Earning profit or steady income is one of the reasons why people start investing in property business. As for rental property investment, there’s various tasks an owner should do in order to make sure that the cash flow will steadily grow. Every property owner may use different strategy in order to keep the income flowing. However, one of the biggest important factors in rental property is tenant. It is important to keep your property tenanted if you want to maintain steady income every month to pay for your mortgage and every expanse in your financial plan. Vacancy is the biggest enemy for rental property investment.
Rent reduction and how to manage possible problems
Every rental property investor and landlord must want to raise their rental return in some ways. However, raising the rent is not always a good idea because you need to consider various factors including your tenants and rental market. There might be a situation where you have to reduce the rent instead.
Vacant property is one of the reasons why you should consider reducing the rent. Before thinking of how to raise the rent, you need to secure tenant first. If you set the rent too high or higher than the average rental market, it is highly possible that no one wants to rent your property. However, letting your property vacant for a long time is not good either. Thus, rent reduction can be the only option if you have done everything to attract tenants. Besides, rent reduction can be caused by the situation in rental market as well that leaves you no choice but lowering the rent.
Rent reduction may sound like a nightmare for landlord and property owner. You have expenses to pay every month and you need to support your life too. Reducing the rent sounds like a bad idea. However, it can’t be that horrible if you know how to manage the situation well. Before reducing the rent, make sure to make proper calculation and estimation. You need to drop the context of all the gains you’ve earned in recent years. Thus, you can set the perfect price for the rent.
Rent reduction can be a good idea to solve problem for a short-term. However, you need to take the big picture out of it. Even though rental income is one of the most important keys for rental property investment, capital growth still hold bigger frame within this business. Rent reduction can sound intimidating. However, there is something worse than earning small income, vacancy. Keep in mind that vacancies can be very expensive.
It is highly recommended to time your leases accordingly because rental market can be seasonal and cyclical. Therefore, rent reduction is not a solution you need to use for a long term. By setting the time of leases accordingly, you will find the time to increase the rent later. To help you deal with this situation better, you may need help from professional property manager. They can help yo setting the right price by weighing every risk and option.