We are definitely seeing an increase in value with turnkey new fourplexes. However, I am still seeing older 4 plex values going down. I contribute most of that to recent distress sales of some properties that are in very poor condition. Rates are still amazing. Although we’re seeing a fair amount of activity on duplexes, I’m not sure if we’ve hit bottom or not. Again, the newer properties that are in turnkey condition appear to attract more buyers and better prices.
As we enter the holiday season, we know that tenants typically tend to hunker down and not move. This makes vacancies hard to fill. Below is our updated vacancy chart. We’re doing well and if we have any properties sitting, we are or will be talking to the owner to consider a more aggressive approach considering the current market.
By design, First Rate Property Management does everything it can to not have leases expire in the fall and winter months. However, what do you do when a lease expires prior to the fall and winter and the tenant wants to remains on a month-to-month agreement? There are two ways to deal with these:
1. First Rate Property Management’s leases are created so that once the tenant goes month–to-month, their rent increases by 5-10%. That rent increase is our way of encouraging the tenant to renew. Additionally, depending on the market, we recommend offering renewing tenants some sort of an incentive. Again, this thanks them for being a great tenant and encourages them to renew. We approach the tenant about renewing about 3 months before their lease expires and do so, each and every month thereafter until they move or finally renew. The problem is, if they don’t renew, there is a possibility that they may vacate during the winter months, which is not a good time to fill vacancies. Typically it requires a discounted rent or a large incentive.
2. The other approach is to give tenant notice to renew or 30-days to vacate. This puts a lot of pressure on a tenant and often is perceived by the tenant as being un-welcomed or not recognized for being a good tenant. In a perfect world, the tenant would renew. But what if they move out? Then you have turnover costs, advertising, and a vacancy.
On the bottom of your monthly statements you’ll find a rent roll that shows lease termination dates. If you see a month-to-month tenant or a lease expiring soon and you would like First Rate Property Management to try the 2nd approach, please just let us know. We can talk about the current market conditions and make a decision. It may prove to be the smartest thing we have ever done, or maybe not. I’m not sure.
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