First Rental in Fort Worth area - advise needed

12 Replies | Fort Worth, Texas

I am a Pennsylvania (Philadelphia and surrounding area) investor and just made my first venture into Texas in the 76131 zip with 4 bed 2 bath SFH. Did a total gut rehab inside and the house is quite nice. But after one month, only received one unqualified application. Rent lowered to significantly below what our local partner thought we should get - but to what appears to me, based on comps, to be about right. My questions for the experienced investors in the area:

1. How is this zip doing investment wise and what do you expect appreciation wise?

2. Are you seeing rents reduced this season - due to Corona?

3. Is it possible that the hot rental market was pushed back a bit and that it is just getting started now?

4. Before you say the problem may be the PM, I will say that my impression is that they are doing a good job but maybe I miss something

I will truly appreciate any feedback from the local experts. I have not even been to Texas once! Not sure how concerned to be that this did not fly off the market with all new interior, roof, stainless steel appliances, great layout ... 

Can you give us the address?  If we cant see the pictures or the prices it is tough to give you much more than general advice.  To me you know you are in the right price range when you are getting about 1 showing a day mon-friday and 2-3 on the each sat and Sunday.   If you're not getting that many the price is too high.  

@Bruce Lynn   Tnx for response! I am actually looking for more general understanding of the market and answers to my questions rather than an evaluation of my property 

1. How is zip 76131 doing investment wise and what do you expect appreciation wise?

2. Are you seeing rents reduced this season - due to Corona?

3. Is it possible that the hot rental market was pushed back a bit and that it is just getting started now?

@Sheryl Sitman having only 1 application in 1 month is not normal.  We are crushed with renters right now...way more applicants than there are homes....because of people not wanting to live in apartments.  Without knowing your pricepoint, etc. it might be a little hard to advise on specifics but this sounds very unusual to me.  @Kyle Mccaw what do you think?

Originally posted by @Sheryl Sitman :

@Bruce Lynn   Tnx for response! I am actually looking for more general understanding of the market and answers to my questions rather than an evaluation of my property 

I don't understand the reluctance to share the address.  It is useless to talk about a zip code, that is a large area with all sorts of differences in properties.

If you are not getting showings and applications, you are asking too much for the property.  Condition, neighborhood, market, etc. play into it, but they all add up to the final number a prospect is willing to pay.

Gotta agree with @Andrew Postell and @Neil Aggarwal .  If you have a decent product product at a decent price, it will fly off the shelf.  There are so many people looking to rent homes (as opposed to apartments) that even my pain-in-the-butt houses are renting almost instantly.  Also, tough to give advice without address.  I have a couple in that zip code (one I rented recently in a couple of days)  Decent amount of blue collar workers in that zip code (particularly Blue Mound) so it may be you're overpriced.  

To answer your original questions, though, there is nothing wrong with that market as far as I'm aware.  It's a hot market and I'd buy more there if the numbers made sense.

Originally posted by @John Chapman :

I'd buy more there if the numbers made sense.

 That is my biggest problem right now too.  I would love to buy more houses, but the asking prices are out the roof.  People want retail for wrecked properties.  Definitely not workable.

Zip code is good.... I think the rental price is way too high for the age in my opinion.  No garage which is often an issue around here for that price.  There are homes in the same general area that are much newer, and in more organized neighborhoods with 2 car garage at near the same price.  These are homes built in the 1980s and 1990s.   

I think all bets are off with appreciation now....demand is still good in this general price range.   My guess is for this year appreciation will be flat.  Before all the runup appreciation was maybe 3-4% a year.  Last few years we've probably seen 8-10% in this area, but that can't continue forever.   I'm guessing if the economy gets rolling again you might see 4% again on this house for a few years.  That's my crystal ball.

So far I am not seeing reduced rents due to Covid.....looks like everything is pretty stable.  So far the big PMs for both apts and single family are showing rent collections for March, April, and May just about where they were last year.  Somewhere around 92% on time.   I think everyone keeps thinking the shoe will drop on rents, but so far it hasn't.  Renewals are up slightly, moveouts are down slightly.  That's all for Texas and Nationwide.   I may be off a little on the %, but that's general range...and some markets might be better or worse.

I don't think the rental market got pushed back at all, but possible....some of the potential renters for this house might be on furlough so they know you probably would not accept them.

Nice house, nice the rest of this is just from experience and suggestions to make you more successful.  To me vacant houses cost you money and a ton of take these notes with love...I'm not picking on you, just trying to help you.   You may not have been looking for these notes, but hopefully adds value to you.   The name of your company is wrong on the tax rolls.  You might want to get that cleared up so that you get the right mail to the right address.  You don't want missing tax bills or code violations or some other important notices.   Also the size of the home is based on "owner" estimates.   Many brokers would never allow that....probably not a big deal on a rental, but you don't want it to be.   If it is bigger than what is on the tax roll, get it measured by an appraiser for $150, that might keep you out of some trouble at some point.   I'm guessing it is different due to some additions over the years.  Maybe you have an appraisal?  If so use the number from that for free.   Your PM is only offering $250 to the tenant's agent.   My guess is the vast majority of agents will not show it for that....right or wrong...they just won't do it.  Most expect 50% of one month's rent.   That's the first thing I would change...while not normal you might even do more than that....give a bonus.  So give the tenant's agent 50% of one month's rent PLUS the $250.   Get agents excited about your house....I can tell you what a lot of agents think about that compensation...and it is not a good thought.

I can't tell from the pictures if the cabinets and some other items are purple or not.  My thought would be to make them a color that is interesting to most of the people that come in.   If they are purple, then you might have cut out 70% of the potential tenants.  Neutral rents and sells houses.

Weed/feed/mow.  Mow every week.

Nothing you can do about it, but be aggressive on price, is renters don't always look by zip code.  Same with buyers.  My guess is the reason this house sold lower than many, and will probably rent lower than many is based on the city.  Nothing wrong with it, just smaller and not on the radar for many people.  So basic economics...less demand...lower price/lower rent.

While no deposit is attractive to many renters, the $150 admin fee is offensive to many.  I am just telling you what many of my tenant clients say.   They skip properties all day long with fees like that.  

I would also get it on ShowingTime...the appointment service....easier to show...vs emailing or having to call PM directly.  It is a frustration for many agents....showing 5-6 houses and 4 are on showingtime and therefore super easy to make appointment and get information for showing, schedule route, get directions, etc...and then you get to the two that make you go back and forth and round and round for the you start out with a bad taste for many agents.

MLS allows 36 pictures....we don't have a lot of magic stats for MLS and who hits what and why, but the 1 thing we do know is more pictures do get more hits. You've got a super nice description...detail that out with some more pictures of what's in the description if it doesn't make sense to take more pictures of bedrooms. I'd probably be more interested in pictures of the yard, but that's me. Max out the pictures somehow. Add a floorplan. Add a picture of the clean inside of the oven or something to max them out.

I'm not picking on you or your PM...I'm sure many people are successful with different strategies...but this is a good if not great market....changing a few or all of these things will help you get your home rented faster and for more money in my opinion.

Price solves a lot of issues, but these can add frosting to your cake.

Best wishes and good luck...looks like you probably got a nice deal in a market where nice deals are tough to find and get under contract.

We haven't been seeing any downturn in the rental market due to Covid-19. If anything, we have more people willing and wanting to rent houses instead of buying, due to the uncertainty of the market. Also have more people looking to rent houses instead of apartments for many reasons but also because of property owners are much more willing to work with their tenants rather than apartment companies who don't always seem to care about their tenant's circumstances. 

For us at McCaw Property Management, we have had the lowest number of available rentals in years. We can't keep rental houses on the market because they get rented out so fast! That's definitely a combination of things like how we conduct our marketing of available properties, stringent tenant screening, as well as the current market. 

Hope this helps! 

Flower Mound is a great area to get into.  You can use as a sanity check for rental rates for your address and area.  It will provide a rental price range, newer homes on the the higher end of the spectrum, older homes on the lower end.

We do a lot of rehabs and know what buyers/renters are looking for in the area.  Send me the address or link to pictures and I'd be happy to provide my inputs on location, amenities and features.  Although it would have been better to post for input before your rehab was completed.  Cheers.

Hi, @Sheryl Sitman

Hope by now that you’ve placed a tenant for your property since this post was posted a few weeks ago. We purchased some investment properties in this zip code last year. While I do not consider ourselves as expert investors, I can share our experience so far. 

1. How is this zip doing investment wise and what do you expect appreciation wise? — So far, our investments are clearing net income of over $300/door per month. appreciation is 7-8% from last year. Typically, rents range from $0.85 /sq ft - $1.10 /sq foot for new builds in this zip code. Of course that depends on location, size, and condition of the property. You’ll also get higher $ / sq ft for single story homes compared to 2-story homes. Our properties are in the $1/sq ft range. There continues to be good job growth, population growth, and new development in this area, which should continue to promote solid appreciation growth annually. 

2. Are you seeing rents reduced this season - due to Corona? — Not yet, if anything, monthly rents seem to be increasing due to demand. 

3. Is it possible that the hot rental market was pushed back a bit and that it is just getting started now?   —the purchase market is hot in this area according to RE agents and mortgage lenders that we have worked with — they are swamped with business. Rentals are also in high demand, especially for “newer” turnkey properties. There seemed to be a “pause” mid-March thru April due to apprehension about COVID-19, but activity was back in full swing by May. 

4. Before you say the problem may be the PM, I will say that my impression is that they are doing a good job but maybe I miss something. — The other responders provided good info on the # of showings and qualified applicants you should expect. 

We are actively looking for more investment properties in this specific area if we can find a reasonable deal again. 

Hope that helps!

@Cary Ogello   Thanks for great input!!  We did get a good tenant in. At what is apparently a good rental rate for the area - but significantly lower than the local team had led us to believe we could get. All part of the business getting into a new market / remote investing. That would never happen in my local market where I do most of my investing.        I think you are going to find many reasonable deals in the coming months if you are patient.