In earlier posts we talked about how to buy foreclosures. Then we discussed how to fix them up and get them ready to rent. We dove into how to create a team, how to use leverage and the various benefits of investing in single family rental houses in the Dallas, Fort Worth, Denton area.
Now, let us get into the intricacies of owning and operating a rental business. A rental home is not just an investment. It is a business. With the purchase of your first rent house, you become a business owner. Just as in any business, you need a well thought out plan. You need definite goals and measurement criteria. You need to keep good track of your numbers and monitor them. As you acquire more rental properties, your goal is to make your business more streamlined and efficient, not more complex and time consuming.
So what are the steps involved in operating a rental business? We have covered the acquisition and rehab steps in detail. Now, let’s talk about the exciting task of marketing the property and finding the tenant.
Marketing Your Rental Property
Sign in the Yard: One of the key marketing tools is the sign in the yard. The sign must clearly say that the property is “For Rent”. It is sufficient to have a phone number on the sign. A website address with property pictures like the one on dallasrenthouse.com is useful as well. You need not put the rent amount on the sign. It’s better to have people call you, so you get an idea of the traffic that you are getting. You can buy these “For Rent” signs at Home Depot or Lowes. Use letter and number stickers of adequate size, so that your sign is clear.
Neighbor Signs: Try talking to the owners of the corner houses and see if they will let you place a small directional sign pointing to your house. Most owners do not want a property vacant on their street and may gladly help marketing it. Be friendly and thank them even if they don’t allow it. However small your sign, it is a still an inconvenience to them and people may mistake their house as the one on the market and even ring their doorbell. Write your property’s street name and number on the directional sign.
Street Signs: Many cities allow marketing signs in public areas like street corners during the weekend. Where these signs go, how big they can be and how long they can stay varies from city to city. So make sure you know the rules. You may want to put your property street name and number on these signs rather than your phone number. You want prospective tenants to see your house before calling you.
Listing on MLS: We have talked about working with an agent who not only works with investors but is also one who invests in single family rental real estate themselves. Also make sure they list leases in MLS. Some agents do not work with leases. Some agents specialize in leases. If your agent is an investor and works with investors it is likely they take up lease listings as well. When your listing is on MLS, several other real estate sites (like realtor.com) will automatically publish your listing as well. Your investor agent should know very well how to give your lease listing maximum online exposure. Based on your business arrangement with your agent, there could be a cost to not only listing your property on MLS but the agent who brings the qualifying tenant will be paid a commission as well. Make sure you have accommodated for this cost in your marketing budget. Listing on MLS gives you such a broad exposure and allows for qualified professionals to handle showing your property, discussing your terms with prospective tenants, use of state promulgated lease forms etc. that you may find the cost well worth it.
Other Media Advertising: Based on the area your property is in, some periodicals, news papers, online listing services etc. may all benefit incrementally. Discuss the usefulness of other media in your area with your mentor.
Monitor your Marketing: Whatever marketing method you employ, you must be able to monitor the impact of that method. When you get a call about your rental home, ask them where they saw the property. Note how many calls you get from the signs vs. other methods. You should have a way for people who visit your website to contact you from there as well.
Early Marketing: Usually you start marketing your property only after the property is show ready and may be even staged. But sometimes you may want to start marketing early, before all rehab is complete, especially if you are approaching a down season. But for this to be successful your property must show sufficiently well. Many people cannot see past the clutter of rehab and envision the final product. On the other hand, for some people the location is of utmost importance and they may want to “reserve” your property for when it is ready. However, that puts a significant time pressure on you. You may be tempted or pressured into not finishing out the rehab as you would have otherwise and may pay for it later during the lease period with higher maintenance costs.
You should also consider what visitor traffic might do to the work in progress. The house may not be very secure for both the people visiting and the people working. Contractors like to work in peace. They may not appreciate the additional unpaid job of being your ad-hoc salesman, or worse, they may not be good at it!
So, all things considered, for a new investor, it might be best to finish out the rehab and then market a fresh property, that’s nicely staged.
Fraud and Spam: Once you provide your contact information to the public, like you would have in marketing your property, you are exposing yourself to spam and fraud. You will get emails and phone calls you do not want. You may get a call from a curious neighbor posing as a prospective tenant, which is the most benign of all spam calls, to much worse. A healthy suspicion will keep you safe. I will write a post on talking to a prospective tenant over the phone and there we’ll address how to weed out the miscreants or the ones that simply won’t qualify. As far as email goes, practice safety tips that you always do – like not opening attachments from unknown sources etc. If something sounds too good to be true, it probably is.