Welcome to the first part of a three part series where we will be covering the fundamentals of how to properly prepare or, as we say, provision your investment for the future. In this first part we will be covering some tips and topics to think about before and during the listing process of your property. If you like what you read here go give our Facebook page a like so you can stay informed about the release of all of our tips and helpful articles. Now let’s get to it.
Before your investment property can make any returns or generate cash flow you need to move in a tenant. And before you can move in a tenant you need to market your property, otherwise known as creating a listing. We get a lot of questions regarding this stage of the rental process, so we are here today to give you our best tips and tricks so you can be confident you are listing your property in an efficient and effective manner. First a disclaimer, by this point we are assuming you have done all the hard labor of getting your property rent ready. Meaning you have rehabbed the inside, acquired all relevant rental licenses and lead certificates, and if you want to accept housing vouchers you have passed all the necessary inspections.
Alright, so now you have your property rent ready, but you aren’t confident that you know how to list your property so as to maximize its potential returns. Well here at Provision we have simplified our process down into five steps or “tools”; How, What, Why, When, and Who. With these tools in hand you should feel confident that you know how to successfully list you property to get the most rent and the best renters. So let’s jump in!
The first thing you need to decide on is HOW much are you going to charge in rent. Quick disclaimer, this section is the most comprehensive in this article because this is the question we get asked the most. Now down to brass tacks.
There are two possible unintended outcomes when deciding how much to ask in rent. You can either ask below market value and you get swamped with inquiries and you feel you are missing out on cash. Or you ask too much above market and your property could potentially sit for a long time leaving you, or the owner, to cover the cost of the mortgage. Neither of these outcomes are ideal, so how do you make sure you are asking the right amount in rent. Well the first thing you need to do is go onto any of the major listing websites, like Zillow or Hotpads. Go onto Zillow and type in the address for your property. Depending on when your property was last updated with the MLS, Zillow might have a Rent Zestimate that you can use. Write this down, but don’t get caught on that number we have found we can usually get a more accurate number by doing a little work ourselves. Start to look around your address to see what other landlords in the area are asking for.
Things to keep in mind when looking at these comparables, or “comps” as we call them, are how many bedrooms do they have compared to yours, is your square footage similar, does your property or community offers amenities the others don’t, and how does the interior and exteriors of these comps compare to yours. Obviously the property with newer appliances and fresh carpet can demand more in rent than they otherwise could. If after evaluating these comps you don’t think you can fetch the rent you wanted this would be a good time to stop and ask yourself if maybe you should go back and renovate a few more aspects of your property, so as to increase rent.
But that is a more advanced question and one where a property management company like ourselves becomes valuable. We have connections with other landlords and property management companies in the area, giving us inside knowledge on the relative prices of individual markets. We have the knowledge to be able to say how much more in rent is that extra half bath really worth, or how much more you could earn if you turned that office into another bedroom.
However, say you are confident in the relative shape or your property and you have found good comps in a close vicinity. You look at what they are asking for and how long have they been on the market for. In our area, any rentals that are on the market for over 30-45 days are considered overvalued. That timeframe definitely has room to adjust depending on time of year and location, but for us the vast majority of homes we list are filled with a renter within 30 days. So you know to not list your home at or above the price of those comps that have been on the market for that long. Also if you are really lucky you might see a comp posted one day and taken offline within the week. That is usually a sign that the landlord or property manager was swamped by inquires so they had to de list the unit. Take this as a sign that their asking price was below market.
Once you have established a good range we have two suggestions for you, aim high and market whole. By this we mean you should list at the high side of your range and you should ask for your rent in nice round numbers. It’s always easier to lower the price of your rent than it is to raise it, and it’s industry standard to ask for rent in intervals of $50-$100 dollars.
Now onto the what.
The “What” we are concerned about here is WHAT platforms should you be posting your listing to. This is easy. It’s 2019, nobody looks at their local paper anymore for apartments to rent. If you want to ensure you are being efficient with your posting you need to go digital. Posting on a digital platform is great for many reasons such as having the ability to show photos of the property, streamlined communications, and being able to edit the description.
But all of the features that online platforms give you would be for nothing if you don’t leverage them achieve one of your main goals, efficiency. Online platforms make finding tenants much more efficient if used properly, and to do that you need to focus on answering peoples questions before they are asked. Some of the main questions we get asked are “What’s your policy on pets”, “Do you accept vouchers”, and “Can I see more photos of the property?” So make sure that in your description you answer these questions and that you are uploading quality photos. If you find that prospective tenants are still asking you these questions you should go back into your listing and edit the description to be more clear. That is just one of the many reasons why you should ditch hard copy listings and move onto digital platforms. Some of the main ones we use are Zillow, Trulia, HotPads, and Aprtments.com.
When refers to both WHEN is the property available to rent and WHEN should you made the posting live. You need to be clear about when you want people to move in, so setting a firm date is always a good idea. For example adding “Available to move in June 1st” to your description will save you a sizable amount of time. This is because you don’t have to deal with people asking you when the property is available to rent and you make it clear you don’t want to deal with people who aren’t ready to move on your timeline.
Now, when it comes to deciding when you should make your listing live it is essential to make sure your have both completed the steps on deciding how much to ask for and you are ready to devote roughly 6-8 hours a week solely on your rental property. This time estimate is composed of meeting people at the property for tours, reviewing applications, running credit and background checks, and answering phone calls and emails from prospective tenants asking you questions. So make sure you have the right amount of time budgeted for this process. The last thing you want to do is put yourself in a situation where you feel like you don’t have enough time to make a well informed decision. This may lead to you jumping the gun and placing a tenant who you otherwise wouldn’t have, but you did because you felt you didn’t have the time to put any more thought into the applicant.
Of course at the end of the day speed is important because every day the property is vacant is another day that the owner has to come out of pocket to pay the mortgage. So like all challenging tasks you need to walk a fine line between thoughtfulness and speed.
Now let’s cover the real “sales” aspect here. WHY should someone choose your rental to call home. Here is where you have to talk up your property to the max. Whatever features your property may offer should be in every description that people see. And I’m not just talking about mentioning the community pool or the school district. I’m talking about reserved parking or garage, laundry appliances, gas vs. electric, forced air or radiator heating, whether you are proud to allow pets or not, literally the longer the list you can make the better.
In our experience the longer the list we can make the more interested people are. I have a feeling it is because people correlate amount of features to less problems with the properties. Like in someone’s mind they go “Oh jeez all of these features sound great, and with the sheer amount of features how can there be anything wrong.” So people become more reasonable about the price you are asking and they become more confident that your property is the one they want to live in. And trust me, the higher quality you make your listing the higher the quality of tenants you will find.
The who is question here refers to “WHO should I choose.” In the follow up article to this we will be talking about how to effectively and efficiently screen tenants to find the ones of higher quality. But when it comes to listing your property I offer this advice. It’s better to cast a bigger net than a smaller one. Obviously we would only like to have to deal with 5 potential tenants to find that great tenant, but that’s a dream not likely to come true. Most likely you will have somewhere around 20 people inquiring about your property. That becomes a lot of calls and emails to respond very fast, but that’s why we will be reviewing how to efficiently and effectively screen tenants next week.
And of course, if you think we missed something or want us to dive into one of these topics in more depth, please reach out to us on Facebook! Best of luck to you and your investments. Until next week you go getters!