The LPA would like to thank Jane Hodges, The Wall Street Journal / Real Estate Journal and LPA member Jeff Jones for the following article:
A Landlord Struggles
To Find Qualified Renters
By Jane Hodges
Jeff Jones spent his first two months as an
investment-property owner making $7,000 worth of improvements to the $275,000
house he bought in April 2004 in South Seattle's Lakeridge neighborhood. He's
done renovation and cosmetic work upfront because he believes the improvements
will help him attract high-quality renters -- people with good credit able to pay
$1,365 a month.
With these people in mind, he's spent his
weekends pulling custom paneling decorated with animal and hunting images from a
hallway and removing excessive towel racks from the main bathroom. He's learned
the hard way how to prime and paint over grooved wood paneling in the living
room -- a task he might not repeat because of the difficulty of priming the
crevices between the panels -- and hired contractors to handle specialized jobs,
like exterior painting. He painted the dark brown living-room paneling a warm
beige color called "maize" and coated the dark living-room ceiling in a shade
of white to lighten up the room. He's also begun planning a major landscaping
project for the yard, kickstarted when he paid a tree service to remove a
30-foot tree blocking the lake view.
"I thought I'd spend a great deal of time just working on making
things presentable," says Mr. Jones. "I think it looks 100% better."
But two months and thousands of dollars later,
Mr. Jones hasn't found a great renter. In a way, it doesn't matter -- yet. He's
set aside a four-month financial cushion to cover his mortgage and doesn't need
a renter until Sept. 1. Even after he finds a tenant, the rent won't completely
cover the $1,850 mortgage. With tax deductions, Mr. Jones won't lose much money
and could break even, but he won't consider the property an "income" property
for several years, when he can fetch a rent that surpasses his mortgage payment.
He knows that won't happen for awhile.
For now, his task is just to find qualified
renters -- and sell them on an under-the-radar neighborhood in a city where the
rental market is soft and home sales are hot and a state where the unemployment
rate is higher than average.
Knowing he faces some obstacles, Mr. Jones
decided early on to work with some established resources. He signed up with a
national organization called The Landlord Protection Agency (www.thelpa.com)
so he could download official rental-application forms, participate in online
landlord forums and save $10 on the sign-up fee for the LPA-affiliated AMSties
Credit Reporting Bureau, which can run credit checks on his prospective renters.
If he ends up with bad tenants, LPA will help him report rent delinquencies to
credit bureaus. The site also has a "deadbeat" database to help landlords with
the screening process.
As Mr. Jones worked on improving the house, he
also began formulating a marketing strategy for it. He took a grassroots
approach: To find renters, he tried to think like one. When considering where to
advertise his house, he first went to the Web search engine Google, where he ran
a search on "house and rent and Seattle" -- the terms he assumed a prospective
renter would use. The search turned up several Web sites where he decided to
advertise his property, including:
Mr. Jones says the sites vary in terms of monthly
charges and feedback capabilities. Craig's List, for instance, was frustrating
because rental listings are organized by the date they're posted rather than by
other criteria such as price, neighborhood, or lease start date. However,
listings there are free and his ad has produced leads. Other sites, such as
Yahoo! Classifieds, give him tools to see how many people are viewing and acting
on his ad, a valuable service should he decide to tweak its language, change
photos or adjust the rental price. Generally, he's paying for the most deluxe
listings possible on some of the Web sites.
For now, Mr. Jones says he's avoiding posting
"For Rent" signs around the neighborhood and in area retail stores, though he
may resort to this later. Instead, during the first month and a half, he's run
listings for his house that included an e-mail address and several photos with
the hope that he could avoid a lot of phone calls. That approach brought him
only one or two e-mails a day -- not enough -- so he added his phone number to the
ads. That led to four or five calls a day, but some callers never followed up to
make a visit. Others made appointments to tour the house but never showed up.
It's a 12-mile drive that can take up to 30 minutes in heavy traffic for Mr.
Jones from his home to the rental property.
In the process, though, Mr. Jones says he's learning a lot about
which aspects of his house need more work and what sort of renters he can
realistically expect in the neighborhood. Some Section 8 renters -- people who
hold vouchers from the U.S. Department of Housing and Urban Development to help
pay their rent -- have approached him, and he's learned that if he leased his
property to them he'd need to collect part of the rent from a government agency.
He would also have to set a rent within certain levels so that his property
would be considered affordable for low-income renters, a strategy he'll pass on
for now.
He's also learning from visitors' gut responses. In June, for
instance, a woman came by with a friend to check out the house.
"They were honest: They said it's nice, it looks great, but 'the
tile sucks and the light fixtures have to go,' " he says.
Another woman brought her boyfriend to see the house. They turned it
down because of the boyfriend's reservations.
"His answer was 'We just don't know enough about the neighborhood.'
He also said, though, 'People seem to be taking care of their houses here'," Mr.
Jones says.
So Mr. Jones decided to find out more about the neighborhood. Given
that Lakeridge is an area still finding its identity and that there's lots of
competition throughout Seattle to attract renters, he wanted to highlight
something special about the neighborhood. What he came up with was some history:
The area was once a logging camp, and many of the properties were cabins built
around 1910 from locally cut wood. It wasn't much, but it was an interesting
story he could tell renters.
"It's a stretch, right?" Mr. Jones admits, noting he's drawn in a
few renters with his story.
Four renters have reached the application stage, and Mr. Jones has
doggedly followed up. He's approved renters with good credit -- such as a flight
attendant who liked the combination of water views and airport proximity -- only
to see them choose someone else's property. He's called references and sent even
the most unsuitable of prospective renters polite rejection letters if they made
it to the application stage.
One pair of 23-year-olds approached him about the
house and filled out an application. Despite their dismal credit, which he
checked through the AMSties database, they had positive landlord references. Too
positive: Mr. Jones ran an online reverse phone look-up of one of their
"landlord" references only to learn he'd just talked to the applicant's brother.
"I just let it go," Mr. Jones says, chalking it
up to experience.
Another prospect, a couple, ages 29 and 30, liked
the house's large open basement -- a space big enough for their mammoth
television set and recreation equipment. The renters even came with good credit,
geographically convenient jobs in South Seattle and lots of cash. Mr. Jones
learned, though, that their landlord had paid them to move out early. Their
landlord, also an investor, had gotten an offer for his house that he couldn't
refuse and broken the lease. Though the landlord and couple's parting was
amicable, the abrupt move was an inconvenience the couple didn't want to relive.
Despite Mr. Jones's assurances that he wouldn't flip the house out from under
them, they decided to move elsewhere.
So it goes in Landlord-land.
While there have been complications, Mr. Jones
says he's learning, and he's glad, as an owner, he's learning now how to
position his property.
"It's been a great experience learning about the market," Mr. Jones
says.
He's discovered, for instance, that many of his renters have dogs,
so he's tweaked his classifieds to say "Pets Negotiable" -- with an extra $300
security deposit. Many Seattle apartment buildings don't allow dogs, or place
weight restrictions on pets that permit only cats, so Mr. Jones is discovering
pet owners are a niche he can target.
He's also considering employing a few new
marketing tactics -- perhaps offering a free month's rent to entice someone to
his home, which rents for a little more than the $1,000 a month most two-bedroom
houses fetch in the area. (Mr. Jones knows -- he's posed as a renter and made
phone calls.)
"I'm just looking for a renter who will pay on time and preserve the place," he
says. "This is the hardest part, getting your first renters in."
-- Ms. Hodges is a free-lance writer in Seattle and writes the Investor Profile and Landlord Chronicles columns for RealEstateJournal.com.
Printer
Friendly Version of this Article
|
