When should I start getting nervous? Cant find a good tenant!!

74 Replies

Im just wondering the logic of buying a high end townhome new construction in a small town in NC for a rental investment? There has to be a story in there...

I get stood up frequently, so I just try to schedule multiple showings within a time frame.  Be super patient, and you'll find the right tenant.  The right tenant can make the investment.  Especially if they stay 5+ years.

I used to live in Goleta, by the way.  Technically Isla Vista (UCSB).

Originally posted by @Allyson Edwards :

Hi everyone,

I have a property in NC that i closed on June 15th. https://www.zillow.com/homes/105D-Brookshire-lane-...

I have a property manager taking care of trying to get a renter. the problem is she is constantly getting stood up by prospective tenants, or people just don't follow up after they contact her. Ive listed it on social media and other sites. I trust she is doing her best.

Any one have any other ideas? Is this the norm? Flaky people or am i freaking out too early? Does it normally take this long (I live in CA so I have a very skewed view of RE, ill admit that). 

I did my due diligence on this area, I've been there several times, i know the area is growing, and the schools are good (Troutman school district not Statesville). 

So what am I doing wrong? Any help would be appreciated. Thank you.

 My first guess is it is overpriced.  As mentioned already, that's a HIGH rent price for the overall area.  

I know you're not looking for Monday Morning Quarterbacking, but why did you choose Statesville?  I drive by the exits to Statesville several times a year on the way to other cities, but have only stopped in the area four or five times over 20 years.  There's not much there, and it's always struck me as economically depressed, and as a city definitely not on the uptake.  I'm just curious why an OOS investor would choose to buy a $180,000 condo in such a small out-of-the-way town.  Not criticizing, just curious.

Oh, and to answer the question in your thread title: You should be nervous. If you can sell and come close to breaking even, I would do so immediately.

@Allyson Edwards I had a rental sit on the market for 2.5 months before it was rented even though rentals in my area usually are gone in a week or two.  However I knew going in it was over priced because I wanted to test the market to see what I could get for it.  After two price reductions I finally got it rented, but it is still rented for about 20% above comps in the market.   Basically I knew I could get above market rents, I just didn't know how much so I started like 35% higher than the comps (which is waaay overpriced) and factored in price reductions every 3 weeks or so if it wasn't rented.  

My situation might be a little different than yours though, because I knew my property had unique features that people would pay up for, for example in additional to newly gut remodel with new everything, prime location and enclosed garage (most comps are further away and have no garage). And the mortgage and expenses are low so I could afford to have it sit on the market if necessary while I played with the price a little.

I don't know your market so I can't say what you should do but price is one of the biggest factors of why a place rents quickly vs why it sits.  There's nothing wrong with your place that I can see, but you'll only be able to rent it for what someone is willing to pay.   Your best option might be to keep reducing the price until it's finally rented so at least you'll know what you can get.  If you are losing money though, you might have to consider whether this is really something you want to keep long term?  

This thread is a great example of why I prefer to invest in my current city rather than OOS.

There is always unique factors that affect every market that OOS buyers just won't be privy too; sure, an agent can be a wealth of knowledge (ours is), but there is still something said for knowing the area well.

I find some of the posts from OOS folks on Huntsville interesting, because it shows how little they truly know the market here.  Everyone assumes that houses in 35801 are fabulous due to various websites and experts on the area - there are some parts of 35801 you absolutely have to stay away from, and some parts that the rent changes by $200 to 300/month by simply moving one street over.  But that knowledge can't be gleamed from simply reading about the city or rentometer;  if your agent works mostly in suburb properties, they may not know these nuances as well.  You just  can't replace first hand knowledge of the location you are investing in.  

How much commission are you wanting to pay your PM for managing your property?  Is their commission included in your rent amount?  If so, could you put up with managing the property yourself in order to save that percentage?  This might allow you to lower your rent some to become more competitive.  Also, when dealing with renters, most don't care if you have fancy yards, nice appliances, etc in my opinion, cheaper rent wins out almost every time.  Unless you have an amazing benefit of why they should pay you more, you're going to get skipped over for the lower rent properties.  Try reevaluating why someone would pay more for your place, and really advertise those features to justify you asking a bit more, and find a way to get your pricing to a more competitive level.

@Michael S. You're correct, but I live in one of the most expensive RE markets in the country. So I have to go outside the box. Then when I have more experience and money maybe I could start investing here where I live. And yes, I know this market Like the back of my hand. Unfortunately I'm dealing with overpriced and inflated RE here...I'll have to get more creative. This place is on the border of Statesville and Troutman with Troutman schools. When I did my research I found growth in the area and backed it up with info given to me by agents, family and friends. That's why I chose here.

@Allyson Edwards the problem is likely the high price as it was mentioned here several times. When you get told by other people, investors or even realtors that you can get certain rent on those properties, always verify the data by looking at rented comp and how long those properties were on the market.. Trust but verify.

If you don't want to sell and want to keep the higher rent in order to stay in positive cashflow, you might try to consider a short term rental option. You would however need to invest in the furniture etc but you will typically be able to charge much higher rent. I don't know that area to give you the proper advice, so you would need to do research if that is even an option there to make it work.

@Allyson Edwards I'm sorry that your deal doesn't seem to be working out so far. The problem with turning it around and selling too quickly is that, without enough appreciation you will potentially lose more money from the realtor fees. My last property was also brand new, and I wanted to rent it out for a premium, but ultimately it still went down to market price. Many renters simply don't care how much WE feel it is worth compared to properties that aren't as nice. If you're lucky, you can get your premium but oftentimes they just want the cheapest price for a place that they like "well enough".
If you can get out of this without losing much money, it might not be a bad move for you. Unfortunately, I don't know this market, but if the neighborhood really is growing and there is strong potential for appreciation, then I would try to rent it out at zero CF and wait on some appreciation. The last property I mentioned has gone up by about 10-15% each year for the past two years. The overall appreciation in the area has affected rental prices and allowed me to increase the rent and CF since I bought it. The benefit of a brand new property is that you usually don't have to spend any extra money on repairs, etc. The roof, HVAC, water heater, etc... they've all got some life on them and should still be covered by the warranty if something happens. The new property has also been appreciating at a faster rate than my older property just a few blocks away even though the older one is larger. 

Good luck either way.

@Allyson Edwards I just did a quick Zillow search for properties in Statesville that rent from $1500-1750.  There were 2 properties listed, and yours was one.  From this, I would conclude like others have commented that your price may be higher than market rent, or higher than the market can support.

Good luck with whatever you do.

I don't have an answer on why it is not renting. I'm new to REI. One thing I keep hearing on the podcasts/forums, everyone has deals that didn't turn out as planned. It sounds like you have a few other ideas for it now. Thanks for sharing your experience and best wishes!

Hey Allyson,

I have a few thoughts for you to think on 

1) You're using the realtor as your property manager? How do you measure or how do you tell if she's doing a good job? It may make sense to you to look at using another PM company if you find she's not doing a good enough job for you.

2) The price of rent - if you're having lots of actual viewings (ppl will always flake so I don't worry about that as much as people who actually come view and want to rent) and nobody wants to rent it, your place is probably not as nice as they thought.  If you're having problems getting people through the door to see the place, then the rent is too high and you will want to consider lowering it.

Not having a renter in there, is costing you rent already and lowering the rent will also let you have the power to select a better tenant instead of the first one who says they can pay and then end up being a bad tenant. You can always increase rent in future years if you think it is underrented compared to the market

3) If you want to sell that's totally up to you but keep in mind the fees you're going to have to pay to the realtors which is probably going to make you take a loss. Its important to consider what you plan to do with the money after you sell this place as that is your opportunity cost. Rent and appreciation tend to rise over time so you'll be able to get out of the cashflow negative hole.

I'd chalk this up as a good learning experience for not properly gauging market rents unless they did end up shifting since you purchased. Using conservatives numbers (I like to add in vacancy rate %, assume a bit lower than market rent, etc. so I have a buffer on cash flow)  is important so you're never forced to sell because the property becomes unsustainable and can always sell on your own terms when the timing is right

Don’t rush to drop the price.  If you did your DD and knew what you were getting into then your first thought should be to test the efficacy of the property manager not all your DD.  Secondly, I don’t like lame excuses and a PM that is complaining about being stood up sounds like she isn’t doing a very good job of qualifying potential tenants. You may be lucky she hasn’t found you one yet I can only imagine what a tenant he/she procures would be like.  You may want to talk to some other property managers.  You might get very guerilla style and either “secret shop” the place and see what happens or put an ad in CRAIG list yourself and see what happens.  If all of that fails,you can look at adjusting your price but if you got that wrong, and you only just bought the place it would make me wonder how well this was underwritten from the start. Good luck 

@Allyson Edwards Ryan nailed it. Is the property in a good area with upside potential? If you’re around the NC - Raleigh/Durham Area, and you have a property that is solid but just not making the numbers, you should likely keep it. By 2020 70% of the population will live in just 15 states and that property is in one of them. If it’s in a B class property or above and has long-term potential, consider the following: 1) upgrade countertops (vinyl is fine, $1,000) 2) add modern backsplash ($500) 3) update fixtures ($500) Drop price by $100, see if the market bites, two weeks no bite, drop $50 more.
@Allyson Edwards Do this experiment. Get someone else to call your PM and see if she answers the phone from 9-5 Mon-Fri. Have them leave a voicemail and see how long it takes to get back to them. Have another person leave a text message from another phone number. If I was a potential tenant and the PM I was calling from the ad does not answer the phone, I would just go on to the next ad. Many PM companies say they do not have time to answer the phone. If potential tenants don't show up for their appointments to tour the property, what is wrong with the property? If the PM is answering the phone and doing their job (very rare by the way), July and August are great times to rent out places. So, are you priced too high? After one month the rental rate should be dropped, after the second month in the summer, something must be wrong. Reach out to me if you want me to give you more detailed info on what you should do. Swanny

The person who is winning here is the PM. She got the commission when the place was bought and the PM agreement will assure her the RE commission on the sale as well if you sell. In this market she is likely busy showing houses and may not have enough motivation to find you a tenant. I have always been a little uncomfortable in the relationship of the RE agent becoming the PM; too cradle to grave.

I'd start with finding a new PM. They may not be taking your property very serious if the first few people decided not to rent it. She may be discouraged at this point and is  busy with properties she KNOWS will rent quickly. I could be far off, but I'd definitely seek a new PM before I did anything else.

I live around 45 minutes away (Concord, NC) and own around 17 SFH rentals near me. You have a beautiful property; however, many others are right, it is over priced for the location. The people that can afford that price point would generally commute on I77 and it is a political and construction mess involving toll lanes to/from Charlotte. There is just not enough going on in the specific area (jobs, entertainment, restaurants, child care, shopping) for that price point and getting most anywhere involves I77. Then there are more convenient, attractive areas closer to Charlotte like Davidson, Huntersville, Lake Norman and Cornelius, etc. where people might pay $1,700 or so for what you have. It's not the PMs fault, the location and price are killing you. I wish you the best.

 @Allyson Edwards there are 3 things which affect this business:

1. Location

2. Condition

3. Price

Location is given and you can't change it, we have to hope that it will get better after all construction is finished.

You can add something to condition: but it seems like already pretty good.

Price is your only tool here: if property is not rented for 2-3 weeks even in January - it's price. If it's not rented in June&July!!! there is really something wrong.

Is your real estate agent does PM on regular basis or just took on it because she was the selling agent? This is very different business - to sell vs rent property. Property is vacant for 2.5 month and agent doesn't lose money - you do.

As for "stood up" - at such price range, the tenants are very responsible, usually it takes one Showing to Rent property even at $1300-1400. At $1700 it's people with income higher than $60-65K/year, that means pretty successful people - they don't flake out, they actually call to cancel and not the last minute.

If there is not 2-3 calls/week, something needs to be changed: price, marketing, agent, whatever. Don't advertise it on CL - only MLS and Zillow.

Create your own add on Zillow - by owner, if it's on MLS - it's already on Zillow, too. Answer phone calls - off course, you'll pay your agent comissions but it won't hurt to estimate the demand for the property.

I'd consider the situation as an emergency - you're losing $5K already.

Selling after Labor Day might take long time especially if there is new construction of similar houses.

Lease to own is not that attractive (at least around here): banks are getting very flexible on financing and almost everyone could get a mortgage. If they don't - why would you want to lease them? They will fail and then you have to foreclosure on them vs evict for non payment rent (which is much easier and cheaper).

You need to do something now - not just worry, but really change something in your approach.

Good luck!

I probably can't add much more than has already been said, but for the no shows, we experienced this in the last Unit we were attempting to rent.  Texting reminders right after the appointment was set, and again on the day of the appointment, helped.  We still had one or two no shows, but things improved well.