hassle finding solid tenants

[Austin Berlick]

Hi everyone -

I own a 5 bed 4 bath home here in North Austin, TX that I currently house hack. I've been doing 3-6 "trial leases" for new tenants and they can extend after; however, I have a W2 sales job that takes a lot of my time. Finding tenants via facebook, craigslist, word of mouth, etc.. doing a phone screen, running background checks, etc.. takes A LOT of my time. I'm starting to wonder better ways to outsource this work and find solid tenants who will stay for the long haul.

Unfortunately, I don't have tons of margin to work with. When I move out in Sept, get married, and fill my current room, I'll basically be breaking even after expenses and maintenance.

Any vets in here that have solid advice on how I can outsource finding awesome tenants who sign longer leases and all the work that goes into that?

[Sarita Scherpereel]

Are you renting by the room on rotating leases? Meaning not all leases start and end at the same time?

[Austin Berlick]

Renting by the room and rotating leases - yes!

[Alecia Loveless]

@Austin Berlick I’m not sure how you would outsource the leasing aspect of any property without incurring a leasing fee of 8-15% depending on market. Or at least first month’s rent.

I do agree that leasing is the single most time consuming thing about my rental portfolio.

I’m not sure if there’s anything you can do to maximize your leases and get the existing tenants to stay more than 1 year thereby reducing your efforts.

If it’s that much of a problem maybe offer some benefit to extend the lease past one year. (5% off/month) or some benefit that allows you to save time but is more cost effective than hiring a leasing agent.

[Sarita Scherpereel]

Quote from @Austin Berlick:

Renting by the room and rotating leases - yes!

I just wrote about this on another thread.

Whenever I see properties that are being sold by an owner who did SROs(renting by the room) they are usually in rough shape. The better ones seem to have a dorm room structure of cleaning and caring for the units with chore assignments. It does seem like the owner is less of a landlord and more of a glorified RA.

If you can find the right tenants and live there as long as possible to make sure care is given to the space, I believe that will go along way. But this is really up to you doing the work. Realtors don't typically like to do rentals under the $2k price point due to how little money they will actually make on the sale. At least that me....In Chicago. 

This structure seems to work best for house hackers looking for roommates in their friend group to help cover the mortgage. We see this a lot in the collegiate markets of Chicago. There are specific facebook groups for these types of housing. I'm sure Austin would have something like that. There's even a group here for people wanting to rent from smaller landlords...verse lux buildings.  

Just be careful about the lease structure when you get ready to sell. Having leaving leases line up so that any future owner can easily move in or even get financing is ideal. It will help with your exit strategy...down the road. Definitely ask your realtor in your market about that. Please give advise on here based mostly on the thing they see in their market and experience.

I hope this helps. Best of luck! 

[Anthony Swain]

Hey @Austin Berlick from Austin haha

Renting by the room is definitely more task heavy than other forms of renting. What about good Standard Operating Procedures (SOPs) to make it easily repeatable? Then, possibly you can outsource some responsibilities to a lead tenant in exchange for discounted rent? I'm just brainstorming here...

If you don't have a lot of margin to work with a 5 bedroom rental by the room, then is it really a worthwhile investment? I think it would be important to look at your ROI after your move out and if its worthwhile to hold or potentially sell to roll capital into another more lucrative investment.

Good luck with future tenants & the property!

[Lindsay Davis]

@Austin Berlick,

There are essentially two ways to outsource the grunt work of “landlording”—unfortunately, both will eat into your margins.

The first is to hire a professional property management company—this will cost you between 5% and 15% of rents, plus surcharges for out-of-scope services. They’ll handle the entire leasing process (i.e. property marketing, tenant screening, placement, lease execution and renewal, turnover etc.) for you, plus everything else. This means maintenance, evictions, repairs, and so on are all taken care of.

The other option is to hire a leasing agent—this will cost between 50% and 100% of a month’s rent. Your leasing agent will take care of everything you’re doing now. After the tenant moves into your home, things become your responsibility.

As a more immediate remedy, try to do away with those trial leases. See if you can screen tenants more comprehensively and then offer them a long-term lease right off the bat.

P.S. Some property management companies offer a 0% property management fee in the first year as a way to attract clients. You could potentially sign up for a free trial and re-evaluate at the end of the year to see if it’s something you’re still into.

[Rick Albert]

I've done open houses for my rentals. You send them your criteria ahead of time and tell them the window that you will be showing the unit. Because you will be there anyways, it doesn't really matter to vet them. Plus you want as many people through as possible. Even if they aren't qualified, it gives the impression you have a desirable place and those that are qualified will see it and hopefully jump on it.

[Zara Massoud]

Quote from @Sarita Scherpereel:

Quote from @Austin Berlick:

Renting by the room and rotating leases - yes!

I just wrote about this on another thread.

Whenever I see properties that are being sold by an owner who did SROs(renting by the room) they are usually in rough shape. The better ones seem to have a dorm room structure of cleaning and caring for the units with chore assignments. It does seem like the owner is less of a landlord and more of a glorified RA.

If you can find the right tenants and live there as long as possible to make sure care is given to the space, I believe that will go along way. But this is really up to you doing the work. Realtors don't typically like to do rentals under the $2k price point due to how little money they will actually make on the sale. At least that me....In Chicago. 

This structure seems to work best for house hackers looking for roommates in their friend group to help cover the mortgage. We see this a lot in the collegiate markets of Chicago. There are specific facebook groups for these types of housing. I'm sure Austin would have something like that. There's even a group here for people wanting to rent from smaller landlords...verse lux buildings.  

Just be careful about the lease structure when you get ready to sell. Having leaving leases line up so that any future owner can easily move in or even get financing is ideal. It will help with your exit strategy...down the road. Definitely ask your realtor in your market about that. Please give advise on here based mostly on the thing they see in their market and experience.

I hope this helps. Best of luck! 

This!
Theres no shortcut for this that I’ve heard of. 

[Laura Shinkle]

So we're coming up on the fundamentals of real estate. To get more cash flow, it's more work. For something that is truly passive, the cash flow is less. That's just the way real estate works. 

Second, no one will do work for free. You're frustrated by the amount of time it's taking from you. Well, the work itself doesn't get easier or less time consuming if someone else is doing it. If you don't want to hire a PM to do this work for you, then you could try a couple different things when you move out: 

1. Change strategies and turn it into a LTR. The LTR will be the easy button (compared to other strategies in real estate) but will be less cash flow. Perhaps it's worth it for the increased appreciation you anticipate. If you sell after a couple years, you've gained appreciation and still get to keep the profits tax free if you've lived there 2 out of the last 5 years. 

2. Change strategies and turn it into a MTR/STR. This should, ideally, get more cash flow, and allow you to hire a PM without breaking the bank. That takes the every day burden off you, and gets you cash flow. Make sure that's allowable with the governing agencies/laws.

3. If none of the above work, would it be so bad to sell the house? Take the appreciation and turn that into another property that is better for one of the above strategies, allowing you more of a passive income than you have now. It has served you well, taught you a lot, and now maybe it's time for you to turn that into a better investment for where you are in your life.