I am still recovering from the flu and can’t manage a coherent thought. Please enjoy this guest post from Kalen Bruce of MoneyMiniBlog. You can earn more about Kalen here and don’t forget to pick up his free eBook.
I don’t always lower my tenant’s rent, but when I do, I write an article about it. Holly wrote about why she never raises the rent on her tenants. EvenSteven wrote an article about how he raises the rent frequently. Both were great reads and valid points. After reading their stories, I decided it was time to share mine.
Yes, I lowered the rent. Let me explain…
Losing a Great Tenant
My wife and I had great tenants for several years. They always paid on time. They informed me of any maintenance issues as soon as they happened and they treated the house like it was their own – a landlord’s dream.
They were also great friends of ours. It worked out well and since they were our first renters ever, they kind of spoiled us. They were great tenants, but they were missionaries and we knew it wouldn’t be long before they were going to be moving to continue their mission work.
We didn’t expect to find tenants like them again, but we were pleasantly surprised to find new tenants quickly and, after meeting them, they turned out to be pretty awesome. Their references checked out, they had a steady income and they were personable and friendly.
Hooray! New Tenants!
Our rental property is a fairly large home. 2400 sq ft. Four bedrooms. Two living areas. We were expecting a large family to reach out to us, but this family was relatively small. They only had one child.
We weren’t too interested in their personal life. I mean, if they want a huge house for a three person family, that’s their decision. As long as they can afford it, we’re good on our end.
They loved the house, we loved them and they moved in within the month after our previous tenants were gone. They signed an 18 month contract and paid on time every month for the first year.
Everything was going great until I received a phone call…
The Phone Call That Lowered the Rent
As I was finishing my run one day, I checked my phone to see a voicemail. I quickly listen to it since it was from my renters. There was a family emergency. Her husband left her and her child. A mom and her son, alone, in a four bedroom home and stuck with the bill.
At first, she explained how she wouldn’t be able to afford the home any longer and she would have to move. Of course, I totally understood and agreed to work with her on getting out of her lease and returning at least a small portion of her deposit.
After a brief conversation, I figured out how much she would be able to afford and what she was looking for. Then I let her know that I was there if she needed anything and we ended the phone call.
Then I started thinking (dangerous, I know)…
The amount she could afford was about $150 less than she was paying. It’s expensive to go through the process of finding a new renter and even if I could find a new renter quickly, would they be a good tenant? Would they take care of the home? Every time a rental property changes hands, you take a risk.
I knew it wasn’t easy to find good tenants and I knew I had a great tenant already living in my home…decisions, decisions…
Weighing Options and Making Decisions
Of course, I could have just let her go on her way and started the search for another tenant, but I decided to weigh my options first. I thought there may be a way for this to still work.
Regardless, $150/month adds up. I know this. And what if she stays for several years? It could be several thousand dollars.
We had to consider a few things. We came up with some pros and cons. Since you asked, let me share them with you…
Pros to lowering the rent:
- We wouldn’t change renters: Lowering the rent wouldn’t break our budget. We would still be profiting from the home and, profits aside, she is still buying us a house.
- We’re helping someone: I know the old sayings about how dangerous it can be to mix business with pleasure or friends and so on, but this could be a situation for us to help someone without hurting ourselves.
- Lower maintenance costs: Keeping the same renter would mean that we wouldn’t have to fork over an money to get the property ready for someone else.
Cons to lowering the rent:
- Less profit: This is the first and most obvious thing to consider. We would be earning $150 less each month from the property.
- Less motivation to keep the renter: Great tenants are hard to find, but I have to admit that the renter was more valuable to me when they were paying the full price.
I know, I know…we shouldn’t get caught up in other people’s personal lives. It’s just business. If you can’t pay the rent, get out! Right?
Maybe for some people, but not for us. We saw this as an opportunity to help someone and it wasn’t a financial burden on us, so we made a decision. We didn’t feel like we were being taken advantage of.
We decided to lower her rent by $150/month until the end of her lease.
This was not an overnight decision. We weighed our options, talked to our mentors and came to a conclusion. And I feel like we did the right thing. We’ll renegotiate when the lease is up, but for now, we’re happy knowing that she doesn’t have to move and we still have a good tenant. In fact, she is looking for a housemate, so she may end up being able to afford it after all.
We base our decisions off a set of financial principles that I have developed over my life and part of the principles we live by are to remind us that money isn’t everything. People are more important than money. I think it’s too easy to blow people off with the old “don’t mix business with pleasure” mentality, but for me, I try to distinguish the difference between wanting to keep things business-focused and pure greed. I try to avoid the latter, but I am human.
It’s easy to get caught up on just worrying about the profit produced from rental property, but you also have to remember that even if you aren’t profiting, someone else is still buying you a house. And that’s a pretty good deal. I don’t want to have my property destroyed by a terrible renter just because I wasn’t willing to keep a good renter.
And in my experience, the peace of mind when you have a great tenant is worth taking a few dollars off the rent.
So what do you think about lowering the rent in a special situation? Do you think I’m too soft? Should I have just booted her and child out?