Landlord Rental Philosophy/Policy: 4 Considerations

Have you ever wondered why we so often see so many empty store fronts immediately next to fully occupied buildings? Why do some landlords have far more tenants, turnover, and vacant apartments than others? For the sake of this article, we’ll assume all other things/features are similar/same etc. So, we could fully examine, 4 basic considerations, a particular landlord’s rental philosophies often impact. Owning an investment property can be financially smart and valuable, or a potentially risky proposition. This article will attempt to briefly consider, examine, review, and discuss some things to consider and evaluate.

one. Prices: Some landlords decide that their best strategy is to price their rents as high as possible, while others prioritize quality of tenants, etc., and may price a bit lower. I have witnessed stores, in large locations, sitting empty for extended periods due to rents, while others are rarely empty! Proponents of the first philosophy generally claim they do because of their belief that in the long run future rents will continue to be higher by doing so. However, for example, if a store, which charges $3,000 per month, remains empty for a year, how long and how much more must be charged to recoup that $36,000 per year? Residential owners also have the option of pricing, at the high end, mid-market, or low end. If one’s goal is to steal from tenants, they need to understand that it usually leads to more churn and eventually lost rents/increased vacancies. One reality is that every time an apartment is turned over (one leaves and another starts leasing it), it becomes a significant expense for the owner!

2. Tenure quality: What value does the quality of a tenant have? Wouldn’t you prefer quality tenants, who pay their rent on time, are reasonable, have good character and take care of their property? As an owner of multiple rental units, I have found that owning is much less stressful than those who only focus on getting the highest rents.

3. Occupation: When there is little turnover and you maintain near full occupancy, you generally have less ownership stress.

Four. Cash Flow: Calculate your rents, based on a combination of your fixed/known costs/expenses, plus reserves for vacant apartments, repairs, renovations, appliance replacements, etc. When this is done right from the start, it will protect you from having a comfortable, positive cash flow!

If you want to own commercial property, proceed with care, prudence, and preparation. Consider your options, don’t be greedy and proceed accordingly.