Mr Baldwin said often landlords will hold out vacant for weeks attempting to attract a tenant to pay a higher rent, only to eventually be forced to meet the market anyway.
“But in the process they have not only had to reduce by $20 or $30 a week, they have lost thousands through their property being vacant for a long period of time,” he said.
Ms Walkinshaw said PMs should explain to the client that lowering the rent can be a more positive outcome than having the property sitting vacant for another two or three weeks.
“You can always increase the rent at a later stage when the market improves,” she said.