All Forum Posts by: Jill Hutson

What sub market/town neighborhood is this in? If this is in a build to rent location it may be where builder got them rented at a very high price because are brand new but now when it comes time to fill it is very difficult to find that tenant. Won't solve your issue but looking to multifamily can help reduce your vacancy risk here in KC. You can do this through a 1031 exchange and still defer your gains. 

Jill,

I have owned 13 rentals in the kansas city metro area for years and own my own handyman company. I have some recommendations on a local PM as I know a ton of them in town. If you want to shoot me a DM I am happy to help point you in the right direction. 

Jason

If you listed in July, and got no bites last two months, it is not timing. IMO

Speaking anecdotally here; I had 2 clients this time last year rent out SFR both in Northland, both in Staley HS district. one was a tighter sq foot 3 bed 2 bath traditional split. They struggled to place a tenant @ $1900, and were hyper focused on high credit scores (>680) and income.

Another had a 3 bed 2 bath more spacious home a bit more South, but still in Staley HS area. He easily placed a tenant at $2000+/month. 

His Screening parameters were not as restrictive. do you need to adjust your screening parameters? Obviously, dont put an unqualified person in there, but with record credit card debt in America, and a worsening recession on the horizon, one can expect much worse credit scores across the board vs 5 years ago.

I have struggled to place tenants in my properties before, and have fixed the issue by adjusting my screening parameters. 

My only other advice would be mgmt companies. Not throwing shade! Im sure yours are swell. But they are generally entry level younger people at a boring job. if you havent been 'encouraging' them with daily communication, I would encourage you to do so with with your point of contact. they may not be doing the necessary follow up needed to get a tenant in the home. and you inquiring everyday will most likely encourage them to do the necessary follow up. Or do their job and come up with a new strategy to get qualified tenants in.
I know quite a few people in the property mgmt, and there are certainly some great ones, but also ALOT of lazy ones, just like in many different service industries. particularly with larger companies with lots of employees

High rent properties tend to be harder for us to rent than others because there are fewer people looking to rent in that price range than just buy. (And for us, higher rent is generally anything over $2000.) 

So it might just be that. Normally I'm not a fan of selling, but I would ask if this property cash flows. If not, it very well might be worth selling.

If you want to hold, obviously the big thing you can do is lower the price which we try to do regardless of how we feel about it on a semi-fixed schedule (we'll slow down lower prices if we're getting lots of showings for example). Not a lot you can do about location or the neighbors.

It would also be worth doing another walk through of the property. Is there something aesthetically that's turning people off? Faded paint? Dated flooring? Unfinished repairs? Overgrown lawn? In that price range, people want it to shine so that might be an issue. 

@Jill Hutson

three reasons why apartments don't rent: Condition, Price, and Marketing, and a fourth can be the leasing agent, although I would tend to lump that into marketing.

If the house is in good shape, and you're on all the platforms marketing it, then it's a function of price.

There has been an oversupply of new inventory coming on line in many markets, and that's why rents have dropped in a lot of the metros.

Unfortunately, it appears you have a pricing issue and you may have to start reducing the price, or throwing in some type of  concession

Good luck

Gino

Sometimes Local PMs are better as they are more dedicated than national ones which tend to be very busy and not focused on you 

@Jill Hutson, vacancy and turnover costs are EXPENSIVE especially if you are an out of town landlord paying an agent/PM for tenant placement.

Here are some things I think about with regard to this issue.

1. Market rent: I don't look at market rent as 1 single number that I want to meet or exceed. Quite the opposite. I think of it as a range of rental prices of comparable properties and my goal is to make a good return on the lower end of that range of values.

For example, if you identify market rent for a unit as $3,000, I might be thinking of it has $2,600-$3,400. I might want to rent my unit out for $2,650-2,700 if I can make a decent return at that. 

2. I think carefully about the value proposition I am offering a tenant. I look for opportunities to offer MORE for a tenant but I look for low hanging fruit in this regard. What is this property best suited to offer.

For example, the layout of one kitchen might lend itself to adding a dishwasher easily. Another house might be a single family home with a fenced yard and LVP flooring and be more suitable for allowing pets.

3. By offering a BETTER value proposition at a lower than average price a tenant is VERY hard pressed to have a motivation to move and to be able to find a comparable property for similar rent.

So, if I budget 5% for vacancy, I can readily beat that budgeted estimate.

4. My cash-flow is NOT affected by vacancy! That sounds crazy, I know but it depends on how you view cash-flow. I view it as the money I can pay myself. So, I don't just factor in hard expenses like mortgages, taxes, insurance, utilities. I also factor in soft budgeted expenses like cap ex, maintenance, and vacancy.

For example, if I had a $3k rental and the hard expenses were $2,200 you might view this as $800 cash-flow positive, but I am going to budget maybe 15% for those soft expenses and my cash-flow would be $350 per month. The difference is that as long as I am managing those soft expenses well my number is solid and consistent. With your estimate, you might earn $800/month for 2 years and then incur a vacancy at the same time as you need a roof replacement and for that tax year your cash-flow might be -$1,200/month.

I prefer my method because with the $800/month estimate you might buy a property believing its a great deal, BUT sell it after several years having made negative cash-flow. I view the soft expenses as things that WILL happen and so the money is accounted for when its received even though it isn't spend on a monthly basis much like how taxes and insurance are often escrowed.

5. If I was going to improve on one thing, I could certainly tighten up my turnover process and make units ready to rent again a little faster or even advertise a little ahead of when they are ready. I might be able to lessen my average turnover time from ~5 weeks to maybe ~4 weeks. I have no intention of showing properties before they are vacant at this time. So, I can't see reducing it further.

Where are you advertising? Do you have a good and dedicated PM