Archive for the 'Tenants' Category

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Up Side DownAt the start of the decade, vacancy rates for rental units in the Twin Cities hovered near an almost incomprehensible two percent. Demand for places to rent came probably about as close at it could statistically to 100 percent.

As a result, landlords didn’t have to offer very much in the way of perks, upgrades or property improvements. Rent went up every year. And owners could almost do as little as stick a sign in the front yard and have the new tenant move in the front door while the old loaded things out the back.

Times changed. Low interest rates and the boom in housing wreaked havoc on vacancy rates. Qualifying for home loans was comparatively easy. It made more sense for a tenant with a good credit score to buy a property rather than rent. After all, that way he or she could realize the tax benefits and appreciation that come with property ownership.

Needless to say, vacancy rates skyrocketed. While low compared to U.S. markets, the cities of Minneapolis and St Paul spiked to seven and eight percent, while the outer ring suburbs saw double digit numbers in several types of units.

To attract tenants, landlords started offering incentives. If a renter signed a one-year lease, he might get the first month free. Some landlords gave away televisions, free cable, and when all else failed, decreased the amount of rent until someone decided to move in. Rent increases became almost unheard of.

Here’s the good news about today’s down real estate market. Fewer people are buying houses. Some are even losing their houses to foreclosure. Those folks still need places to live. So they rent. Demand goes up, and inevitably, so does rent.

In the tight credit market, it’s also more difficult for people to get loans. Which means there are fewer buyers for rental properties, which means purchase prices are going down.

Translation? In the short term, I’m seeing small multi-family properties on the market with very good cash flows. In the longer term, those properties will appreciate rapidly when the market rebounds. (And c’mon — in all the negative press, name one single pundit who’s said it’s never coming back!)

Seems like the best of all worlds if you’re an investor.

 

Free Is Good

said on May 18th, 2008 categorized under: Buying A Duplex, Multi-Family Property Investing, Tenants

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Free

Once upon a time, well, not that long ago, most of the landlords I knew used a couple of tried and true ways of filling a vacant unit: print ads and yard signs.

In college, I worked part time in the classified ads department of a major metropolitan newspaper. There was no such thing as taking Friday night off, because that was the last opportunity for people to get their Sunday ads in before the deadline. We were there until 9 and the phones never stopped. After all, didn’t everybody consult the Sunday classifieds when the were looking for apartments? Cars? A used drum set?

We’ve all heard how the daily newspapers are struggling to stay afloat. The Internet has become the “go to” place for many of us for news, weather and a calendar of happenings.

I learned this the hard way. That’s where renters are looking too.

For weeks I advertised a unique property in the local paper: to the tune of $100/Sunday (and they wonder why nobody’s advertising). On a good week, I’d get two calls. I spent hundreds of dollars trying to chase down a tenant. Nothing. Not only was I out the ad money, I was out rent too.

Out of desperation, I tried Craig’s List. I had over 30 inquiries in a matter of hours. Close to 100 overall. And it was free. The downside? Fielding all of those e-mails (the property wasn’t right for everyone).

Since then, I’ve spoken with a number of friends and clients who own income property. They’ve all had remarkably similar experiences.

The lesson? Why pay for terrible when free works better?