Rental Property Advice Sought

[paramount]

I have a house in Temecula that I have been trying to rent for the last month. The house has had a lot of traffic, but no interest beyond the showing.

For some reason I thought the rental market was strong in Temecula, but what I am finding is that rents for SFH’s going lower than apartment rentals.

There may be a lot of potential tenants, but there are also a lot of rental houses on the market.

I hired a property management company, they provided me a rental analysis so I set the rent based on their data.

The house is in very good condition, so I don’t think that is the issue. I set the rent at a level that I thought would get the house rented quickly.

They are also listing houses for rent in the same community for significantly less than what my house is currently listed at, so feel like they are undercutting me.

Some other observations:

1. I believe the so called investors/sharks are asking rents far below market value. Again, in many cases less than apartments. This might also force more short sales.

2. There is a lot of competition on the market – tenants are firmly in control because of this.

I’m considering my options, which may be:

1. Short sale the house – why take a loss every month?

2. Fire the property management company?

I’m very frustrated, and I’m loosing a lot of money.

3.

[Hobie]

School just started so families would already have rented. And a month with lots of traffic seems positive, so far.

What does Prop Management say? Maybe they are using yours to tip prospects into cheaper homes. Are you getting applications, credit checks? I dunno, just tend to be suspect of prop management types. 😉

[paramount]

The house was available prior to school starting. One of the things we noticed is that people move in and out of houses all year long. Summer may be a peak season, but we see U-Haul trucks in our hood almost weekly year round.

Property Management is telling me to hold off. I have ZERO applications after probably 30+ shows. Yes, the house is small (approx. 1500 sq ft) by California fantasy land standards.

[NotCranky]

As a rental it sounds like you need to lower the rent. It is what it is. I doubt the other house is trying to undercut you, rather they are also not landing a fish even at a lower price.

I am having a harder time renting my extra house than usual this time. Lots of traffic but only tenants I would screen out want it(I am pretty strict). So, I am thinking about dropping the rent to entice quality renters and asking for first last and deposit as a sort of litmus test for that. In the long run it might work out better.

As to short selling, that is a different issue. It’s up to you if you have had enough of your alligator.

[bearishgurl]

Due to the sheer amount of people that have lost their homes to foreclosure, deed-in-lieu and short sale in recent months/years (and may have been “camping” at relatives’ houses at their last stop), I would surmise that the current “family” rental market is full of applicants with bad credit.

[paramount]

On a few occasions I’ve had the opportunity to talk with prospective tenants and in each case they were in foreclosure.

One of the issues I’ve been facing (I suspect) is that many of these people are probably coming from a house they couldn’t afford and is likely larger than the house I’m renting.

A form of austerity I guess – and they ain’t happy about it.

[CA renter]

Paramount,

What if you were to eliminate the property manager and try to get a tenant who is willing to take care of the maintenance for slightly reduced rent?

Of course, you would want good references and a high credit score, but these renters are out there.

Not sure if you’re paying for a gardener, etc., but it might help if the tenant took care of the yard and maintenance for a ~$200/month reduction in rent. There would have to be a cap on the maintenance they’re responsible for, but it might help.

If that won’t work, and if you are losing money every month, I think it would be a pretty good idea to talk to your lender about doing a short sale.

Good luck.

[UCGal]

[quote=paramount]

The house is in very good condition, so I don’t think that is the issue. [b] I set the rent at a level that I thought would get the house rented quickly.

They are also listing houses for rent in the same community for significantly less than what my house is currently listed at[/b], so feel like they are undercutting me.
[/quote]
I think the bolded part shows your issue in the current market. People can get a similar product for less, so why would they rent from you.

I honestly don’t have good answers for you. We kept my husbands pre-marriage house as a rental property, first self managed, then with a property manager when we moved to San Diego. (House was in Philly). Our experience was that we had more qualified tenants to choose from if we started at a lower rent than the “going rate”. When we first priced it *at* the market rate the applicants were all somewhat sketchy… dropping the rent brought in more credit worthy, reliable tenants. When we get back into the landlord business we’re going to apply this lesson learned.

[(former)FormerSanDiegan]

Drop your rent by $50.

That may not seem like a lot to you, but tenants make decisions based on that (or smaller) amounts.

If it doesn’t lease out in a week or 10 days, drop it another $50.

Repeat until you get a tenant.

Don;t tell you mgmt company your strategy (otherwise they will tip off the tenant that the price will drop next week), just give them the order to drop the price when you want.

[svelte]

[quote=paramount]On a few occasions I’ve had the opportunity to talk with prospective tenants and in each case they were in foreclosure.

One of the issues I’ve been facing (I suspect) is that many of these people are probably coming from a house they couldn’t afford and is likely larger than the house I’m renting.
[/quote]

I’m wondering if many of them are riding the free rent wave and won’t actually rent until they are sitting on the curb with their stuff. Maybe they are just looking at your house now to see what they will eventually be paying in rent…

[Ren]

[quote=paramount]I set the rent at a level that I thought would get the house rented quickly.[/quote]

[quote]They are also listing houses for rent in the same community for significantly less than what my house is currently listed at, so feel like they are undercutting me.[/quote]

These statements are contradictory. Every successful landlord I know rents below market, and every unhappy landlord I know rents above market. The former gets the better qualified tenants who have their pick of properties, the latter gets the tenants with questionable qualifications, because those are the only ones who will accept the higher rent. The higher priced places are also the ones that end up with more evictions and damage, and more vacancies means less of that higher rent anyway. Ask yourself if you would rather get 10 months/year at $1,450 from someone with a 500 fico, or 11 months/year at $1,350 from someone with a 680 fico.

As I recall, you’ve got a little over 20 years to go on the loan. If you can charge below market and come close to breaking even now, remember that the rent will only go up while your payment stays the same. I’d love to have an ATM like that in 20 years, right about retirement time.

Don’t accept what your property manager tells you the rent should be – do the research and decide for yourself. I wouldn’t even use a manager without significant positive cash flow, and I definitely wouldn’t use that particular one if they don’t know the basics.

[paramount]

Ren: Those statements are contradictory, but I should mention I would consider the low rent houses outliers.

And I’m not even sure of their condition.

[ctr70]

Great post from Ren!

What are you asking for rent? Did you try posting it on Cragislist yourself and speaking to the tenants yourself? I do think time of the year matters a lot, early summer is the best time to rent to families. I have had property for rent in Jan and Feb and literally got ZERO calls…and then spring rolled around the calls poured in.

I think borrowers with recent prior short sales or foreclosures are great tenants. They may have a 580 credit score, but if the ONLY mark on their credit is a foreclosure from a underwater property they walked from, I think they are a great risk. I rented a house of mine to a couple that were coming off a BK and moving out of a house that foreclosed and they have been awesome tenants. Other landlords overlooked them b/c of their credit score and didn’t read between the lines that it was an isolated event. I also like former HOMEOWNERS b/c they are more used to fixing small things themselves and keeping up the lawn since they have OWNED A SFR BEFORE. And…they are usually used to making a much higher PITI payment then your rent (even though they may have been on the free rent gravy train for 2-3 years prior to getting booted from their house).

This is a great example how rental property investors have to be really careful researching rents, neighborhoods, demand before buying. You never truly know what it’s going to be like to rent it until YOU HAVE TO TRY YOURSELF.

[paramount]

The rent is $1595.

I was told $1650 was the upper limit.

[EconProf]

30 showings and not one application? The market is telling you something here.
If you had lowered the rent after 10 showings, maybe one of the next 20 lookers would have applied.

[Author]

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