I am a relatively new member here on BP and completed my first new investment property purchase in Pflugerville, Austin (TX). It's a new, 3 bedroom, single family home by D R Horton. It's been 2 weeks and the kind of applications we are getting are far from ideal...bad credit scores, delinquencies, hard to figure out how much do they make (meaning self employed in some cases) are some of the issues that made me reject 4 applications so far.
My property manager (who helped me buy the house) has posted the ad on all relevant websites, we have priced it at the lower end of the range at which similar homes are listed in the area, but still not happy with the applications.
I would be interested to hear what folks, knowledgeable about the Austin market, think...is there more that we can do? Is it difficult to find good tenants in Pflugerville? or am i just being impatient? We just did the closing 3 weeks back.
Also, i have not transferred the utilities in my name yet hoping that i would find tenants super quickly and easily. Do I need to do that? Is there any repercussion of this except that the utilities may be shut down and i will need to pay a little penalty to restart it.
@Surendra Chawla, I have rental property in Pflugerville and know several others that do as well. I have had mostly good tenants, but would be lying if I told you all were good. It is my belief that you have to keep in mind WHY people are renting (vs buying) in the first place and take this into account on a case by case basis. In many cases it is because they are recently self-employed and do not have good income history, or maybe because they have bad credit history or delinquencies. So I try to be a little more open-minded and dig a little deeper.
First of all, I always do full credit and criminal background checks, and verify their rental history with previous landlords. Before I do that, however, I review their (detailed) application and income history in detail. If there is something in their history that is problematic, I try to find out whether it was a one-off circumstance or bad decision, or if it is something that has been systemic.
For example, if some one had a foreclosure during the 2007-2009 time period, I want to find out what happened. In one case I had a couple who were being foreclosed on by a less than honorable bank, and despite significant effort to work it out with the bank, the bank just ramrodded them through the foreclosure. They could show regular payments and subsequent attempts to pay. After discussing this situation with them, we asked for a double security deposit, which they agreed to, and signed a lease. They leased the property for 24 months with no issues.
When someone is self-employed, and it is difficult to see income history, take a look at their credit history and bank balance instead. If they have plenty of money in the bank (enough to cover several months of rent), and good records on paying their rent (always check rental history), again ask for extra security deposit. If they can provide it and there are no other glowing red flags, sometimes it is worth giving them the chance.
I have had applicants whose credit is bad due to medical bills resulting from an unexpected disease, surgery or hospital stay. In these circumstances, I have validated that they are regularly paying all their other bills and trying to pay off their medical bills when they can and there are no other glaring concerns. Again, I check rental history and I might ask for extra deposit money to mitigate my risk.
I have had tenants with a criminal record (misdemeanor) that happened 10 years ago when they were "young and stupid." If there is nothing indicating they still act this way, I am likely to overlook it.
That is not to say that this always works. In cases where tenants lie and you have no way to confirm or validate their claims, you may make a mistake. In those cases, it is important to act fast when you realized you made an error in judgment and remedy the situation as soon as possible.
Just remember that someone who is renting is renting for a reason. If everyone had excellent income, credit history, rental history and a clean criminal record, they would probably be buying, not renting! If I believe they have taken steps to improve their situation, and I am comfortable they will continue to do so, I will often request something to mitigate my risk and move forward anyway.
On your other question, bite the bullet and move the utilities over to your name! You do not want the power shut off...especially as we move into the hot season. I have seen several homes damaged due to mold and/or warpage of doors because the owners didn't want to pay air conditioning bills. The resulting damage cost them far more. Also, very few tenants want to rent a home that has no lights, AC or water when they go through it. Suck it up ;-) ...Consider it a cost of doing business.
If the home has only been on the market 2 weeks, you are a little impatient. After all, you HAVE gotten 4 applications, so that shows that there is interest and it looks to be priced well. Also, most families wait until school is out to move, which is still a few weeks away. And, some areas of Pflugerville have a lot of competition, so make sure you compare your asking rent price to similar homes that have already rented...not only to homes that are actively competing with yours.
Hope this helps!
Offer a move in special- reduce the security deposit and increase rents by $25-$50 a month, allow pets with pet rent
Most people have problems coming up with sec dep + rent at same time in this price range-
Also think about a lease to own for 6 months or an owner finance- those will def work and get you out of the rental game and into the mortgage wrap/note game.... much more lucrative, less headaches and easier to close
PM me if you have more questions. Don't forget to think of us if you need construction services, cabinets-counter tops-flooring or mortgages/insurance! We do it all.