A Tough Economy & the “Hard-To-Rent” Property

You would have to be a hermit holed up in the back-of-beyond not to have been impacted by the challenging national economy this past year.  Many areas have seen mammoth numbers of foreclosures.  My area (Denver, Colorado) has been one of the cities that has fared the best.  Still we have felt changes in the rental market.

Creativity is a key word for me in looking at how to rent during tough times, but also, being creative in renting hard-to-rent properties.  I own two buildings that have basement apartments… one of them is actually a raised ranch, so the lower units qualify as “garden level” apartments.  They are nice spacious apartments, well maintained, washer/dryer and dishwasher included and heat paid, so lots of good things going for them.  Still they are never the first choice for prospective tenants.

Frequently, I run a “Move-In Special” for these units… “First Month’s Rent FREE with Paid Deposit and Signed One Year Lease*” (*approved credit).  The same flier, of course, mentions all of the amenities I listed above and highlights the Paid Heat.  It usually gets a qualified tenant within days.  Don’t let them talk you into a six month lease instead of a year… you don’t come out ahead.

For more than one unit that you need to rent right away, I would spring for a big banner… “FREE RENT*”… or “Heat Paid… remodeled apartments.”  My friend, Robert and Julie at J & R Graphics do a great job for a reasonable price and ship everywhere. 

So… how to market properties in less than desirable neighborhoods… be careful that you don’t lie about the area or make it better than what it really is.  When questions come up about crime rates, I refer prospective tenants to:

• the neighborhood association

• Neighborhood Watch

• the city website for crime statistics

I assure prospective tenants that I do criminal background checks on my tenants, but also explain that everyone has their own comfort level.  You don’t want to talk someone into living somewhere that they will be afraid and move out in a month.

With properties in less than desirable areas, you will find that door-to-door fliers in the immediate area will bring calls.  If prospective tenants already live there, they are likely to be OK with the area.  may church youth groups and school groups will distribute fliers for you as a fund raiser.

If there is a lot of graffiti in the area, I commonly hire a laborer 0r talk my husband into painting over the graffiti just to clean up the area where we are trying to rent.  In the west part of Denver we have a community center that does it for us if we provide the paint.  Denver, also, has a department that you can call to clean up graffiti in alleys and on public property.  Sometimes, prospective tenants just need to see that someone is trying to improve things. 

The 800 pound gorilla in the corner is “Do I reduce the rent?“  If you can’t carry the mortgage without the property rented then you need to look at what you bare bones basic expenses are and get the rent to that level until things improve.  No cash flow or low cash flow is better than losing the property.  Plan ahead!

You may, also, need to change to a six month lease or month-to-month lease, but don’t do the free rent move-in offer and shorten the lease time unless you are really in a bind.  Look at all your options first.

Small improvements in hard-to-rent properties, like my basement apartments, can be enough to bring in a good tenant:

• street appeal may need trim paint, yard cleaned up, new porch light or door

• interior paint is always a big draw

• real good clean up after each move-out so that the unit stays very clean

• wash the windows and put blinds on, at least, the bedroom and bathroom windows

When faux painting was the rage several years ago, I faux painted a wall in the living room of each basement apartment.  The For Rent photos that went on craigslist.org featured the faux painted wall.  I learned to faux paint from a $5.99 video from Home Depot.  Material are cheap.

A couple of other techniques that might help rent single family homes are Lease Option and First Right of Refusal.  Basically, with a Lease Option you are giving the tenant the opportunity to purchase the property with a small down payment (a lot of folks do $2,000) and a little extra on the rent each month that is applied to their down payment when the Lease Option is exercised… one or two years.  In Colorado, those funds would need to be held in an escrow account.  Always check your local statutes.

A First Right of Refusal usually does not involve money… and it can be more applealing, because it gives the tenant the first right to purchase the property if you put it up for sale.  So it is less binding for both parties.  As always, check with a real estate attorney for specifics in you state and municipality.

A lot of room for thought in this topice, and hopefully, I’ve provided som suggestions that will be helpful and timely.  Please let us know if you have other questions or specific areas where we can be helpful.

Thanks!

B

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Art of Being a Landlord by admin