Where do these renters come from??

General Landlording & Rental Properties
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Where do these renters come from??

Chad Tessmann
New to Real Estate · Manitowoc, WI · Member since 2021 · 22 posts · 6 votes

After reading all these books and forum posts... one thing that still doesn't click with me is where on earth do these renters come from?!?  So I find a good property deal... takes time but ok.  Fix it up probably... yeah, I'm good at that.  And then what?  I post an ad on a few popular sites and magically a renter will apply?  

I guess I have a fear that all of the renters in my area will suddenly vanish.

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Peter M.
Rental Property Investor · DFW, TX · Member since 2013 · 953 posts · 910 votes
5y

@Chad Tessmann Not everyone can afford or want to buy their own house. There will almost always be renters in any market. Of all the fears and pitfalls on REI, the supply of renters is very low on the list of risk factors.

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5y

    @Chad Tessmann the short answer to your question is...yes, but it will depend on a number of factors, such as how your rental stacks up against other available rentals feature-wise; the monthly rent you plan to charge; your application process; where and how widely you advertise; any other quirks of your metro area.  But... check out some other threads on BP about this.  If you advertise it, they will come...

    1Reply
  • Peter M.
    Rental Property Investor · DFW, TX · Member since 2013 · 953 posts · 910 votes
    5y

    @Chad Tessmann Not everyone can afford or want to buy their own house. There will almost always be renters in any market. Of all the fears and pitfalls on REI, the supply of renters is very low on the list of risk factors.

    5Reply
  • Christen G.
    Rental Property Investor · Seattle, WA · Member since 2017 · 383 posts · 248 votes
    5y

    There's not a lot of magic...people need a place to live and not everyone wants to own, or can afford to own. You're providing a service.

    4Reply
  • Justin Hoggatt
    Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes
    5y

    @Chad Tessmann I can understand the hesitancy and just one aspect of managing a property.  Where is the area that you're looking?

    Yes, marketing is a great way to get a renter and will always need to happen.  A sign (form of marketing) is very effective in front of a property and will get calls.  Not all people are actually interested in renting but more just want to know what a price is.  Online posts (the most effective) is often done through syndicating through services like Appfolio, Rentec, TenantCloud, etc, etc.  You can create one marketing post and they go to all of them. 

    There will always be a market for renters but not every rental is equal.  You will have to have a reason for them to come to you.  One could be notoriety of the property, one could be how nice the unit is, one is the price, one is the area - you get the point.  There is a mixture of how good you could have each one and sometimes having the best unit in a crappy area just won't work financially - but it does help maybe attract the best possible tenants in the area.  Overall, I wouldn't worry too much on how to get the renter - if there are no renters responding, check your marketing, check your pictures, check you price.  Someone will come along.  

    As a quick side note - unless you're selling the property soon, it wouldn't make a whole lot of sense to hold out for a higher paying tenant when you could quickly fill the unit if you lowered the price now.  Vacancy gets expensive.

    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y
    Originally posted by @Chad Tessmann:

    After reading all these books and forum posts... one thing that still doesn't click with me is where on earth do these renters come from?!?  So I find a good property deal... takes time but ok.  Fix it up probably... yeah, I'm good at that.  And then what?  I post an ad on a few popular sites and magically a renter will apply?  

    I guess I have a fear that all of the renters in my area will suddenly vanish.

     Hi Chad,

    "Where do the renters come from?"

    On a map draw 3 rings around the property at a one-mile, three-miles, and five-mile radius.

    Typically 80% of the potential renters seem to come from ring 1, the rest from the other rings.

    As an owner, you should know the demographic makeup within each of these rings. 

    Because if the right renters Class-A, B,C to match your property Class-A,B,C, are not within that three-mile ring you may have problems attracting renters.

    There is a lot more to it than that, but as a mechanical engineer, I thought you'd appreciate the mechanics of this approach.

    And there are no guarantees. There is RISK in this business.

    Good Luck!

    4Reply
  • Chad Tessmann
    OP
    New to Real Estate · Manitowoc, WI · Member since 2021 · 22 posts · 6 votes
    5y

    @Justin Hoggatt I currently live in northeastern Wisconsin and am looking at potential BRRRR deals for SFRs or duplexes.

    So if my fear of not having any renters isn't actually a fear I should be having, am I missing something? Maybe some other concern that should be taking my focus?

    I feel pretty confident in my rehab skills (honed from running jackhammers at age 8 at my parents house). True deals are hard to come by although driving for dollars seems to be a good tactic. Analysis of properties is still a new thing to me although the general concepts I feel I'm grasping quickly. I just bought my first house (my own personal house; not investment) so I am now in the process of saving up at least some amount of capital before putting offers out on investments.

    0Reply
  • Chad Tessmann
    OP
    New to Real Estate · Manitowoc, WI · Member since 2021 · 22 posts · 6 votes
    5y

    @Scott Mac Yes! Mechanical engineer approved. 👍

    0Reply
  • Justin Hoggatt
    Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes
    5y

    @Chad Tessmann - You'll do great.  The numbers is the biggest item to worry about.  Will it all make sense. Purchase price, holding costs, rehabbed value, rental price.  I'm sure you've heard of the 1% rule (buy a house that you may be able to rent for 1% of that), and I'm not sure what it is in NW Wisconsin but something closer to that will be a pretty safe bet.  Of course, when you get a deal that you can Rentovate (our coined similar term), make sure the money you have to put into it at least equals the value at the end - hopefully much more value though.  You can also start out by getting a hard money loan on a property that makes sense and then sell it or finance it with the equity you have in the house at that point.  That could be a quick way to get your first house and have money for the next project.  You can also wholesale, don't let not having capital stop you if you're motivated.

    Tools to use for rent estimates - Rentometer.com, Zillow, etc.  You can also even post an add for trial and error.  Even on your own home - post it and see how many people call.  You don't actually have to rent it, but just see what the market it doing and how interested people are at certain price points.

    0Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y

    CORRECTION: Typically 80% of the potential renters seem to come from ring 1 AND ring 2 combined.

    0Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y

    If you are in a rural area, or a small town or a financially dead town with little new employment, your fear of finding a stable supply of renters might be warranted.

    In a place like Chicago, Minneapolis or Miami less so.

    Put your town in here and you can get an idea of what others are doing: https://www.apartments.com/miami-fl/

    Good Luck!

    1Reply
  • Chad Tessmann
    OP
    New to Real Estate · Manitowoc, WI · Member since 2021 · 22 posts · 6 votes
    5y

    @Scott Mac So there are multiple properties I know of about 2 miles out in the country. According to this idea, they wouldn't make good rentals. Although drive time is only 4-5min to multiple factories, hospitals and business parks. Could these still be rentals or would it be better to consider some simple flips?

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Chad Tessmann you have an irrational fear. It is like people who are scared to fly. It is completely irrational, because statistically flying is much safer than driving in a car. National home ownership is around 65% which is one of the highest levels ever. That means 35% of people rent. Some rent because they have no choice financially and some rent by choice. Most all of my tenants could qualify to buy a home, but choose to rent.

    I don't know your market, but given an hour, I could pull up data with market rents and vacancy rates. That would tell me how good your market is for renting.

    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y
    Originally posted by @Chad Tessmann:

    @Scott Mac So there are multiple properties I know of about 2 miles out in the country. According to this idea, they wouldn't make good rentals. Although drive time is only 4-5min to multiple factories, hospitals and business parks. Could these still be rentals or would it be better to consider some simple flips?

    That would have to be your call after finding out more information.

    Right now it might be a good idea to talk to a few local realtors who have been in the business for a while and see what they have to say is going on in your market right now (remembering they will make a profit only if you buy).

    Every area is different, and ever investor has different goals.

    Also talk to some local investors who have been at it in the area for a while and get their spin on what's going on in the area.

    Before Covid meetup.com was a good source of local investor meetings, now (???).

    The investment you make is based on local conditions, and talking to other local investors is a good way to get some traction on what's going on near you.

    And if you are going to flip--knowing when to stop flipping is important. 

    Educate yourself more on real estate market cycles to get some knowledge of that.

    Good Luck!

    1Reply
  • Corey Hawkinson
    Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
    5y

    @Chad Tessmann Wisconsin seems to have a pretty active REI community. Try to connect with people from WiscoREIA. They have meetings (outside of Covid times) in Green Bay if that's close to you. I'm unclear of where the boundaries of NE Wisconsin are. I do have family in the greater Appleton area and they are starting the REI journey with 1 single family rental now. Try to connect locally though. It'll be difficult at first but will really help you in the long run.

    1Reply
  • Keaton M.
    Austin, TX · Member since 2017 · 75 posts · 39 votes
    5y

    @Chad Tessmann

    You can also hire a real estate agent or property manager to bring in renters. You don’t HAVE to wear every single hat. As an engineer and DIYer, it’s hard to let go of some things.

    Also, honing your innovation skills with a jackhammer is a good way to lose all your money 😂😂. That’s like saying you’re a doctor because you watched Grays Anatomy

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y

    I did not see a single mention of the area's population growth/decline.  There are areas in this country with large declining populations.  You would be hard pressed to rent a home in an area were there are fairly nice homes sitting empty only because there are less people who want to live there than there are homes.  My wife's family is from such an area in the Southwest corner of North Dakota.  Decent homes that quickly decay to homes in need of TLC then decay to needing more than TLC and eventually decay to where they are not worth saving.

    Research the population growth of the area and the local vacancy rate.

    Assuming the population is growing, I think if you are not finding a tenant it is likely because your rent is too high for the unit.  Reduce the rent to the "correct" price and you will find a qualified tenant.

    Good luck

    1Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Chad Tessmann:

    After reading all these books and forum posts... one thing that still doesn't click with me is where on earth do these renters come from?!?  So I find a good property deal... takes time but ok.  Fix it up probably... yeah, I'm good at that.  And then what?  I post an ad on a few popular sites and magically a renter will apply?  

    I guess I have a fear that all of the renters in my area will suddenly vanish.

     I just put it in Zillow for free

    Always worked for me 

    0Reply
  • Karla Simmons
    Vacaville, CA · Member since 2019 · 218 posts · 140 votes
    5y

    @Chad Tessmann

    There are many people out there that don’t ever dream to own a house, for whatever reason. Some lack motivation. Some lost a house previously and are afraid to try again. Some don’t have great credit and don’t think they will qualify to buy a house . You would be surprised.

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Chad Tessmann part of what I love about this business is that we are buying what is essentially a proven business! I own multiple properties here in the Chicago suburbs of Berwyn, Lyons and Cicero. We are talking about suburbs that together would be 150,000 people or more in just a small area. There are literally tens of thousands of renters. Even with a decent sized portfolio at 62 units I only need a tiny fraction of the population to be good people who want to rent my apartments. 

    I have a few types of rentals, and I am mainly attracting 1st time renters with good jobs/college graduates, retirees or divorcees.  I also have a smattering of families in one of my newer buildings. These folks are salt of the earth people working hard, making a decent living (I see a lot of $18-25 per hour type of jobs) and they generally make for reasonable people to serve in the housing business. 

    You should know your submarket this well after you have been in the business for a while. 

    2Reply
  • Chad Tessmann
    OP
    New to Real Estate · Manitowoc, WI · Member since 2021 · 22 posts · 6 votes
    5y

    @John Warren What do you mean by "sub market"?

    0Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
    5y

    @Chad Tessmann

    Yep, you have it. I list on Craigslist and zillow. I get applicants who I screen then show the property. Some like it enough to submit an app. I go through apps in the order I receive them and either accept or reject.

    0Reply
  • Greg KellPro Member
    Greencastle, PA · Member since 2019 · 18 posts · 3 votes
    5y

    Renters will come. It can be scary. We just filled our first 3 units.  Only advertised on Apartments.com  They will find you.  Work them through the funnel and get the one you want. You can do it. Stroll past that fear.

    1Reply
  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    5y

    @Chad Tessmann good Question. I suggest you go to my profile there's a file linked off the 1st paragraph call how to buy a blue bulletproof rental portfolio. It focuses on choosing your tenant then the house.

    Being a landlord is similar to being a fisherman you have to know what fish you going after and then you put the right bait on the hook and you fish in the right places in the tenants will appear because you have what they want..

    Read my paper and read about how to choose your tenant type. My wife and I have decided that we focus on middle blue collar dual income a couple kids and a dog. So all of our houses have fenced backyards and our 3 bedroom 2 bath in OK not the best but OK neighbourhoods for OK not the highest not the cheapest rent.

    This is exactly what desirable middle blue collar tenants are looking for and they will reply to your ad. :)

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Chad Tessmann - I get your concern, I felt it too a little bit when I bought my first rental 12 years ago. My particular concern was that I did not want to be in the wrong part of town - I wanted to make sure I am in a good "rental area". As if there were no tenants in other areas LOL

    Today I know that tnenats are a little like tourists, they prefer living in an owner occupied area. So there are no best "rental areas", there are just areas with a lot of tenants. Your concern is understandable but irrational. It's like opening a restaurant and then worrying if anyone will come and eat.

    How do you get over it? Watch the rental market, go look at new listings, ask the owner how many applications they have, how long it takes to fill the vacancy. Takes me about 1-2 weeks on average. You will find that some nice units fill immediatley, others will sit forever. When you see them in person it is very obvious why.

    35% of the US population rents. People always move because their lives change, job, divorce, death, kids, more space, new girlfriend etc. The model with circles is incomplete, because it only describes people who want to stay in the area and move because they don't like their current home. It does not capture life changes, which is by far the bigger driver.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Joe Splitrock:

    @Chad Tessmann you have an irrational fear. It is like people who are scared to fly. It is completely irrational, because statistically flying is much safer than driving in a car. National home ownership is around 65% which is one of the highest levels ever. That means 35% of people rent. Some rent because they have no choice financially and some rent by choice. Most all of my tenants could qualify to buy a home, but choose to rent.

    I don't know your market, but given an hour, I could pull up data with market rents and vacancy rates. That would tell me how good your market is for renting.

    its also market and demographic dependent.. some areas Of the US that number is flip flopped at least for SFRs were 60% rent and only 40% own.

    in Portland or market on SFRs its less than 15% of those are rentals the rest are owner occ.

    go to Memphis and it flips the other way big time.. 

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