Most landlords calculate returns by looking at the rent number on a lease. Few calculate what they lose when that number sits at zero for three months while they hold out for a premium no tenant will pay.
In property management, the instinct to maximize rental rates is understandable. A higher monthly rent looks like a straightforward path to better performance. But Frank Schrader, Owner, Broker & Realtor at Real Estate Direct in Brevard County, Florida, argues that this logic collapses when vacancy costs and tenant quality enter the equation. His position is that disciplined tenant selection and fair market pricing consistently outperform aggressive rent optimization. He has refined this view over nearly three decades of managing properties, through two major market cycles.
The Vacancy Math
Schrader’s core argument is arithmetic. “A rented property is what you want,” he says. “Three months of vacancy and you might as well have lowered it by God knows how much.” A landlord who holds out for a rent above market and sits vacant for 90 days has already forfeited more than a year’s worth of that premium. Add in the costs of re-listing, showing, screening, and preparing the unit for a new tenant, and the gap widens further.
Schrader argues investors consistently underweight this in practice. The pull of a higher number on a lease is strong, and the costs of vacancy are spread out over time in a way that makes them feel less immediate. The result, in his view, is a systematic bias toward overpricing that produces worse outcomes than a more conservative approach would.
“Turnover is a killer,” Schrader says.
Tenant Quality Matters
Beyond vacancy costs, Schrader argues that tenant quality has a direct and often underestimated effect on property returns. A tenant who pays on time, maintains the property, and renews their lease is worth more to an investor than the marginal rent increase that might attract a less stable occupant.
“I would rather get 95% of a market rent and have an incredible tenant that takes care of my property and pays on time and is respectful than I would to try to get 105% from someone that could potentially trash it,” Schrader says.
Property damage from a poor tenant can run into thousands of dollars. Security deposits cover part of that cost, but rarely all of it. Add legal costs and time involved in an eviction, and the financial case for accepting a slightly below-market rent from a well-qualified tenant becomes clear.
Screening, in Schrader’s view, should weigh more than whether an applicant can afford the rent. Ability to pay says little about whether a tenant will maintain the property or stay past the first lease term, and those factors carry more weight for long-term returns than the initial rent figure.
Pandemic Stress Test
The most concrete evidence Schrader offers comes from the COVID-19 pandemic. Eviction moratoriums, economic disruption, and tenant financial stress pushed vacancy and non-payment rates sharply higher across the country during that period.
“We went through all of COVID, and at that time we were managing about 160 properties,” Schrader says. “We had zero evictions in the entire time of COVID.”
Schrader points to zero evictions across 160 properties as the outcome he’d expect from prioritizing tenant stability over rent maximization, even under the acute financial pressure the pandemic put on tenants nationwide. In his view, the pandemic is the clearest validation of that approach: the difference showed up precisely when conditions were worst.
Strategy in Practice
Real Estate Direct currently manages approximately 225 properties across Brevard County, with a team of five property managers, a full-time administrator, and supporting staff. Schrader says the pricing approach described above is the one the firm uses across its portfolio.
“We try to keep our rents where they represent the market, but they’re also representative of good value for a tenant that is well qualified to rent somewhere,” Schrader says. “We’re not looking for people stretching because someone’s offering a free month.”
Schrader notes that small price adjustments are currently producing the desired results in Brevard County. Properties are not staying empty for long periods, and tenants are not pushing back aggressively on pricing. He describes the current market as balanced: absorption is healthy, though units stay vacant slightly longer than he would prefer.
For property investors evaluating management approaches, Schrader’s framework offers a counterpoint to rate maximization. The full cost of turnover and tenant instability rarely appears as clearly as the monthly rent figure on a new lease. That gap, in Schrader’s view, is why so many landlords make the wrong trade.
About the Expert: Frank Schrader is Owner, Broker, and Realtor at Real Estate Direct, an independent brokerage and property management firm he founded in 1997, serving Brevard County on Florida’s Space Coast.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.