The Danger of Overpricing Rental Properties: A Cautionary Tale

June 12, 2017

Imagine this scenario, which is every landlord’s nightmare. A property has been sitting empty for several weeks with income losses and costs adding up. The landlord does not want to drop the asking price and take less than he was earning from previous tenants, but week after week drift by with the property vacant. Then along comes a tenant, or even better a young couple, very polite and willing to pay the asking price. And at first they did pay, maybe even up front for the first several months. Then the payments started coming late before they stopped all together. When arrears notices were filed the tenants claimed the property was ‘unliveable’.

Even though their accusations were warrantless, due process needed to be followed and the courts looked into the claims, leaving the landlord with non-paying tenants occupying the premises even longer. When the tenants were finally evicted the property, there were damages that required costly repairs. Looking back there were a few red flags. The nice looking tenants may have explained their recent unemployment due to personal bad luck or recent illness, but were willing to pay cash up front while trying hard to get back on their feet. Perhaps they had a sob story about an ailing parent to explain why they had been out of the country and didn’t have previous landlord references.

Unfortunately, there have been more and more stories like this recently. Rental prices are down, and there is a large supply of properties on the market in Christchurch. Landlords need to be cautious when leaving properties vacant while holding out for higher rents, as this makes them susceptible to accepting tenants with poor credit or rental history.

Setting the record straight

At First Avenue Property, we know that when landlords propose a fair market price for a property, they will get a good range of applicants to select from. However, if a property is marketed at a value above that paid for comparable properties in the area, then landlords leave themselves at risk of being targeted by bad tenants who know they will be getting limited enquiries and viewings.

Along with sob stories, landlords should also watch out for tenants offering to pay cash. While not always the case, tenants who offer to pay a large sum of cash up front – several months in advance – may be using it as a diversion to distract from their poor rental history and/or references. Even worse they might be hoping to keep the landlord away while they use the property for illicit purposes such as drug dealing.

How we can help

If you are uncertain about the market value of your property, we encourage you to contact us today. We offer a free rental property valuation and can advise you on the best way to market your property so you’ll attract the best tenants out there. If you choose to work with us, you’ll also benefit from our rigorous tenant screening process and strict rent collection system.

 

Photos

Bad Credit by Jake Rustenhoven, CC BY 2.0

Tenants by Mike, CC BY 2.0

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Filed under Landlord Information

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