Nervous about renting out first rental property

[Jane Z.]

Just finish repairing my first rental property. It is a ranch home with 3 bedrooms 2 bathrooms. Nice, clean, lots of trees and privacy in a good school district. My property manager took some pictures last Wednesay and put on MLS, which seems also flowing to other websites, such as Zillow. She said she will also post ad on Craiglist soon.

The property manager was referred to me by my real estate agent. I consulted her before I bought any of my rental properties. Since she has been working in property management business for more than 12 years, I thought I should value her opinions a lot. Basically she is against buying at rundown neighborhoods or bad school districts, even though those neighborhoods are at very convenient locations. She values a good school district more than anything else. The other thing is that she prefers not putting a 'For Rent' sign in front of rental properties. Her theory is that internet savy tenants are better quality tenants. Besides, too many 'For Rent' signs make a neighborhood look not very nice.

It is less than one week since we put the ad, but my friend, who bought in a bad school district, but a convenient location, told us she rent out her house even before she finished the repair with a good rental price. I was so sure about my investment strategy, which is only buying single family rental properties with positive cash flow in decent neighborhoods at good school districts. Now I am a little lost. I could buy even cheaper properties in those bad neighborhoods. It seems it is not difficult to get them rent out at all with a good price. I told my property manager my worries. She said it took time to find a good tenant and the tenants she placed before have never live less than a year in the properties, usually several years. The other thing is that I think she put the rental price ($1250) too high. But she said we could lower the price after two weeks if no one responses. I am so nervous now. Not so sure whether my friend or my property manager is right because my friend always argues many houses in good school districts are too far away from the main traffic.

[Aaron Mazzrillo]

Originally posted by Atlanta2011:

She said she will also post ad on Craiglist soon.

She shouldn't wait to post the ad. You can use Vflier.com to post to many websites all at once. Make sure you get some nice photos to upload.

Originally posted by Atlanta2011:

Basically she is against buying at rundown neighborhoods or bad school districts, even though those neighborhoods are at very convenient locations. She values a good school district more than anything else.

She sounds very smart. Think about the type of tenant your house will attract over the type of tenant a bad neighborhood will attract. Don't get me wrong, I have property in bad neighborhoods. REAL bad neighborhoods where people get shot. These types of properties that supposedly earn more cash flow also have many more problems that come with them.

Originally posted by Atlanta2011:

The other thing is that she prefers not putting a 'For Rent' sign in front of rental properties. Her theory is that internet savy tenants are better quality tenants. Besides, too many 'For Rent' signs make a neighborhood look not very nice.

Nonsense! I put a for rent sign in the front lawn, in the front window (in case the kids steal the one in the lawn or it blows over) and maybe 1 or 2 at the nearest intersection (but not busy intersections). I prefer stop sign intersections because people have to stop and have time to write down the number. I like local signs because they attract people with an attachment to that neighborhood; friends, family members, or people wanting to move to that area and cruising around looking for a rental.

Originally posted by Atlanta2011:

It is less than one week since we put the ad, but my friend, who bought in a bad school district, but a convenient location, told us she rent out her house even before she finished the repair with a good rental price.

And what type of tenant do you think will be willing to sign a lease on a property that hasn't even been finished being rehabbed? Yes, there are instances when I have leased a property to a tenant before I am finished fixing it, but these are in highly DESIRABLE neighborhoods where there are very few or no rentals available.

Originally posted by Atlanta2011:

I was so sure about my investment strategy, which is only buying single family rental properties with positive cash flow in decent neighborhoods at good school districts. Now I am a little lost.

Don't be. As a new investor, you made the best decision.

Originally posted by Atlanta2011:

I could buy even cheaper properties in those bad neighborhoods.

There is a very old and wise saying: You get what you pay for.

Originally posted by Atlanta2011:

She said it took time to find a good tenant and the tenants she placed before have never live less than a year in the properties, usually several years.

I don't believe I really make any money on my rentals until my tenants pass the 3 year mark. I budget 1 month per year for vacancy. When they have been there 3 years, I have captured that vacancy as profit now. If they leave after 2 years, it may take me 2 months to get the property cleaned, on the market and re-rented to a quality tenant.
My number one rule as a manager is: You keep the bad tenants out by not renting to them in the first place.
My number two rule is: If you can't afford to keep it vacant until you find the right tenant, you can't afford to keep it.

I wish you luck in your investing, but this business really has almost nothing to do with luck and everything to do with making smart decisions. I think you made several smart decisions. Don't second guess yourself because of what your friend did and how wonderfully you friend thinks his/her investments have been after owning them for such a short time. Give us a follow up in 1 year and let's hear how those tenants are working out!