How hard is it to find apartment or duplex tenants?

Question

Hello,

I am interested in getting into the rental business soon and am curious as to what you all think about finding renters for apartments and duplexes? How much time is really required to find a renter and is this process a hassle?

I know this might be a vague question, but I am trying to see how difficult it seems to be to find decent renters. I live in a decent area with about 27,000 population in the city and about 174,000 in the county.

How hard is it to find a decent renter?
How long does it typically take?
Where do you find renters from? (Online leads, newspaper, craigslist)??

I currently sell insurance and the reason why I like real estate is because I will not have to go into the office everyday and hit a certain sales number. Sometimes the pressure is high trying to sell X policies per week, X per year, etc. I realize that everything takes work, but I feel that real estate rentals would be less everyday pressure. I can rely more on the rental income as long as I keep up nice units and work the numbers correctly to attain a profit.

Let me know your thoughts.

Thanks,
Craig

Michael Rogers · Answer

It varies by local market, but my market (Chattanooga, Tennessee) has been very good the last 2 years.  I've got a duplex, triplex, and SFH's and have found I can turn them over with a couple days to 2 months vacant time.  I've had as long as 4 months of vacant property during 2009.  I would typically plan for 1 month of vacancy when turning over a property just to be on the safe side.

A couple pieces of advice.

1. Screen potential tenants to get really good tenants.  The better the tenants, the less hassle, headache, and time you will expend over the term of the lease dealing with problems.
2. Don't pay too much.  Buy with a "margin of safety". 
3. Keep in mind that when you get ready to sell a multifamily property, you will almost exclusively be selling to investors.  Investors will be concerned with cashflow and will pay you based on that.  Single Family Houses have the benefit of being able to sell them to ordinary homebuyers.  This market has other considerations besides cost and cash flow.  Therefore you can get a little higher price when you sell.

Good luck!
Michael

Kyle Meyers · Answer

I have properties in small towns and a large city. I thought it would take much more time to rent out the places in small towns, but they actually were filled faster than in the city. I don't think the size of the town is as important as the rental market there. If there are a lot of for rent signs, there may be too much supply or not enough demand. It has taken me as long as 2 months and as short as 6 hours to fill a vacancy.

Robert Adams · Answer

It depends on the market you are in. In Vegas it is very easy to rent these types of units if the property is priced right and marketed properly.

Craig S. · Answer

Michael, it also looks like you focus more on single family rentals whereas I am looking into at least a 2+ unit property. Preferably 4+ units.

Also Loiusville, KY does have closer to 250k population. The entire Jefferson County has closer to 750K.

See here (Jefferson County):
http://www.google.com/publicdata/explore?ds=kf7tgg1uo9ude_&met_y=population&idim=county:21111&dl=en&hl=en&q=jefferson+county+kentucky+population

See here (Louisville, KY):
http://www.google.com/publicdata/explore?ds=kf7tgg1uo9ude_&met_y=population&idim=place:2148000&dl=en&hl=en&q=louisville+ky+population

Craig S. · Answer

Michael,

Thanks for the reply. I started my own insurance agency about 3 years ago so it isn't just selling insurance I guess. I am the marketer, online advertiser, accountant, web developer, customer service specialist, sales agent, etc. all in one, although I get your point.

I don't mind hard work. I just like the fact that rentals seem like a more stable way to build income over time. My approach would be buy and hold. With insurance, once I reach a time and technology limitation I cannot sell any more policies per week without hiring someone else. With real estate, I think I can scale larger with less personal effort. In other words, I can hire a property management company, etc, etc.

We have a few larger apartment properties near me (300+ units) and they are doing quite well. I have talked to the owners of them both and they find this market great in this area right now.

I'm just trying to learn as much as possible.

Craig

Michael Seeker · Answer

Craig - I'd almost guarantee owning enough rental properties to support yourself will be more of a full time job than selling insurance.

That being said, I would not feel very confident having rentals in a town of 27,000 people.  I have rentals in Louisville which is a college town with 250K people in it.  Most of my rentals have less than one month of vacancy over the past 2 years.  I would not expect that to be the case in a smaller town.  You should be able to get better returns and more steady tenants, but vacancies may take 6 months or more to fill in.

I post all of my listings on craigslist - however I'd suspect in a small town you'd need to focus more on highly visible signs, not internet advertising.