Feature
by John McWeeny
The San Francisco rental market is in flux. After several years of double digit rent increases, rents have declined an average of almost 20 percent from November 2000. In San Francisco, average studio prices city-wide are down 17 percent; one bedrooms, down 22 percent; two bedrooms, down 18 percent; and three bedrooms, down 17 percent. At MetroRent, there are three times more vacancies listed now than at this time last year.
While some units are languishing on the market for weeks and even months, there is still a need for housing. Vacancies are being filled. So how can you rent your unit in this uncertain market?
1. Keep your current tenants. Vacancies are being filled, even in today’s changing market. However, if you have good tenants in your units already, you are wise to try to keep them. If your current tenants moved in during the past 15 months, they are probably paying over the market rent. Consider proactively lowering rents to prevent tenants from even starting the apartment search process – remember that nobody likes to move. Be prepared to negotiate a new rent if your tenants approach you. Current comparable rent information to help you decide on a reasonable rate is available through the SFAA, MetroRent and other sources.
2. Add amenities to your unit or building. Tenants who moved within the last year are accustomed to paying relatively high rent. As their leases expire, many tenants are assessing whether they can find a better apartment for the same or slightly less rent. Consider adding a dishwasher or laundry appliances to your unit, for these are particularly appealing amenities.
3. Make the unit easy to view. Unlike last year when tenants were lining up for open houses, landlords can now expect one or two interested tenants at an open house for a competitively priced unit. On-line photo tours are an easy way to attract interested tenants to a “virtual” open house. Many on-line apartment-finding services, including MetroRent, will post interior photos with your listing. There are a lot of vacancies on the market, and it is important for yours to stand out.
4. Accept pets. Tenants with animals still have difficulty finding rental housing in the city. Many pet owners are exceptionally responsible, so if you have not considered accepting pets in the past, now could be an advantageous time to change your pet policy.
5. Offer free rent. The economics and psychology of offering a month of free rent appeal to both owners and tenants. In an uncertain market, individuals often pause in an attempt to determine the direction the market is headed. Tenants are cautious about signing a lease when rents may continue to decrease. Owners are loath to lock themselves in with long-term tenants at low rents. A $2400 two-bedroom rental with one of twelve months free equals an average monthly rent of approximately $2200.
For tenants who hope average monthly rents will continue to decrease, a free month of rent can bring their average monthly rent to an appealing level, encouraging them to lock in at this lower rent for at least a year.
For owners, a free month of rent can provide comfort in signing a lease when current San Francisco rent control laws allow owners little latitude to raise rents once a lease is signed. A higher monthly rent in the lease should protect owners if average rents change course and increase over the next year.
6. Set the Price to reflect the market's reality. While a particular unit may command more or less than the average, vacancies priced solely on fond memories of past rent increases are sitting vacant for weeks and even months. Consider the lost income from a unit sitting vacant for an extra month or the lost rent from pricing too low, and the importance of accurate pricing is obvious. Current comparable rent information is available through the SFAA, MetroRent and other sources.
At MetroRent, we work with thousands of landlords from the Bay Area and Los Angeles. We offer many services to assist you. We look forward to helping you fill your vacancies with quality tenants quickly and at the best possible price.
To help owners effectively price units in today’s market, the SFAA is pleased to offer Instant Market Surveys, powered by MetroRent. Instant Market Surveys go beyond average rent information and provide pricing information based on the following criteria: number of bedrooms/baths, neighborhood, unit type, parking, outside space, and view. SFAA members pay only $20, (a 20 percent savings) for each market survey ordered through the SFAA Web site
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. John McWeeny is Chief Operating Officer for MetroRent, a San Francisco-based apartment listing and real estate information service. He can be reached at 563-RENT. © Copyright 2002.