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3 Tips on How to Rent (or Sell) Your Rehab Before It’s Completed

by Tom Sylvester on April 7, 2014 · 18 comments

  
Renting Property While Being Rehabbed

If you are like me, you hate losing out on income with your real estate investments.  So you try to avoid things like evictions and vacancies.  Another hidden “area” of lost income related to vacancies is the time between when a new property is ready to be rented/sold, but it is just sitting there empty (and not making money) in the meantime.

My First Rehab…

My first rehab was a duplex that we kept as a rental.  We did all the work ourselves, which at the time I thought was smart, but have since learned that it was not the best choice.  You see, the total monthly rent for that duplex was $1110.  So over the course of 6 months, we missed out on $6660 of potential rental income while we were renovating it.  In addition to that, we did not start advertising until we finished the renovations, which meant that it took another 1 month to rent out one unit and 2 months to rent out the second.    That equates to another $1,665 in missed rental income.  So by doing the work ourselves and not advertising until we completed the rehab, we missed out on several thousands of dollars.  Assuming that we hired out most of the work and began advertising sooner, we might have only missed a month or 2 of potential income while we were renovating, instead of $8,000+.

Contrast that with our most recent acquisition.  We picked up a ~2,400 sqft top/down duplex.  We started renovations 2 days after we closed and are hiring most of the work out.  This is a full renovation, from framing, plumbing, electrical, HVAC, sheetrock, paint and flooring.  With that said, we are 4 weeks into the renovations and just signed a lease for one unit starting on May 1st.  The best part, the renovations looked like this when we actually signed the year-long lease with the tenants.

Sylvester Enterprises

That’s right, we rented this unit without being very far into our renovations, actually without the tenants even seeing the property until the day they signed the lease.  How did we do it?  Find out below..

3 Steps to Renting (Or Selling) Your Rehab Before it’s Completed

Establish a Brand

Most of the buy and hold investors in our target markets do nothing to set themselves apart from the competition.  They use the generic red and white “For Rent” signs that you can get at any hardware store.  They do not establish a business or a name around their rentals, outside of their personal name.

We saw this as a great opportunity to create a brand for our properties and stand out from the competition.  We designed a logo and used blue as our primary color.  This not only clearly set our signs apart from other “For Rent” signs in the area, but blue also displays honesty and responsibility from a psychological perspective.

Sylvester Enterprises

 

Related: Tips for Building Your Brand in 2014

Create a Reputation

Once we had a way to set ourselves apart with a brand, it was time to build a reputation around that brand.  We knew that we wanted to be known for quality.  Not only would this attract a higher quality of tenant, it would also allow us to charge a premium for our apartments and create positives experiences for our tenants.  In turn, our tenants would also talk positively to their friends and stay longer in our properties, which would lead to low vacancy rates.

We provide a consistent experience for our properties.  This means that we use the same materials and create the same look/feel in each unit.  Not only does this allow us to buy and bulk and systematize many of our processes, it also allows people to know what to expect with a property.  Below are a few images of our units.

Related: Reputation Management: The Only Time It’s Better to Lose Money…

Sylvester Enterprises

Sylvester Enterprises

Sylvester Enterprises

Notice any similarities?  What do you think our next unit will look like?

Advertise Right Away

In the example at the beginning of this post, we lost out on 3 months of rent by not advertising right away.  The fact it, it takes time to find a quality tenant.  Once you find that tenant, they typically (especially if they are a good tenant) need to provide 30 days notice to their current landlord.  Depending on when they provide notice, this might actually be closer to 60 days because typically has to be 30 days before the end of the month.

So we start advertising right away.  The image below was taken the day that we closed on the property.  The first thing that we did was to place 2 of our custom “For Rent” signs on the property, along with a large “Now Leasing” banner.  This property has been sitting vacant for 12 years, so just putting the signs on the house started to spark interest.

Sylvester Enterprises

We also then advertised the property in other locations, such as our website, newspaper and social media channels.

Sylvester Enterprises

 

So that’s it.  3 simple steps to get your rehabs rented or sold faster.

If you have utilized these strategies, what has your experience been?  Do you have any other recommendations?

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{ 18 comments… read them below or add one }

Kimberly H. April 7, 2014 at 12:58 pm

This is a very interesting post. We put our last rehab up for rent in what I figured was “close enough” condition, totally painted and cleaned and done, with the exception of only appliances needed, dryer venting built, wall unit a/c to be removed (already had central air), new basement window where one was missing, getting all the scrap and trash out of the garage, and a few little odds and ends like installing a couple shower curtain rods. Surprisingly I was asked by potential tenants, “Well, when is it going to be done?” several times, and had a real estate agent give feedback “hard to rent at this price with all the work still needed.”

However, I haven’t established the brand for my company, or put up the website, or anything like that. Haven’t gotten around to it since we’ve been so busy rehabbing properties. So, what you are doing is very interesting to me. I don’t know that I have seen anyone else in the area put up new rehabs for rent short of being totally done; Invitation Homes is big in the area and only list once totally done minus appliances. I of course like the idea of getting it rented way earlier. Not only would the tenant need to trust the work would be done to their satisfaction, you would also need to make sure you can make the contracted lease start date as well.

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Tom Sylvester April 7, 2014 at 4:12 pm

Kimberly – You bring up a few valid points that are important to discuss.

People want to see a finished product. They often times get caught up on small details. This is especially homeowners, have can have a difficult time picturing what something will look like. So it is important to provide them with the finished product. We do this with consistency in our properties and showing them floorplans. We don’t actually show units to prospective tenants unless they have passed our application process and are interested. Your area may be different, and maybe you want to wait longer to actually show the tenant the property.

Regardless of when you show the property, it is very important to start building a buzz and interest early. By advertising right away, we start getting interest from potential tenants. This gives us a longer timeframe to collect application, screen tenants and make a selection. It also allows neighbors and others to talk about the renovations. If we get to the point of being done and not yet having it rented, we can now hold an open house with all of the interested people. This builds anticipation and creates some competition when people finally see it.

As you mentioned, having a trust-able brand and recognition are important pieces.

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Kimberly H. April 7, 2014 at 4:27 pm

You said “We don’t actually show units to prospective tenants unless they have passed our application process “…do you mean a full-fledged paid for application with background and credit check, or do you just pre-screen based on info they provide?

I did try a “coming soon” listing on Craigslist for a property last year, with pictures of the property almost done, about two weeks or a month ahead of when it was available for showing, but it didn’t yield any interest. Again, that could be regional, you could have a much hotter rental market, and/or could be do due lack of brand/trust.

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Tom Sylvester April 7, 2014 at 5:06 pm

All potential applicants fill out a 2 page application. Often times we quickly deny an application for not meeting basic criteria (ex. income 3x rent, no evictions, etc). If we pass that then we go deeper into references, background check, etc. If they pass it all then we considered them a qualified tenant and could rent the unit.

I would recommend continuing to test things out. It could be the market, the advertising location, the copy of the ad or the lack of brand/trust. They key to marketing is to find something that works. For us, that is signs on the property, local newspapers that push to our website and Facebook posts that push to our websites.

Kimberly H. April 7, 2014 at 5:39 pm

Thanks!

kevin April 7, 2014 at 1:24 pm

Hey you stole my business model, lol. I totally agree with you. I only have 4 properties now, but Post Properties in Atlanta really built there apartment brand this way and I’m trying to emulate that model. I have a logo and am trying to brand myself for a certain area of town. Of course, it would help if I had more properties, but I’d like to get to a point where I can get some of my vacancies filled by referrals. I agree about promoting before you’re finished. My first two rehab rentals were filled and I had to rush to complete. Plus by using Postlets which is free no worries about marketing cost. I’ve been getting tons of leads from Zillow, not much from Trulia. I don’t like Craigslist as I think they call it ghosting where someone copies my ad and puts a much lower price trying to scam potential renters into getting their deposits, but I had that happen twice and I won’t use it anymore.

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Kimberly H. April 7, 2014 at 2:59 pm

Ghosting is when you put a post on Craigslist, but no one other than you can actually see it. It can happen if someone flags your post; Craigslist will make it so no one can see it, and you aren’t informed when your post is flagged or ghosted. No matter what it’s called, my newest tenants almost got scammed that way on another property they were interested in before mine; there was a real listing from a real estate agency for $1800 a month, someone stole all the pictures and reposted on Craigslist asking for only $1000 a month, they were asked to money order in some huge deposit without seeing the inside of the property.

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Tom Sylvester April 7, 2014 at 4:16 pm

Kevin/Kimberly – It is important to people to be smart when doing things online. I would not wire or money order a deposit without actually seeing the property and vetting the owner. Hence why us building our brand is so important so that people can trust us.

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Tom Sylvester April 7, 2014 at 4:14 pm

Kevin – It is a great business model to have, but it does take some time and a focus effort to create. But there are a lot of benefits once you get yourself established.

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Mike April 7, 2014 at 3:43 pm

Great article!!

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Tom Sylvester April 7, 2014 at 4:16 pm

Thanks Mike!

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Geoff Van Dusen April 7, 2014 at 7:38 pm

All great ideas, watching for more.

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Tom Sylvester April 9, 2014 at 4:50 am

Thanks Geoff.

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Andy April 8, 2014 at 1:51 pm

Great points – I like the branding idea. Any thoughts on the impact of or how to best apply the branding approach for a smaller investor (e.g. I have 4 properties now) in a larger market like Dallas-Ft.Worth? I am a pretty small fish in a very large pond. Is there a critical mass to reach first?

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Tom Sylvester April 9, 2014 at 4:52 am

Andy – Obviously having some critical mass helps. but you can start the process with your first property. They key for someone in a larger market like yourself is to focus on a small area. You will not stand out in the entire Dallas-Ft.Worth area if you only have a handful of properties. But if you target a small area/neighborhood, then you can start to establish a brand there.

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Jasmine April 12, 2014 at 8:45 pm

This is great if you already have a lot of properties and hence can post pictures similar to what your finished product will look like. I am in the process of re-habbing my first rental and posted the ad on zillow/trulia/craigslist etc…I still have a week or two to go to complete the rehab, but all the calls I got from interested tenants they want to see the property first and I dont think it will help to show them the unfinished product in its current shape, they will likely not come back.
Like another poster said, it you have some critical mass, it might work..however for us starters it does not.

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Kevin Polite April 13, 2014 at 6:43 pm

@jasmine I think it depends on the product as well. Myfirst 3 homes were in an close-in area of older brick ranch homes. the two rentals each rented before completion, because of the areas and I’d like to say because of the homes. The for sale homehad a lot of traffic and went under contract soon after

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Shane Woods August 4, 2014 at 12:03 pm

I love this post! Great ideas, especially with the custom for rent sign. I’ll keep this one thanks!

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