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Rent Below Market for Six-Figure Income
1 Dec
Summary
- Renters earn six figures by renting below market rates.
- Below-market rents reduce tenant turnover and boost applications.
- One investor uses a binder strategy to involve tenants in pricing.
Ted and Jamie Garber, a Florida-based couple, have adopted a contrarian approach to real estate investment, choosing to rent their 28 units at or below market rates. This strategy has proven successful, significantly reducing tenant turnover and attracting a higher volume of applications. As a result, the Garbers report earning a six-figure passive income annually, demonstrating that lower rents can still lead to substantial profitability.
Their approach acknowledges the unique challenges in different markets. In Florida, where insurance premiums have escalated due to natural disasters, rent increases are sometimes necessary but are capped at a maximum of 5% per year, as stipulated in their leases. In contrast, in areas with an oversaturation of rental properties due to institutional investors, they opt not to increase rents, recognizing that supply outpaces demand, making it essential to retain existing tenants.
Another investor, Dion McNeeley, employs a similar philosophy of offering below-market rents, further enhanced by his innovative "binder strategy." This method involves engaging tenants in a conversation about property values, taxes, and insurance costs, fostering a sense of partnership and understanding that helps maintain tenant satisfaction and loyalty, thereby contributing to a stable and profitable rental portfolio.
