Rental Market Knowledge equals Rental Market Success

rental marketBeing in the property management business in the present market and economic conditions is certainly a challenge. Each area of the nation and each community has a different environment economically speaking. The numbers of renters appears to be increasing according to statistics, but landlords/owners in some areas are finding their properties are competing for those tenants in a larger inventory of vacancies. The “days on market” can vary greatly city to city and even from neighborhood to neighborhood. Some tenant/applicants are finding their applications are being rejected because they have just experienced a foreclosure and it has tainted their credit record. Others are faced with evictions because they may have lost their job due to the economy or layoffs.
How do we as property managers and landlords/owners deal with the situation at hand?

Rents are dropping in many areas because of increased inventories, but mortgage payments, taxes and insurance may have increased. Other areas that have seen the rental inventories depleted can be assured of rental increases.

For rental home shoppers the availability of rental properties varies greatly. For any given property, a landlord may have to decide how much additional cash they need to service the debt or how much cash will they need to upgrade to compete for the best tenants. At the same time, a market with a depleted inventory doesn’t mean rental home shoppers will accept a property that isn’t in good condition.

The primary concern for the rental property owner is to ensure the property is a top competitor in the market where they’ve invested. The way to do this is to be aware of two major considerations:

  1. Condition – Is your property in the best condition it can be in? In many markets rental home shoppers have many choices and condition is certainly a major consideration. If a property is pristine “move-in” condition and the tenant can actually take possession without putting forth any effort to clean it up, then that property moves to the top of the “shopper’s list”. If a property is in less than desirable condition it will be placed low on the shopping list or be eliminated altogether. Some rental shoppers are spending less time looking at properties that are not in better-than-average condition. One look and they eliminate it from their shopping list. The “curb appeal” may draw the shopper in, but if the interior fails to live up to the first impression you’ll be hearing doors slamming as they leave to rush off to the next prospect on their list of eight to ten properties.
  2. Price – How do rental shoppers select a group of prospective properties? The answer is price. Location and bedrooms are important considerations, but the main driver behind choice is price. When a rental shopper looks at results from internet searches price is the playing field leveler. They know what they can and will pay and they know the competing properties.  If you have a property for rent it needs to be competitively priced to draw attention. Without competitive pricing the property will continue to sit empty. That means no income. The longer a property sits empty the more the owner looses. The longer it sits on the market with a non-competitive price the more qualified tenants keep right on passing it up. Price a property correctly right up front and get it rented quickly. Don’t try to “fish” for that one tenant who will pay more. That’s not working in this market. Know the market conditions where your property is located. Know what tenants are shopping for and study the market from that perspective. A professional property manager can advise owners as to particular markets.

Some owners may develop a false sense of security about their property. They fail to look at the property as a business. It’s difficult to turn loose with your heart and think with your head when you may have lived in a home for many years and now are faced with the need to find a tenant until the market is right for selling. But as an owner you have to be objective and not sentimental during this time. Occasionally I have to tell an owner that there is no way I can help them if they are not willing to cooperate with the market. It’s not that I’m making unreasonable requests. I’m just doing my best to help the owner by placing their property in a competitive position among so many other properties on the market. It’s not my job to hide the truth, it’s my job to reveal it.

If you are thinking about renting your property try these suggestions:

  • Interview several property managers.
  • Ask about their company and their experience.
  • Learn the market or hire a professional who knows it.
  • Take time to put the property in better-than-average condition.
  • Price the property competitively.
  • Shift from “heart thinking” to “head thinking”.
  • Market the property where rental shoppers are looking.

If you can adhere to some straight-forward principles you can weather this market and your property can produce a good stream of income.

Guest Post by Jack McSwain, PRM, Realtor®
Managing Broker for Walter Williams Property Management, Inc.