Pros And Cons of Being Flexible on Your Rental Rates
Some rental properties are firm about the rates that they charge tenants, while others are not. As the property manager, you'll need to consult with the property owner as to whether you'll be flexible or firm, and follow their lead. If the owner asks you to develop a policy, it's important to weigh the positive and negative aspects in this area. Here are some pros and cons of rental rate flexibility.
Less Likelihood of Vacancy
Vacant units are a property manager's worst nightmare in some senses, so that many property managers want to do all that they can to keep the vacancy rate low. One way of achieving this simple goal is by instituting flexible rates. For example, if you charge $850 a month for a small apartment unit, but someone comes to check it out and struggles with committing to the price, you might think about accepting $750 a month. Doing so may help you to occupy the unit, rather than leaving it totally vacant.
Less Revenue
One challenge of being flexible about your rental rates is that you may have the mindset that you're making less revenue. In the above scenario, you may think about how you are earning $100 less per month, or $1,200 less per year. This is technically true, but you also need to remember that you're not technically losing money that you didn't have — and if you hadn't rented the unit, you'd be missing the full amount each month.
Less Time and Money Spent Advertising
For property managers, advertising vacant units requires time and money. For example, you might draft up listings to put online, or buy signs to place around the neighborhood. Flexible rental rates that keep your vacancy rate low will save you the time and money investment in advertising, which can allow you to spend more time on other property management responsibilities.
Potential for Tenant Conflicts
Another issue with flexible rental rates is that tenants can talk among themselves to find out what each is paying. If a tenant finds out that another tenant is paying $100 less a month for an identical unit, you'll quickly have the first tenant raising the issue with you. You'll then need to decide whether you want to drop this person's rent after the lease is up or keep it the same. In a large building, multiple examples of this scenario can be time consuming.
