Black goes with everything. The Mediterranean diet is very healthy. People are afraid to rent their houseare, possibly, the three truisms that you hear the most in the street. As we at Monapart Valencia are neither fashion experts nor nutritionists... here we go with the third statement.
Why are people afraid to rent their homes?
A homeowner considering renting out his or her property suffers basically from two things: non-payment and damage to the property, either through misuse or vandalism. To understand this in all its magnitude, we would need to know: 1) What type of landlord suffers from these fears; and 2) how big the risk is. On the one hand, we have the owners who decide to opt for tourist rentals, who are much less affected by these fears, as the system itself and the platforms offer them protection. A separate issue is the economic risk... (we recently had the opportunity to talk about the "Airbnb hosting bargains). On the other hand, we have professional landlords who, even if they opt for long-term renting, their fear becomes a business risk, better or worse quantified, but previously assumed.
Why are people afraid to rent their homes? Basically because of two things: non-payment and damage to the property.
How is the client of the Monapart rental service?
Although we have this professional client, the vast majority have a more "accidental" profile: owners who are in no hurry (or need) to sell and decide to rent so as not to part with their home for a price lower than their expectations; owners who cannot sell due to a high mortgage burden; owners who have inherited and are wondering whether to sell or rent; owners who "accidentally" have bought a home to invest their savings, even though this is not their activity. Let's look at a practical case: an owner, who fulfils any of the above conditions, decides to rent a flat for, say, €500 per month, which will cost him €18,000 over the life of a 3-year contract. How much would it cost to repair this same property if it were to suffer damage due to vandalism? And let's go further: How big will the economic hole be if, in addition, the tenant does not even pay three monthly payments? We understand better the fear we are talking about, don't we?
Fortunately, there is prevention for this type of situation, and usually A real estate agency can put in place a number of mechanisms to mitigate risk when renting a property:
- Basic filterWe establish a rent/income ratio for tenants that can range from 30% to 45%. Income which, of course, must always be proven. In other words, a tenant who earns €1,000 per month will be able to access a rent of between €300 and €450 per month. If there are several tenants, the incomes of all of them will be added together.
- Specific filterWe set conditions adapted to the type of housing, for example, a specific tenant profile (there are people who do not want to live in a house). singles nor students, and people who just want to singles or students) or economic thresholds (requiring an open-ended employment contract is an option).
- Pricing strategyThe same property can be put on the market for €1,000 or €1,500. When we give the owner the choice, most of them choose the second option... But when we explain the reason for the price difference, things change. Let's suppose that the market price of this hypothetical property is €1,100, which sets the minimum market price. Who would rent the same property for €1,500? Anyone who has no intention of paying, or who, even if they do, cannot guarantee payment in any way. And which owner would rent a property worth €1,100 for €100 less? The one who wants to attract more demand to choose his tenant from as many options as possible. The latter is always done with caution, establishing how conservative our marketing strategy-risk assessment will be.
- Eyes on the ballOur experience allows us to detect any characteristics of the potential tenant that make us wary. The most common is to offer monthly payments in advance. We don't like that for several reasons.
- The more sugar, the sweeterWe have within our reach some extra options to guarantee a rental, such as looking for a guarantor, a bank guarantee (the guarantor is the bank, which is not free) or an extra deposit (not to be confused with the advance rents in the previous point).
- First and foremost, cautionThe agent should always prefer a good deal to a quick deal (i.e. easy money).
What happens when prevention is not enough to mitigate risk when renting a property?
Our intuition may fail us (in the end it is the landlord who, advised by us, chooses the tenant) or we may encounter deception that is very difficult to detect (false documentation, significant personal burdens in the form of debts or non-payments, etc.). What to do in these cases? We will have to work with extra security, especially in the rent segment between 400 and 800€*, as potential tenants will by definition have tighter ratios and greater difficulty in providing guarantees. So what is our first option, which by the way covers almost all of the above? A lease policy.
* This segment is in Valencia, as these price ranges in cities such as Barcelona or Madrid are science fiction.
We have been familiar with leasing policies for years, and we know that they work wonders, mainly for two reasons:
– QuestionsThe company asks who the tenant is, what his or her income is and what his or her history is (debt files), which is already a thorough screening.
– AnswersIn case of "claims", which is how we will know the non-payments or other eventualities, the company will cover an amount of monthly rents or damages due to vandalism. And, very importantly, it will cover the resulting legal costs.
Monapart Valencia, teaming up with the Valencian brokerage firm JM Ridaura Assegurances y ARAGwe have created a joint package which will include the marketing of the property, the management of its rental, the rental policy and specialised advice on both real estate and insurance. And all of this at the usual price.
The days of rental uncertainty are numbered. Monapart Valencia improves its services with complete specialised advice, including a rental policy, for greater peace of mind for the owner and their home.
