Landlords and Leasing 101

math-problemAt Loftway we do a lot of leases every year. We advise landlords every day on what to price the Lofts at to get it leased, but sometimes they go against our advice.

Most of the time they want to go higher than we suggest, but a few times for their surprise they are at a lower number.

When they want to go higher they are usually basing their number on their monthly cost (mortgage, HOA, taxes) and not on market value. Although will be nice to be able to break even in every single investment property a lot of times is not possible. Either because the landlord did not have a lot of money down when he bought the place or because the HOA’s are too high for whatever reason sometimes they are negative every month.

Most things in life are simple math and this is one of them. Instead of worrying about the monthly amount you have to think about the full amount.

Lets see how it works in this example:

The rent is $3,000 per month, so the annual rent is $36,000 per year.

If you give a discount of $100 per month ($2,900) the yearly amount is $1,200.

Now for every month that you are vacant at $3,000 you are losing $3,000 per month.

By that logic, even if you discounted $200 ($2,800) yearly $2,400 you would still make more money per year than if you did not reduce and took you longer to lease the place.

If you priced really high, you might find someone eventually, but will take longer and you would lose more money. You could also not find anyone at the high amount and have to reduce in the end anyway and therefore lose even more money.

Conclusion, price it right to begin with and you will end up with more money in your pocket.


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