Tenants found finally - some learning

Seems like I haven’t learnt my lesson on quickly reducing rent and so extended vacancy happened again. Albeit for 6 weeks instead of 3 months (previous case on another property Rutherford IP has not been rented from xmas)

This property was listed at $450 mid-December. Finally found a tenant after reduction to $400 it is rented this week.

It took a lot longer due to a combination of things

· Timing - December is slower than other months while January is flooded with new listing, to make it worse

· Pricing were not sharp enough, and I wasn't quick enough to drop the price. This is combined with a handover to new personnel (previous personnel has poor communications and stop working at the agency). The current PM wasn't familiar with the area and I can only see what's happening on the market online.

· Inspections - Weekdays open inspections were done during inconvenience time for workers. I don't think the agency did a private inspection either until I requested 2 weeks ago.

· Feedback from visitors - this is a smaller 4 bedroom home (was 3 bed with garage converted to ensuite). Many people coming through was looking for a bigger living room. The great professional photos that shows a spacious living room became a downfall as people get disappointed when they arrived.

Lesson learned and I’m thinking of the following for improvement:

· Floorplan with measurements – to help potential tenant visualise the size of the house along with the living room. Hopefully will help getting the right visitors through in the first place.

· Description on the kind of tenant that might find the place suitable (e.g. starter family, couples with pets, etc).

· Reduce rent in a faster much significant rate. A direct reduction from $450 to $400 might have been the best way to go about it as it will bring searches from different price bracket (it was gradual reduction to $430, then 1 week rent free, then $400).

· Inspection timing is important and it's best for the agency to also accommodate for private appointment

If this happen again, I will go back to this post and smack myself.

 

@wylie agree.
In my case the bedrooms are good size and the house do have 2 full bathrooms (ensuite shower + toilet, separate toilet, and shower + bathtub), however living space and kitchen is of the size of a smaller 3 bed house and it turns big families away. There's no open door to the back patio either. The only way to make is bigger is to bump the house out.

The listing itself has good portrayal of the bedrooms, but the living room look bigger than it is. There were no mention of smaller size (which I think should be done next - presenting the Property fairly is better)

 

Rather than focus on the smaller living room, would you do better to market as 3 bedrooms plus study? Particularly if you believe the property would not suit a larger family who need all 4 bedrooms?
Marg

 

Thought about it too @Marg4000, never tried but I reckon worth considering

 

I would say the two biggest issues are pricing and inspections. Your agent should be offering private inspections at times of the day that suit tenants, not themselves and be providing more price guidance.

The time of year is a factor, but there is a price point for everyone and clearly $450 was over shooting the mark. Your agent should be able to judge pretty quickly by enquiry levels and/or number of people showing up to inspections whether the price is right. As an investor, I then direct a $5 price drop every 3 days until enquiry stabilizes, then they hold inspections (private and turn them into opens if necessary) and if no applications on the follow up, drop it again and repeat. Nothing kills cash flow faster than vacancy and I've actually written articles (see our website) on this exact topic that you've been through.

If agents aren't doing private inspections then find one who will. Open homes are a lazy way of leasing and are a B grade way of attracting tenants. In today's world, everyone has different hours, flexibility and schedules and the old days of holding an open on a Saturday as the primary letting method are long gone for those who take advantage of technology and keep up with the times. We will turn private inspections into open homes as necessary but tenants registering for private inspections is RT primary method. This allows us to track and communicate with them and gives much greater transparency as to the letting situation.

It's a shame as it sounds like your PM has cost you a lot of money but it's also good that you've recognized them for next time.

All the best with the new tenants!

 

Interesting. Do you find it more effective to do price review every couple of days? The enquiry level wasn't bad, and we did had a couple potential applications however they decided on another property, this puts me into confusion as I'm not sure when to reduce the price further. On the agency part, the PM wasn't familiar with the area at all and wasn't adding anything apart from what I already know.

I do think inspections should have been done privately most of the time as weekend open house is delaying the price review process. They were also not available during the Xmas period.

I did told them that if don't find anyone by end of this week I'm moving it over to another agency. I will do another review in a couple months (sent them a long feedback). I hope the tenants are ok!!

 

Well done! I am in the same position at the moment where one of my rental is taking abit of time to rent out at the moment. Almost the same reasons as yours and have dropped the rent amount by $30 to get someone in quick and also told off my leasing agent as she has not been proactive enough for my liking and is really bad in comparison my normal leasing agent who is away on mat leave atm.

 

I price reduce every three days by $5 on enquiry levels, not inspection levels. The PM will provide that guidance and may not make the same suggestions - that is purely my philosophy as an investor i.e. if zero enquiry, the price needs to come down. Once people start enquiring based on the advertising, they at least believe the specs are worth the price. If no one is turning up to inspections and/or applying then it needs to be tweaked. I am proactive from day one with consideration to vacancy rates in the area also. There is no point in waiting two weeks at zero enquiry to make a price adjustment - all it will do is create further vacancy.

 

Great post and I think timing is pretty important which is why I try to have my leases finish in early-mid January. I'll offer someone a 13 month lease to end in January rather than 12 month lease which ends in December.

Where did you find someone to do the floorplans with measurements?

 

There are plenty of the professional photography company that offer floorplan options.

 

My IP finally rented out! Been on the market for 30 days and to be fair it was pretty bad timing for it to be on the market. I guess I agree with all the recommendations above, but prob the only other thing I would do differently is have the property manager more accountable and take instant actions instead of "let's wait and see" approach. I did have to escalate my concerns and issues to the manager, which resulted in instant changes but if I was onto it early on, maybe the IP could have been rented out alot sooner.

At the end of the day, it's your money at stake and losing money sucks.

 

The trouble with $5 rent reductions is that often you are just following the market down. We always found that if a property took longer than we wanted to rent a $20 rent reduction usually got a quick result.
Marg

 

I took that approach @Marg4000 and actually instructed the manager that I wanted to take that approach than wasting another week just for the sake for $20.

 

Newbie question if you don't mind, what do you mean by "enquiry level"? Is it the same as the number of applications put in, or the number of people asking questions?

If Dec/Jan isn't ideal, when do you reckon is the best timing? Is it depending on the property location?

 

Sure! Enquiry level is the number of people contacting your PM to enquire about the property i.e. ask questions and/or book or register for an inspection. This is pre-inspection and is basically a function of price assuming everything else is being done properly with respect to marketing. As a general rule of thumb, if your property is being marketed correctly but not getting enquiry, it's a pricing problem. If your enquiry levels are good and people are showing up to inspections but not applying, it's a property problem. You can solve the former quite easily (which ebbs and flows with market supply and demand) and the latter could be anything from putting in an air conditioner to mowing the lawns to getting it cleaned to a full renovation! This should be discussed with your PM based on feedback from the inspections.

Hope that helps

 

I think it really depends on the location and local market. E.g. January is generally a good time buto everyone think the same think and flood the market, renter has more choices, vacancies increased if property not priced properly. December = people on holiday + offices close so you can't do background check then

 

I have to agree with EN710 everyone has flooded the beginning of Jan. I did notice that early January was slower than normal but February has been great time for houses to be let.

 

Our Townhouse had two applications this week after it being vacant a long time. We have previously followed PC advice having the old lease expire mid January, but there were no enquiries in December and early January. About the only time the counter on the Net changed was when I checked the ad myself! We hardly had any inspections until the very end of January.

Another problem was pricing - RP Data suggested a price much higher than we finally received. We could have saved several weeks vacancy by keeping the old tenant at his lower rent carried over from previous years. When RP Data suggests $360-$380, take your PM's advice and go straight to $350.

 

Hope you have a tenant now @Angel
I think sometime moving right to the next bracket below is better, so $450 bracket directly to $400 etc etc