For some reason, last year, I had a challenge getting two of our houses rented in Florida.
Both were in sought after neighborhoods, but stayed vacant for a much longer time than I ever would have imagined.
My goal was to get these properties rented but we met with a few hurdles; hurdles that had to be overcome before I could achieve the goal.
Both required maintenance. Carpets needed to go. We replaced with new tiles throughout. Cabinets needed upgrading. And, other minor repairs to bring the properties back to market rent condition.
These repairs cost money. Lots. The repairs ran about $8,000 per house. So, we were up for over $16,000 to have all this work done.
But, was this enough to bring properties up to market rent condition? Apparently not. We had to go a few steps further to get them “happily” rented.
The first step was simple. Lower the rent.
We fixed the properties up so they looked great, but still folks were price sensitive. They didn’t want to pay more than a certain amount and there were plenty of properties to choose from. Why take ours when they could have something almost as nice for less?
And, then we ran into our second hurdle. The people applying to rent seemed to have financial issues.
Mainly credit history black marks.
My property manager helped me get over this objection by pointing out, “If you exclude everyone with a bad credit rating, you’ll never rent the place.”
I accepted this advice. But, we put safeguards in place to reduce the risk. For instance, one tenant with a bad credit history, paid double bond and first and last month rent; all upfront. This showed us he had funds and was very serious about renting our property. He initiated this offer after we rejected his application the first time. He’s currently renting the property.
So, the double approach worked; lower the rent and lower the applicant credit history rating standard.
I feel comfortable with both. Here’s why.
First, the lower rent still represents a great return. We purchased the properties for about $90,000 so $775 a month rent is a 10% return. Very good in my book.
And, with the US economy going through turmoil, it’s probably going to be difficult to find people who do not have a credit blemish. Seems like just about everyone was affected. So, to lower the credit rating standard doesn’t seem like a big leap of faith; it just seems like a new reality.
Anyway, that how I see it.
Have you got rentals in Florida? Have an issues with getting them rented?