I have a 2/1 home that was actually my wife and I's first house that we turned into a rental when we bought our new home. Being in a college town is great, tons of renters, however their move in and out schedule sticks to the school year, so if they leave early, finding new renters can be tough. I have dropped the price on this home down to rock bottom to get tenants in and still am having no luck. I have $30K cash equity in this home, not to mention the $15K in upgrades, however I can only sell it for what I paid for it, maybe a little less even. So, the question is this, should I continue to hunt for renters and possibly eat money every month due to no tenants, or low paying tenants, or do I sell it and lose not only the money I have paid in upgrades, but also some of my paid principal?
Ramp up your marketing. You might consider raising your price. Completely redo your online ad. New pictures words etc. Hit it hard. Do $99 April Rent for qualified applicants.
If you listed today you likely would be out 2 months to get it sold. By the time it's sold you could have easily rented it.
Hang on and keep on. That's my vote.
Also add and Early Termination Fee Clause to your lease. If tenants leave early they pay you $X,XXX.
@Mike Sattem , @Bill S. makes some great points. In addition, if you know your renters are seasonal and let's say you expect to the house to be empty 2-3 months in the summer, then I would do the following:
1. calculate my annual expenses
2. how much I want to have as positive cash flow
3. Add together and then divide by number of months you expect the house to be rented
This would determine my monthly rent and I don't have to worry about 'eating losses' when empty because I have already accounted for that.
Also, how are you marketing the property? You may doing some of these already: craigslist, campus bulletin boards, campus newspaper/newsletter/housing assistance - just a couple of suggestions.
Best of Luck!
So long as the long term market doesn't appear to be heading south and you could at least break even with cash flow on an annual basis and are not in a tight spot financially I think retaining your asset is best. If you are feeding the investment it becomes a lot more complicated depending on your specific financial situation.
If you really want to exit the property and minimize loss you could consider owner financing, lease to own, etc.
Thanks everyone. The housing market in our area is tenuous, as our two largest, and pretty much only employers, are the University and a Lumber mill which opens and closes every several years. I agree @Jeff M. and think I will hold it for as long as I can, especially since I have another rental home which can cover the bills of both (barely).
Can you not get students to sign a 1 year lease? That is what my daughter had to do so while she graduates in May her lease is not up until the end of July. When my soon to be daughter in law rented in a different college town, she had the same arrangement. Or maybe this is one of those regional things? Oh, and new leases have to be signed prior to the end of the term, so last year we had to pay first month rent and deposit in April to secure the apartment for Aug.
@Mike Sattem you need to take control of the management of the property. If it's a student rental then you need to insist on a year lease. You also need to get some language that compensates you if they leave early. Get parent co-signers so the kids don't leave you high and dry. If you can't get a year lease from students and rent is not high enough in 9 months to cover the remaining months you need to not rent to students (no illegal discrimination here just require a year lease - end of story). Market your property accordingly. If you clearly state in your ad that you require a year lease then hold to it. Also something to remember, students are always in transition and it's not unheard of for roommates to have a falling out mid semester and one of them want a new place. Market for one of those now. Maybe low (half) rent until semester's end with signing of a lease for next year. After all half rent and covering utilities is better than no rent and paying utilities. Use your imagination. Also with student rentals, "jointly and severally liable". They all sign the lease and if one doesn't pay they all are on the hook. Remember, as I have been told, "timid landlords have skinny kids". You need to manage so that tenant drama is not your drama or at least you still get fully compensated.
Thanks Again Everyone. I do require a year lease on my properties, and then month to month after that. I have budgeted in my rent for 5 weeks vacancy every year, however this property in particular is always my problem child. Keeping it fully occupied can be an undertaking because it is too small for a family and quite a distance from the university, however for a young single couple it worked out quite well. I have it on my rental website, craigslist, and a sign in the yard, but no luck thus far.
@Mike Sattem why do you allow it to go to month to month after a year? Make it automatically renew for another year unless they or you give proper notice otherwise. Absolutely no reason to go to month to month that I can see.
Most college rentals the LL makes tenants sign a 12 month lease and they pay for the summer months weather they are there or not. Also many college rentals require parents to co-sign, ask me how I know this.
otoh, personally I prefer 3 or 4 br rentals over 2s, even though I do have some 2s that I rent and just finished a rehab on a 2 that we're keeping to rent.
A case can be made to sell this property and get a better rental property. Many properties are just not good rentals for one reason or another. we had one where parking was tight, tenants didn't like it and didn't stay long term. What did we do we sold it to an owner occupant and bought a better rental some place else.
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