How to stand out in a crowded rental market?

Question

I am currently shopping for my second rental property in an area that is undergoing revitalization and should offer nice capital appreciation down the road.

The problem I am running into is this area already has a crowded rental market, including many section 8 properties. If information I find on Zillow is accurate then it appears many of these properties are staying vacant for many months at a time (perhaps these are the properties that are not listed as section 8?) The mortgage on this particular property would be one that I could handle paying out of pocket for months at a time, but I don’t know if it’s going to be worth battling constantly as I hold out for long term appreciation.

Each area that I look at with properties in the price range that I am shopping seem to have this same issue... I am becoming rather frustrated and am looking for insight from the community.

Thanks in advance for any feedback you all can provide.

Marc Winter · Answer

@Joseph Cacciapaglia speaks true.  Zillow and other sites are algorithm-based programs, and although many cherish this data-driven overview, real estate on a local level is always a person-based business.  Speak to Realtors, property managers, other local investors, and tenants.

Go and physically inspect properties in your chosen area.  Know what is overpriced, what is undervalued.  If you don't know your market, you won't know a bargain when you see one.  They are there, but it takes consistent hunting to bag a great deal.

Good luck and keep moving forward!

Joseph Cacciapaglia · Answer

Don't fight the market; the market always wins. You may be able to slightly beat market vacancy, but I wouldn't count on outperforming by a ton. Also, the way you describe the area, makes the capital appreciation seem somewhat dubious. If you can't attract tenants to an area, it's tough to get home buyers.

Joseph Cacciapaglia · Answer

Rental data isn't reliable in every market, especially online rental data. Some markets don't require people to report when the unit has actually rented. You should contact a good property manager and ask about leasing times in the area. I know anywhere that we actually want to manage has properties that lease in 21 days or less. Anything more than that causes real problems with cash flow.

James De Stefano · Answer

Good advice so far.  The market will either accept, or reject,  your property at a certain price.  Often it's that simple.  Little things, like putting HIGH quality pictures online , can help bring in more traffic. spend the $150 wisely.

It's hard to "stand out" in a market if you're worried about vacancy and the rent amount.  like many things in life... price moves product.

Scott Mac · Answer

Hi Adam,

You could try offering rent concessions, such as sign an 18 month lease and get 2 free months of rent.

Your wallet probably won't notice a difference, and if you pick "Lifetime Renter Types" (and take good care of them) with a GREAT Rental history, that 2 months will be money well foregone.

Good Luck!

Adam Pridmore · Answer

@Joseph Cacciapaglia

The problem is this IS a hot area that is just now being tapped into. Driving through the area you can see that many houses are already renovated and sold/occupied, and many more are under rehab at this time. The area is definitely improving, but Zillow shows lots of rentals still on the market.

In fact most other areas that I’ve looked at in this same price range seem to have the same problem - lots of vacant rentals... I’m starting to second guess myself simply from the information I am finding on Zillow...

How to stand out in a crowded rental market?

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