Some rentals rent quickly and others linger on the market and often very little separates the two. When the right principals are applied you can have a home leased in much less then the average time and if you miss a few details you can have a home empty for longer then necessary. Below are a few basic principals.

1. If the home is not clean and I mean sparkling clean even in the nooks and crannies, the grout, the paint, the floor and even the filters, then you’ll loose a lot of potential tenants. This is one of the top complaints we hear from potential tenants about other homes they’ve seen. Often you won’t even know that’s the problem. They will either tell you “it’s nice and I’ll get back to you” or simply say no and disappear.
2. Calling back and or returning emails is on par with no. 1 and amongst the silliest of ways to lose potential tenants. Just as often as we hear about cleanliness, we hear about the other guys not returning calls. What’s the purpose of placing ads and putting up signs if the caller will not be even called back. You can wait a day or two because by then they will usually forget which property or they may have already found something. Same day works best if you can get back within an hour or two, but 4+ hours and your losing them.
3. Photos of the property will only look good if the property is clean and prepped. Don’t skimp on photos. If you don’t have an appropriate camera, hire one or hire a photographer. Photos are a key draw and if you have a nice property that’s not well photographed you’ll easily get dismissed by looking tenants, and are looking online: more so for homes then apartments.Consider that a professional photographer that will provide you with some 30 photos will cost about $150 and bad photos may prevent your place from leasing for some additional time, the cost quickly becomes a mute point: if your rent is $1,000 a month, just leasing a weak earlier because of good photos will be very much worth it and you’ll have the photos for the future as well.
4. Marketing a home online is vital. Skip the papers. Take the time and spend some money to place the ads in some of the most looked a places, including some that are free like craigslist or some paid like rentals.com for about $40 per month. Also consider PropertyNut.com - a one month ad there is about $10 and they will distribute your ad with photos to lost of sites, including automatic periodic placement in Craigslist.
5. Be flexible with showing times. Lot of potential tenants work a lot. That seems to be the way of live in American. This harsh work life prevents many tenants from having lots of time to look for properties. If you can, accommodate them.
6. Be flexible with credit. The recent market downturn has been bad for a lot of people, but they are not bad people. Yeah, you have to be aware of the complete losers who simply have no respect for credit, but quite a few people had a foreclosure or short sale. Can they now afford the rent, do they have a job, how is the other credit. Don’t go by the credit score as you’ll lose out on some of your best tenants. Consider more then the numbers.
7. Provide evidence or assurance that you’re a good landlord. Lots of tenants move because their current landlord fails to live up to their responsibility. If you can provide evidence and assurance that things get fixed and taken care of, that will go a long way at getting your place leased. Remember this is a business and tenants are your customers.

Consider that tenants are providing so many benefits to you: paying your mortgage and paying down your principal, keeping your property occupied and secure, then it would be prudent to treat them with respect for mutual benefit: it’s worth the extra effort, even though, I know, it’s easy to sometimes skimp on a few things.

Even if you are not the landlord manager, but you have a management company, check on them. Is the management company doing things right. From my experience they fail on many levels so vet carefully.

This is a post originally published at PhoenixMarketTrends.com

There are a lot of pressures on rents our there, but little in terms of help for current owners.

It’s simply supply and demand, but also the quality of the supply and the tenants perceptions that govern the rental market.

Drive almost any area in the valley and you’ll see lots of discounts on rents.  While many times those discounts are a rouse to get people calling the perception is still there that deals are abound for the tenant.

And they are.  The combination of increased inventory and also new inventory from owners who got a good deal and can undercut the competition, is driving rental prices down.

If someone purchases a fourplex for $170,000 with renovations it will be much easier to compete for a tenant then for an owners who paid more and has higher obligations. They may still have to in order to get tenants, but it will take them longer the actually bite the bullet and lower rents.

Current tenants and potential tenants know this and are able to take advantage of the situation, but asking for reduced rents, improvements to the properties or a combination of the two: actively looking tenants want low move in cost and as little in additional expenses as possible.

Having a nice apartment, a washer and dryer and especially as a small patio or yard is a definite plus and will help lower vacancy rates.  If you can, add these items and you’ll get a long term benefit.

Be prepared for this to continue for a while.

It’s that cycle of the market where most multifamily property owners are having to adjust their modus operandi: even well cared for and superbly managed properties are seeing increased vacancy and pressures on rents.  This cycle seems to be of great girth, depth and resonance.

It’s a tough one, one that has and will continue to affect may owners.  It’s especially difficult for owners who debt prevents them from being competitive with owners who are able to reduce rents to stay competitive and still cash flow.

So what’s going on.

This is a perfect storm, a beauty from the distance but fierce when you’re in it.

1. Depressionary pressures: prices for many goods are down, but so are wages and unemployment.  Lower demand has forced many retailers to lower prices, cars, houses and many durable goods are down as well with rental rates right behind.

2. Consolidation: many people are consolidating living quarters reducing the need and increasing supply.

3. Vacancy: is also up because the buoyant housing market where prices have decreased a great deal making the rent vs. buy decision easier for the tenant.  The government is providing massive incentives in cash and low interest rates to reduce housing inventory, but at the same time hurting landlords.

4. Competition: is up from other owners and from single family homes and condos.  Multifamily owners not only have to compete against each other, but veryattractively priced single family homes.

What can you do.

This is not the time to cut back on maintenance, advertising and property management: quite the opposite. Owners need to be scrupulous with their resources and activities, but not to the detriment of the properties.

To compete in the is market you need to be diligent with having the units be clean, well cared, for, maintenance free and well advertised.

1. Adjust rents, even for existing tenants to keep them in place. It’s much less expensive to keep existing tenants then to to cope with vacancy, repairs and advertising for a new tenant.

2. Paint is an easy and cheap way to freshen up the interior and exterior. Often some strategically painted walls on the interior with interesting shades will make all the difference with out having to paint the entire interior.

3. Increase the competence and quality of your advertising. Make sure potential residents know about your property and get as much information as possible.

4. Be a little bit more flexible with credit. Many prospective tenants in the current market are the same people who lost their home to foreclosure or a short sale. These actions do not necessarily make them bad tenants.

Don’t skip on processing and due diligence. Sometimes it easy to bend your qualifications too much just to get a body in the doors. I’ll tell you from experience that tenants accepted out of desperation don’t work out and often end up costing much more then if you would have waited.

It’s a very difficult market now, one not seem in many decades. On the one hand there is a tremendous occasion to buy low priced distressed properties that will certainly do well. On the other hand current owners and new owners are all in the same difficult rental market. It’s people that take on adversity as a challange in personal life or business that get past it with strength, often in a better position then before.

Investing in real estate is a business and as with any business you would carefully do research on where you customers are and how to reach them.  It’s no different in real estate.

Certain parts of the valley tend to be better for investment then others.  No matter how inexpensive some property may be if there is no rental market it’s not a good investment period.  You can hope to leave that property vacant and maybe it will go up in price but that is not a sound investment strategy, though, many people did that.

So where are the renters?  They are where most people want to live: near jobs, good transportation, schools, shopping and some entertainment: these are popular places where homes don’t sit vacant, where they don’t deteriorate nor are decimated by un-use (home that just sit around, not used tend to deteriorate).

Where to invest?  This is a more difficult question.  Rental rates don’t increase proportionately to prices.  A 1,500sf home in Avaondale can lease for $1,000 and cost $125,000 but a $350,000 Central Phoenix will only lease for $1,800 on average.

There is more to consider, of course.  What are you going for, appreciation, cash flow or a combination.  What ever I say now is subject to change based on market conditions.

Homes in Avondale, parts of Goodyear, Litchefield Park, Surprise are well priced, still and the rental markets are fairly good.  These are areas where you can purchase income homes and rent then out for near a 1% per month return in gross rents: $100,000 leased for $1,000 per month is 1%.  That’s a good goal to have.

You won’t get this in Central Phoenix but it does not mean it’s not a good investment.  We’ll selected properties will provide a good return for many other reason then simple rent cash flow: these could be the reuse of land for better purposes, an increasing population or even a changing population.

If you buy a home for $50,000 in rural Phoenix, it can be large, newer and fairly nice.  There are places like Buckeye or Queen Creek or Arizona City where inexpensive homes are abound.  There is a reason they are this low in price.  They could be good purchases if you live there, but tread carefully if you’re investing for rentals in those areas

Some news purporting the strength of multifamily in the next phase of the cycle.

Housing experts predict that multi-family rental properties and apartments will recover fastest from the current downturn, followed by housing in cities that didn’t overbuild.

The market is likely to hit bottom in the next few months, says Bernard Markstein, senior economist and director of forecasting for the National Association of Home Builders.

“Next year will see slow but steady improvement, as home builders are controlling their inventory,” Markstein says.

Apartments and other multi-family residences will snap back quickly once businesses start hiring again, predicts Victor Calanog, director of research at Reis.

Baby boomers looking for retirement homes and first-time home buyers also will lead the way out of the decline, predicts Bill Singer, a securities attorney and trader who is a member of Forbes.com’s panel of financial gurus.

In Greater Phoenix we did overbuild but in certain sub-markets we did not. While there is plenty of hosing, land and lots with pipes sticking out of the ground ready to be built once the demand picks up, not everyone will be as eager to live on the outskirts: it will take a while if ever for people to get comfortable, en mass, with the idea again.

The central location, Scottsdale, Phoenix, Tempe don’t have much room to grow except infill plus the population is increasing naturally plus the draw of a reviving urban city. These will help sustain and grow the demand for multi-family housing in Phoenix.

While rents in many areas have decreased they are holding steady in the urban areas. Once the market picks up, higher prices will keep people from being able to buy a home or condo. Plus as the economy becomes more mobile and agile there is no need for a growing population to even own real estate. Owning is not fore everyone and this maybe a realization that finally takes hold: for many it’s better to rent and there is nothing wrong with that.

The recent Apartment News a publication of the Arizona Multi-housing Association reports that vacancies in the valley are at "record levels"

In the valley rents dropped by $3.00 to $770.00 on average.  This is, "the first year to year decline in the same quarter (3Q’08) since 2003.  Vacancies stood at 13 percent, a record high for the Valley."

While the data compiled is for larger properties the smaller properties those 3-20 units have similar results.  From what I have seen and in doing the occasional rental survey, vacancies – both economic and physical are up. 

Competition has increased.  Driving through neighborhoods potential tenants are faced with many choices even in some of the more desirable rental neighborhood where vacancies were usually low.

It is difficult to find a tenant and a lot of effort has to be forth to entice them to even look at units.  Even in the advertising outlets there has been a surge of properties. 

So why so many vacancies if homes are so difficult to buy?  Well, homes are difficult to purchase but not in all segments.  In fact, sales of homes under $125,000 have increased 5,200% over last year.   The spurt of affordable housing has enticed quite a few tenants to buy homes. 

Increased competition from rentals includes homes and some tenants have moved into single family homes.  A very common occurrence is consolidation of families from multiple living units to one: families and friend are moving in together.  On the other hand we have had some interest from people who have decided to rent their home which has a higher mortgage and find a lessexpensive apartment: though this is a very small slice.

Either way, the rental market -whether for apartments or homes- is soft.

The Phoenix Business Journal (9/26/08) has an overview of the apartment building vacancy rates.  I’ll add my thoughts to this relating to smaller multifamily buildings.

Reasonably when the market for homes goes down in sales and demand there is increased demand for rentals, both homes and apartments, "We were initially surprised to discover that what was bad for single family housing was not good for multifamily housing either."

"Hendricks’ researchers estimate that there are 8,500 private homes, including condos, listed for rent in the Valley. There are an estimated 22,000 empty apartments as well."

Take a look at our data for demand and supply of single family rent homes.  This includes months of supply and the median sales price for comparison.

It’s quite clear by all the for rent signs both broker and private, that many home owners and investors are trying to lease out properties.  Often this is because it’s because they cannot sell or it’s not the right time to sell. The surge in single family home rentals has a shadow effect on all rental, home and apartments.

"Experts in the multifamily market believe some people are so pressed financially that they are moving in with friends and family members."

We have noticed this trend directly with out own properties and the properties that we manage both single family homes and multi-family apartments: it’s either friends moving in together or a mother moving in with her son and so on.  Often this is a consolidation of two apartments into one or two homes into one.  I’ve seen cased where a home owner moves in with family and rents out their primary home to help during this economic change. 

"Vacancy rates on average are creeping up to 12 percent.  That’s more than double the 5 percent vacancy rate that is considered healthy for a metro market.", "…vacancies in west Phoenix stand at 13.2 percent.

So both physical and economic vacancy is higher because besides having less units occupied many of the complexes large and small are offering incentives to move in.  Smaller properties tend to do better if they are properly managed.  The central Phoenix areas and east Phoenix tend to have lower vacancy rates due to the central location, while apartments in less desirable areas, even in certain pockets in central phoenix, tend to do worse.  Despite the central location it’s everywhere that owners need to put in more work or more advertising to keep units rented.

Vacancy rates are:

• Average for the valley  12%

• West Phoenix  13.2%

• Scottsdale 9.1%
  

• Paradise Valley 9.9%

• Ahwatukee 8.4%

• Chandler 8.7%

For those of you more interested in investing in single family home investing,  we just posted an in-depth spreadsheet of rental rates by city in Greater Phoenix.  This includes per square foot rates, total inventory, units leased and more.  Plus we added a bit of commentary about the current investment rental market.  You can see this data at Phoenix Market Trends, a sister blogsite to this one. 

Greater Phoenix Investment Rental Market | Single Family Home Rental Rates and Supply

Apartment News a monthly newspaper from the AZAMA.org reports that multifamily vacancies are at record levels and that rent gains are moderate.  While this report is mostly about largercommunities the affects are felt by smaller property owners as well.
Vacancies stand at 11.5% for the first quarter of 2008, up from 9.6% the first quarter of 2007. 
The AMA reports that “the North Central Phoenix sub-market experienced the highest rate of rental growth since the first quarter 2007…” 
Here are a few or my own observations not based on serious number crunching but dirty in the field work on our own properties and discussions with our clients who have anassortment of property size types ranging from fourplexes to mid sized apartment communities.
In Central and North Central Phoenix rents have held steady with an increase of 4% in rents over 2007 for better located properties while the rate stayed flat for properties of worse, lesscompetitive condition.  None of the 27 people I spoke with had given any concessions.
We gave a small concession to a tenant.  Most apartments lease within 2-4 weeks but some lease immediately.  Houses lease quickly as well, when pricedcompetitively.  Just driving around on a daily basis we see signs going up and quickly coming down; more quickly then last year or even 2006. 
Lease rates in other areas such as Scottsdale, Glendale, North Phoenix have held steady for the last several years.  In essence, adjusted for inflation rental rates for houses are down from 2005, 2006 even though the amount is equal. 
This will probably continue for the coming 2 quarters.