Having Trouble Renting Unit in First Property

[Kevin Zmick]

Hey All! New forum member here.

Long story short, I ended up through circumstances deciding this was a good time for me to buy a live-in two flat, which I mention because it is not a cash-positive investment for me. I'm happy with my purchase but am having a very hard time finding a tenant for the vacant unit. I've lived in the city for over 10 years and have been in a lot of apartments, and I can't see what it is about the unit that could be giving me so much trouble. Newer appliances, free nice laundry, 2nd floor, yard space, storage, clean bathroom, included heat, installed window A/C.

Appraisal suggested the unit was worth 2,300 a month, which I felt was a bit high, so I listed it for $2,150 with no move in fee and a 2k deposit. No takers after 1 month (September) on the market. Lowered the price to $2,050, more interest, but no takers for a Nov 1 move in. As of yesterday, I listed at 1995 with half off first month for a Nov 1 move-in. 

I can afford to have the unit empty, but obviously don't want to do that, and am at a loss around what I should do going forward. I'm stressing because I wasn't anticipating this and am not excited about the prospect of paying 2k more than I was expecting when my mortgage payments kick in next month.

I'll be searching the forum for answers as well, but since I am kinda desperate at the moment, I thought I would go straight to the source for advice. Any strategies for enticing clients? How to find the right price?

Thanks in advance!

PS My realtor did me a solid and listed the place on that network for free and isn't taking a commission, but as a trade off I'm kinda on my own as far as finding someone when leads come in.

[Brook Davenport]

A few options here! First I would start by determining the market price for rents in the area. Go on Zillow, type in your zip code and the bed/bath count, and see what is currently for rent. Divide the price of those units by the sqft, and you’ll get price per sqft. Apply that to your unit, and you should get a good ballpark for rental price. Realtors listing is a great way to market it, Facebook is also an underutilized method. I market in local groups on FB, along with running cheap FB ads if needed ($1 a day).  

A flyer put up at your local gym, store, work also goes a long way. Someone always knows someone looking for a place to live, and I’ve found they are more likely to refer if they know the owner. Hope this helps!

[John Mason]

You are looking at only Long Term? Or can you try a monthly by furnishing it?

[Nathan Gesner]

Quote from @Kevin Zmick:

When a property doesn't rent, there are two primary reasons: the price is too high or your marketing isn't reaching the right audience.

If your REALTOR listed it in the MLS, then it's probably syndicated to the best websites and you're casting a wide net. That indicates price is the problem. The slowest months of the year are typically October - December. Weather cools, people are busy with school, resting from summer, prepping for the holidays, etc. You need to be aggressive with your pricing to compete for the few available renters.

I recommend dropping our price to $1,750 and offering a month-to-month lease or six-month lease. That fills your unit for the winter and buys you time to prepare for the next time. It also makes getting rid of a difficult tenant easier. In the spring you can list it for market rate and have better marketing/screening strategies in place.

HOW TO SCREEN APPLICANTS

I recommend you include some of your key qualification criteria in the advertisement. For example, I mention that every adult must pay a $30 application fee, pass my credit/criminal background, make a combined income of 3x the rent, and whether or not the property accepts pets. Use the top three or four discriminators so applicants can screen themselves.

Then you need to have clear screening criteria yourself. What's the lowest credit score you will allow? Do you check Landlord references? Do you verify their income? Do you know how to read the credit/criminal background? What if they have collections or judgments?

Here's a detailed guide on how to screen applicants: Application Screening Guide

[Jonathan Greene]

Who took the photos? If your realtor is listing it for free and not helping, that's not much help since leaving you to screen tenants and run through leads is like asking you to perform knee surgery, you don't know what you are doing.

All rental listings should get bombarded on Zillow Rental Manager and HotPads, etc in the first week so if you have limited activity, your price is either too high or the photos are bad and the copy about the place is bad.

Use something like RentSpree from screening. Tenant pays $49 for a full profile without criminal background. You sound like you might jump at the first bad application that comes in so you need to watch out for that as that is the worst new landlord mistake you can make.

[Kevin Zmick]

Deeply and truly appreciate everyone stepping in to provide advice. I definitely am leaning toward the first application being the one for me, and I appreciate the advice to make sure it is a good tenant in addition to just being a flesh and bones human who (might) pay me the rent on time.

One of the advices I read above was to be a bit less discerning perhaps and get someone in the door for 6 months at a reduced rate, and then find my golden tenant in the summer. I think I will take both of these directives and try to find a happy medium.

As far as photos and advertising, I'm going to make some tweaks to the ad, and I have many friends who are in film who could hook me up with some better photos, or at least the camera equipment I need to do it myself.

I have a showing tomorrow, and in the meantime I'll work on a plan for my next move and will post an update as things progress.

Thanks again!

[Michele Fischer]

You've gotten some great advice.  The only thing I would add is using your time with prospective tenants to ask what they are looking for, how the unit aligns or doesn't to what they are looking for, etc.  "What do you like about it"  "What do you wish was different?"  Don't be obnoxious, but a few open ended questions may give you good insight into what your unit may be lacking and what people do like about it, to help drive future upgrades and marketing, and maybe help compensate for a shortcoming in the short term too.

[Chris Grenzig]

Quote from @Kevin Zmick:

Deeply and truly appreciate everyone stepping in to provide advice. I definitely am leaning toward the first application being the one for me, and I appreciate the advice to make sure it is a good tenant in addition to just being a flesh and bones human who (might) pay me the rent on time.

One of the advices I read above was to be a bit less discerning perhaps and get someone in the door for 6 months at a reduced rate, and then find my golden tenant in the summer. I think I will take both of these directives and try to find a happy medium.

As far as photos and advertising, I'm going to make some tweaks to the ad, and I have many friends who are in film who could hook me up with some better photos, or at least the camera equipment I need to do it myself.

I have a showing tomorrow, and in the meantime I'll work on a plan for my next move and will post an update as things progress.

Thanks again!

 Kevin, don't skimp on photos, we hire a professional company and do 3D Matterport tours. However, it all is market-dependent. Take a close look at what other similar units look like on Zillow or other online listing sites and try and mimic them or exceed them. I would also highly advise to spend 30 minutes and do a rent survey yourself and find comparable units and see what they rent for and charge. Find out how long they've been on the market and if they've been dropping the price or have a different strategy. 

Appraisers are great, but at the end of the day, they're not the ones buying a property or the ones who are renting it. The most knowledgable people on market rents are the prospective renters who are currently shopping around trying to find the best option for themselves to live. So your best bet is to put yourself in their shoes and shop around just like they would be.

Also, some markets are definitely seasonal, and your market rent could change drastically from winter to spring/summer. Talk to so some knowledgable rental agents who specialize in this, and ask them of this is the case. If so, I would definitely consider a shorter-term lease or MTM lease to get you into that period and re-negotiate with the current resident or re-lease it at a higher rate. 

Also, often times leasing is about who can respond to inquiries the quickest and offer the most convenience. If you are working and busy and can't respond quickly enough, you might be losing people who would have otherwise rented because someone else answered them first. 

[Colleen F.]

@Kevin Zmick  I would also add your part of the city to get local perspective but it looks like you might be in Chicago?   A shorter term tenant could do fine for you because they are not bad but just people in transition, so you don't lower your standards.  You could swing to a furnished rental if that works for your area even with rental furniture but that is a different model. One thing people haven't mentioned is look for your own ad on the key rental syndicated sites and see if it presents well. 

[Jonathan Klemm]

Hello there @Kevin Zmick - I was just in a similar situation so you aren't alone...it is much harder to rent out units during this time, but the right will come.  A

What neighborhood of Chicago is your property in?  

I have to assume that your realtor listed it the Multiple Listing Network (MLS)? If you haven't had it listed on the MLS that could be a big reason you haven't seen much action. Anything over $2k should be on the MLS For sure.

What platforms have you been using on your own?  I like using hemlane.com because Hemlane sydicates to several other listing sites.  Plus, can upgrade to premium to get more attention.

How many showings have you had in the last 2 months?  Sometimes it is just about timing and being patient.

Lastly, echoing @Jonathan Greene - Don't jump at the first application PLEASE do your due diligence, call references, past landlords, etc.

P.S. I had a realtor ask if I had any other 2/3 bedrooms so happy to connect you with them if you have a 2/3 bed?

[Sean Wagner]

The security deposit might be a big factor. I would charge a move in fee instead of anywhere from $350-$500/per resident. Security deposit laws in Chicago are disadvantageous to landlords anyways. Another thing we like to do is offer a discount on second month's rent if you apply within 24 hours of viewing the apartment. When you do find a tenant, offer a term longer than a standard one year lease that will put you into the rental season on renewal. Ex. Lease starts December 1, 2024 and ends March 31, 2026 for a total of 16 months.

Hope this helps!

[John Warren]

@Kevin Zmick the rental market in Chicago can be very, very seasonal. This is especially true for the city and for most of the trendy neighborhoods. Your price point is right around where it gets tougher to rent in the off season. If you have the opportunity to list this during the summer in the future, you will likely be able to get quite a bit more for your unit due to seasonality. 

Take this time to make sure you have professional photos of the unit taken. This will come in handy next time you are ready to lease. Congratulations again on your purchase!

[Aaron Zimmerman]

Chicago can be quite seasonal. Depending on the neighborhood, there simply might not be a lot of demand but I would not get discouraged. I’ve had to rent in the offseason before and have gotten quality applicants but it does take longer. 

I’ve had the best success with Zillow (which goes out to hotpads and trulia) as well. I’ve tried domu but haven’t had much success.

I would echo other comments about screening tenants, especially in Chicago. It can be a long time to get someone out. 

[Kevin Zmick]

Thanks everyone once again for the feedback. I have decided to work with a listing agent as I really need to get someone in here. Price will be reduced to 1800 for the time being, which is competitive it seems with nearby properties based on the time of year.

Fingers crossed!

[Jennie Berger]

@Kevin Zmick Where in Chicago is your unit? 

[Arvand Sabetian]

I think many others have touched base on a lot of important points such as price and seasonality. Location is also a factor. Keep in mind photo quality on listings also helps quite bit. 

Make sure your listing is getting pushed through to all the major sites. We see that Zillow accounts for the majority of our quality leads in our syndication. 

Since you're having a difficult time finding applicants make sure there is thorough screening done on any applicants that do come through. Don't feel the need rush the process and choose the first one that comes through. A bad tenant can cause way more in headache and costs. 

Good luck on your search!

[Kaylee Walterbach]

Echoing what everyone else has said about seasonality. October is tricky, November is hard, Dec-Jan can be impossible. Finding tenants around the holidays is really tough.

[Jake Knight]

Are you able to gather feedback from your showings to gauge public opinion?  Also, I'm in Indy, this is a very seasonal market so time of year you put it on market is a big factor!

[Jake Knight]

There are a ton of factors that do into this. In my mind, you only have control over how you market the property and how your respond to leads and where you price it.  

[Colleen F.]

@Kevin Zmick also consider if you have an area specific advertising forum, a local facebook group,  or an area specific advertising platform you haven't tapped.  

[Michelle Fenn]

I am having a similar problem in Cleveland.    Same seasonal moving issues.  I have heard similar comments from other landlords in my area also.  Right now the majority of viewing requests I am getting are from potential tenants that have credit issues and eviction filings.   Increase your due diligence in screening tenants during the next couple of months.  

[Paul Cijunelis]

Kevin, sounds like you're a bit new to this and while I did not read all the way down I will offer some advice I did not see up to this post of yours. Since we are both in Chicago, I would highly advise checking into the landlording laws here. 

As Sean Wagner mentioned, the city of Chicago has adopted their own regulations on charging what's commonly referred to as a "security deposit" you need to do it another way. 

Another thing I would say is for you to is to contemplate dropping rent to $1750 if comps are +$2k. In Illinois and especially the city of Chicago, getting rid of a tenant is not easy as some previous posters must believe. Having been in the RE market for many years, I've seen and heard some horror stories. Giving away the place cheap only creates more work for yourself screening lower income individuals, and attracts scammers. Then if they don't' pay and don't want to move, you have to evict which in Chicago means 6-12 months and/or "cash for keys" (landlords please stop doing that it just incentivizes these people). This is very costly to an owner of course. A steep drop in rent just attracts scammers imo. Also stay away from craigslist. Again, scammers.

One horror story... I acquired a 3-flat in Humboldt a couple months ago who had two units not paying (ouch). Two units 11 months no rent, each. Plus damages. Owner was desperate to sell. The price was too good to pass up. If I shared the price people wouldn't believe it so I'll leave it at that. Just finished the rehab, likely will go through the same thing. It's winter, hard to find tenants. the last thing we want is bad tenants who don't pay, though, so while it is listed a bit lower than market it is not a screaming bargain. I am expecting my two units to probably not rent for a bit. Screen hard. Don't bend. Make sure whoever you put in there is financially responsible and I'd do a 6 month or month to month explaining in summer rates will increase.

Keep us posted.

[George Skidis]

Check out the Chicago Creative Investors Association (CCIA) run by Jane Garvey. Most of her Chicago landlords do not charge a deposit since the anti-landlord penalties can result in paying triple back to your former tenant for some minor infraction. So, a $2,000 deposit could cost you $6,000 in court.

Waive the deposit and raise the rent to make up for it.

Back in the 90s we had a 9 plex in Cahokia, IL. Started out asking $300 rent and $600 deposit ($900.00) for a one bedroom with water, sewer and trash provided. Couldn't give it away. Raised the rent to $400 a month and lowered the deposit to $350.00 ($750.00). People lined up and threw money at us even though we were charging $1,200 a year more. It is all about perception.

Learn how to screen your applicants. Set your standards up front.

Raise the rent to the market max and the difference will cover the deposit in 12 months or so.