The rental market is changing

 

I’ve written to you recently about how the resale market is changing, but after doing some research this week, the rental market is changing, too. Let me tell you about it.

This all started when I was talking to my friend and mentor, Bill Cook. He was up in Bartow County from his home in Florida because he had at least three rental properties that needed to be filled. Bill was calling me because things were not going as usual for him.

 

On the call, he told me that normally he can put some ads on rental sites, post on Facebook and then put up a ton of hand-painted red signs with directionals around the rental to advertise that the home is for rent. He usually does a couple of open houses, and through those efforts, he has a number of great applicants in a few short days.

 

His method is so streamlined that he doesn’t even rent a room or drive his camper up here to do it. He just camps out in the vacant house until he gets it filled.

 

This time, however, it has taken weeks for him to find decent candidates, and he told me they had to do price drops across the board to get them. On the call he was asking me what I was seeing.

 

At the time of the call, we had only one house on market for rent, and it has been sitting for a while. Our procedure is quite different from Bill’s. We use a service called rently.com to advertise our rentals. We post an ad with them, and they syndicate that ad to all the major rental sites like Zillow, Trulia, Rent.com, etc. Prospective tenants use the Rently app to get verified and securely self-tour the home using Rently’s lockbox system. Once that is done, the applicant gets a link to our web-based application, and we start that process.

We have chosen this method because it’s very streamlined. Potential tenants get information about the house online and get to safely and securely see the house in person and on their own schedule without having to coordinate with our office. This makes the viewing process efficient for them and for us.

 

I told Bill that our rental had been sitting for over a month with very few showings. We had even dropped the price, and it still wasn’t getting a lot of traction. We both agreed that something was odd about this market.

 

Now, winter is a tough time to fill a rental. Most people are settled in for the holidays and don’t want to move. Another factor is that people who do have to move at this time of year are often running more financially lean due to Christmas shopping. That makes it harder to find a good tenant who has the funds to move in.

 

But that’s not the only thing to contend with this year. There has been an increase in new construction of both apartments and houses by investment companies for the sole purpose of renting them out. This means that right now — especially in this season — there’s a higher supply than demand for rental housing. Because of this situation, those companies are offering incentives such as “first month free” or “half off the first two months” to attract tenants.

 

This actually caused us to lose an additional tenant mid-lease this winter. They had recently had another baby, realized they needed more room and found a townhome with the extra space offering the “half off first two months” deal. Even though they were stepping up in rent after those two months, the incentive made it possible for them to transition into a bigger place more affordably.

 

For us, that means we have an unexpected rental at the worst time of year to fill properties. Yay!

So, we’re going to have to change some things up to be competitive. The first thing we did was start posting on social media and even running ads on those platforms for the property that has been vacant for a while. This got us some traction quickly and people started going to view the property.

 

Next, we had to evaluate our pricing — especially since we will now have a total of four homes on market for rent by January. But we’re at a conundrum when it comes to how to compete with the “half-off two months” and “first month free” people. The conundrum is that those are great incentives, but does it attract the kind of stable tenants we are looking for? I can see it being a ‘no’ because most stable applicants expect to pay an amount equal to first and last month’s rent to get into the house. So the idea of free rent may attack people who aren’t as fiscally sound. But, in this economy, could it be that prudent people are now searching for the best deal to make sure their money is being used wisely?

 

I don’t know the answer to this yet. But I know we aren’t going to increase the rent rates on those vacant houses, and we may even slightly reduce them. We’ll probably do a shorter lease to get us into the summer months and then re-evaluate before doing lease extensions.

 

And if those don’t work, we’ll come up with something else. Either way, the rental market is changing, and we’ll have to figure out the best way to change with it.

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.