Posted almost 8 years ago

The Six Deadly Mistakes Rental Owners Make

The Six Deadly Mistakes Rental Property Owners Make…

(How Many of Them Are You Making Right Now?)


Part 1 of 1 ....


 

Costly Mistake #1: Allowing a property to sit vacant for 3, 5, or even 7 months, hoping for a good tenant to come along.
Let me assure you about one thing when it comes to finding a good tenant:
Hope…Is Not A Good Business Strategy!   I see this mistake all the time. So let me give you my “cardinal rule” for property management: Ifyour property is sitting vacant for more than 4 to 6 weeks, there is at least one thing WRONG that must be fixed, and I have NEVER found an exception. And YES, this is true even in today’s strong rental market. The first and most common issue is the rent is just too high and has to come down a bit. Right now, tons of people are sitting on empty rental properties, because they’re trying to find a tenant to pay a rent high enough to make their mortgage payment. These owners are understandably reluctant to rent out their beautiful home at a loss, each month. Pulling money out of a savings account to make up the difference between the rent and the mortgage is not anyone’s idea of fun.

The unfortunate reality is we are in a down cycle of the real estate market. The foreclosure crisis has caused rents to temporarily drop 5% to 10% in most neighborhoods including Philadelphia.


Therefore, it’s critical your rental rate is competitive with similar properties in the surrounding area. Your property manager must give you:

                              

A Fair Rent Assesment

  In other words, how much can you realistically rent your home for in the next 30 days? And by the way, you should be willing to drop the rent a bit below that price (if necessary) to start getting cash flow rolling in.
Without question, in this economy, renters will negotiate rent. And the reality is, the property owner who is flexible will get the best tenants for the longest amount of time.  Look, I know this is not a popular topic to discuss. After all, who likes to talk about getting less money? However, I’d rather have you know this up front rather than after your property has been sitting vacant for six months, because the rent is too high.   I’ve routinely seen rental homes sit vacant for being just $50 a month more than the going ratefor similar homes in the neighborhood. So it’s extremely important you get this right. The second common issue is something goes wrong inside your rental, after it was painted and cleaned. Let me tell you a strange story about this. One month, there was a dead cat in the driveway of one of our available rentals.   We were wondering why tenants weren’t putting in rental applications, after they looked at the house.  So, one of us got into our car and drove out to see what was wrong – a very good technique by the way. Sure enough, once we removed the“dearly departed,” the house rented within 2 weeks. Or sometimes, bugs will suddenly show up. Not to be gross but a few dead roaches on the floor will scare away just about anyone. Other times, the roof, toilet, or sink might suddenly start leaking, and anyone who visits starts wondering what else might be wrong with the home. So, they pass on your rental property because they think if the owner missed these “obvious” repairs, it is just the tip of the iceberg. In their mind, there is probably a hell of a lot MORE things wrong, they can’t see.   The key is to get feedback from tenants after they look at your rental, so you can spot this stuff early and fix it. We are constantly quizzing tenants who visit one of your properties to find out why they didn’t rent. Based on their feedback, we make any necessary repairs to your rental, immediately. For example, the carpets may need to be steam cleaned again, because some stains showed back up, or the maid needs to clean the bathroom again, because she forgot to wash down the tub. You get the idea.   Although this may sound very simple, this is extremely uncommon in the property management industry. Most property managers don’t own rental properties of their own, and therefore, haven’t had the painful experience of their ownrental property sitting vacant because of one of these issues.   Regardless of the reasons, we have learned (the hard way) that well over 65% of all tenants who look at a typical rental property, are turned-off, instantly. They are turned off because either the rent is too high in comparison to similar properties in the neighborhood, or one or more things are wrong inside the home, like bugs or leaks. Think about it, haven’t you experienced the same negative first impression, looking at places to rent when you were younger?   We have learned to carefully and objectively research the real world, rental rates of properties we manage for our clients. We check online and in newspapers to see what properties are currently available for rent, in a specific neighborhood or zip code. Our goal is to find 4 or 5 similar properties so we are comparing apples to apples. If you price your rental $75 above what other similar properties in the neighborhood are priced at, it will sit vacant… a long time.   Is it a bit more complicated than this? No, not really... However there are a large number of things inside your rental that need to be checked carefully so tenants are not turned off.   My operating philosophy is if my mom wouldn’t be 100% satisfied with the cleanliness and condition then the rental is not ready to rent. However, the average property manager or landlord often just does the minimum to get a house ready for rent. This is a mistake and results in the property sitting vacant for months, and eventually, renting to a lower quality tenant, who typically pays the rent late and doesn’t take care of the home.
Please come visit us again next week for Part 2 of 6 Critical Mistakes Rental Owner's Make!

Del Val Realty & Property Management is a FULL service residential property management company serving Philadelphia, PA and the western suburbs. We offer real estate investors and property owners a vehicle to build wealth and financial security through hassle-free ownership of rental real estate with our "Total Property Management Program." This proven management system allows property owners to enjoy the financial benefits of cash flow, tax savings, and wealth creation while it GUARANTEES you will never receive a late night emergency call, deal with a lengthy eviction proceeding or ever have to interact with an irate tenant.
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