Ease of finding tenants?

[Eric Cioffi]

It seems everyone is a pessimist when I tell them I am very interested in investing in real estate (rentals).

Out of curiousity, how easy or hard is it to find a tenant in todays economy? I understand that it varies depending on the house and the area. But in general, do you typically find tenants within a short time of a tenant leaving or buying a new property?

I'm nervous that if I were to start looking and find a property I want to invest in, I wouldn't be able to find a tenant and be stuck with 2 mortgages.

Thanks!

[Jon Holdman]

This is a question you're in the best position to answer.

First, find a good area. I suspect Columbus is like most cities. Some areas won't work as rentals, some will. Start looking on the MLS and look at what basic 3/2/2 houses sell for in different areas. Look for rents, too. rentometer.com is useful, though optimistic, in my experience. Craigslist should give you a pretty good idea. At this point, you're just looking for overall averages, not specific details.

Now, read in the rental property forum about the reality. Vacancies are a fact of life, and if you assume you will have a tenant in place every month, you will fail. My last vacancy was no vacancy at all. One tenant moved out on the 30th, and the new one moved in on the first. The two before that were two months each. Read about the "50% rule" and apply that at this point.

If you do the math, based on the typical rents for an area, you'll determine what you can afford to pay. Find some areas where that's at least close, based on what you see in the MLS.

Then, jump in your car. Go drive those areas. Some may seem scary at first and some may well actually be scary. Eliminate anything you're uncomfortable with. But don't be too quick.

One you've found a few areas you like, drive them thoroughly. Up and down every street. Look for "for rent" signs. Write down the numbers and make a few notes. Get the address, too. Make some calls. Find out what they're actually asking. Ask about condition and amenities (basements, garages, and AC are common questions here.) Repeat the driving once a week or two weeks for a few months. Same signs still up? Or, do they come and go in a few weeks? If some move quickly and some linger, note what it is that makes some slow. Might be condition, might be price, might be a busy street or something else.

Now start looking at houses in the area. You really don't want to pay retail. That is, the listing price on the MLS. You want to have some equity up front. If you're end up having to sell, the transaction costs are quite high. REOs might be available that, with some work can be nice. Maybe short sales. Maybe tired landlords. Maybe just asking around. Finding bad deals is easy. Finding good ones takes work.

I'd suggest finding an agent who's willing to work with you and start looking at houses. You don't want a neighborhood with a bunch of unique houses because those are hard to value. Rather, a better neighborhood is one that has a lot of similar houses. That makes comp'ing much easier. Somehow I though the tract home thing with four floor plans and three front elevations was a recent thing. Its not. So, if you have a neighborhood like this, you'll learn values. You'll learn what different floor plans look like. Which ones have basements and which don't. Etc.

By this point, you will know the areas, know the properties, and you'll be able to easily answer you question. What you're looking for is an area where "for rent" signs (or craigslist ads) come and go fairly quickly. If after three months all the same properties are for rent, that's probably not a good area. OTOH, you need a neighborhood where you can buy something. If there are plenty of houses for sale, your ability to get a good deal is higher than if there are only a few.