New Investor - Should I Hold House for 1st Solid Applicant?

Question

Hello All,

First time posting, but I've been reading/listening a lot. Thank you all for all the helpful content. My wife and I bought and fixed up our first property and it has now been listed on Zillow, Trulia, Hotpads, Realtor, and FB Marketplace for a week now. We have had lots of "inquiries" from Zillow, but none that have followed through with answering questions or truly scheduling a showing or anything like that. After 5-6 days we opened it up to allow pets, knowing that we were squeezing our tenant pull down too small and didn't get any real interest for a couple days after that. We were talking about dropping the rent from $1650 to $1600 to drive some interest knowing that we are approaching holidays and the slower winter season, but we just got our first solid applicant last night (Researched comps showed pricing should be: Zillow $1688, BP $1650, Rentometer $1600, two comps in neighborhood with 1 less bedroom are at $1600 and $1550 but they have been vacant for a while). Only down side to this tenant so far is they want to start their lease in January. I obviously don't want to let it sit vacant in December, but so far this is the only solid and responsive applicant I've had. I am meeting them tonight to show them the place and would like to have some ideas on how to approach this topic with them.
1. What strategies could I use in this scenario to encourage them to sign a lease for December?

2. If they absolutely cant start till January, would you ask them to pay for part of the month to help cover holding costs?

3. Should I just leave it up and see if we get any more interest?

4. Should we drop the price and try to drive more interest? Even though if things go through with this prospective tenant they will be paying $1650 and $20 each per month for two dogs netting $1690 (that's very attractive lol)?

Thank you all for your time and insight!

Greg Sawyer · Answer

Thank you for your reply Doug. We did end up lowering the rent to $1600 and got a little more traffic, and just now we landed a good tenant and have the deposit to hold. They have a small 8 pound dog and we are making $20 a month off it, which seems like it should work out pretty well. It is funny however, right at the end of this month starting on the 27th we started getting a flood of applicants. Seems people are pretty good procrastinators. We went ahead and did a 18 month lease to help us end the lease in a more favorable time of year and provide some stability on our first rental. On to landing the next!

Doug Garrison · Answer

I’m sure you have already made a decision but I just wanted to add my thoughts. I used to be adamant about no dogs but have completely turned around on this issue. I feel like a good solid tenant with a dog is probably more settled and more likely to stay for a very long time. Turnover is costly.
I’ve been in the Greensboro rental market for years. My wife and I bought our first rental years ago (a fourplex) and spent months renovating one of the apartments. We advertised it and for about a week or so got no response. We were so stressed out. Thoughts of “What the hell have we done!” filled all our conversations.
Personally I feel like November and December are the hardest months to find new tenants. Also, it’s really hard to know what is a solid market rent right now with the crazy pricing the last 2 years.

Julian Colvard · Answer

1. A strategy I use to entice applicants to sign a lease early is including washer, dryer, and or Internet/Security with no additional cost IF they sign the lease before a certain date. Or, I will give them half off the first month's rent or the entire first month free. Stating this is the rental ad can also bring you more applicants so you can choose the best one.

2. If you want them to sign a lease early, you can ask them if they would like to pay a fee so that the property is not available to anyone else. You also have them sign an agreement stating that this fee is nonrefundable. If you need that paperwork, let me know by sending me a connection request and messaging me your email.

3. Usually it takes around 45 days to get a property rented this time of year, so slow interest is normal. What you are experiencing is not unique. Don't panic. Always have enough money to go 2-3 months without a renter.

4. The easiest way to drive more interest for a rental property is by lowering the price. If the listed rent price is below Market rent and cheaper than everything in the area with similar property condition, same bed/bath count, similar lot size, etc, applicants will rush to see the home and or fill out a rental app. After you have multiple (good) applicants, you can reach out to all of them to let them know there are multiple people who qualify to rent your home, and whoever is willing to pay the most in rent gets the house. Just ask them what's the max amount of rent they would be willing to pay and are comfortable with.

Theresa Harris · Answer

What is your local market like right now?  Are listings staying up for a long time or are places being rented quickly? It is already Dec 1, so any tenant who can move in for Dec is going to have a story.

Rent it to them, but get them to sign the lease and give you a non-refundable deposit. That deposit turns into their security deposit once they move in, but if they don't move in, you get to keep that.

Doug Garrison · Answer

Greg,

That's great. I've noticed the same thing with procrastinators. One of my Red Flags is someone who needs to move in 2 days.

All of my leases become month to month after the first year. I've found that for the most part most of my turnover still happens in the spring and summer. However, I don't think this is the norm. I imagine most people want the predictability of renewing a lease annually so I think the 18 month lease was a good idea.

I also think that Zillow etc. makes it way too easy for renters to just click a button that says they are interested in a property. I've gotten to where I rarely respond unless they at least take the time to type a few words describing themselves.

Good luck on finding your next property. I think it's the hardest part of this business. My wife and I started almost exactly 30 years ago and have averaged one property every year and a half or so, most we've kept but we flipped about 5. Greensboro has been a good market for us. Most of our properties are small multi-family (duplexes and quads). It's hard not to get excited and go look at some of the multi family properties that just came on the market. I knew the owner and know how much work they need.

Greg Sawyer · Answer

Thank you for your post, John. I appreciate your perspective on the lead time to fill the vacancy. I know I just have the first time jitters, but we'll learn through it haha. I've read posts on here that said if you don't get much high caliber traffic within two weeks that's typically a sign that your price is too high, so that's what had me thinking that way. Obviously I'm jumping the gun at 1 week, but yay for newbies.

On the pet topic, I actually did quite a bit of research on this topic before making the call and ultimately I didn't find anyone that said, "don't ever". Most said, I didn't allow them at first but now I do, due to 1. Longer term tenant typically (harder to find pet allowing properties), 2. Larger security deposit, 3. Extra rent for the pets, and 4. It increases your tenant pool by 60-70%. I'm going to give it a shot on this one and see if I learn a lesson the hard way. I was super thankful for my past landlords that allowed pets when I was a renter so I know how it feels. Also, Dave Myer posted a helpful article on this topic showing all the data and that pretty much sealed the deal for me. Of course I cant find it now to link here. Sorry.

Thank you again for taking the time to respond!!

John Woodhouse · Answer

Great question! Heres a couple notes I would say:

1) I would anticipate waiting about 1-2 months to fill a property (depending on the market), which means you want to start marketing a property asap. I know your situation is different, but typically you'd ask a tenant a couple months before their lease is up if they want to resign. If they say no, then you'd be able to start marketing the property as available in a couple months and have plenty of time to fill it. Don't feel like a bad landlord or like you have a bad property just because you can't fill it in a week!

2) In regards to them wanting to start a month later, here is an offer that I have used with my current tenant on a property: let them know that you love their application, but that it's a bit far out for you and that another applicant might come along that will be willing to start sooner. Tell them they can lock in the property If the sign a lease that, for example, starts on Dec 7. Be sure to emphasize that they would start paying on that date and do the math as to how much they would need at that date as most people are living paycheck to paycheck so they might not have the money available. I ran into that a clarification issue with my tenant; they were confused why they were paying early.

3) It wouldn't be terrible idea to lower the rent to 1600 to increase interest but I personally wouldn't dream of allowing pets.

Hope this is helpful!

New Investor - Should I Hold House for 1st Solid Applicant?

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