Seller Objections: I Want More Than Market Rent

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“What do you say when they say, ‘I want my monthly rent to be above market rent.’?”

 
Joe: It’s the most important thing that you can do when putting together a for rent deal is making sure that the market rent is at or below market rent. Now, the purchase price can be higher than its real value but the market rent – it CANNOT be above market rent. If it is, the likelihood that you’ll sell it drops down dramatically, so make sure that their monthly income on that property is at market rent or below.
 
Joe: The way you find out what market rent is use a website called rentometer.com (r e n t o m e t e r.com) or go to Zillow.com (z i l l o w.com). Both of those have market rent in there. They’re not always accurate, so the other way to find out is to go to Craigslist into the for rents and see what is renting in there to try to get a ballpark idea of what’s going on. Once you get to know an area pretty well, you’re going to know what the market rent is.
 
Joe: Rents fluctuate. Just recently, here in my town of Indianapolis, our rents have softened a little bit, maybe 5% or so just over the last year. That’s because we’ve had some hedge funds come in and buy a bunch of properties in Indianapolis, just hundreds of properties in Indianapolis, so its made the rental market a little softer and its dropped our values a little bit. But I believe it will go back in the near future, at least I hope (I’ve got a lot of rental properties).
 
Joe: So here’s the way to handle that objection: “it doesn’t really matter much to me how much you want for it, but if we put it in for over market value, I won’t be able to find a buyer. That unfortunately is the reality. I can get you full market rent but not above that. Buyers look at between 18 and 23 houses on average before they buy one. If your house isn’t the best one they look at for the price, they won’t buy it. you don’t want to just be on the market to help your competition to sell, do you? Also, we don’t really know what market rent is. We can guess at it but if a buyer doesn’t like our price, they’ll buy something else. We’ve found that if it’s not sold in 30 days with the marketing that we use, it’s not going to sell at that price and we need to lower the rent by $50 or $100 a month, so be prepared for it if that happens. Does that make sense?”
 
Joe: So take them through that process. Ask them questions about it. Always follow up with the question and get them to respond to what you’re saying, and if it makes sense to them, then you can move on with the next close. Alright, I hope that helps. Good luck.