January 2008
Community Paper


How (Not???) To Manage A Rental Property - Part 2
by Mike Derenthal, Derenthal Realty Group and College Park resident

Our strong buyer's market prevails. Many sellers have resorted to renting their homes and hence been thrust (involuntarily) into the glamorous world of landlording. Others meanwhile, will confess their foray into landlording was in fact pre-meditated. Whichever group you belong to, if you're not experiencing the property management bliss that was promised in all of your "Landlording Made EZ" books, perhaps some of these suggestions will help you get things back on track.

If you'll recall, my first two rules of thumb are:
1. Know two things: your numbers and your competition.
2. Undercut your competition.

Rental markets are just that – markets. The supply and demand curves we learned in economics are absolutely in effect. Buyers (in this case tenants) of your service (the shelter that you are leasing) will seek the best value for their money and will shop, similar to the way that any of us might shop for a tub of butter. (Note: If you're offended at my comparing your beautiful rental home to a tub of butter, we may have just diagnosed the problem – pride of ownership that translates into a rent rate that is too high.) Always keep in mind that tenants are going to do their research and they are going to pursue rental homes that are appropriately priced.

How do you figure out the appropriate rent to charge? The most reliable source of information is your competition. I can usually get a very accurate idea of market rents by simply driving a neighborhood and calling on existing "For Rent" signs. When I make these calls I first ask for the details and rent on the home, and then explain to them that I'm not actually a tenant and that I'm researching the rents in the area for my own property. I've found an honest, friendly approach is always best, and typically very fruitful!

The responses you get from other landlords will typically fall into one of four categories:
1. The "Irritable" Landlord: If you're lucky enough to find someone who's rude and irritated that you have called, then they've probably got their place over priced. Make a note, politely move on, and keep an eye out for the "For Sale" sign to show up in the front yard in the near future.

2. The "I Could Rent It Out For More If I Really Wanted To" Landlord: Don't you love charity? These are the ones that will tell you they are renting it out for $800, but could probably get $1000 if they wanted to. If their "For Rent" sign is still posted a week or two later, chances are that even their $800 number is too high.

3. The "I'll Have It Filled In 30 Days" Landlord: If true, these are the guys that are probably charging right about what I would call a "market rent". They're also the ones who are used to turning their properties once every year (or more) because their tenants move on to the next best thing. Their expenses are high and their tenants are often high-maintenance.

4. The "Smart" Landlord: When you find a landlord that gives you a rent rate that seems just a bit lower than everyone else, and he or she tells you they have multiple applicants and expect to have the property leased before the week is out, you‘ve probably come across a landlord who knows what he's doing, or perhaps I should say, shares my philosophy.

A lot of new landlords make the mistake of being overly concerned with maximizing their rent rate. They don't appreciate that they can significantly improve their overall returns on the property by renting it for less, but reducing turnover and minimizing vacancies.
And with a lower rent rate, it is a fact that they will attract more applicants, which increases the odds of being able to locate truly outstanding tenants. This in turn leads to fewer management headaches, which ultimately leads to property management bliss.
And before signing off for ‘07 – I'd like to extend a very sincere "Thanks!" to each of you who read this column, and especially those who have taken the time to give me your feedback this past year. I really appreciate it. Happy holidays!

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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