Why can't I find tenants?

Question

Hello All,

So my wife and I have owned a duplex on the NE side of Grand Rapids for the last 7 years and have never had a problem finding tenants. We are situated right between downtown and Knapp Corner with easy access to the expressway.  Both units are updated and in great condition.

Recently we bought an identical duplex right next door.  The plan is to move from our current duplex into the new one so that we can update that one as well.

So in my current duplex I listed the 2 bedroom apartment for $1200 and had multiple qualified applicants within a couple days. In the new, un-updated, duplex I listed the same apartment for $1100 and again had multiple qualified applicants within 48 hours.

However, I've had my 3 bedroom, 2.5 bathroom, 2200 sq/ft, apartment listed for almost a month with almost no interest at all. The apartment has an attached garage, large fenced in backyard, and private laundry.  I'm asking $1350 which is only $150 more than the 2 bedroom.

What is going on?  Is it the wrong time of year?  Is the rent to high?

Any help would be much appreciated.

Tim VandenToorn · Answer

@Jonathan Boyd  As a property manager overseeing approximately 600 units here in Grand Rapids, you are not alone.  We have been seeing this since early Oct.  Some of this is seasonal, however we suspect the new developments are having an impact.  We have had to get creative with leasing our properties.  If you would like to discuss this more please reach out to me privately.  We are anxiously waiting to see how this plays out next summer, but I think it's safe to say, rent prices are going to stabilize if not drop slightly here in Grand Rapids.  I also recently sent an owners update to all our owners, after surveying 5 other large management companies.  They all reported a slow leasing season and dropping prices.  FYI.

Sam Shueh · Answer

I recently sold a home in 1 weekend with multiple offers. To lease that nice home at market price will take me 2 months to rent out. Furthermore, I have 3 rental listings from 1+ to 3 months near high tech center(Ntfx,Googl, Aapl, Tsla etc). Two are still on the market with no interest in spite of price reductions. After years of job expansion there are more people leaving few want to come from outside for job due to high housing cost.

You need to see who is moving into your town wanting to rent before Thanksgiving and year end. In our area it is likely to be someone got evicted.

Account Closed · Answer

Many owners are reporting the same thing.  The market is changing due to many factors, not least of which is all the new and upcoming rental units coming onto the market.  These changes will influence where people choose to live and the rent they are willing to pay.  Most of the units becoming available are in the $1,200-1,400 per month range.   As the new units become available (and there are a lot more yet to come onto the market), tenants are likely to shift around, i.e. some will move into the newer units, opening up other units, etc.  In other words, it is likely that the vacancy rate is going to increase as leases expire.  Since vacancy rates were so tight over the past several years and rents increased so much, some renters chose to live in units that they wouldn't ordinarily choose to live in.  This will also drive a shift in the market as competition heats up for the newer units.

Also, according to economist in the area, we are heading into a recession in 2018 and that will likely have an impact too.

Bottom line, most investors believe we have hit the top of the curve in the area.  This doesn't make GR a bad place to invest--it just changes our numbers.  Be a smart investor!

Account Closed · Answer

You may very well have a seasonal issue.

Though you may also have a market issue. Maybe the higher rent is just too much for people interested in that area. Appraisal theory cites a dynamic called super adequacy or over-improvement. Its when your improvement or land is superior in features as compared to the typical expectations of a particular market. The easy example would be a mansion in a neighborhood of much lessor homes. Another example might be the super expensive cabinets that only the person who purchased them would notice or care about, or a 6 car garage or 7 bedrooms or 20 acres of land. People only need so much utility and the rest is gravy. The value dynamic that occurs is called diminishing returns, where the first unit of feature is worth one amount and subsequent units of the same feature are worth less. Land value is probably the most dramatic example of this. Maybe that 3rd bedroom just isn't as desirable where your unit is. Maybe 1350 is just too much in any event.

Of course if you have numerous new developments in the area that will hurt too, as the supply has increased and brand new units are always more attractive than used.

Unless you have zero renters in the area, you will get a bite once the price comes down. Until then and if you want to stick to your guns on price, extra marketing is what you need.

You could try a lower rent on a month to month and raise the rent later.

Jenifer Kynor · Answer

Jonathan,

The best thing you can do is use a rental estimate report to see what others in your area are pricing their 3 bedroom/2.5 bathroom units. Do this before you lower the rent anymore. It could potentially be a seasonality issue. Many renters want to move well before the holidays or after they are over. This next month and a half is a difficult time for landlords.

Another concern I have is, how are you marketing your property?  The best thing you can do is post your property to every major listing site. The more sites your property is on, the better! Finally, if the property is listed at the right price, you are marketing it like crazy and you still have no luck, maybe rethink your listing page. Do you think better pictures would help? How about a more detailed description? Try redoing your listing page and see if that helps at all.

If you have any questions, please reach out!

Good luck!

Rob Beardsley · Answer

@Jonathan Boyd To see if your rent is too high, try lowering the price $50 to $100 and see if you get a bump in interest. If not, then it is probably a seasonal issue.

Jake Thomas · Answer

@Jonathan Boyd I agree with everyone else, the time of year is terrible. The same goes for people buying houses. Nobody wants to move right before or during the holidays. I don't think its a price issue it's a current lack of demand. I have been trying to get all my leases to start or end before the end of summer so I do not run into this issue but it can't always be perfect.

Jonathan Boyd · Answer

Thanks everyone for the feedback.  @Tim Vandentorn I also agree there are so many new developments in the area I was wondering if it would push prices down. @Paul Leason I also use rentlinx to get my listings on many sites and I do already have an ad on Facebook.

So what now? After a month do I lower the rent, edit the listing, or be patient?  I'm not moving out of the apartment until mid-December, but it would be nice to have a lease in place by then.

Thanks again.

Tim VandenToorn · Answer

Paul, keep me posted on your Facebook experience.  We also post there on occasion but mostly when looking for a low income tenants.  The quality I have found has been lacking, but perhaps posting on the Marketplace is a good option.

Why can't I find tenants?

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