Quote from @Kevin Sobilo:
@Yoana Yordanova, a few thoughts:
1. Rentals are about function more than form. So, your competition aren't just nice new townhomes but any 2 bedroom rentals in nice condition with similar amenities. When I search zillow I see 2 bedroom rentals in Acworth from $1300-2000. Kennesaw looks a little higher so, you may be more in the middle of the range there.
2. Your PM's process to find tenants may be geared toward time efficiency for them. Their questionnaire to pre-screen potential applicants meant to save them from wasting time showing the property to unqualified people. So, the number of inquiries will be understandably lower with that approach and intentionally so.
When managing my own properties, I take the OPPOSITE approach to save time. I schedule 2 open houses per week and ANYONE can come. No pre-screening. My time is rarely wasted since there is almost always at least 1 qualified person showing up.
Different approaches, but both should work just fine.
3. Why did you decide not to sell your townhouse when you moved?
If you lived there 2 of the previous 5 years any profits from a sale would be exempt from taxes up to $250k for a single person and $500k married filing jointly. So, it could be an opportunity to pocket TAX FREE profit.
4. Do you plan to buy more rentals? I always suggest people own at least a few rentals. When you only own 1 or 2 you never become proficient with handling them and because you only have a small number there are more ups and DOWNS!
You will barely notice when things are going well for several months, but when things then go poorly you will be able to think about nothing else! When you have several rentals the other performing rentals cover everything and you don't feel the stress from the one nonperforming rental. That allows you to stay stress free and better able to cope with that situation.
5. Have you examined your "value-proposition" for a tenant? Do you offer what they want/need? Do you allow pets? Do you include a washer/dryer (which many rentals don't)?
6. Your current asking price for rent is equal to your mortgage. So, you will be losing money. You still have to pay the PM. You may directly pay some municipal utilities as in most places those become liens if unpaid. In addition you need to budget for maintenance/repair, capital expenses, and also to cover the vacancy/turnover the next time a tenant leaves you.
So, you may want to look at what that will add up to as you make decisions because covering the mortgage is very different than "breaking even".
Kevin, thank you for sharing your thoughts! It is absolutely appreciated :)
I would like to hear more, as we are trying to come up with a new strategy and decisions. (Hence why I am posting here, and all the feedback is appreciated :) ) I will be updating the original post, as some of you came up with really good questions. Below are some structured notes to your reply:
1. We (me and my fiancé) absolutely agree with you on that, and when we did our due diligence to set expectations for the rent, we were comparing our property to exactly what you said. We lived in the same 3 mile radius for 7 years. As you will see the address of the property in the update above, the address is right on the border of Kennesaw and Acworth, and I would say it feels more in Kennesaw, than in Acworth. We even pay tax to the city of Kennesaw for this same property, even though the address is in Acworth.
2. We absolutely respect this if it was for efficiency. And originally this is what we though the process was ( as you say). But here is what they did in reality: They will get a call/request to view the property, and schedule a viewing. After the walk-through, they will see if the tenant has interest in renting, and if yes, they would sent them the questionnaire so they, and I quote, "save the tenant the $60 for application fee", in which within the questions it would be things such as, if they have pets, yearly income, cosigners, if credit score is above a certain number, etc. Their logic is, that they want to see if the tenant qualifies before they ask them to fill in the application. In my humble opinion this should be done, as you say, before the walk-through, or at the time of it. They have not yet held an open house event.
3. We lived in the house for 2 years, and as part of our long term strategy, we wanted to keep the house, rent it out (essentially have someone else pay it off for us), and keep it as an asset. The strategy was not to get rich from it, or make a business out of it. We own a different business. This seemed better option, since we were not in a rush to pull cash, and we did not have a large equity on the house either. We simply wanted to keep it and turn in into asset (long term). Perhaps for real estate pro`s this might not make sense, but to us it did, since it is not our main business.
4. Yes, eventually we want to buy more rentals (not back to back, but within the next 5-10yrs). This is also part of our long term strategy. However, we need to figure out the first one first.
5. Yes, we did a few examinations, and frankly, this is what we are trying to do again. Since, this whole thing does not make any sense so far. So we are open to suggestions and corrections, on price, and what else could be added, etc. We allow cats, and we also allow small dog breeds. We are open to considering medium and large dog breeds. The townhouse has a bathroom in each of the bedrooms, so this aspect is nice as it provides a bit more privacy. We include washer/dryer.
6. We absolutely hear you on this. Believe me when I say, renting it for exactly the mortgage was not our intend. Originally, we wanted to rent it out for $2,100, which seemed plausible (perhaps on the high end, however I could find a few comps at this price range), but this price point was including everything you listed + $100 for "if this breaks". Utilities would`ve been on tenants name, and they need to show proof of it (show us that they signed them over). The HOA and taxes was planned for in the monthly rent. When we began talking with the PM, they came back and told us that such property should be listed for $1,600/mo. Which, to us, for the area, this sounded crazy. (for example, before me moved in the house in 2021, we were renting an outdated 2bd apartment across the street for 4 yrs, apartment complex amenities were in a very bad shape (unusable), and we were paying about $1,600/mo and they were about to increase it to $1,850/$1,900. And this is right about when the "COVID" craze began to happen in Atlanta (people from other states moving in in GA and buying properties, bidding wars, etc). I am not a professional, however, to me it seems crazy to suggest to list our townhome for $1,600, after the huge inflation in the market that had happened in the last 3 years.
Additionally, and I believe this is part of our mistake, is that this PM is owned by the family of a friend of mine (at the time I though it was a great idea, since I know them and trust them). They specialize in the market in Canton, GA, which is about 30-45mins north from the townhouse. In which area, this is what you would expect to rent for ($1,600). So when we heard their suggestion, we explained that this does not make any sense to us. They agreed and listed it for what we asked (actually a bit above). To which we didn`t see any activity for a couple of weeks. Then the PM came back and told us that we should lower the price. We got the same result. And this happened a few more times, until we reached $1,895.
At that price, we had the 2 out of the 3 potential renters view the property, but both came back asking for $1,700/$1,750 rent. Which I don`t really blame, since if you look at our zillow history, the property has been on the market for so long, and the price has been lowered a few times. In their minds, they probably think there is something wrong with it, and gives them confidence to negotiate a lower price.
The PM has not given us any support on this, instead has been pushing us to agree to the $1,700.
This is where we are at right now, and thus why we decided to seek advice and suggestions from other real estate professionals. We are not confident in the PM anymore, that it is seeking middle ground for tenants and us, nor that is trying to serve in our best interest. (Especially based on a few comments from them).
I am personally trying to evaluate if I am being so incompetent on the RE market, and if truly our "value-proposition" is bad, or if the PM needs to be changed asap. If we are to change it, we want to avoid the same mistakes.
Thank you for taking the time to read through all this.
