When there are more houses for rent than there are qualified tenants, the tenant can command a premium for his tenancy. As a practical matter, this is often the case anytime that mortgage credit is plentiful and interest rates are low. This situation provides good tenants the opportunity to stop renting and to start buying their own homes with low down payments and mortgage payments that are as low, or lower, than prevailing rents.
On the other hand, this happens much less often that the opposite financial climate in which more selective loan qualifying criteria, higher down payments, and higher interest rates do an effective job of blocking tenants from buying. It is at these times that a tenant begins to place a higher value on safe, clean, decent housing in an attractive desirable neighborhood, giving better landlords the edge.
Before proceeding further, you landlords should stop and re-read that last paragraph. Notice words like decent, safe, clean, attractive, and desirable. It is folly to expect to attract the tenants you want, and to be able to get them to pay higher rents unless you take pains to buy houses as rentals for which good people would be willing to compete to rent long term. And, being able to buy these houses pre-supposes that you've already set up a system to find motivated sellers with large equities who will provide any needed financing at low interest rates and with creative terms.
Assuming that a landlord has such a house that he is willing to rent in a more or less “tight” rental market, then he has to be sure and point out the benefits he is willing to offer a qualifying tenant. Instead of requiring a tenant to be willing, able, and ready to perform his own repairs, the landlord must emphasize the benefits of being able to get a long term lease to guarantee family stability in return for performing a few maintenance chores.
He has to explain how rents are the key to his own personal solvency, and that if he is to be able to provide decent housing, it is essential that net rents after all expenses keep pace with his costs. Having tenants perform routine inspections and maintenance is one way to do this, but nothing can prevent taxes, insurance, and inflation from effectively reducing his net rents.
So, although rent increases will be kept to an absolute minimum, the tenant will have to expect them to occur. Otherwise, the only recourse left to the landlord is to sell the property. This should be precisely what the tenant does not want to happen, if he is truly the best tenant for this house. Of course, there are other sweeteners that can be added to make paying higher rents more attractive to the right tenant:
Let's say That a family has allocated $800 to pay for lodgings, but that they have some discretion as to how much more of their income they can allocate to rental housing if they really want a particular house. Their choice boils down to two houses of about the same size and suitability in the same neighborhood. One of these rents for $795 and the other for $995. Why would they choose the more expensive house?
Suppose you had this same choice? Wouldn't your selection ultimately be based upon how much more you liked one house over the other? What would make the difference in your mind?
Suppose the cheapest house needed painting and had no “curb appeal”? Or had a dried up lawn that didn't present an attractive image? Or needed cleaning? Or had chipped, battered kitchen appliances? Or had a number of things wrong with it that needed maintenance?
By way of contrast, suppose the more expensive house were one of the most attractive homes on the street; with a healthy lawn and accent shrubbery? Pristine inside and out with a glowing paint job and gleaming appliances? Everything about the .house makes the statement that the landlord cares about how it is maintained? Wouldn't you be willing to pay more to live in it?
If I were the landlord trying to persuade you that paying more rent was really in your best interest, I might suggest you figure out how each member of family would benefit from living in the better house.
What kind of friends would your kids be willing to bring home if they lived in the shabby house in comparison to those they'd be proud to show the better house?
How ashamed or proud would you and your spouse be of the home you'd selected when inviting friends over? How would your choice impact your social life? Suppose your boss dropped over, what kind of image would it project?
I'd be sure to point out that the cost per day per family member would be minuscule in terms of the benefits each would obtain. For instance, if a family of five paid $200 more per month, that would boil down to a mere $1.32 each per day.
For this pittance, you'd have a better self image, project more confidence, lose weight, grow hair, and be promoted. Your kids would be able to attract more influential friends, go to better schools, make better grades, have a better selection of colleges, and be more successful; all for less than the cost of a cup of coffee a day per family member.
