How do I know my units will rent?

14 Replies

Hello guys, looking into a duplex deal and being my first ever investment, I'm scared sh**less if these units will rent. From studying the market (Craigslist and Zillow rentals), I've been noticing similar units have been vacant for a 2+ months now. What tools do you guys use to scope supply/demand of rental units and gauge rental interest from tenants?

@Chas Noren i know the feeling. a lot of people will post ghost ads (fake ads). Meaning, throw some pictures of a place up on craigslist in the area that you are looking to rent and see who reaches out. if you have a good ad up in your area and nobody reaches out, well, then you may have your answer. If people reach out to you, then you can proceed with more confidence. 

Lengthy vacancy in the area could be a problem. Seek areas where there is excess demand and a shortage of supply. More importantly, make sure the property generates enough in rent to cover regular monthly expenses,  replacement reserves, and unexpected repairs. Rentometer could give you a sense of the rental market landscape in the area. 

Originally posted by @Victor Menasce :

Lengthy vacancy in the area could be a problem. Seek areas where there is excess demand and a shortage of supply. More importantly, make sure the property generates enough in rent to cover regular monthly expenses,  replacement reserves, and unexpected repairs. Rentometer could give you a sense of the rental market landscape in the area. 

 I have allocated around 22% for vacancy, cap expenditure, repairs etc. but will be managing property myself for a few months just to get my feet wet. Thanks for the insight. Do you use any tools to analyze demand and supply in areas?

Originally posted by @Ryan Deasy :

@Chas Noren i know the feeling. a lot of people will post ghost ads (fake ads). Meaning, throw some pictures of a place up on craigslist in the area that you are looking to rent and see who reaches out. if you have a good ad up in your area and nobody reaches out, well, then you may have your answer. If people reach out to you, then you can proceed with more confidence. 


The advertisements are already up but nobody has reached out yet. Granted, it has only been a day. Going to try not to loose sleep over it. Luckily, I had some reserve capital saved up for rehab so I can polish these units a little to make it more rent worthy.

 

@Ryan Deasy a big indicator for me is population decline or increase and look at the availability on Zillow and apartments.com. If the population is increasing people will need a place to live. If I see lots of apartments available in my intended rental bracket, I will look elsewhere.

Stagnant or population decline is not a good sign. 

@Chas Noren this is the kind of thing your agent should be able to tell you BEFORE you buy the property. In my target markets in the Chicago suburbs, the vacancy rate is currently 4.2%. How do I know this? I pay for great data. My clients also know this info because I keep myself educated and up to date. If you are in a high vacancy area, you should generally know how high before you start. 

Why not reach out to your agent, lender and any other professionals to see if they know the going vacancy rate? 

Originally posted by @Ryan Deasy :

@Chas Noren i know the feeling. a lot of people will post ghost ads (fake ads). Meaning, throw some pictures of a place up on craigslist in the area that you are looking to rent and see who reaches out. if you have a good ad up in your area and nobody reaches out, well, then you may have your answer. If people reach out to you, then you can proceed with more confidence. 

 It is against the law to advertise properties that are not available and honestly this is part of the reason that Craigslist is rapidly becoming irrelevant. It is filled with spammers and fake ads. Zillow requires you to confirm your address, so it makes it harder for fake ads.

Doing market research does not require false advertising. Simply look at the listing prices of comparable properties. On Zillow, you can also look at listing history. You can see when a property was listed for rent, for how much and how fast it rented. Based on doing this research, you should be able to come up with a rent range. Make sure the investment works financially at the bottom number.

Any property will rent. It is just a matter of what price it rents at. 

@Chas Noren did you get anyone contacting you yet? are you sure that your pricing is accurate? also, quality pictures and a well written ad goes a long way too. i know we are getting micro with this, but it is worth getting quality pictures taken and to write an attractive ad (no super long wordy paragraphs, etc)

@Chas Noren figure out a market analysis in that area? What's the demographic? What's the absorption rate? Is it a desirable area? Are there any amenities close by? What's the historical occupancy for that area, as well as the vacancy? Just some things to think about

@Chas Noren - check the vacancy rate in the area. If it's under 7% or 8%, then move on to step 2, which is compare the location, amenities, curb appeal, and layout of the units under consideration. If those factors compare well with your competition, you'll be able to rent the units. If those factors compare poorly, you'll have difficulty renting the units. 

Even if the factors compare poorly, you may still be able to rent them if you adjust the price accordingly. However, if this is your first investment, I'd avoid challenges like that. Get a house which is appealing to tenants. That recommendation will be as good at the beginning of your career as it is at the end of your career.

@Chas Noren I own some units in pretty rough areas (with adequate rental demand and very landlord friendly laws). I keep them in really good shape and my property manager prices them right. They rent pretty quickly, and even though the neighborhood brings some incidentals with it- the property cash flows quite beautifully.

Moral of the story is, unless you made a very poor purchase decision, you'll be fine to fill units. Now I can't quite speak for your rate of return, etc... but that's a whole different subject anyways.

@Chas Noren - If you are providing a good product in a decent neighborhood your place should get rented within a month.  Also, if it is taking 2-3 months that simply means you are overpriced for what you are offering.  As others have mentioned reach out to others experienced in leasing such as brokers and property managers and get their advice for the area you are looking at.

@Chas Noren

I see old listings sometimes. It’s usually bc it’s run by a poor property manager who does not answer the phone or return calls. It may already be rented and they didn’t bother to remove the listing.

I have come to believe that renting a house is the easiest part of the process. Finding a deal is much harder. Getting a lender to believe it’s good enough to loan you a sack full of cash is another issue. Dealing with contractors is another headache. But finding someone who wants to live in a fresh new home is not hard at all.

Thank you guys. All good insights. Here is what I'm gathering from all the messages...
1. Research. Research. Research. Zillow and Craigslist.

2. Talk to propery managers and agents. My agent is going to get me in touch with someone who understands this market better in the area so I'm winning already.

3. Any property will rent, the price has to be right. My next objective is to get this price. I may have priced it 50-100 bucks higher. Got greedy and got two inquiries in a week.

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