Terra Residential Services
February 2011

Address
14655 Northwest Freeway
Suite 124
Houston, Texas 77040

Phone
(713) 895- 9966
(800) 275-7776

Email
info@terraresidential.com

Website
TerraResidential.com

Houston's Only
Certified Residential
Management Company.
Specializing in Investment Brokerage & Management
Since 1990.


Serving You

Michael Mengden
MPM®, RMP®, GRI®

President/Broker
(713) 895-9966 x305
mmengden@terraresidential.com

Bridget Mengden
Accounting
(713) 895-9966 x304
bmengden@terraresidential.com

James Dominy
Property Manager
(713) 895-9966 x308
jdominy@terraresidential.com

Jennifer Steward
Property Manager
(713) 895-9966 x306
jsteward@terraresidential.com

Carolyn Marsh
Assistant Property Manager
(713) 895-9966 x303
cmarsh@terraresidential.com


Our Services
  • Leasing
  • Make Readies
  • Rent Collection
  • Evictions
  • Electronic Statements
  • Online Payments
  • Property Acquisitions
  • Sales
  • And More

Announcements

Check Your Insurance: Events can happen - flood, extreme heat, hurricanes, fire, and more! It is important to check your insurance to obtain the best coverage possible and ensure that it is current. Review now with your insurance agent before a disaster/emergency occurs.

If An Emergency Occurs: Our first priority during any emergency is to handle the situation, taking any necessary measures for the safety of your property and your tenants. Then, we will contact you as soon as we are able.


Our Associations
Associations

Rents - Do the Math

It is natural to want to obtain the highest rent possible when your property is vacant. A long vacancy can cause frustration, anxiety, and anger. However, holding out for more money can be more costly than you think.

When this situation occurs, it is better to use a mathematical approach. Write down the expenditures for your investment and this can indicate to you if it is worth the risk. Consider everything it takes to support the property for one month. It can be mortgage payments, taxes, homeowner association dues, insurance, repairs, gardening, and any other expense required to maintain the unit. Even if the mortgage is low or non-existent, can it really pay for a rental price that is not attracting a tenant? If the property is in a negative position, the picture can be worse.

Here is an example of the expenditures of an investment property and determining the rent.

Mortgage 845
Taxes & Insurance 145
Management cost 70
Gardening 50
Repairs 50
Total 1160

The above property has been on the market while occupied for thirty days and now vacant for two weeks. The asking rent is $1200, the property is in good condition, and it is in a good neighborhood but there are no applications. The Property Manager calls and requests the owner approve a rent reduction of $100 because of the competition and the slower economy. This property will cost $1160 for a month of vacancy. Already, the two-week vacancy has a loss of $580. If it is vacant for six weeks, it will be $1740; two months would be $2320.

If the price lowers and the property rents within 2 weeks, the loss will only be $1160. Now that you have seen the math on this property, is it worth it to keep the higher rent if the activity is non-existent? There are no guarantees that the right tenant will apply even with the lower rent, but the odds are greater.

Now it is time to apply a reverse example of this same math. The owner of the above property will not lower the rent and the property remains vacant. The rental now has been vacant for six weeks so there is already a loss of $1740.00. Prospective tenants apply but their rental record and credit is not good. This is a tempting situation but not a good one.

Although there has already been a loss, a destructive tenant can create a greater loss than that of the vacancy. Generally, a poor tenant will not pay the rent. More money is lost if attorney fees are needed to evict the tenant. There are often major damages when tenants default. The impulse is to give in and rent to the unqualified tenant to stop the rental losses. It is NOT worth the price.

The smarter choice - lower the rent and attract the right tenant. Qualified tenants know the rental market. They will simply ignore those asking too much and rent a comparable property for less. There is still no guarantee that the property will rent but picking the wrong tenant is still the wrong choice.

It cannot hurt to try a higher rent if the market indicates properties are renting quickly. However, if the property is still vacant, it is time to think about doing the math and reducing your liability.

 

Terra Residential and CNR
partner to improve
Cash Flow!

CNR Insurance Brokerage Services - 8% Insurance Rate Discount for TERRA RESIDENTIAL CUSTOMERS
- Up to $500,000 Personal Liability Protection PER PROPERTY
- Lower Rates for Real Estate Investors
- Broad Coverage Form
- Current CNR Customers can call for these greater discounts
- This product is for Texas, Oklahoma, and Arizona

Example Quote: $120,000 Home, Built in 2006
ANNUAL PREMIUM: $639.00
CALL CNR TODAY

972.248.2415 | Toll Free 800.539.1744 | Fax 972.248.4294

info@cnrbrokerage.com | www.cnrbrokerage.com


The material provided in this newsletter is for informational and educational purposes only. It is NOT legal advice.
Although we believe this material is accurate, we cannot guarantee that it is 100% without errors.

 

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