Author Topic: What would you do...two potential tenants  (Read 3468 times)

umterp1999

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What would you do...two potential tenants
« on: June 02, 2017, 09:31:16 AM »
Tenant one:  Individual, 49 years old, steady job, strong credit, wants to sign two year lease.  Rent is listed at 1750 per month, she offered 1650, and is unwilling to go up.  We would still be bringing in about 225.00 a month above average expenses.  Move in July 1.  Has already completed application.  I am confident she would sign today if I sent her the lease.  Continues to look at other places.

Tenant two: Couple relocating from out of state.  Arriving June 4.  Inquired about a 30 day rate.  I gave a rate of 2625 for one month, 2187 for month to month, and 1750 for a year lease.  They are eager to secure something quickly, but want to see the place on June 6th prior to committing.  I know nothing about the tenants background, credit, as they havent completed an application.  He seemed pretty confident they would at least do a month to month lease at 2187.  He said his current job assignment has no specific end date.  It could be six months or two years.  He works for the IMF, and has moved 7 times in the last 15 years. 

Other information:  We just recently put in 10,000 of renovations, and I haven't received rent since February because my tenant died. 

My wife and I disagree on what to do.  I want to take the 1650 sure thing for two years.  She wants to roll the dice with a shot at a higher return, but more question marks.

What would you do?


dryer

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Re: What would you do...two potential tenants
« Reply #1 on: June 02, 2017, 09:43:04 AM »
Two years of pretty guaranteed rate at a decent mark up seems like the smart play to me.  Especially as you'd avoid potentially being in the same position again in a few months looking for another tenant and having vacancy expense piling up.

Vindicated

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Re: What would you do...two potential tenants
« Reply #2 on: June 02, 2017, 09:47:52 AM »
I agree with Dryer.  Sign up Tenant 1, and move on.  If you lose even one month of Rent, the difference you could've made from Tenant 2 would be lost.

rockeTree

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Re: What would you do...two potential tenants
« Reply #3 on: June 02, 2017, 09:48:36 AM »
How much of a hassle is it for you to find good tenants, typically? How much do you and your wife share management work? How much if at all do either of you dislike it? I would take the done deal for two years because I hate hate hate dealing with turnover. But it's $500 or so extra a month, which is not trivial and may easily exceed your turnover costs over the life of the lease... does your wife want to find the next tenant if you go for the potential of the higher deal and it doesn't work out or they don't stay long?

Cwadda

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Re: What would you do...two potential tenants
« Reply #4 on: June 02, 2017, 09:56:12 AM »
How long have you been advertising it? How many people have you shown it to? What percentage applied?

umterp1999

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Re: What would you do...two potential tenants
« Reply #5 on: June 02, 2017, 10:00:02 AM »
Good question.  I primarily handle 100% of the rental.  I am the one the tenants call, i collect payments, I advertise, etc.  She does help out with the cleaning, sprucing up between tenants, and the occasional showing, but I handle most of it.  I have had a lot of people come look at the property, but most of them have some sort of "baggage" that makes them less than ideal (poor credit, sporadic work history, groups of young people, etc.) My first tenant is the one that basically hits every box on the checklist, we would just like a higher rent.

umterp1999

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Re: What would you do...two potential tenants
« Reply #6 on: June 02, 2017, 10:03:04 AM »
How long have you been advertising it? How many people have you shown it to? What percentage applied?

I have been advertising it since April, but it took two months to really get all of my prior tenants stuff out, and get the renos done.  In that time, probably 40 people have inquired.  20 of which passed my initial screenings.  Of those she is the only one to actually complete an APP.  Other says they will, but then never follow through. 

Cwadda

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Re: What would you do...two potential tenants
« Reply #7 on: June 02, 2017, 10:12:11 AM »
How long have you been advertising it? How many people have you shown it to? What percentage applied?

I have been advertising it since April, but it took two months to really get all of my prior tenants stuff out, and get the renos done.  In that time, probably 40 people have inquired.  20 of which passed my initial screenings.  Of those she is the only one to actually complete an APP.  Other says they will, but then never follow through.

That raises a few questions. Why aren't the people applying? How streamlined is your application process? Do you have both paper and digital applications available? How many sites do you use to advertise? I use Hotpads and Cozy (which cross post to Trulia, Zillow, Realtor.com, etc), several different Facebook groups, and Craigslist. The exposure is very high.

Are you very specific with your screenings? For example, I don't show people the apartment if they don't meet the qualifications. It's a waste of both parties' time.

Do you tell each prospect how many inquiries there've been in order to give a sense of urgency?

Do you give every person an application, even if they don't apply?

Do you keep tabs on each person that said they wanted to apply? Do you call or text them to follow up? What is your general work flow for processing leads?

You don't have to answer these questions but they're good to at least think about.
« Last Edit: June 02, 2017, 10:16:00 AM by Cwadda »

$200k

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Re: What would you do...two potential tenants
« Reply #8 on: June 02, 2017, 10:13:32 AM »
How much of a hassle is it for you to find good tenants, typically?

I would take Tenant 1.

But to play devil's advocate, I would take Tenant 2 and accept that risk only if I knew what the market is like for tenants.  If Tenant 1 is an exceptionally good and steady tenant for your market, then it's a no-brainer.  But if Tenant 1 (or something close to her) is not difficult to find, well then I would take Tenant 2 risk for a higher reward.

Secretly Saving

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Re: What would you do...two potential tenants
« Reply #9 on: June 02, 2017, 11:37:32 AM »
I would take Tenant 1.  She has a good head on her shoulders and has obviously set a budget.  It is likely that she will pay in full and on time for two years, making that a win.

Candace

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Re: What would you do...two potential tenants
« Reply #10 on: June 02, 2017, 12:30:17 PM »
Bird in the hand. The others are like vaporware until they check all the boxes. What are the chances of that? Take the sure thing and enjoy two years of steady income.

YttriumNitrate

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Re: What would you do...two potential tenants
« Reply #11 on: June 02, 2017, 12:34:40 PM »
I'm in a college town, and in May/Jun/July things tend to rent in days. However, if a place is vacant after August 1st it will probably be vacant for a while. If I was in an area with less seasonality, I might gamble on the out state tenants, but where I am at the two-year-lease tenant wins hands down.

patchyfacialhair

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Re: What would you do...two potential tenants
« Reply #12 on: June 02, 2017, 12:38:01 PM »
Take the sure thing.

That being said: the only "sure thing" you've gotten is a guy that's gotten you down to $1650. Are you sure that $1650 isn't the true market value of the place? If you marketed it at $1650 do you think you'd get a more diverse and better set of applicants? Just some thoughts that ran through my head.

Megma

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Re: What would you do...two potential tenants
« Reply #13 on: June 02, 2017, 10:00:38 PM »
Take the sure thing.

That being said: the only "sure thing" you've gotten is a guy that's gotten you down to $1650. Are you sure that $1650 isn't the true market value of the place? If you marketed it at $1650 do you think you'd get a more diverse and better set of applicants? Just some thoughts that ran through my head.

This is whay i was thinking, if you had 40 inquires and only 1 application who still want willing to pay your asking price, maybe your asking price is too high.

the_fella

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Re: What would you do...two potential tenants
« Reply #14 on: June 04, 2017, 09:47:59 AM »
Can't you just not include a butler and make the rent a bit lower?

radram

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Re: What would you do...two potential tenants
« Reply #15 on: June 04, 2017, 10:23:46 AM »
If you have not offered to tenant 1 by now, I would show the place to tenant 2 today, requiring an app be filled out on the spot if there is any interest. If they say no, then offer to #1. If they fill out app, run them and reevaluate.

I agree that rent may be listed too high since few have filled out apps.

We had a house years ago listed at $775 in a newspaper (remember those :). ZERO calls that week. Listed for $750 the following week, and dozens of calls. Each area has a sweet spot.

Keep us posted.

Pootie22

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Re: What would you do...two potential tenants
« Reply #16 on: June 06, 2017, 12:05:26 PM »
I would go for tenant 2, the return is considerably higher but make them sign the lease asap.

If not, offer it to tenant 1 but at least put in a $50 increase after year 1 in the lease.

tralfamadorian

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Re: What would you do...two potential tenants
« Reply #17 on: June 06, 2017, 12:15:40 PM »
I have been advertising it since April, but it took two months to really get all of my prior tenants stuff out, and get the renos done.  In that time, probably 40 people have inquired.  20 of which passed my initial screenings.  Of those she is the only one to actually complete an APP.  Other says they will, but then never follow through.

Normally, I do not negotiate rent because it sets a precedent with the tenant that they have power in the relationship.  However, April?!  Sign the two year now.  You've already lost the opportunity of thousands of dollars of rent due to delayed preparation and inappropriate pricing. 

VTSlim

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Re: What would you do...two potential tenants
« Reply #18 on: June 07, 2017, 11:41:19 AM »
If tenant 2 would respond to a message that you have someone else interested and will only continue to consider #2 if they fill out an app within 2 days, then I would go with #2.  Only because I find that people who feel they can get the upper hand that quickly in a negotiation will continue to ask for more breaks. (the ____ isn't working quite right, I'm going to give you $25 less each month, etc.....)

umterp1999

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Re: What would you do...two potential tenants
« Reply #19 on: June 09, 2017, 05:54:07 AM »
So my wife was right.  Tenant 2 signed a year lease at 1750, and has already moved in, paying prorated june rent and security deposit. 

Vindicated

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Re: What would you do...two potential tenants
« Reply #20 on: June 09, 2017, 06:50:21 AM »
Glad it worked out for you!

Dicey

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Re: What would you do...two potential tenants
« Reply #21 on: June 09, 2017, 07:06:50 AM »
Good for you! FWIW, we're in a similar boat. Tenants wanted $100 off for a two-year lease, we said, sorry we have a mortgage payment and overhead. Nope, two years from now, all the work we just did will be two years old, not brand new.
They took  it anyway for full asking price. Fingers crossed that they turn out to be good tenants, because we're good landlords.

radram

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Re: What would you do...two potential tenants
« Reply #22 on: June 09, 2017, 07:26:45 AM »
Congrats. Ever hear from Tenant #1 since their original counter?

umterp1999

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Re: What would you do...two potential tenants
« Reply #23 on: June 12, 2017, 06:49:49 AM »
Congrats. Ever hear from Tenant #1 since their original counter?

Yes Tenant one signed a lease in another part of town.  She found a cheaper place, with more updates, that is part of an area undergoing a revitalization.  It's a nice area for sure, but there are greater problems with crime, than the area my home is in.

radram

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Re: What would you do...two potential tenants
« Reply #24 on: June 12, 2017, 07:43:42 AM »

Yes Tenant one signed a lease in another part of town.  She found a cheaper place, with more updates, that is part of an area undergoing a revitalization.  It's a nice area for sure, but there are greater problems with crime, than the area my home is in.

Sounds like you got a tenant who was grateful. I bet it works out well for you. We once had someone that wanted to rent and were making demands before they even signed. We were glad to say no thank you.