How do I know my units will rent?

Question

Hello guys, looking into a duplex deal and being my first ever investment, I'm scared sh**less if these units will rent. From studying the market (Craigslist and Zillow rentals), I've been noticing similar units have been vacant for a 2+ months now. What tools do you guys use to scope supply/demand of rental units and gauge rental interest from tenants?

Joe Splitrock · Answer

It is against the law to advertise properties that are not available and honestly this is part of the reason that Craigslist is rapidly becoming irrelevant. It is filled with spammers and fake ads. Zillow requires you to confirm your address, so it makes it harder for fake ads.Doing market research does not require false advertising. Simply look at the listing prices of comparable properties. On Zillow, you can also look at listing history. You can see when a property was listed for rent, for how much and how fast it rented. Based on doing this research, you should be able to come up with a rent range. Make sure the investment works financially at the bottom number.Any property will rent. It is just a matter of what price it rents at.

Victor Menasce · Answer

Lengthy vacancy in the area could be a problem. Seek areas where there is excess demand and a shortage of supply. More importantly, make sure the property generates enough in rent to cover regular monthly expenses, replacement reserves, and unexpected repairs. Rentometer could give you a sense of the rental market landscape in the area.

Ryan Deasy · Answer

@Chas Noren i know the feeling. a lot of people will post ghost ads (fake ads). Meaning, throw some pictures of a place up on craigslist in the area that you are looking to rent and see who reaches out. if you have a good ad up in your area and nobody reaches out, well, then you may have your answer. If people reach out to you, then you can proceed with more confidence.

Account Closed · Answer

@Chas Noren I own some units in pretty rough areas (with adequate rental demand and very landlord friendly laws). I keep them in really good shape and my property manager prices them right. They rent pretty quickly, and even though the neighborhood brings some incidentals with it- the property cash flows quite beautifully.Moral of the story is, unless you made a very poor purchase decision, you'll be fine to fill units. Now I can't quite speak for your rate of return, etc... but that's a whole different subject anyways.

Chas Noren · Answer

Thank you guys. All good insights. Here is what I'm gathering from all the messages...1. Research. Research. Research. Zillow and Craigslist.2. Talk to propery managers and agents. My agent is going to get me in touch with someone who understands this market better in the area so I'm winning already.3. Any property will rent, the price has to be right. My next objective is to get this price. I may have priced it 50-100 bucks higher. Got greedy and got two inquiries in a week.

Jason C. · Answer

@Chas NorenI see old listings sometimes. It’s usually bc it’s run by a poor property manager who does not answer the phone or return calls. It may already be rented and they didn’t bother to remove the listing. I have come to believe that renting a house is the easiest part of the process. Finding a deal is much harder. Getting a lender to believe it’s good enough to loan you a sack full of cash is another issue. Dealing with contractors is another headache. But finding someone who wants to live in a fresh new home is not hard at all.

Jonathan Klemm · Answer

@Chas Noren - If you are providing a good product in a decent neighborhood your place should get rented within a month. Also, if it is taking 2-3 months that simply means you are overpriced for what you are offering. As others have mentioned reach out to others experienced in leasing such as brokers and property managers and get their advice for the area you are looking at.

Michael Gansberg · Answer

@Chas Noren - check the vacancy rate in the area. If it's under 7% or 8%, then move on to step 2, which is compare the location, amenities, curb appeal, and layout of the units under consideration. If those factors compare well with your competition, you'll be able to rent the units. If those factors compare poorly, you'll have difficulty renting the units. Even if the factors compare poorly, you may still be able to rent them if you adjust the price accordingly. However, if this is your first investment, I'd avoid challenges like that. Get a house which is appealing to tenants. That recommendation will be as good at the beginning of your career as it is at the end of your career.

Tj Hines · Answer

@Chas Noren figure out a market analysis in that area? What's the demographic? What's the absorption rate? Is it a desirable area? Are there any amenities close by? What's the historical occupancy for that area, as well as the vacancy? Just some things to think about

Ryan Deasy · Answer

@Chas Noren did you get anyone contacting you yet? are you sure that your pricing is accurate? also, quality pictures and a well written ad goes a long way too. i know we are getting micro with this, but it is worth getting quality pictures taken and to write an attractive ad (no super long wordy paragraphs, etc)