How long should a house be vacant in Memphis TN?

Question

Reside in CA and considering buying a house for rental income in Memphis.   I'm using the following link because that management company is used by the agent I'm dealing with.

http://memphis.craigslist.org/search/apa?is_paid=a...

Those rentals are the type houses I'm considering and seemingly in nice areas.  My concern is most have been vacant for more than 30-days.

Is it normal for rentals in that price range and in those areas take more than 30 days to be leased out?  If so, how long does it usually require to find tenants?

Thanks in advance for taking time to share you experiences/knowledge with me.

Alex Craig · Answer

How to rent houses.....

30 to 45 is normal, but sometimes good houses sit vacant, maybe it is time of the year. Higher rent homes are harder rent during the Holidays. Think about, higher rent homes are typically more stable families that don't up and move during Christmas. Lower rent homes we see time of year really not make a difference. Also, homes in the suburbs are really hard to rent during the school year. With that in mid, we do not let leases is certain areas expire during certain times of the year. This is our best way to prevent a long vacancy.

Now that timing has been addressed, marketing is very important. Great pictures and descriptive marketing paragraphs calling out the features of the home. We use high res pics with wide angle lens to display most of our homes. Most leads (about 85%) come from online leads. With that in mind, why not position your home to look fantastic.

Aggressive leasing agents and quick responses. Our online response is super quick and my leasing agents are hungry.

Pricing is more then just analyzing the area, it analyzing your price versus your competitors amenities. Are you comparing apples to apples? Is your home a tad dated, while your competitors home has been recently updated? You want your home to be the nicest on the block with curb appeal.

Curb appeal....have it!

Rent specials. We got rid of the half off rent special during the holidays and went with a 50" TV promo on $895 and up homes. Half off was close to the same price as the TV, actually cheaper on homes at $995 and up. We were not buying Samsungs. I think we either bought Insigna or Maganvox. The TV we saw appealed more then the 1/2 off rent special. We did rent specials during the holidays as there are less qualified renters during that time. Now that the holidays are over, we are seeing stronger applicants. We will do a few more TV specials for Super Bowl for a few select homes.

Lease terms. We used to do 24 month lease, but got a lot of push back. Since then we have done 18 months leases with no push back. These leases are almost all getting renewed.

1/2 month deposit instead of 1 month. I know this is unpopular with a lot of people, but it does give our homes yet another competitive edge. If a tenant narrowed down his choices to 2 houses, and one has cheaper move in, which one is he taking? The difference between a $500 deposit instead of a $1,000 is close to a months mortgage. You want that property rented asap. Take a lower deposit then inspect the house 3 months later.

We just started doing surveys as to why tenants move into a home; so far "best looking house they looked" at is by far the #1 answer. Keep in mind 90% of what we manage is what we sell. Best looking house on the block is our whole business model. I will be publishing thise results in about 3 months.

Excellent customer service. When prospective tenants call in, the staff should give A+ customer service. Follow up with showings quickly and approve qualified applicants ASAP.

Ok, so I pretty much gave out all our secrets.

I typed this on a mobile device.  Excuse any mistakes I made.

Jay Hinrichs · Answer

@Fred Dray  many of the turn key companies have shifted their focus from C and D to A and B over the years... this is true in all markets.

Us west coast folks really don't know what we don't know.. and when you go out to the mid west its totally different than what we deal with here on the West coast.

For instance can you recall a time when you may have seen a 40 to 80 unit apartment complex boarded up.. in your market..

Well you can drive around Memphis and find many... failed landlord syndrome is very evident in those markets.. and the lower the rents the tougher the tenant base and the ability to succeed is.

I had a friend from Oregon ( against my pleading) buy a 40 unit in Memphis..  for 15k a door. .he was giddy of what a great deal he got... spent about 10k a door getting the units back to rent able condition putting in a new hoop and BBQ area.. well within first 30 days hoop is destroyed BBQ are stolen he had one murder and a bunch of other violent crime he thought we would sell at a 15 cap and make about 500k on the deal.. he ended up selling and losing 400k... all in 18 months place ended up boarded again..

these areas are only appropriate for those that FUlly understand the market the tenant and how to run these areas.. an investor buying a SFR if its in the wrong area will just throw their money away.. you need to buy quality.. if you do you can a good day.. although be aware values do not rise there.  just check out new construction you can buy new for what the used stuff is going for ... I would take a trip out there and spend a few days really checking it out.

Douglas Skipworth · Answer

Hi, @Fred Dray.

Exciting that you're considering an investment in Memphis!

From my experience, you should expect for those type of houses to be rented within 30-45 days.

Best of luck to you!

Fred Dray · Answer

@Alex Craig Wow, your post touched on all my concerns with the listings from the prop mgmt co ads I posted above.   They must have just rented several units because when I posted there were 12 listings and 10 were posted between 12/1 and 12/15.  Now to be fair, I am in beginning stages of choosing a property and was referred by a friend who works with a realestate investment co in memphis who uses the mgmt co posted...and I have not spoken with seller or mgmt co.  I had found a few properties on the seller's website I had interest in (and because of a recommendation and what I read on the internet, I think the seller is someone I would work with) and researching the mgmt co was the last step before contacting him.

You touched on the very thing I found missing in the mgmt co listings....

Aggressive leasing agents and quick responses. Our online response is super quick and my leasing agents are hungry.

I work for a prop mgmt co and have written thousands of listings on craigs list.  I've had units remain vacant for up to 30-days.  However, I would update the listing each week so perspective tenants would not know how long it's been vacant.   I could tell from this co's listings that the properties sat vacant for 30-45 days which leaps out at me as a negative.

Plus, each listing had basically been cut and pasted.  Different house, but same base description.  With each unit I have, I write a story targeted to the upper-income, higher educated tenant I want to attract and list positives like "You'll love opening your bedroom window to let in the morning sun...and if you're a plant lover...that sun will allow your plants to flourish."  The cut and paste suggests the person posting their ads was not hungry (which is the same term I thought of when reading the ads for the first time).  A prop mgmt co is so important, especially when my property is several thousand miles away, that I want someone who is hungry/dedicated/go the extra mile....because they will be taking care of my property.

I could share more, but it's not fair to that company as again I have not spoken with them.  For that reason, I'm going to delete this post tomorrow as I stumbled into a means of evaluating areas...I can find top prop mgmt co's in any area, find their listings and just keep track as to how fast units are renting and even respond as a perspective tenant to see how hungry they are to rent to me.

Have to say Alex, I like your approach/attitude as it mirrors mine.  In a difficult rental environment, a property owner should want someone who knows the market and is hungry to get/maintain business.

I'm still wrestling with if I want to invest in Memphis and if I decide to, I will talk to the guy my friend works with...but I'll be checking in with you as well.

Thank you and best of luck with your businesses.

Jay Hinrichs · Answer

@Fred Dray  hard to compare the mid west rental business with the West coast.

the mid west its common for about 50% of all SFR's to be owned by investors.

So renters do not have the urgency like they do on the West coast. And much of the rental pool are life long renters and use to shopping for rentals and moving many times in their lifes

Not sure of your area but if you have a SFR to rent in the Portland Market you will get 30 Reponses in 2 hours on craigs list and rent it in 24 to 48 hours with good wage earner and ficos over 700.

YOu will generally not see this in the mid west.  Those with good credit and earnings will be buying ... However if you buy higher end you will get a much better tenant generally speaking and if you take care of your property they may actually stay more than one year.

Tuan L. · Answer

@James Wachob Is your map on BP? If so, can you tag me with the link? Thanks.

James Wachob · Answer

@Fred Dray I agree with @Jay Hinrichs - I'd suggest looking into B and better areas of town. I have a free maps I've created that explains each area of town. My investors are buying homes from $20,000 - $200,000 but the majority of educated investors are choosing to stay away from the cheaper homes that promise a great return "on paper" but in the long run the vacancies and repairs kill the cashflow.

Mike D'Arrigo · Answer

@Fred Dray Keep in mind that December is a very slow time of year in the rental market. Most people don't want to move during the holidays and often times, the ones that are moving then are not moving by choice. I'm not suggesting that all of Memphis has high crime. Like any city, it has good areas and bad areas but you can be sure that properties renting for $595 or $650 are going to be in pretty bad areas. On the other hand, the properties renting for $1495 are most likely in very nice, owner occupied A class neighborhoods. It's all about the neighborhood. In Indianapolis, we don't deal with anything renting for less than $750.

Fred Dray · Answer

Hi @Jay Hinrichs and thanks for sharing your experiences.  I manage an apartment complex in Glendale, CA and it seems the response rate is the same as in Portland.  I understand houses and apartments are apples and oranges and time vacant varies in different areas.  This would be my first purchase of a rental property and Memphis is one of the areas the agent I'm working with has properties for sale.  Interestingly enough, I was focused more on area/crime/cost/return on income and just about everything but finding a tenant.  When I saw how long the properties had been available, it raised a red flag that keeps getting redder due to my hesitation over Memphis crime rate.   I think I would have to apply your advice about buying an A property to Memphis due to diversity in neighborhoods.  Thank you

How long should a house be vacant in Memphis TN?

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