Interesting question isn’t it – ‘Would you really drop rents?’ I know that for many landlords the answer to this question is a definite ‘No’, but I think it really needs to be thought about more carefully, and the benefits and drawbacks carefully scrutinised.
I have dropped rents in the past and here is the criteria that I consider when a tenant tells me they are struggling to pay the rent:
a) the tenant has been in the property for a minimum of 12 months
b) the tenant has previously always paid the rent on time
c) the tenant keeps the property in immaculate condition (i.e. just as though it was their own)
d) the tenant has hit a genuine financial problem (i.e. bills have increased, lost a job etc)
e) how quickly they are likely to get back to paying the full market rent?
f) how likely they are able to pay the arrears?
I always try to consider helping out a tenant if I think it will benefit both me i.e. keep the property let at close to market value and benefit them. In some instances I would also consider moving a tenant out of a property quickly, especially if they have hit major financial problems and it is unlikely I will get any rent at all.
At the end of the day having a tenant move out of a property and going a single month without any rental income can have a much more serious impact on your cash flow than dropping your rent slightly for a suitable tenant. Therefore, seriously consider whether you can help to keep the tenant in your property.
Don’t lose track of your cash flow!
