Need advice: Frustrated but don’t want to give up

14 Replies

Bought a duplex last year in what we thought was an up and coming area. Assessed at purchase price. After tenants moved out, we are now struggling with vacancy for almost 6 months. Renovating but not getting the right tenants. House feels like a complete money pit. Barely cash flowing at this point. Any experiences or strategic perspective? Continue on or try to sell at likely a loss?

Why do you believe this is happening? 

Do you have a local mentor that could give you some insight on your property and the local market?

You can turn this around and stay in the game if you truly have the passion and aptitude for the residential rental business. Focus on learning the business and/or find a great property management company to assist you.

Find the ROOT CAUSE of the vacancy issue and focus on resolving it!

Possible causes

  • Overpricing
  • Quality of Unit
  • Quality of Neighbors (homes and businesses)
  • Location of Neighborhood, Amenities, Transportation, and Employment Opportunities
  • Supply and Demand in your area
  • Effectiveness of your marketing  (Are you reaching the potential renters best suited for this property?)
  • Your management style  (Make yourself available to field the inquiries. Remember when you interview prospective renters, they are also interviewing you!   Initial impressions are key, as well as great follow-through.)
  • Your documents, rental agreement, and property rules (These need to comply with the laws of your jurisdiction, professionally presented, and be top notch to serve both you and your tenant well.)

Good Luck!

Generally,

Location+SF+Amenities+Market Demand = Rent (in dollars).

Now think of the right side of that equation as a scale. If you put the place up for rent for $1, you'd have a line of people down the street (100% demand). If you put it up for rent for $1 million, you'd be looking for a very long time to find someone to rent it (maybe never) (0.0001% demand). So you want your rent to fall into the heavy percentage area. I like falling into the 75-95% percentile. The scale climbs quickly but levels off quickly,  and falls quickly, such that (hypothetically):

$1 rent = 100% demand, $50 rent = 100% demand, $100 rent = 100% demand, $250 rent = 97% demand, $500 rent = 80% demand, $750 rent = 60% demand, $1000 rent = 30% demand, $1250 rent = 10% demand, $1500 rent = 2% demand, >$1500 rent = <1% demand. [All relative to location+sf+amenities].

If your place is a dump, in the ghetto, with no amenities, what do similar places rent for in your area? 

Most of the time, owners with long vacancies are dishonest with themselves about the reality of their unit. They'll call it a solid "B" area when it's a "C-" area; they'll say it has great space for the price, but the rooms are all chopped up and not very usable; they'll say it has great amenities, but those amenities are a 30 year old dishwasher and a central hvac system that groans and clanks when it turns on. ETC. 

@Denise Pauzano - are you self managing? Have you spoken to a local property manager? Without knowing the specifics of the deal, it's unfair to give any advice as how you should move forward. I am happy to chat with you about the specifics of your deal if you think it might be of assistance. Best of luck!

@Dennis M. Actually no, it’s not “self evident” after 1 month. There are plenty of different reasons a place can stay vacant that may not be realized righy awat. This one has multiple. But thanks for your input.
Originally posted by @Denise Pauzano :
@Dennis M. Actually no, it’s not “self evident” after 1 month. There are plenty of different reasons a place can stay vacant that may not be realized righy awat. This one has multiple. But thanks for your input.

 Ok what are the multiple reasons you mentioned so we can help find a solution to them 

@Dennis M. Sure. So here are the issues we’re learning. When we bought the property, the area was “desirable” bc its close to a city/metropolis...jobs, city life etc. We Inherited 2 great tenants who paid on time, no issues. They moved out and we were able to fill the one unit no problem. We soon learned the area was starting to decline demographically, more and more low income applicants that couldn‘t qualify. We also saw some flaws in the property (design and nondesirable) that some tenants coming through began pointing out. So we’re now renovating. Also the rent we are asking is right on but in a declining market, not possible any longer so we need to reduce rent. We’ve come up with some strategies (and thanks to the first couple responses for productive perspective). So this is where we are. I’ve decided to try some new strategies and see if we can get it filled. But any additional positive feedback and tips are much appreciated.
Also the yard was being used as parking space...some tenants are ok with that, many are not (then it would be on street parking only if we changed it...some want the private parking space...depends on tenant). Right in town...some prefer, some don’t. It’s getting that right tenant(s).

The yard is being used as a parking lot.

I've lived in many places around the world and parking on the lawn is always a sign of a low-class property.

You have a large population so the demand exists. You need to fix it up and price it to match your market. One month of vacancy costs you more than reducing the rent 10% and getting it filled. A 6-month vacancy costs more than reducing the rent 60%!