Confession I Lowered the Rent - picture of house with For Rent sign in front
Real Estate

Landlord Confession: I Lowered the Rent

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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?

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47 Comments

  1. Once I saw that you were lowering the rent FOR THE DURATION OF THE LEASE, I knew you were making the right business decision. Yes, BUSINESS decision. Just one month’s vacancy while you searched for a replacement tenant would be equal to many times that $150 per month rent reduction. And who knows what kind of a tenant you would end up with? Once the end of the lease approaches, you can reevaluate. But, until then, you did good.

    1. Yeah, I definitely only agree to lower the rent for the duration of the lease. I even had her sign an addendum that went with the lease stating this new agreement. Her lease will be up in two months and we are going to renegotiate. I’ve already talked to her a little to prepare her for that conversation.

  2. I think that’s a very generous and thoughtful thing to do. I’m sure it means the world to her to be able to regroup from the comfort of home. And, since she’s a good tenant and you’re avoiding vacancy, seems like a good decision all around.

    1. It really was a win-win, plus it gives her time to figure out her situation. 🙂

  3. I think you are being too soft. That’s just me. I totally get why you do it, but some people are really good at sob stories. I guess since this is just until the end of the lease it is probably a pretty ok decision, but are you going to keep working with her if she wants to resign? Then what happens when she has another sob story next year? I know those are all what ifs, but you have set a precedent with her. Just my thought process, but then again, I may be a heartless jerk (which is why I am not a landlord).

    1. LOL, I wouldn’t say you’re being a heartless jerk. Many others have your opinion on the matter and I can totally see it from the business side. And I had those same thoughts, but this is a pretty rare event and the only drama that this tenant has brought up.

  4. You made a very thoughtful decision and one that shows you have good moral standards. In your shoes I would’ve done the same thing. You know she’s a good tenant and she just had a huge blow in her personal life. Life is hard and it’s good to hear stories of people who help out each other in times of need. Even if you look at it from a financial standpoint, $150 less on a place can be worth it for a good tenant. My landlord commented that she keeps hers rents low so she can help out young professionals who are just getting started (she’s a fantastic landlord too).

    1. Thanks! 🙂 I felt right about it. Neither one of us were losing out. I was still profiting and she could afford to live there for a little longer.

  5. I had my previous tenant call me up to tell me the same thing – she could no longer afford the rent. I worked with her to end the lease early without charging a penalty but I didn\’t lower the rent for her.

    In my eyes, what will lowering the rent by $200 really achieve? After working for a financial planner I know that most people under estimate how much they spend each month. I was worried she just assumed she could afford the rent if it was $200 less and would be getting a call in another few months telling me she still couldn\’t afford the rent. It was easier to just allow her to break the lease and both of us move on, avoiding potential headaches.

    1. That is true. Lowering the rent by a couple hundred dollars or less shouldn’t really make that much of a difference, but she can pay it, and my house doesn’t sit empty for a month…or longer. The good news is that she only had a few months left on her lease, so it wasn’t much of an issue. Now she has a roommate, so her rent will go back to normal.

  6. It seems like you made a great decision! I probably would have done the same thing, seeing as they’re good tenants. That being said, you still need to turn a profit, so I hope you still are.

    1. Great point and yes, I am still profiting from it. Ironically, right after I decided to lower her rent, my mortgage payment went down even lower due to some tax changes…it must have been meant to be. 🙂

  7. Sounds like a great decision. If you were still able to make a profit/cover cost for the rental, but help her out sounds like a win/win. Having it set for a period of time end of lease is a key part, so both parties have an expectation of when the agreement will end.

    1. Exactly, Brian. I think it was important that we had an agreed upon time at this amount as well. When her lease is up, we’ll renegotiate.

  8. A good tenant is valuable…having to find new tenants and clean up the place will have costs as well. You can always raise the rent back at the end of the lease. And I think I would have done the same thing (though I’m not a landlord…yet). We’re still human and it’s good to help out someone who’s going through a bad time.

    1. Like you said, we’re still human. I found a way to make it work for both of us. It isn’t forever and we can both be happy.

  9. I can see it from both sides, but looking at it I would’ve made the same decision. Yes, it means lost profit, but knowing the details I don’t think I could live with the decision of making the tenant move out. I think limiting it to the length of the current lease helps mitigate the loss as well as give them time to prepare to move on.

    1. I agree, John. And it’s just for the last few months, so she will be able to figure out whether she can find a way to afford the full rent or not.

  10. I think you made the right decision for you, but I can’t be certain you made the right decision for the family, here’s my thought process.

    Having a major event happen, whether it is a job loss, relationship breakup, or health emergency can bring your life to searching for anything and everything to just make it by. I’m more concerned for her that while she thinks she can pay $150 less, she really doesn’t know at this point what is going to happen. $150 seems very low for losing an entire income/person for the family, why not give her some time to search and see what is available in her price range that is not going to affect her at all? I feel like her emotions may get the best of her in this situation and make a decision she may regret and not live up to, I know it would for me.

    You certainly can’t make decisions for other people, but I wouldn’t be surprised if she struggles financially during this time. I hope it all works out for the both of you.

    1. You make a good point, man. She basically went from living a fairly luxurious life to just scraping by. Now it’s up to here to decide if she wants to just scrape by or move out and find a house within her means. I’ll leave that decision up to her, but I’ll definitely provide my input…I can’t help it! lol

  11. A good tenant is an incredibly valuable thing (spoken from the perspective of someone who had to clean up a rental property after a bad tenant moved out last summer!) As long as you can still cover costs, I think you made a good decision.

    1. You know from first hand experience. I haven’t dealt with “that tenant” yet, but I know it’s hard to find a good one and I want to keep her.

  12. You made the right call, IMO. The costs of transitioning to a new renter (and the risks) are typically fairly large. One month of vacancy would dwarf the delta of the new rent (at least for the 6 month period).

    1. I think transitioning renters is one of the worst parts of being a landlord, both in costs and work.

  13. I would have done the same thing, its a pretty sad story. I’m sure something will come up maintenance wise, where you can deduct or write off a portion of that amount. By doing this she might just resign when her lease is up because you didn’t judge her during this family emergency.

    1. I’m glad you brought that up! Yes, she has actually been helping with maintenance and repairs that she wouldn’t have had to help with, since I am working with her.

  14. You talk about your tenants being a landlord’s dream, but you’re being a tenants dream landlord! It’s amazing you were willing to budge and help this woman out in a tough time. And you’re right, if you have a good situation going with your tenant it may be worth that money to keep her instead of finding new ones and risk someone who could damage your home.

    1. Well that’s a good way to put it…thank you! I’m just glad it worked for both of us.

  15. Good for you for helping her out. Seems that your tenants are great so it’s important to retain them as much as possible. I think you did the right thing. I probably would have done the same myself.

    1. It’s good to hear that so many of you guys feel the same way. It’s also good to know that there are plenty of people who would do the same thing.

  16. At the end of the day, you still have to be able to sleep at night with the decisions you’ve made. Yes, lost profit, from a first glance. But the condition of your soul matters too…

  17. Ben Luthi says:

    Solid decision. You’re not selling the farm here, and doing it just until the end of the current lease is perfect. What some people don’t understand is that the trauma from something like this can be paralyzing. You just saved this woman a lot more stress and grief…which will likely pay off in the long run (and it doesn’t have to be a monetary payoff to be meaningful).

    1. That’s right…it was very dramatic for her. I was glad to be able to help. I like that I was in a position where I could afford to let her keep living there. 🙂

  18. You made a good decision. A small decrease in income is not such a loss. If the house was empty for a month, you would lose a year Of 150 per month. If more than a month, well you know. You did the right thing.

    Keep cranking,

    Robert the DividendDreamer

    1. Thanks! Yeah, it would have been a big hit to take for the house to sit empty, even just for one month.

  19. I have to say I’d have done the same thing as you. Yes, the reduced rent is a pain in the ass, but you’re right about holding on to good tenants.
    I’ve recently rented one of my houses out, and I rent them by the room normally. Anyway, a company got in touch and wanted to take the whole house from me, and they wanted to put extra people in there and share the bedrooms. At first I wasn’t sure- it would mean the whole house being empty again at once etc, but we agreed. I also got extra rent in from the extra people, but not as much as I’d have liked to charge (it would only just cover costs). It is also not something I’d normally consider. In the end I agreed to it.
    As it turns out, they’re brilliant tenants and it was worth taking that risk on them. I suppose you just have to take a chance sometimes.
    Thanks for the interesting read.
    Reece

    1. Interesting. Seems like it worked out for you. I know in bigger cities, it’s very popular to rent your house by the room and have your tenants share the common area. I never thought about that as being a way to always have some rent coming in, but that makes sense. Sounds like a good idea. 🙂

      1. Yep- it works really well in that when you lose a tenant, the whole property doesn’t stand empty. Granted, it’s not for everyone, and there’s more management involved, but I can live with that.
        How many houses do you rent out? And do you do all of the management yourself?

  20. That’s really good of you. I can definitely see the appeal of keeping good tenants, and in her situation in particular, I’m sure she values the helping hand you’ve given her at far above $150.

  21. Yes she does. She is still extremely appreciative, even though she knows I will have to raise the rent back to normal at the end of her lease.

  22. What a wonderful thing to do. From a business perspective it makes total sense too. Finding renters can be difficult, especially good ones that pay on time and don\’t destroy everything. It\’s something I would have also done in that situation too. Hope it works out well for you.

  23. It seems like a very sound decision. $150/month is still an awful lot but I believe that you\’ll be receiving more blessings because of this!

  24. One reason I favor real estate as an investment is that I feel like I can always assure that my money making aligns with my personal values. I probably would have restructured the lease and gone month to month with a $150-$200 credit for being willing to show the house, but $150/mo deduction for the remainder of the lease is very generous, and something I support.

    My Grandpa invested in commercial real estate, and he accepted gift cards for rent when the town’s economy suddenly got flushed down the toilet. I think all told, he got $8000 in Domino’s gift cards, $3500 in sports equipment, and $950 in Caribou gift cards (all only good in his town’s locations).

    7 or 8 years later, my grandpa is still not paying for pizza 🙂

  25. I believe that you did the right thing. I’ve owned investment properties for many years and sometime the long term cashflow isn’t as important as the short term requirements of good people. I’m a capitalist but i believe that being a good person for the right people is a long term advantage. This has worked very well for me over the years and i know it will continue to be the right course.

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