You may have heard the statistic that 90% of millionaires became wealthy by investing in real estate. These investors come in all shapes and sizes. As a prospective resident looking for lower rent, there is a specific type of investor you are looking for. The investor you want is one who owns fewer than 100 apartments and works as their own property manager.
When working with self-managing landlords, you are working with someone empowered to make deals. Larger investors hire property management companies in an effort to avoid dealing with individual residents. While some property management companies have leeway to negotiate, most do not. Therefore, any negotiation would require them to go get approval from the property owner. But, the property owner specifically hired the property management company to handle their properties. No management company calls the property owner unless they really have to.
In addition, smaller investors are more motivated to negotiate. Larger investors can even out the fluctuations in their cash flow situation because their income is averaged out over hundreds, if not thousands of apartments. Consider an investor who owns one single family house. The property is either rented or it isn’t. There is no middle ground between rented and 100% vacancy. Rented means there is income, vacancy means no income. If you offer to rent for $25 to $50 below their asking price per month, you just saved $300 - $600 per year. This can and does happen, especially if the property has been vacant for any length of time. Most landlords have mortgages and the monthly payments on those mortgages don’t stop just because the property is vacant.
Property managers work with all types of residents from all walks of life and varied employment backgrounds. Their responsibilities include not only leasing to new residents, but also renewing the leases of those who are already residents. But, working on a renewal for a resident who works as a real estate journalist for the local business newspaper definitely adds a new twist. In this situation, the initial renewal offer included an increase of $100 per month based on the manager’s analysis of the market in the apartment community’s neighborhood.
This resident gathered data from properties outside the neighborhood and presented a number of viable, comparable alternatives. Not only were these alternatives less expensive than the renewal offer he’d received, they were cheaper than his current rent. Since the resident had substitutes that were readily available it made the possibility of losing the resident much more real. Armed with market data, and a stellar rent payment history, he created a strong bargaining position for himself. In the end, the resident and property manager settled on a smaller increase at $50 per month. The manager secured an increase and kept a current resident, avoiding vacancy and other apartment turnover costs. The resident avoided the cost and hassle of moving while saving $600 a year. For those keeping score, that’s one to three extra car payments depending on what you drive.
If you are not a real estate journalist, you may be wondering how to find this information and why this would have credibility with your landlord. Perform an internet search for rental properties in your city. Numerous websites will appear that can help you locate suitable alternative properties, including Craigslist. While those websites will show pricing information it is best to confirm by calling the leasing associate for each property. The phone number should be available on your website of choice. Once armed with that information, your credibility is actually enhanced three ways. First, you are a resident who is currently deciding whether to renew or not. More specifically, you are deciding whether to maintain the continuity of the landlord’s cash flow. Second, the pricing information you’ve discovered is real, verifiable, and relevant to your renewal decision. Third, the fact that you bothered to get the information shows just how serious you are.
There are a couple of factors that can enhance your power to negotiate. First, focus on smaller investors who self-manage to be sure they can negotiate, or work with property managers who have at least some leeway to negotiate. Second, you don’t need to be a real estate journalist - just look for pricing information from other communities to support your negotiation position. Working with those who can negotiate and having actual market information at your side makes the power of negotiation the most effective.