Prices of goods and services increase with time, the same is true for rental rates. During the recession, when people cannot afford to buy homes, rental rates increase. The housing industry is very competitive during such periods and owners increase rents. However, this is not a rule. Sometimes rental rates decrease during the economic crisis and we experienced that back in the 2008-2009 economic crisis. At the time of the great recession the Housing market was greatly affected. Mortgage rates increased the gravity of the situation. The percentage of renters was 36.1% in 2006 and in 2014 it reached more than 40%. These are the numbers for the 50 largest metro areas of the country.
Even now some property experts are predicting a recession and rental unit owners are worried about their properties. It can be a very risky situation for owners. Although it’s not confirmed yet as a rental unit owner you must be prepared for any situation. Here we are discussing some ideas for rental unit owners. You will find them helpful if recession knocks at the door.
Try to retain present tenants
If your present tenants are paying rent on time and are not causing any major problems for you, try to retain them as long as you can. This way you can avoid the fear of vacant homes and adjustment to new tenants. Try to understand the situation from a tenant’s viewpoint. Tenants like those owners who are flexible in payment methods, for instance, they accept online payments. Moreover, the landlord should take maintenance problems seriously. Tenants should be allowed to have privacy and enjoy the property as far as they are not causing any damage. If you have this flexibility for tenants, they will be ready to occupy your unit for a long time. Build a positive relationship with them. Use online tools and apps to collect rent. Be responsive to their messages and communicate with them regularly.
Consider alternative uses for your unit
If you have a rental unit and you cannot find an appropriate tenant, consider alternate uses. For instance, you can use it as a short-term or holiday rental. Short-term tenants are easy to find as tourists love to stay in rental homes to enjoy more privacy. You can turn it into a mid-term rental for business people. If you don’t find any kind of tenant, you can change it into a production studio. It can be a support for any local business. However, if your space requires some changes, consider your budget first. Depending on the location and size of the property, you can consider many alternate uses. But a 12 months rental is the most suitable choice for the majority of landlords.
Discuss financial terms with the tenant in advance
During the recession, some people lose their jobs and you have to keep in mind that your tenant can be one of them. If it happens, it will be difficult for him to pay the rent. Not just the rent but utility bills, mortgage, and taxes as well. It will be a very troubling situation not only for him but for you as well. To avoid this situation, you need to discuss with your tenant if they have any emergency budget. Will they be able to pay your rent if they lose job or not? If you depend on rental income to meet the running costs of the unit, it will be difficult to manage for you. You must have a backup plan in this case. Save some money which you can use to pay property expenses, at least for six months. Moreover, reduce your expenses as much as possible to save money for the worst situation.
Reduce your expenses
If you want to prepare for the financial crisis, you need to reduce your expenses. This is important for every landlord, no matter whether they owns a single rental property or multiple properties. Keep a proper record of all your expenses and use the money for very important things only. Renovation and redecoration of units can wait, spend on immediate maintenance problems. You can use apps and online tools to track your expenses. It will help you to avoid unnecessary expenses and manage your finances in an organized way.
Keep in touch with the latest market news
It is very important to keep yourself updated. Several factors affect the housing market and it changes very quickly. Read national and local real estate news regularly. Be aware of the latest market trends. Adjust your rental rate according to the local market. It should not be very high, keeping the affordability of tenants in mind. But should not be very low either as you have to generate money to cover your losses. Get information about similar properties and how they are charging from their tenants, it will help you to stay in the competition. However, when you compare with other properties, consider their size, location, and amenities they offer. Compare with those which are very close to your property.
Every landlord wants to generate a steady income stream in every situation. During the recession, it becomes more important as the inflation rate increases. So, you have to protect your income stream in every possible way. You can bind your tenants in long-term agreements before the recession. It will be a security for your future. If you have a good tenant, you can offer him some discount if they stay for a long time. It can reduce your monthly income slightly, but secure a steady income stream in the long run. There will be nothing to worry about recession, as your house will be occupied by a good renter. Moreover, you can consider other options like short-term rentals and using your space for a local business. Most importantly, be prepared and have a backup plan. Keep some money safe for the future. Cut down your expenses and save money to pay the expenses. If you consider these tips, we hope you will not be worried during the recession.
If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.