All Forum Posts by: Peter Lohmann

This is not the way to frame this question. The correct way to think about this is: Why would a well-qualified applicant pay more in rent than they have to? Good tenants are like you and I; they know a good deal when they see one, and are willing to wait and shop around quite a bit. Those are the people you want living in your assets.

I don't recommend lowering the deposit below 1 month's rent under any circumstances.

There is a lot of misinformation in this thread.

You absolutely can get qualified applicants for C-class properties, yes with 3x the rent in income, yes with a large deposit. We have done it for years and years. People continue to tell me to my face it can't be done, yet we do it almost every day. 

You just have to be patient, be picky, and be willing to lower the rent. Poorly-qualified applicants are willing to pay more in rent, so it can be counter-intuitive to lower the rent when you are getting steamrolled with applicants. But that is typically what you need to do if you are not getting qualified applicants.

Don't overlook bad luck as well. Even with perfect tenant screening, you can still expect a small percentage of bad ones to slip through or "turn bad" after moving in. It's a numbers game, like poker. You can play your hand perfectly and still lose.

There is more to the story as well.

We log all applications and outcomes after tenants move; we have done regressive analysis on ended leases to find out what application factors correspond with good tenants and bad tenants. With hundreds and hundreds of move-outs to analyze, patterns start to emerge, and it's not what most people think. Every landlord and property manager I know has a different pet theory on how to screen tenants. Is it rental history? Income? Credit score? Clean car? Nobody is applying science and data to this problem from what we have seen, so we started doing it ourselves.

@Amanda Roderick I don't know anything about it, but it does sound worrisome. I'm sure our eviction attorney will fill me in soon, I'll report back.

We generally use five years. Three is too short IMO, but I guess it is what it is. If a landlord spent the time and money to file an eviction against a tenant just 4 years ago, that says a lot about the likelihood of me having to do the same sometime in the future. Not people we want living in properties we manage anyway.

HUGE change for landlords in Columbus - Franklin County just removed access to hundreds of thousands of eviction records! Anything older than 3 years will no longer be viewable online. How will this affect your tenant screening? Read the details: 

https://www.dispatch.com/news/20200114/franklin-county-set-to-shield-some-online-eviction-records

Your LLC and STR permit from the City of Columbus (it's not from Franklin County btw) have nothing to do with being licensed to operate a property management company (broker's license), which is handled by the State of Ohio. If you want to be safe, you need to be operating a licensed real estate brokerage.

@Robert Ellis Sure it was. He was asking for advice on how to convince landlords to switch their properties to STRs. I was giving him the perspective of a landlord so that he can have a good understanding of the mindset, which will enable him to better handle objections and lay out the advantages of STRs. I run 1 airbnb unit myself so don't get the wrong idea - I think they're great. But if you want to convince more landlords you gotta know what they are thinking about.

Risk is not just limited to the behavior of guests. As a property owner myself, here are some of the risks that come to mind when I think of turning one of my long term rentals into an Airbnb:

-Seasonality of income/demand throughout the year.

-Regulations (Airbnb/STR is regulated on a city-by-city basis and can change at any time).

-Increasing competition from ever-more airbnb units coming online, reducing demand for my unit and lowering rates.

-The sunk cost of furnishing the home.

-Airbnb property management companies in general are in a bit of a limbo state right now with regard to regulation by the State of Ohio Division of Real Estate. If you call and talk to them about it, you will find their opinion is that they must be licensed just like a normal property management company or real estate brokerage. Yet several airbnb management companies are operating without a license and claim they do not need one. Who knows how this will play out.

-Risk of hiring a young/new company to manage my property. How do I know they will actually provide transparent accounting and remit all funds to me that are owed. Especially if they are claiming they do not need a license and are unregulated by the state.

-The risk of a lawsuit or liability incident goes up with so many people coming through the door every month.

-Risk of my insurance company not covering a claim if they find out I'm hosting short-term rental guests OR having to pay for more expensive insurance to make sure I'm covered. Airbnb's host insurance is notoriously useless.

-My neighbors might be pissed off about me running a STR and call code enforcement or otherwise be a nuisance. Or maybe I like them and don't want to make them mad.

That's just off the top of my head. Some talking/thinking points for you to consider as your work on your marketing and business plans.

...But we're pretty dang close.

We help real estate investors unlock free time and peace of mind by correctly managing their property, transforming their investment into true passive income.

Interested?

View our plans and pricing, all with NO leasing fees: rlpmg.com/pricing. Discounts apply for 5+ units.

Real talk: contractors in Columbus in 2019 do not care about the potential for future work from some out-of-state real estate investor. They all have more work than they can handle right now and are priced accordingly.