Finding Realtor or Rent by Owner?

Question

I am a first time landlord and would highly appreciate your suggestions.

My condo's monthly asking rent is $2,100, which is located in a convenient and popular rental area (average rental rate is $1,000). However, I tried to not use realtor and posted my list on Zillow, Trulia, Hotpad, Craiglist, Cozy...etc. I only received 2 interest for the past week. My page views on Zillow of the condo is always the lead from the past week and now I am not too confident that if I am on the right track. Here are my options:

1. Find a realtor, and pay the first month commission. Pros is they will handle all the potential tenants and help me take care of showing and rest of the things. But the commission will lower down my average monthly income to $1925. And there might have some rent negotiation from the tenant before signing the Lease.

2. Lower down the price to $2,050. But I am worry that the people who can afford this price will go directly to a realtor. I am not sure if I keep waiting, there are no more potential tenant will show up.

I have to start my lease on 6/1 so I still have sufficient time to look for someone but just want to make a right path for now.

My current tenant paid $2,000. I used a realtor to find them 9 months ago. The market seems even better now so $2,000 to $2,100 didn't seem too bad of a starting point.

Do you see a difference in how tenants shop between a $1,000/month unit vs a $2,000+/month unit? I'm worried higher end buyers don't use DIY sites like craigslist. Thanks.

Bryan Reid · Answer

@jona leu the first thing that jumps out at me in your post is that you're asking $2100 but the average rents in the vicinity are just $1000.

Are you certain the market will support $2100 for the property?  It very well may, and since you found a tenant last lease for nearly that you have some good evidence it will.

But if you've had so little interest in a good market something is going on.

I would definitely suggest a Realtor, but not just any Realtor.  Find one that specifically specializes in investment properties.  They will be well suited to help you price your unit, advertise it in the places that caliber of tenant will see it, and place a tenant.

A good Realtor is a fantastic tool for investors.  They will over the long term increase your monthly profits, not decrease them.  (Just be sure to pick the right one - someone who knows investment property.)

And I can say this without bias too, because I always bought through another Realtor before I had my own license.  I found it well worth it way before I ever considered becoming one myself.

Gus Ross · Answer

@Jona Leu I'm a believer that price dictates the demand/interest ... a realtor is basically going to offer you additional marketing via the MLS etc. and give you market comps.  You're going to notice a direct relationship between price and interest.  As you lower price my hunch is that you'll generate more interest.

I would look at competition in the area (on Zillow or Trulia etc) for a comparable unit and see what it's renting at and base your rental price decision given the current market conditions.  Keep in mind that the time of year you are looking to gain a tenant can sway demand and thus the price.

Hiring a realtor may be your best option to save the time you'll have to put in, but I've found that when trying to yield highest ROI, a licensed realtor/agent often doesn't fit the equation.

Jona Leu · Answer

@Gus Ross Thanks for the information. Just an assumption, if I lower down the price, what do you think it might be the time to transfer to the realtor? ex. less than 3 interests a week...etc.

Gus Ross · Answer

Hey @Jona Leu I have been in your position and generally default to using option 2 as I've done both in the past numerous times.  I'll break down the math in a second but a little insight into my experience ... I own 9 doors and am a licensed agent in Florida.  I have used a realtor for rentals ~4 times but all of those occurred within my first 3 years of being a landlord.  The reason I would suggest trying option 2 FIRST before seeking a realtor are purely anecdotal from my experience:

(a.) The math works out in #2 more favorably if you can afford the time to adjust the price and pay close attention.

(b.) Using a realtor generally costs 10% of the value of the lease so you'd be losing 2k+ on the use of an agent which would be the equivalent of a significant price drop in the rental.

(c.) Vetting tenants is crucially important for being a landlord and as owner of the property, nobody will complete this process with as much integrity as you will.

I suggest exhausting your #2 options before being willing to give up 10% of gross rent value.  I hope this helps and feel free to ask more questions.  I'd love to help in any way I can.