52% of the homes in Reno are not owner-occupied. Which means that over half of the single family residential properties in our area are likely rentals. That remarkable statistic comes from the most recent Washoe County census data (2010). The data don’t include apartment complexes or privately owned multiunit dwellings of more than four units. For Washoe County, the figure is 41.5%.
Although some of those homes have probably been rentals for a long time, it seems likely that many became rentals during the recession. As the bottom fell out of the housing market, investors with cash swooped in and bought everything they could get their hands on, from short sales to foreclosures to unavoidable “fire sales”; many of those properties were kept and rented. In addition, not all homeowners qualified for a short sale, some didn’t want to attempt one, and still others didn’t want to take the financial hit of selling at a big loss. Not uncommonly these owners turned their former homes into rentals out of necessity.
With the housing market heating up again this spring, prices at the lower end have largely recovered to the point that many rental owners either once again have equity in their properties, or, if they purchased at the lows, are now showing a nice profit. The number of rental properties on the market has increased accordingly.
One thing we’ve noticed this year is a significant increase in the number of properties listed for sale with renters in place. While this isn’t a problem necessarily, it does introduce some complexity to the showing process. State law requires that renters be given 24-hour notice for all showings, eliminating the possibility of a spur-of-the-moment showing appointment. Many renters are less than pleased at the prospect of having to move, and throw all sorts of obstacles in the way: rejecting showing appointments, keeping the house in, to be generous, less than “show-ready” condition, or hanging around while the property is being shown making the buyers uncomfortable and hastening their departure.
What to do? Here are a few suggestions if you are on the hunt for a home this spring, or putting your rental on the market. As always, don’t hesitate to call; we’d love to help you reach your goals
- Give some consideration to waiting until your buyers move out to list your property for sale. We understand that the expenses of holding an empty property add up, but homes priced below $400,000 are selling fairly quickly. You want to make it as easy as possible for buyers to visit, the more the better. Every buyer turned away is one less opportunity for multiple offers, and peculiarly, buyers whose showing requests have been rejected often won’t make a second attempt to view the property.
- If waiting is not an option, consider incentivizing your tenants to ensure their cooperation. A partial reduction in rent in exchange for accommodation with showings and keeping the place tidy is worth the investment.
- Be sure that your tenants are clear on the process, and the need to respond to requests to show expeditiously, whether from your agent or from a showing service.
- If the tenants would like to stay on with a new owner, be sure and have your agent include that information in the listing, preferably along with the current rent, in order to pique the interest of potential investors. A good tenant in the hand is worth two in the bush.
- Freshening up a worn property in inexpensive ways is well known to property flippers as a means of adding value above and beyond the cost. New paint and carpet, a thorough interior cleaning, power washing the exterior and garage, and trimming back and tidying up the landscaping are inexpensive ways to turn a tired and bedraggled rental house into a sparkling, like-new home for a lucky buyer.
- Train yourself to see beyond the clutter to the house beneath. Even if the tenants’ taste in furniture tends toward Early American Salvation Army, and their idea of tidying up is to shove the clutter to the periphery of the rooms, try to envision the home with your own furniture and décor.
- Look for the right things wrong…wild paint colors, stained carpet, and the like are easily fixable; you may even be able to negotiate an allowance from the seller to cover some expenses (check with your lender first!). Bad floor plans, low ceilings (if that bothers you as much as it does my husband), no yard, or insufficient storage are not readily correctable.
- It is not uncommon to find rental properties being offered “as-is”. Be especially careful to check out the Big Four: roof, foundation, plumbing, and electrical, where significant problems can turn into significant expenses after the sale.
- Work the owner’s disinterest in having the property show well into an advantage for you. Not everyone has the ability to see the rose and not fixate on the thorns. Less competition in the form of multiple offers means a possible opportunity for you to buy at a better price. Being willing to take on some repairs yourself can also lead to instant sweat equity for you.
Photo credits (From Flickr via Creative Commons License):
No Cats Allowed Birdhouse by Mechanoid Dolly
TV and stuff by Eric Bartholomew
Messy Room by Joe Dykes