What is the likelihood that I wont be able to rent my Investment?

4 Replies

Hey everyone,

Just recently started diving into real estate investments and was wondering if not being able to rent out your property is a common problem? I'd hate to invest in a property and then have a vacancy rate of like 50% (if that's even a possibility). Is there anywhere I can go to check out the market vacancy rates in specific areas? Also have any of you ever experience ridiculously high vacancy rates? If so was it because of the location of the home?

Thanks. 

Hello and welcome to BP!  I do not know you have seen him but his name is Grant Cardone and he has a lot of MF units, about 4000 of them and has seen the good and bad but he learned the hard way about what works and what does not.  He is really a domineering type man.  I am still getting used to him on YouTube.  He gives a weekly show about getting into real estate and he is a little opinionated when it comes to estimating.  He seems to know what he is talking about and I intend to believe in some of the things he says and one of those statements is you should never own one rental unit because the thing that you are dependent is that single unit is either 0 or 100% occupied and takes about the same physical effort as a small apartment project and according to another man I believe in is Lance Edwards who use to do that part time while he had a W-2 job that he hated and it took him only 2 years to quit his W-2 job and had no prior experience in real estate and Lance has made it in apartments and now does some teaching which is pretty normal of people.  He also has a book written about small apartments being a good place to start and by enough units that will pay enough to hire a good property management company.  You might think that I am unusual with what I choose to say.  First of all I am 60 years old and I found BP about 20 months ago while I was recovering from some medical issues.  It was major enough for me to be able to learn about 60 hours a week and I have learned much about real estate investing while not working and spending about 22 hours a day in bed and I still cannot walk and have really dedicated my life to learning.  Eventhough my issue happened a little over 6 years ago and luckily my wife has taken care of me and our daughter who is in her 3rd year at the University of Arkansas.

I was born and raised in Dallas Texas and still live in Dallas County.  I still eat most of my meals through a tube because I have not done to well with eating tests.  Why am I telling you this?  It is mainly because I want you to know that the future is not known.  My personal Docter had been telling me for about 30 years that I was in excellent shape and my chiropractor saved my life with suggesting I get a head X-ray that is called a MRI.  That is when we found a problem and what gave me a brain annuerism and a stroke just 2 days before my scheduled preventive surgery from a specialist.

I am going to try to leave you out from my problems and concentrate on yours.  The more you learn, the more confidence you will have.  Yes, location is a big key and then its the "classification" of the neighberhood your subject property is in.  "B's" and "C's" are the types you are after.  Stay away from war zones (class "D") and "A's until you have a little experience.  The best way to get a feel for your prospective property and the rent you could charge by calling existing property managers and find out what they are charging.  You might want to ask that and other pertinent information like you are a possible tenant.  If you try to be honest with them you'll probably be misled.

Some other major things to consider doing after you select your niche and market area but before you start making offers will be talked now. The first thing to consider is forming some type of corporation or a LLC for your new business. You might need to hire an attorney, and/or a CPA, and/or a tax consultant to advise you on which way to go. This will help keep your personal items away from anybody that might bring legal action against your company. Another thing you might want to consider is to get your financing figured out before you make any offers, if needed. The lender you select can provide you with a loan letter that states their average time needed to close your loan and the maximum amount you qualified for.

The last major item I will mention is to find your new business office location. It needs to be convenient and have minimal distractions. You can locate that office in your place you currently sleep in as long as you can close it off and have minimal distractions, especially if they are personal. One other good reason to get into small apartment complexes is the quantity of competition is lower and more in your favor. SFH's have more competition depending on the repairs needed and/or the rehab usually has less competition. Try to be in control of all investments you are responsible for until you can trust somebody else to do your improvements. Track all properties income and expenses you are responsible in report form with people you feel comfortable with and understand your goals and all of you might reduce some of your expenses and increase your income.

Do not assume anything. Always remember to do the math analysis and try to look at your prospective properties before you make an offer and possibly back out of the deal if something is found that is major and you did not budget for. At least have a physical clause involved conditions contingency clause in the sales contract that allows you some upfront time (about 10 days) to make a detailed inspection. That clause should not penalize you too hard. Another thing to consider having a Team of professional members that are local and experienced in what you do. The typical primary members are lawyers/attorneys, real estate Agents/Brokers, a CPA (or accounts you know and trust), Inspecrors, Project Manement, General Contractors, and Handymen.

I am sorry that this is so long but I will tell you others later.  Just keep it simple at first and just do what is average in your subject neighberhood.  Since it is kind of a seller's market just study as much as you can   It is harder to find a good deal right now.  Do not give up.  Being afraid and making mistakes are pretty normal.  Favor areas that are the area future growth will occur.  Do not forget the curb appeal.

Good luck to you!

^^ nicely put. As long as you aren't acquiring in a war zone you should be ok. People ALWAYS need places to live. Things to consider is your competition. So place your rents at or very slightly below market averages. Also consider sprucing it up a bit as this can be done smartly and very cost effective. Things such as neutral paint throughout, light fixtures, laminate countertops, no carpets, paint cabinets and change hardware, stainless appliances(if you supply them) and landscaping.  These are just a few things that will not only keep tenants but it'll attract quality ones. 

Good luck

it is all about the due diligence

like what was stated we cannot foretell the future but if you do a lot of preplanning and look at the markets and areas in which you are investing you will do just fine

don't let yourself be placed in the woulda coulda shoulda category

or the analysis paralysis mindset

get out there and make a deal happen!

you deserve it!

enjoy