Welcome to Winter
The market changed!!
So why are tenants aware of this and landlords aren’t?
There is a parallel here with the sales market…buyers are often more attuned to changes in pricing than owners and agents as they are actively analyzing the market almost daily.
Well tenants similarly are searching and researching the CURRENT MARKET and have a far better grasp of the latest trend down, more so than most landlords and unforgivably many agents.
In fact, some agents are so out of tune with this they are actually stating “we don’t know where the tenants have gone” well they should. I commented on this in my Easter blog for those interested.
Sales agents are grossly over quoting likely rental returns based on old data and Asset Managers and BDMs are doing similarly for fear of missing business by offering more conservative returns in line with what the market will currently pay.
What’s the outcome?
Well, let me introduce you to DOM.
DOM in agent speak refers to “days on market” and if you own an unleased property this is the statistic that will be (or should be) dominant in your thoughts.
Recent comparative market analysis research consistently displays the number of properties that have lingered on the market for 30 days or more…in some cases over 100!! That’s a huge amount of irrecoverable rent! Bearing in mind every week your property isn’t leased is a 2% p/a loss against your overall return and couple this with the extra interest payments this starts to bite hard into household finances.
Tenants whilst not only scarce, are now blithely offering below asking prices, negotiating more favourable lease terms and looking for incentives/ inclusions to sign a lease.
Many open homes are being conducted with a ZERO attendance, the first clue to a prospective tenant that there is NO COMPETITION for the property. When this becomes common its natural that the researched tenant comes armed looking for a better deal.
SOLUTION
Analyze the market in your area and compare like for like. You will need to remove the rose-coloured glasses and be objective. Ensure your property is priced below the next best in your category and that way you will attract the best quality tenant available. Alarmingly there may only be ONE tenant available in your category…don’t give them up to the competition for the sake of a few extra shekels in the kitty, you may just miss the best tenant.
Offering a week or two free rent is another method adopted by agents/ landlords to incentivise prospective tenants.
If you keep believing the market will catch up with your asking price and your property is on page 20 or worse on realestate.com let me assure you it won’t! In fact, you will become an attraction for bad tenants who will realise that both owner and agent are under pressure to accept just about anyone by now.
EQUATION
Best House + Best Price = Best Tenant
