Today’s aggressive bidding wars aren’t only for the ‘Homes for Sale’ crowd

If you have multiple bids on your rental property, here’s how to handle it

        

Welcome to the wild world of bidding wars!

Just like the housing market, competition is also heating up in the rental scene. If you’re lucky enough to be an operator with multiple bids on your listing, this unique predicament presents a number of concerns and challenges to consider.

But first, let’s look at the numbers.

Potential lessees line up in droves

In the early months of 2022, the U.S. housing market saw a massive surge in bidding wars. Places like Manhattan reported a whopping 19% increase in this category, which means the same percentage of renters agreed to pay above the asking rent.

Overall, agents and landlords are enjoying this highly competitive moment.

 
                             

In certain cities, apartment occupancies have hit historic highs, and the greater rental market is thriving during this post-pandemic revival. The following industry facts and stats give a brief glimpse at today’s evolving rental landscape:

  • Occupancy rates for nationwide institutional apartments reached 96.7% in 2021, while single-family rentals soared even higher to 96.9%

  • In Manhattan, bidding wars for apartments were up 18.5% year-over-year from 2021 to 2022, with median rental prices up 31.9% and discount negotiability at a mere 3.4%

  • Manhattan, Brooklyn, and Queens rentals reported a vigorous 10.05% vacancy rate in April of 2022 and an average of 29 days on the market for new apartment listings

For more good news, visit Multihousing News and Douglas Elliman

Preparing for battle

The bidding war craze is certainly good for profits. But it also means multifamily investors are operating outside their comfort zones.

“This is unknown territory for many landlords and managers who are facing bidding wars for the first time,” writes Robyn Friedman of Multihousing News. “Particularly owners of condominiums, cooperative apartments, and single-family rentals, who are more likely to face multiple offers than institutional apartment companies, which typically lease to the first qualified renter to apply.”

If you think your listing may instigate a bidding war, it’s important to plan ahead. Just because many people are interested in your unit doesn’t mean they’re all necessarily qualified. However, this situation DOES give you the upper hand.

Make the most of today’s competitive market by following Everest’s proven strategies for rental bidding war success. Good luck out there!

How to Handle a Hot Rental Bidding War: Landlord Edition

Rule #1: Set forth clear criteria

“Deal honestly, know the protected classes, and remember that money is green. The most qualified person gets the property.” —David Dweck, real estate agent, Boca Raton, FL

Bidding wars have many landlords seeing dollar signs. But just because an agreed upon rent is lucrative on paper doesn’t mean it will always materialize. Serious investors know that when it comes to potential candidates, quality and consistency are crucial.

Instead of choosing tenants based on the highest bid, be sure to stick to your own set of objective criteria. These non-negotiables (rental history, income, credit score, etc.) will ensure you secure reliable, responsible renters who meet your expectations.

Rule #2: Negotiate a longer lease

“Depending on your market, it might be wise to lock that renter in, particularly if they are offering above market rent.”—Robyn Friedman, industry reporter, Multihousing News

      

If Covid taught us anything, it’s that anything is possible! Most operators are relieved that the pandemic rent cuts and ‘free rent’ eviction protections have finally expired. If there’s significant interest in your unit, you benefit in more ways than one. 

By negotiating a long-term lease, landlords enjoy reduced turnover and associated cleaning and marketing costs. If a bidding war results in an above-market rent, an extended lease also allows you to take advantage of the agreed upon number for a longer period of time. Just be sure to check your local landlord-tenant laws.

Rule #3: Start a wait list

“They either take a unit or get on a wait list. When they get their unit, we set the market rate.”—Michael H. Zaransky, managing principal at MZ Capital Partners

If you own a building with multiple units, a bidding war could be a blessing in disguise. Sifting through and screening all those candidates is time consuming, but it also allows you to create a huge database of desirable people who fit your criteria.

Once you find the right fit, don’t let those other names go to waste! Establish an official (or unofficial) waitlist and ask runners-up if they’d like to be contacted about future units for rent. Consider this a fantastic opportunity to grow your network and always have good prospects (and referrals) waiting in the wings! 

Rule #4: Use a real estate agent

“It could be helpful to have a professional on your side, particularly because prospective renters in a bidding situation may offer to pay that agent’s commission.”—Robyn Friedman, industry reporter, Multihousing News

The ability to pick and choose your ideal renter is incredibly empowering. The issue is most landlords have never encountered a bidding war before and are unsure of how to best handle the situation. Keep in mind—real estate agents see this ALL THE TIME in the housing market. Many of the same strategies apply for rentals.

If you run into a bidding war ‘problem,’ take the pressure off by hiring a real estate agent to represent you in negotiations. A professional can help speed up the process, give you priceless counsel, and overall make the most of a multiple-bid scenario.    

Everest says: Let the bidding begin!