Should I invite them to lease or should I hold out?

Question

Hey,

Hey, I've got a listing here in a B neighborhood in C city in the Bay Area (Hayward, CA), that I'm trying to house hack with me living in the ADU out back. The property is top tier in terms of renovation and views, but lacking in terms of AC, room size, bad schools, and of course sharing parking and amenities with the landlord.

The place has got 4 bedrooms, which makes it somewhat of a rare find in the area. I typically manage to do about 5-10 showings a week, with maybe 2-3 highly qualified groups (e.g. Friendly, High income, good credit, one family, etc) per weekend. However I've never been able to land any of these tenants, but have gotten a fair bit of interest from less than ideal tenants (e.g. unusual living situations, people running a boarding house, middling credit, etc).

Some of these tenants are quite friendly and seem responsible, but either have cosigners, non-ideal credit (high 600s), not-ideal income (e.g. 200k+, or self employed) , etc. Other viewers have had complaints about the sharing situation, lack of AC, small rooms, or otherwise. I'm currently 16 days on market.

Should I hold out for an top-tier tenant or is that a fools errand? For those of you in the area, how many days does it typically take you to rent out a unit?

Listing below

https://www.zillow.com/homedetails/3245-Kelly-St-Hayward-CA-94541/24967324_zpid/?view=public

Dan H. · Answer

I think the property looks good. Your pictures look real good and your rent seems to be market.

My units are in San Diego. We do not do individual showings. We hold an open house that everyone who is interested in the unit can see the unit. It creates a frenzy. we typically have 6 to 10 prospective tenants show for the open house (about 25% of those that had expressed interest). We typically end up with 1 to 4 applications. i would estimate we have ~40% turned in application rate. If they do not fill out the application on the spot, regardless of how much they state they live the unit, we have a fairly low application rate.

During covid restrictions we had 4 units to fill.  Wenscheduled individual showings.  Our application rate was dismal, I suspect worse than 10%.  I attribute the reduced application rate to the lack of frenzy.

Try the following: stop individual showings, advertise an open house for at least 4 days from now, respond to all inquiries answering any questions and stating the time of the open house (hopefully you have at least 25 inquiries), a couple/few hours before the open house provide a reminder of the open house via what ever medium they used for the initial contact, create a sign in sheet (can help create the frenzy), hold the open house. Hopefully ~25% of those who expressed interest show up fot the open house and you get some applicants.

Good luck

Matt K. · Answer

You should probably revaluate your tenant criteria. 200k+ and perfect credit, they're either buying or renting something nicer.

3500 mo, that's generically speaking 125-150k yr to qualify for rental based off income. They would have a hard time buying something with what prices are now.

I would also strongly understand what's causing lower credit scores too. Medial Bills, Student Loans can tank a score, but could mean they care more about housing then those things...

But where you're likely at would be by the room, get people in there at 1k mo utilities included. That's probably a competitive price these days more so with the quality of your unit...and those renters aren't going to care about you being onsite since they're already used to sharing space since they rent roomm.

Dong Shi · Answer

Interesting! I didn't know AC was such a big deal. I didn't really want throw money at the issue, and it's quite common in the bay area to have no AC on a property AFAIK, but I do remember also searching for AC when I was renting as well (even though we rarely use it). I think cash for the AC install isn't an issue, but it is a large chunk of cash to throw at the problem....

Matthew Paul · Answer

@Dong Shi   The schools are not good . Any family with children will pass you by . Its cheaper to rent a more expensive place in a good school district than to rent a less expensive place and pay for private school

Dong Shi · Answer

Yea, the place does have ceiling fans, though in the bedroom sounds a bit scary. I feel like nothing beats AC hahah, and I"m concerned about mold issues from having an evaporative cooler.How do you feel about sacrificing on price? I feel that the place is currently priced at market-value, and some property managers I've spoken to agree with this evaluation. I'm not sure if further price reduction is going to lead to a better tenant...

Kelsey Bailey · Answer

Instead of going out of pocket for central AC installation you could look at more cost effective alternatives like ceiling fans in the bedrooms, portable evaporative coolers, etc. I would also typically recommend to our clients that we sacrifice on our price point before sacrificing on quality of tenants. You can consider move in specials as well, such as a certain dollar amount off the first months rent if they move in by a certain date. Those are a few ideas, feel free to reach out if you'd like to brainstorm further!

Dong Shi · Answer

That would work if it was a hands-off rental property, but this would certainly piss-off my neighbors (all white collar, executives, or successful blue collar) as well as expose me to a fair amount of risk (in case something slips through my screening process) given that I will be living on the property as well.

Brian Garlington · Answer

Rent out the main house to properly screened Section 8 or Abode tenants that you screen yourself.

No smoking of any kind

They pay for a $50.00 background check

No pets unless it is a service animal. If it is then it can’t be more than 35 Lbs fully grown and no dangerous breed animal even if it is a service animal (my insurance won’t allow dangerous breed animals).

No evictions , ever.

No felonies, ever.

I have had outstanding results with this method here in the East Bay and in Cleveland with this method and I still have more candidates than I know what to do with, even with that criteria.

Do what I do and set the criteria as above

Matt K. · Answer

None of that tells you anything about the people in those homes or vehicles. It's easy to get a car loan, you wouldn't know if they have a 20% apr loan or paid it all cash. You'd also never know if they're a 600 credit score or an 800.

But generally speaking, a family is going to want that many rooms...and a family will likely value schools more so then a nice property.

Family with no kids, unlikely to "value" the high bedroom count...and would likely want less rooms that are bigger.

Your property is nice, but look at it from a renters perspective. What makes it more valuable or desirable then your competition.

With people returning to work and school, you could probably do well renting out the rooms... Look at how much rooms are going for, they're way up in the East Bay toward Walnut Creek. 1k room is affordable compared to 12-1500+ for a 1bd room plus your property probably nicer.

or since it's furnished, throw it up on furnished finder or do short term rental (but make sure you account for proper insurance).

You could also likely rewrite the ad, sell it that ad would turn me and most people I know away because it's too formal and not welcoming/selling me the dream lol

Dong Shi · Answer

Yeaaa. So this is what I'm having trouble with. I know the city in general has a poorer, more troubled demographic, so the general renter population will be worse. However, it's the property is in the Hayward Highlands, so the neighbors in the immediate vicinity are pretty well-off (You see porsches and teslas driving down the road in the neighborhood pretty often, and lots of the neighbors were successful managers, executives, successful contractors etc in their careers). It's also a much safer neighborhood than down in the flatlands. So I'm a bit at a cross-roads in terms of what to do, to wait for a high-quality tenant or to work with what I've got.

Should I invite them to lease or should I hold out?

Most Popular Reply