All Forum Posts by: Jesse Aiken

I agree, and it's hard to find balance between running a business (for profit) and helping people when all people seem to want to do is kick you in the teeth. It's a broken system and I commend you for your fortitude. The challenges we have with affordable housing in Erie have led me to exploring mobile home parks. I think this is the best answer for our area and seems to me to be the best solution available for the affordable housing crisis in general. There are many challenges in this niche, mainly lack of government support, both locally and federally. If section 8 and government loan programs would provide support to help people become homeowners at a low income level, it would be a game changer for everyone. Section 8 payments toward mobile home equity to help buyers become homeowners would allow people to have pride of ownership even with low income, and would greatly reduce the tax burden and the never ending (overburdened) expense of subsidized housing under the current system. On the investor side, what could be better than leasing the land and utilities and building safe communities without being responsible for the structures and their maintenance? It is the perfect scenario that I plan to pursue.  

@Dennis M.

Another thought: It seems that in our market, success depends on quality -or- quantity, not both, and it seems that the masters of the rental market at the extremes are the most successful. Often times transitioning directly from one to the other..from quantity exchanging for quality, often over generations, these companies are the most successful. It's the middle that is missing, which is where I stand, for better or worse; which is unfortunate for me, our community, and our country as a whole. The middle class is missing. Maybe this is the true root of my frustration. Hopefully that is changing as our market changes from a manufacturing powerhouse to service and technology. Although our views and strategies may differ, I admire you and your success.

I have enjoyed our discussion!

@Dennis M.

Understandable, and I agree that in general, a lower price point is the norm in the rental business (especially in Erie) and with the renter demographic in general; excluding luxury and short-term renters. However, I disagree with the statement that a 2 year lease is a mistake. I think it depends on your customer base and it is a great strategy used by many investors/landlords to reduce turnover costs.

The 2 year lease encourages resident's to stay longer and reduce turnover, which is one of the biggest killers of profit in the rental business. I think it depends on your clientele. If I have a tenant who is questionable, then of course I would not want anything more than a one year lease. In fact, I have tenants (inherited) on month to month leases for just that reason. On the other hand, exemplary tenants are preferable to have on longer term leases to encourage retention.

I also disagree that the lease favors the tenant. That depends the laws and your lease. I use the plain language lease provided as a member of the NWPA apartment association. Using this lease, as a landlord, I can end any lease with 30 days notice without reason. As a tenant, there is a lease break fee equal to 2x the monthly rent if it is ended before the lease term. I find this to actually favor the landlord.

In my experience, high quality tenants on longer term leases pay early and cause zero issues. Some of that is undoubtedly due to luck, but in my opinion, the majority is more likely due to stringent screening and providing a good product/service.

@Dennis M.

You may be right and my standards might be a little higher than some. Even so, I'm OK with it and don't think I'm unreasonable. I think it's all relative to what you are offering and what you're willing to put up with. As I'm sure you know, it would be hard to compare apples to apples with units in this market and someone with lower standards and/or section 8 is definitely going to have an easier time finding tenants. Not that there is anything wrong with that per se (everyone needs a place to live), it's just a different strategy and isn't for me. My last turnover was also at zero vacancy loss and an increase with the new tenant on a 2 year lease. Sometimes it's luck of the draw. Erie is a widely varied market; from 12-1400 for a nice place in Millcreek to 350 for a dump on the lower east side. It just so happens that the majority of renters in Erie city seem to be on the lower end of both quality and price. I think I'm somewhere just above the middle and there are plenty of qualified renters at that level, even if they are a little harder to find, and I'm willing to do a little more work to find the right tenant. For me, losing a month rent if necessary (usually only takes an extra week or 2) to avoid an eviction, a bad tenant, or a short residency/quick turnover is well worth the extra effort; even if it is frustrating at times. I provide nice units and won't place someone who I think may cause problems.

@Marcus Auerbach- The problem isn't that people aren't interested in looking at the unit, it's the opposite in that I am not interested in showing it to most of them. After looking at facebook and county court dockets, I don't even call 4 out of 5. Probably 2 out of three people I call don't answer or respond to a message (I call same day or within 24 hours), and 2 out of 3 I talk to are disqualified during a simple, standard, quick 10 question phone interview. My criteria are not unreasonable and I will bend on certain things depending on the individual. 600+ credit (may bend depending on report), no evictions, gross combined income 3x monthly rent (verifiable), good landlord/employer reference (if possible), and general good character. Most contacts don't come close to meeting basic criteria and although it may work in some markets, scheduling open house showings with everyone would be a bad idea in my market. My ad is thorough but it seems that most people don't even read it (or care) based on what people tell me over the phone. 

The property is in solid C+/B- area with a park across the street in a market where pretty much everything in the city of Erie is C or D. It's a large unit that is higher quality than anything comparable that I have seen, listed slightly under market with the goal of filling quickly and encouraging longer tenancy/lower turnover. @Michael Ablan- I use the same strategy as you by offering a nice product in a good area for a good price.
   

The issue is with the tenant pool. I find that typically, immediately after a unit is listed, I get bombarded with unqualified contacts who may have been unsuccessfully looking for a place for some time and have been passed over by everyone else. They are looking for a landlord who doesn't screen very well and as soon as they find out that someone is actually going to ask them some questions and look into things, they move to the next new listing and keep clicking away until they find something.

Erie is a very unique market and difficult to explain to those who are not familiar. 
I realize that most people in this business have the same issues, but it seems that this market in particular is more difficult than most. Some investors basically just become slumlords so they can better absorb the expenses that come with common issues in this market. I think that is a big part of the problem. It has set somewhat of a standard and become status quo. It seems that things are starting to look up and will improve in the future. It can be frustrating to spend a large amount of time, effort, and money to provide a nice home and then have to sift through a mess of contacts in order to find a handful of potentials. Regardless, I would rather uphold my standards even if it takes a little more time and effort.

There is still a lot of opportunity in this market and things are happening to indicate a strengthening economy (finally). There are many very successful investors in Erie and still opportunity to make money and create wealth, but it's tricky. It's like other Erie investors said in previous comments referencing the Erie market in particular:

@Dennis M.-Learn to Make money in the mess

@Karl B.-point is... landlording in Erie is like playing a video game on the hard level - if you can do it you can landlord just about anywhere

I was just frustrated and needed to vent. Thank you for your comments and for trying to help. On the upside, I had a showing with a seemingly well-qualified prospect this morning. She loved the unit, was excited, and is applying. Fingers crossed!

@Jill F.

I generally look for 600+ but can bend on that. I look at the report, not just the score. My criteria are reasonable. The tenant base here is just not very good in general. This market is unique and hard to explain to those who haven't experienced it first hand.

Like @Karl B. said: landlording in Erie is like playing a video game on the hard level



 

@Joe Splitrock @Patrick M.

I just put a for rent sign in the yard that says "on zillow." I hadn't thought to do that instead of a phone number. Very simple and I should have thought of it. Thanks for the tip! I don't like getting cold calls from people who I can't pre-screen.

The unit is in a nice area across the street from a park that gets a lot of foot traffic. My listing is up on 5 different sites, but I'm hoping that the sign produces some better prospects.   

@Karl B. 

I agree that Millcreek is a more sought-after area. Maybe partially due to safety concerns, but I think the main reason is because of the better school district and because it's generally a nicer area. Cash flow tends to be less though since properties sell for higher prices.

The first thing I do to screen tenants is look them up on facebook and do a court docket name search. Probably only one in five make it past that for a phone call, one in five make it past the phone interview (if they even answer the phone or call back), and half of those that schedule a viewing don't even show up. It's depressing lol.

I'm just frustrated and needed to vent. I know I will be successful if I keep plugging away and be patient.

Sorry to hear about your eviction. I hope everything goes smooth and you aren't left with any major issues after they leave. I like your analogy comparing landlording in Erie to playing a video game on hard...so true. It's a tough market that requires thick skin, but there's plenty of money to be made.

So, I have a big beautiful newly renovated flat in a good location that I listed a little over a week ago. I have good pictures, a nice video (uncommon for my area), am priced below the competition, and have my listing on 5 different sites. I don't even bother with a sign in the yard because the calls that come from that are even worse. I have gotten over 80 contacts that have resulted in one showing scheduled (yes ONE) with the only prospect out of 80 that I think may be a good tenant (and she is from out of town) and remains to be seen whether or not she will even show up (in my experience 1 out of 2 don't show). I invest in Erie PA and this is why I have stopped my original plan of expanding in this area...the tenant base SUCKS if you want to have good properties and good tenants while getting a good return on investment. It seems that the most success in my area  is among investors in D-class neighborhoods with D-class properties that they buy for next to nothing and their tenant base is, you guessed it...D and F-class tenants. Makes things easier when you take the first warm body that doesn't have a recent felony and government assistance to pay low rents. Maybe I just don't want it enough, but I don't think that's it; I think it's a moral issue and I just don't feel good about it. A select few are having success with A-class and student housing (with risky high-end rents that may not be sustainable in this market), but it isn't common and it's a small market and shrinking. I'm still doing well with my investments, but its a struggle. Is the middle class disappearing, or exiting the rental market? IDC how much of a discount (unless they are going to give it to me) or how high the return is, it's just not worth it to me to be a junk dealer and I would rather invest in another area/niche or make money through business and invest more passively with a slightly lower return. Earlier today I saw a post in a local REI group offering a duplex for 15k...and I don't want it. If it was a good deal, they wouldn't be offering to others; It's junk with nothing but problems and headaches. I don't see how it can work if only 1 in 100 renters are good tenants with reasonable standards. Maybe its just my market, but I'm curious if anyone else is having the same problem? 

@ Frank Rolfe Thank you for taking the time to reply. I believe that the MHU boot camp and materials are definitely worth the cost. If I decide to make the leap, I will definitely take advantage.