Tuesday, September 7, 2010

How Long on the Market is Too Long?

Here is a chart from RentalHomeProfessionals.com which shows the average time on the market for properties. As you can see both nationally and regionally, the average time on the market is about 80 days. This is a phenomenon that we have seen over and over. Actually, the rental market is quite flooded with properties that are unlikely to rent.
What is the difference between a home that rents in 30 days vs. one that rents in 90 days? Often they will end up renting at close to the same price (it they rent at all). However, in addition to a lack of marketing reach, the 90 day listings start out by asking too much. The landlords thinking is usually along the lines of "this is how much I need to break even", or "This is how much we used to get". They start off by assuming they can dictate to the market how much their property is worth. However, the market doesn't care how much a landlord wants.
It is only after getting to the point of desperation (and foreclosure) that the landlord will finally get real on asking price. Whats more, by that time, they are ready to use the breath on a mirror application processing approach and end up getting stuck with a bad renter. This is one of the primary reasons why we see people getting out of the rental business at a time when more people should be getting in.
How much better to know the correct rental price before hitting the market (better yet, before purchasing the property), then renting to good, qualified applicants who will get the cash flow coming in and remain consistent?