Nashville’s rental market continues to soften as demand declines and supply continues to rise
Nashville’s rental market continues to soften as demand declines and supply continues to rise. New units come to market daily to compete against existing units and, as we enter fall/winter, fewer renters (not zero, but fewer) seek to move during the colder months. Units will continue to sit, and prices will likely drop—especially in the downtown core.
While there is no need to panic, the time to get real about setting your rental rates is now. You may need to differentiate your listing from other units to get attention. My personal opinion is to make your unit such a good deal that a renter would feel like an idiot to pass it up. You can do this through incentives or lowering the rental price—but do not lower your standards.
Many landlords reduce rent-to-income ratios, credit scores, or security deposits. I am not a fan as these tactics until it’s absolutely necessary or, in the case of deposits, unless the rental unit is bullet-proof and difficult to damage.
Your mileage may vary, and harsh times call for drastic measures. So I won’t blame you for making a difficult call. But consider these options before opening yourself up to a decision that will haunt you or cause damage to your investment:
1. Do your research to ensure your rent is appropriate for the area AND the present market. An agent can help. So can Rentometer and Zillow (but beware algorithms are always lagging).
2. Adjust your monthly rent price to hit multiple rental search bands on the major rental website so you show up in the most searches. Example: A condo priced at $1,999/mo will hit fewer searches than one priced at $2,000 because of how searches parameters are grouped. We are not pricing bread here!
3. Offer to pay move-in fees, elevator fees, application fees or other admin fees for prospective tenants. These can be appreciable, but are generally less than paying a full month of free rent.
4. If you want to test an offer of free rent, try a few hundred dollars off the first 3 or 6 months of rent for any lease signed by a certain date. If you don’t get any bites, increase the dollar amount and/or the months—or both.
The advantage of the first two is that they get clicks on your listing whereas the others get attention only IF someone clicks your ad and reads what you have to say/offer. In the end, you may need a combination of all four to compete. Surely that would be a strong 1-2 punch to have in your back pocket should you need to fill a vacancy.
Also don’t forget to consider additional income opportunities like providing a washer and dryer for a monthly fee. You may also consider taking pets on a case-by-case basis. A washer and dryer at $85 a month equals $1,020 in extra revenue a year. And a nonrefundable pet fee of $350 and pet rent of $25 a month equals an extra $650 the first year and $360 each year after.
Finally, remember that this isn’t forever. When the market settles, you can raise rents. Much like Schooner Tuna from the 1983 film, Mr. Mom, “when this crisis over, we will go back to our regular prices.”
Are you a landlord renting a unit or units right now? How are you finding the current rental market? I’d love to hear from you.
Stephen Parker is a real estate investor and Realtor in Nashville, TN. He can be reached on Twitter and LinkedIn where he posts regularly about finding, funding & successfully self-managing cash-flowing rental properties.