Long Vacancy With Property Management Company. What Would You Do Next
Looking for some perspective from investors with experience in Memphis or with out-of-state rentals.
I’ve owned a Duplex rental in Memphis for about a year. I live out of state and do not self-manage — I have a local property management company handling the property, marketing, showings, tenant placement, etc.
The original plan was to get the property rented and stabilized, refinance into longer-term financing, and then eventually use what I learned/capital available to continue building my rental portfolio.
The biggest problem has been getting the property rented.
It has now been vacant longer than I ever expected despite being under professional management. We have adjusted the asking rent, and I’ve continued working with the management company to try to get someone placed, but I’m still carrying the property without rental income.
Because of that, I’ve basically put my next investment on hold. I had planned on moving into the Knoxville, TN market next and purchasing something more turnkey/ready to rent, but I don’t feel comfortable adding another property while Memphis is still unresolved.
I’m trying to determine whether this is simply the stage I’m in right now — stabilize this property first and be patient — or whether there are things I should be doing differently to maneuver out of this situation and continue making progress.
For investors with more experience than me, I would really appreciate your thoughts on:
• How long of a vacancy would make you start seriously questioning the property management/leasing company?
• What specific information or metrics would you ask the property manager for — number of inquiries, showings, applications, showing feedback, comparable rentals, etc.?
• At what point do you reduce the rent further versus holding closer to market rent?
• Would you consider changing property management companies during a prolonged vacancy?
• Is there another strategy you would consider to get the property performing without simply selling it?
• For Memphis investors specifically, what are you currently seeing with tenant demand and leasing times?
I’m not looking to blindly acquire more properties just for the sake of saying I’m growing. I’d rather fix the weak point in my first investment, learn from it, and make a smarter second purchase.
My ultimate goal is still to build a rental portfolio, so I’m trying to determine whether I’m genuinely stuck right now or if there are moves I could be making that I’m overlooking.
I’m happy to provide the property numbers, asking rent, expenses, loan situation, estimated value, refinance plan, and other details if that would help with the analysis.
Thanks for any advice, particularly from Memphis investors or anyone who has dealt with a similar situation while using third-party property management.
Most Popular Reply
You did not say how long this has been vacant. I've seen some people on this forum start freaking out after a property not being rented for 7 days. I'll assume it has been much longer than that.
There are only one of three reasons a property does not rent quickly:
1) Property Physicals - If there is some physical defect with the property, it will be hard to rent. It could be its condition, its layout, number of beds / baths, no parking, etc. Some physical defects are fixable. Some are not. For example, you can't realistically move the building. Many other things can be fixed. As the owner, this is largely your responsibility. Make sure your property competes well with others in the area. Hopefully you already have lots of photos of its current condition. I would compare those to other properties being rented in the area and see if you notice anything. Ask your manager about their assessment of the physical condition.
2) Marketing - It isn't being marketed properly, nobody knows it is available. This is the responsibility of the manager. I would ask them to describe how they market properties for rent.
3) Price - If the price is too high, it won't rent. Just because the property next door rented for $X, doesn't mean yours will also rent for $X, especially if your property has some physical disadvantage vs the one across the street. On our properties (apartments) we use dynamic pricing. If our vacancy is higher than our specified targets, the software starts lowing price immediately. We may drop the price a few dollars every day. In a slow market when we have high availability of a certain unit style, we might have our asking rent drop $50/week.
Assuming #1 and #2 are not problems, the fastest way to rent your property is to start taking the price down.