Help.. Struggling to rent first investment property
Real estate investor · Alabaster, AL · Member since 2014 · 94 posts · 15 votes
Help.. Struggling to rent first investment property
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Katherine T. very common issue I see with landlords especially new ones they don't realize how vacancy can affect the investment.. they try to rent for top dollar does not rent.
its better to drastically lower rent to get it full than to have 4 or 5 months of vacancy.. you just lost 5X 900 4500 dollars... if you would have started at 900 you might have rented it right away and be 4500 dollars to the good.
what we like to do is offer FREE First months rent... just get nice deposit and have rent come in 2nd months.. again ONE free month to not have a vacancy is 12/ 900 = 75 a month discount first year 75 X 12 = 900 compare that to the 4500 you have already lost and will never recapture...
you will learn these things over time its just costly.. to go through the learning curve.. also the risk of theft and vandalism is real.. when you have vacant units.
66 Replies
- Investor · Franklin, MA · Member since 2015 · 47 posts · 22 votes10y
Consider hiring a realtor . My wife (realtor) places lots of tenants in rentals . They have lots of experience , people calling , previous clients and connections to work with. I also think that they help find generally a better class of looker and then can screen them for you.
- Investor · Century, FL · Member since 2015 · 950 posts · 603 votes10y
I'll give you a simple answer why it's not renting, wrong time of the year. October is the very last month that anything really rents. The best time is March and April. November to December are always dead months for rentals. And January's aren't much better either.
Need to go all out and to cut the rent in September and early October to get it rented for the holidays.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes10y
I would try both Postlets and Rentlinx (they post to some different sites). We get more leads from those sites than from Craigslist. And make sure to take really high quality pictures with a nice camera. Pictures sell the house! You also may need to consider lowering the price again.
There are people who will say, it is time the wrong time of year, the house is not as nice as comparable rentals, the house is in an undesirable area, the pictures are not nice enough, it is not marketed on the right sites, there are too many rentals in the area and on and on and on. The right price cuts through 99.9% of this. My son really wanted a Nintendo 3DS hand held game. It was too expensive because he had to buy it with his own money. Instead, he bought a 2DS because the price was right.
@Jay Hinrichs made an excellent point and one I learned quickly. Vacancy is the real killer. You are better off losing the $22 -$75 monthly rent than 4 - 5 months of $0 rent.
- Rental Property Investor · Baltimore, MD · Member since 2013 · 281 posts · 257 votes10y
Time to hire a good property manager to place a tenant for you! Ending the vacancy is well worth the fee. As another member commented, the PM will tell you what the market demands...perhaps a change in the price or a popular feature.
And set the lease dates so that your next renewal comes in the high season!
- Rental Property Investor · Shawnee Mission, KS · Member since 2014 · 205 posts · 136 votes10y
I also use www.rentometer.com
Stay under the average for your immediate area unless you have compelling features to offset and if so write good copy to showcase your benefits. I have a pro subscription which allows me to dial down the proximity and age of listings being included in the comperables.
- Investor · Chicago, IL · Member since 2015 · 35 posts · 12 votes10y
Loads of wonderful advice on here but pick and choose which one works best for you. I have also been down this road before and I ended up renting out to the VERY wrong tenant (in the middle of winter!) because I was in the wrong neighborhood, struggling to pay the mortgage, and desperate. With hindsight, I did not make up my mind quickly enough if I wanted to do rehabs or hold on to rentals and that was what made things worse. If you are having problems at this point - and the weather at your location cannot be as cold as Chicago (-6) - I would sell and take the lesson.
- Investor · Cleveland, OH · Member since 2015 · 150 posts · 58 votes10y
Definitely suggest putting the property on postlets, I get 90% of my inquiries through that website.
I have properties in neighboring cities but they are two very different markets. Before I got into a new rental market I went to homes that were being rented, pretended to be an applicant, and asked a lot of questions. Helped be find a good price range to list the house I was going to buy, gave me a good perspective on how competitive the market is, and I got a good understanding of what is expected from tenants as far as utilities and lease agreements.
Not sure if this would help you out or not but worth a shot, maybe other property managers are offering something you are not.
Good luck and keep working!
Rob
- Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes10y
I didn't read all the replies, but I want to second "Postlets." We use craigslist and postlets. We then copy and paste the postlets HTML into our vacancies section of our own website. Talking with my wife, who handles all the leasing, I was surprised to just learn that 75% of our leads come from Zillow and Trulia, which are populated by the ads we place on postlets.
Also, I second the motion on it being a little harder to rent during the school year, especially the colder portion of it. We are in Waterville Maine where we have an Ivy League College (Colby) and 3 other sizeable schools (Thomas, UMA and KVCC) so most of the winter prospects we get are people being relocated to employment at one of these schools OR T mobile or other nearby business. In your area, where are new people coming from? Is there any draw, like schools or big employers that people are moving into your area for? If so, try to "get in front of them" and capture some. That might mean contacting someone at one of these schools or businesses and introducing yourself. We did just that and have unofficially become the "landlord of choice" for one local U's incoming professors and students.
- Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes10y
Also, I have to second the notion of hiring a property manager (or at least considering it) for a short time, say 1-2 tenants. They may have a few more resources. If they're well known, they're going to get referrals, so people will be calling them as a "trusted source" vs. your advertisement. Not guaranteed but possible.
Have your own website too, that advertises who you are, how long you've been at it, etc. I can't count the number of people who've rented apartments from us now, site unseen (yes, lease signed and move in funds delivered WITHOUT viewing the apartment physically!) simply because of our website and the impression they got speaking with my very personable and professional wife / leasing agent.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
Interesting feedback that several people feel it is all about price. I do agree that you should consider price relative to time of the year. Places rent for much more in the summer. If you lower the price far enough, you will definitely get it rented. There can be the opposite problem if you go too low, it can create the perception there is something wrong. Lower price may just attract more unqualified people. One option may be to offer a lower rate with a 6 month lease. At the end of 6 months, increase rent $50 or $75 and request a 12 month lease. You may be worried that your tenant will leave after 6 months, but in the summer you will be able to charge higher rents if they do leave. Your tenant will also have to pay higher rents to find a new place so they will be more likely to stay.
You also have to decide what the value of your product (house) is to the market. Like any market there are high end and low end options. Some people have lower quality houses and just price is their value. Some have higher quality houses and target a different market. In the example @Daren H. gave about the Nintendo 3DS versus 2DS, that was two different products. One is positioned as a higher end solution and one as a lower end solution. If your house is a "3DS" then you should not rent it at a "2DS" price. Someone else has a "2DS" house that is a better fit. My point is that Nintendo doesn't lower the price of their 3DS to get customers, they offer a lower end product for people who cannot afford the 3DS.
Originally posted by @Joe Splitrock:
Interesting feedback that several people feel it is all about price. I do agree that you should consider price relative to time of the year. Places rent for much more in the summer. If you lower the price far enough, you will definitely get it rented. There can be the opposite problem if you go too low, it can create the perception there is something wrong. Lower price may just attract more unqualified people. One option may be to offer a lower rate with a 6 month lease. At the end of 6 months, increase rent $50 or $75 and request a 12 month lease. You may be worried that your tenant will leave after 6 months, but in the summer you will be able to charge higher rents if they do leave. Your tenant will also have to pay higher rents to find a new place so they will be more likely to stay.
You also have to decide what the value of your product (house) is to the market. Like any market there are high end and low end options. Some people have lower quality houses and just price is their value. Some have higher quality houses and target a different market. In the example @Daren H. gave about the Nintendo 3DS versus 2DS, that was two different products. One is positioned as a higher end solution and one as a lower end solution. If your house is a "3DS" then you should not rent it at a "2DS" price. Someone else has a "2DS" house that is a better fit. My point is that Nintendo doesn't lower the price of their 3DS to get customers, they offer a lower end product for people who cannot afford the 3DS.
If Nintendo creates a lower end product it's all the same thing, the perceived value of the product is all that matters and that correlates to the price you can charge for it.
Nintendo doesn't lower the price of the 3DS they create a 2DS with less value to sell at a lower price. The point is both the 3DS and the 2DS are priced based on their value. If the lower price 2DS was priced higher than it's perceived value based on what consumers alternatives to purchase are it wouldn't sell at all or sell at lower quantities.
In regard to property it's not just "It's not renting" more importantly what are the specific results you are getting?
Is the phone not ringing at all?
Is the phone ringing but you're not setting showings?
Is the phone ringing, you're setting showings, no positive feed back from people asking renting questions and making moves toward renting?Those are 3 very different things and tell you what the problem is.
If the phone doesn't ring at all you're priced way too high
If the phone rings and you not setting showings you're price too high but not ridiculously high
If the phone is ringing, you're setting showings, and no body makes overtures to rent it, you're still too high. Your price is good enough to get people to show, so your pricing is competitive generally, for the overall market of the type of property it is, but once they get there it doesn't show well and the price is higher than the perceived value, this could be because it's dirty, missing needed features, has a defect (tiny bedrooms) etc.. but the bottom line is the price is higher than the perceived value based on what these potential renters are looking at besides your property and ultimately renting instead of yours.Everything comes back to price. If January is slow that means there is downward pressure on prices in January, your price is too high, lower the price and you will rent it.
It's always the price. A rental property is no different than any product on the market, a rental property is the same as a pair of shoes, a car or a snow blower, it's a product.
You have to either raise the current perceived value of the property to your asking price or you have to lower your asking price to the current perceived value of the property.- Landlord · Port Orchard, WA · Member since 2015 · 80 posts · 39 votes10y
You have the bad-assest name ever!
As has been said, if a rent survey shows that your ask is reasonable for the area, stick to your guns. A vacant unit is better than a bad tenant - waay less expensive.
- Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes10y
@Katherine T. Have you heard about Rentometer.com yet? This site might help you figure out your rent target for your area, and whether you're under / over charging.
- Investor · Chicago, IL · Member since 2015 · 35 posts · 12 votes10y
Originally posted by @Steven Wiltz:
You have the bad-assest name ever!
As has been said, if a rent survey shows that your ask is reasonable for the area, stick to your guns. A vacant unit is better than a bad tenant - waay less expensive.
Thanks. :-)
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
@Mike F. I think you are agreeing with me. Price is relative to perceived value. That being said, I think it is a mistake to believe that lack of interest is only due to price. It goes back to the three P's of marketing. Product, Price and Promotion.
Applying this concept to a home, the product is the house and the perceived value. The price is rent cost. Promotion is how you are advertising and promoting the home. That includes how many rental agents are promoting it, where you are advertising it, quality of photos, marketing description, how you are handling phone calls, how you handle showings, etc. I have seen homes listed on Craigslist with one blurry photo and two sentences. If their phone is not ringing, is price really the problem? I had a house on Craigslist and got a call one week after listing it. The lady told me she was looking every day and just saw it for the first time. She ended up renting the home. People cannot get interested if they don't know about it.
Price needs to match the perceived value, but assuming it does, then promotion becomes the factor. Promotion can increase the perceived value and generates interest. If nobody is looking, lowering your price will have no effect without promotion. Promotion will find the potential renters and it is value/price that close the deal. If they look at three places and yours is nicer and cheaper, they will rent from you.
- Investor · Century, FL · Member since 2015 · 950 posts · 603 votes10y
Originally posted by @Daren H.:
There are people who will say, it is time the wrong time of year, the house is not as nice as comparable rentals, the house is in an undesirable area, the pictures are not nice enough, it is not marketed on the right sites, there are too many rentals in the area and on and on and on. The right price cuts through 99.9% of this. My son really wanted a Nintendo 3DS hand held game. It was too expensive because he had to buy it with his own money. Instead, he bought a 2DS because the price was right.
@Jay Hinrichs made an excellent point and one I learned quickly. Vacancy is the real killer. You are better off losing the $22 -$75 monthly rent than 4 - 5 months of $0 rent.
You dismiss my suggestion like it doesn't count!
Things really don't rent at this of the year. People don't like changing residence during the holiday season, so if they haven't made the move before November, they aren't likely to. We have 3 properties that we're advertising now, all just below market rent and not a single bite. We're only advertising to scratch an itch and pretend to ourselves that we did some work this week.
Not that I much care as we own them all. Costs me very little to keep them empty.
And no, I'm not dropping rents because when the rent goes down because you get desperate, all the crazies crawl out of which rock they've been hiding under.
I'm not going to drop prices to encourage an underclass that will beat the hell out of my properties. Much cheaper to actually wait than take a $2-3k damage bill on a property. Learned the mistake of accepting just about anyone at any price years ago.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@James DeRoest I suspect the OP was over market rent to begin with.
but I agree with you about tenants and for that reason I only have 5 more rentals and when they are gone I am retired from landlording.. much easier ways make money if your all cash
- Property Manager & Investor · Gilbert, AZ · Member since 2016 · 37 posts · 41 votes10y
Could not help but to think of a blog posted by Ben Leybovich earlier this week that basically said "you cannot afford to hire a PM." This is a prime example of why you can't afford not to hire a PM. Every situation is different Ben!
Katherine, I would highly suggest getting someone with experience in your market to handle your rental. Learn from them as you go and when you feel comfortable about managing your own home, do it! But the cost of lost rent far exceeds the cost of a good PM.
Good luck!
Given there is rental demand in the area(people want to live there)
Then there is really only two things that effect your ability to rent.
1. Marketing(making sure it's available through most of the major avenues) Sounds like you have done this
2. Price
Price equalizes all. If you have a really nice property you should be able to ask more than market, if your property is a little old, with older flooring etc, you will be slightly under market. It could be this time of year, you have not reached the market price to get a decent tenant.
Recommendation? Drop the price, slowly but surely, each week, until you find someone.
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes10y
Originally posted by @Tyson Hill:
Could not help but to think of a blog posted by Ben Leybovich earlier this week that basically said "you cannot afford to hire a PM." This is a prime example of why you can't afford not to hire a PM. Every situation is different Ben!
Katherine, I would highly suggest getting someone with experience in your market to handle your rental. Learn from them as you go and when you feel comfortable about managing your own home, do it! But the cost of lost rent far exceeds the cost of a good PM.
Good luck!
Hahaha - saw this and resisted commenting...still not going to. BTW - like Gilbert a lot. Thought about moving there. Can't get over the heat in the summer, though...
Originally posted by @Joe Splitrock:
@Mike F. I think you are agreeing with me. Price is relative to perceived value. That being said, I think it is a mistake to believe that lack of interest is only due to price. It goes back to the three P's of marketing. Product, Price and Promotion.
Applying this concept to a home, the product is the house and the perceived value. The price is rent cost. Promotion is how you are advertising and promoting the home. That includes how many rental agents are promoting it, where you are advertising it, quality of photos, marketing description, how you are handling phone calls, how you handle showings, etc. I have seen homes listed on Craigslist with one blurry photo and two sentences. If their phone is not ringing, is price really the problem? I had a house on Craigslist and got a call one week after listing it. The lady told me she was looking every day and just saw it for the first time. She ended up renting the home. People cannot get interested if they don't know about it.
Price needs to match the perceived value, but assuming it does, then promotion becomes the factor. Promotion can increase the perceived value and generates interest. If nobody is looking, lowering your price will have no effect without promotion. Promotion will find the potential renters and it is value/price that close the deal. If they look at three places and yours is nicer and cheaper, they will rent from you.
I took it as a given that the poster is advertising the house, I'm also assuming the basics are covered like the poster is displaying a phone number for people to call, now if not of course that is step one. LOL Hey OP- put a phone number on your ad!
In Denver we have a billion different methods to advertise a rental, I use one- craiglist and get too many calls to handle. But like you advise, we have many pictures, clear pictures, clear descriptions and our properties are gems and priced a little under market to get as many fist fights in the living room over the property as we can get. With rentals in the $1200-$2000 range I'd rather drop a rent $50 over 12 months and get it rented if it's a 'slow' time of year to the right person with a $600 discount versus leaving it empty for 2 months and lose three times that. Get that phone ringing!
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes10y
Without reading all the posts here, thoughts in no particular order:
- Price dropping smacks of desperation. You can guarantee that the pool of renters will remember your house, and that it was listed at $1000, then $900, then $850, and will wonder why no one wants this house. Before setting your price, you should have a fairly iron grasp of the market price of your house in its current condition and location and price it accordingly. I try to price slightly under market from the get go, because I want higher quality applicants. Pricing right at market is a viable strategy if you can wait for the right tenant. Pricing above market is IMO a common mistake that people make because they are not honest with themselves about the condition of their property, the property's desirability factor, or the level of competition in the market.
- Winter is a slow time of year where I am for some of the reasons mentioned. Someone looking at a 3 BR probably has kids, and people with kids don't like to move during the school year even if it's the same school district.
- Good traffic without applications means you have a pricing or a housing problem. Since you say you have good traffic, I would bet you are priced too high to begin with. You say that it is at market rates, but how did you determine what market rates are for that comparable property? If you are resolved that the price is right, I would start looking at what amenities you are providing in the house. Where I am, a house without CHA, a dishwasher, off-street parking, high-speed internet access, non-basement W/D hookup is a big turn-off. I find that people dislike carpeting. Refusing to accept pets severely limits the pool of renters around here. Being too far from shopping or work is a killer. A house that will obviously be aggravating to maintain (huge lot maybe, or lots of grass on hills that needs cutting) will be tough to rent.
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