Atlanta Rental Market – Lease Renewals
Lately, we have had a couple of owner’s complain about why we renewed their tenants’ leases without an increase in the rental rates. To which I reply that we are happy to get a renewal at this time without having to provide a rental reduction.
Clark Howard, popular radio show host and consumer advocate shared in his July 27th show how to discuss with your landlord a rent reduction, you can read more about his comments by going to http://clarkhoward.com/liveweb/shownotes/2009/07/27/16296/.
About 15% of our owners have been approached for a rent reduction from their current tenant. Not every request was approved, but most requests were. In a lot of cases, once we did the analysis for the owner, we found that their tenant could easily move down the street and pay less.
The cost of the vacancy would cost more than the rental reduction in all cases, so our recommendation was to agree, but put some parameters, like $100 off if paid before the first. This seemed to be a win for all parties. It allowed a good paying tenant to reap the rewards of on-time payment, while keeping the base rent high. It will be much easier to reverse the discount when rental rates climb back up.
Should an owner not be willing to accept a rent reduction, we share with them some ways a longer vacancies impact them. When a property is vacant more than 30 days, the traditional landlord insurance policy may be cancelled. We are seeing this happen more and more. When it does happen, owners then need to purchase a builder’s risk policy which is 4 times more than a normal policy for adequate coverage.
In addition, vacant homes are more susceptible to vandalism and theft. This is one reason we regularly send property managers to our properties so that we can evaluate the condition. Expenses such as mowing, cleaning, and paying the mortgage while no income is coming in, increases the overall financial burden to the owner.
So when we will see improvement? I wish I had an answer. My experience tells me that based on what I have read; it will be another 18 to 24 months. Most people are perplexed by this rental anomaly. With the increase in foreclosures, you would expect that more people would need rentals since they can no longer purchase.
What we are finding is that people are moving in together – multi-generations are living together. This is why 4 bedrooms and above are renting faster than 3 and less. My inventory for 2 bedrooms is not being shown near as much as in previous years. 38% of our current inventory is 2 Bedrooms and that is the highest it has ever been. When I include 2 and 3 Bedrooms it increases to 65% of overall inventory.
So my advice is if you have a tenant, let’s do whatever we can within reason to keep them in the property.
