Landlords Drop Rents To Please Current, Prospective Tenants | Supply and demand interrupted by real estate meltdown
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Sherri Way.
Recent radio ads for apartment complex developer Picerne announce a contest in which prospective tenants can enter to win a rent-free year.
Picerne has an a apartment complex in Providence, R.I., but in Central Massachusetts, the same bargaining attitude has taken hold, area landlords and real estate agents say.
Landlords here are reducing rents as vacancies rise.
Sherri Way, president of the MetroWest Property Owners Association, said she has taken rent on certain of her rental units down from $1,000 to $900.
“There are definitely a lot of vacancies out there,” Way said. Those vacancies are being caused by a number of factors, she said. Tenants are losing their jobs, leaving the area or taking the opportunity to buy a home while prices are reasonable.
Speaking of reasonable, Way said landlords should be able to fill their units without making drastic rental rate concessions if their rates are reasonable in the first place.
“For me, if a tenant wants $100 less, it’s not happening, but if he wants $25 less, we can talk about that,” she said.
The demand in this “definitely interesting” market is coming from different types of prospective tenants. There are those looking for something cheaper than they currently rent, those looking for apartments in specific locations, those who have recently lost a home in foreclosure and the tenants of rental properties that have been foreclosed.
Making It Work
Foreclosed rental properties have spawned their own trend, Way said: Bidding wars between landlords looking to get into potential money-making properties. Outside of foreclosure, profit margins on multi-family properties have narrowed in recent years, especially during the housing boom.
However, a foreclosed multi-family property — elbow grease and all — can still be a decent investment. The only problem is that “a bank won’t fund a property that’s really distressed, and those are the ones you can really make the numbers work,” because they’re cheap to buy and refurbish and can be offered at rates cheap enough to make them attractive.
Mary Surette, an agent who handles rental property transactions for Coldwell Banker in Worcester, said that while the market for rental units and rental properties is picking up, it’s also quite chaotic, depending on the property.
“If you have a pristine piece of property, it’s going quickly,” Surette said. But “lower end” rental units have been languishing on the market, she said. And landlords have been taking rents down by as much as 20 percent “just to get people in there.”
But it would be ill-advised for landlords to fill units with the first prospective renters to come along. Surette said credit worthiness is perhaps more important than ever for landlords, despite the influx of the recently foreclosed into the market.
“People who lost their homes to short sales and foreclosure, their credit is ruined, basically. On the other hand, landlords are being strict about credit. It’s kind of a catch 22,” she said.
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