REAL TALK RENTALS

BEN: [00:00:00] Coming up on today's episode of Real Talk Rentals we're going to talk getting rent ready and what it takes to find a qualified tenant to place in your rental as soon as possible. Welcome back to Real Talk Rentals, a podcast brought to you by on cue Property Management, where we give you all the tips, tricks, ins and outs of owning a rental property. I'm your host, Ben. And with me, as always, is Eric Dixon. How are you doing, man?

ERIC: [00:00:28] Good. Good. How are you.

BEN: [00:00:29] Doing? Good. Doing good. So today, we're going to talk about getting a property rent ready. What that means kind of high level view. I know there's, like, a million ins and outs to it, and we could easily spend, like, an hour talking about one thing, but today we'll do kind of a high level, and then later episodes will dig in even deeper.

ERIC: [00:00:49] Okay, cool. No, I'm super pumped. A lot of this we just went through with some of our personal rentals and with clients. So it's just it's super relative.

BEN: [00:01:00] Fresh.

ERIC: [00:01:01] Yeah.

BEN: [00:01:02] All right. So I guess for first question then is what would you say is the first step in getting a property ready to be a rental?

ERIC: [00:01:11] Well, yeah. So the reason I said this was relevant is so school just started. So the market is quickly changing, right? So aside from there being a lot more inventory and the market adjusting on the sales side, when school starts and people are settled, their rental, their rentals tend to sit a bit longer, maybe the prices get adjusted a little bit. So when you're looking at what the first step is, it's to look what time of year it's at, look at the time, look what's going on. So it might be a good time if you're going to rehab this property, you know, to to spend the next several months getting it rented and make sure it's done right. If you were in May or June and you're like, Man, if I take this off the market for a month or two, I'm going to miss the Miss the hot summer. Maybe you do a little bit lighter remodel. Maybe, maybe you don't do much at all and you're.

BEN: [00:01:57] Like, hot summer. You mean not just the weather in Arizona, but, like, things sell?

ERIC: [00:02:01] Yeah, well, it's. Well, it's 110 degrees.

BEN: [00:02:03] Yeah, yeah, but the market moves quick out here. Strangely, in the summertime.

ERIC: [00:02:07] Oh, yeah. People love moving in the summer for some reason. It's weird, but yeah, so I'd say first step, just kind of look, read the room of the market and say, okay, am I, do I want to do this extensive remodel? Do I want to just put lipstick on a pig? Do I want to just do the bare minimum, you know, kind of look at what that is? And then the second thing is kind of what your budget is. Obviously, the cheaper the better, the less vacancy, the better, the higher rent, the better. But kind of looking at everything as a whole and saying, hey, do I have $2,000, Do I have 5000, do I have ten, Do I have 20,000 to remodel this? And what would my return be on that? So once you kind of know those two things, what we do is a formal rent ready inspection is what we call it. So we'll inspect the property and say this is what it's going to take to be rent ready to bare minimum. And here are some options. If you want to go the extra mile and totally turn this place inside out. Sometimes I'm the wrong person to ask because I tend to over upgrade and overdo things and just, you know, it's just how I am.

ERIC: [00:03:13] And oftentimes it pays off. But sometimes it's like, man, I did not need to totally gut and remodel this place. We could have we could have totally rented it for a fair price for half the rehab cost. And so over the years, I've kind of learned that. And so from that rent ready inspection, whether you're self managing and you're doing it yourself or you're hiring a contractor or a property manager, whatever it is, you know, trying to get a scope of work, get some estimates and then get an idea, does that fit? Because sometimes oftentimes our clients will have a $5,000 budget and the rent ready estimate starts coming in and it's due to your over ten grand easy just in carpet paint countertops, appliances, your ten, 15,000. And they're like, Oh, wait, wait, wait, wait. I only have 5000. And so we'll whittle it down and say, well, maybe it's just new carpet, touch up paint and a deep cleaning and let's just get this thing moving. And so once that budget is set, the estimates are agreed upon, you know, that's kind of the first step, just understanding that. And then you start swinging the hammers and you paint the walls and getting that stuff ready.

BEN: [00:04:19] So that kind of flows perfectly in. The next question is like, do you when you're talking about upgrades or like putting money into it, is there like one particular area that's worth more than the others that's going to translate to higher rent or.

ERIC: [00:04:33] Yeah, so. Is it? I'm trying to think just the couple big things. First that comes to mind is kitchen. You know, it's the kitchen, the backyard, and then the master suite. It's kind of like, you know, the the the master bedroom, the master bathroom, the kitchen and the backyard. It's like that's where most of the the the tenants are spending their time. Sorry, I'm trying to lose my train, lost my train of thought there. But what I like to say is it's the smell test, literally the smell test. So you walk in and you're like, does it smell good? Does it look good? Does it vibe good? Is it like I could rent this place? And Ben, if you're if you're ever asking yourself, Eric, should I paint this wall? It's like if you're asking yourself, should you. Yes, you should. Right? Should I clean the carpets because they smell like my pets? Yes, you should. Yeah. You know, so it's the smell test. I can't tell you how many times myself or one of our sales guys or, you know, goes to a house and the owner is like, Oh, what do you think these stains? Are they really that bad? Or should I clean them? And I'm like, Just the fact that you asked tells me everything I need to know.

BEN: [00:05:45] If they're stains, you can point out. Yeah, probably.

ERIC: [00:05:48] What about these holes in the wall? Yes. You know, this window's been cracked for, like, five years. I've wanted to replace it my hole for five years. Should I do that? Yeah. Yes, you should do all of those things.

BEN: [00:06:00] I think a lot of people, they missed the most obvious step there, which is like, would you live here? You know.

ERIC: [00:06:06] Like if you walk.

BEN: [00:06:07] In and you're saying, like, if this was a rental, a home I was looking to rent, would I be upset about these things? And if you would, then you should probably fix them.

ERIC: [00:06:16] Yeah, well, it's two things. You mentioned a great point. What I. What? I live here, right? So that goes into condition, condition and upgrades and it's like, well, obviously a lot of them are living there. You know, oftentimes our clients, it's their primary home and they're moving out of state or they're upgrading or they're moving and they're like, Eric, I live here. It's great, it's fine. And you're like, I know. But if this was a brand new rental on the market and it looked like this, would you be excited about it? Like, Oh no, I guess I would expect new carpet or I would expect new paint. And that the other factor when when I think about what you said would you do it is price and it's like, Ben, would you rent this house for 2000 a month and you're like, heck no, that's that's so expensive. It's like, exactly. You know, that's what everybody's saying, you know? Yeah. As they as they walk through your home. So that's it's the smell test, you know, obviously the, the actual odor smell test. But the eye test of just does it look okay. And then realistically, would I rent this place? And a lot of the times it brings the owners or the landlords or even myself back to Earth. And I'm like, you know what? You're right. It's not 2000 a month. This is a this is a 1600 dollars a month rental, you know? Yeah. The. As far as what major upgrades, I would say the only other thing I'd mention is countertops are huge appliances, flooring, Anything that's expensive is is is what people are looking for. But the problem is that you have to weigh out is, let's say, flooring. But if you do all the flooring, you got to get new baseboards. If you get new baseboards, you've got to paint. And if you're going to paint, you better replace the blinds that they're touching. And if you're going to get new blinds, they better match the fan and the hardware. And it's just this rabbit hole, right?

BEN: [00:08:06] Yeah, It's easy to snowball and all of a sudden.

ERIC: [00:08:09] And so what I found is this and this is not just promoting our management company, but just any management company, any professional. As soon as I stop doing it myself because I walk through it and I'm like, replace it, replace it, replace it. Fine. Just do it. Just whatever. Let's do it right. I have we work with an awesome an awesome guy at our office, Tim, who does our estimates and he'll go in and he's seeing it with a different lens. He's seeing it from a contractor understanding, Hey, I know you want to save some money here and here. I can kind of fudge this, this and this and make it look good. It's not going to be brand new, but it's going to look good and it's going to save you $5,000. And I'm like, Oh my gosh, yeah, just do that. Yeah. And so I found that the less I'm involved and that's not always the case. Some people are better than that than I am, but I'm kind of OCD, too. And I'm just like, Well, if we're getting new countertops, it may as well just get new cabinets. Sure. You know? And then you're like, Now my two week rehab is now six weeks.

BEN: [00:09:08] And yeah, no, I think to your point to like whether you self manage or you're using a management company, having that third party, even if it's just like have a friend come over and look and be like because if you're living there, there's things you've grown accustomed to that you're like, Well, that doesn't bother me. I've been looking at it for ten years, you know, I'm not worried about that.

ERIC: [00:09:28] That's totally how it is.

BEN: [00:09:29] And somebody will walk in and just be like, Dude, you got to you got to fix that. Like, and it helps to get your emotional investment kind of out of it, I think, and have somebody else just take a look with honest eyes and tell, you.

ERIC: [00:09:43] Know, and just talking about it and saying all this out loud. I think what you said nails it on the head is, what would you do that? So, Ben, would you so-and-so, would you rent this? Because then it puts it back on you as the landlord to be like, Yeah, do you know what? I think I would rent this house with all these stains on the carpet. You know, it's like, it's really just like a gut check of like, do you know what?

BEN: [00:10:07] But I would pay two grand.

ERIC: [00:10:08] But I would pay two grand for it. And so it dude, it's a balance. And I think that's ultimately what it is if you're buying it as an investment. And you said, Hey, I'm paying X amount, it needs to rent for 2000, it's totally worth it. I would rent this house for 2000, then at least you can wrap your head around it. A lot of times they're like, No, I can't rent for 2000. But that's what the market's demanding. But I would never do that. It's way too expensive. Yeah. Then it's like, Well, you need to check yourself and see. Yeah, that's. That's really the right move.

BEN: [00:10:38] Yeah, that's a big part of it too, is just looking at the market and being like I hear all the time from our sales guys, the owners, you know, like, well, I want to rent this place for four grand, and it's like, Well, that's great. That's what you want. But that's not what the market, you know, that's not what everything's renting for in this area, you know? So you've got to you have to have that honest opinion of looking at like what what is fair market value for this place.

ERIC: [00:11:02] Yeah, no. So and that's what I was going to ask you when you were saying that what, you're in the office. So Ben does a ton of our marketing. It's awesome. He produces all the leads and our websites and all these things. I don't even know it's all above my head. But you talk a lot with our sales guys and our sales team, right? About like, Hey, what are our clients saying? What are they doing? What are what do you hear from them as far as.

BEN: [00:11:26] I mean, just today I had a talk with our portfolio manager. Matt came into my office and he was telling me he went to an appointment and nice house, beautiful house would be rent ready, he said, except it was painted with a jungle theme murals on the walls of like lions.

ERIC: [00:11:46] I hope they're not listening.

BEN: [00:11:47] Anger.

ERIC: [00:11:47] I was actually. I hope you are. I hope you are. Because talk through this.

BEN: [00:11:51] They and they didn't want to paint. They said well, I spent a lot of money painting these things and it's like, that's awesome that you love them. But like, think about other people. Yeah, If they're going to walk in and say, Yeah, my TV would look great next to that giant gorilla painting, like.

ERIC: [00:12:07] Well, you know what? That question might not work for everybody If you ask them, Would you rent this?

BEN: [00:12:11] Yeah. Heck yeah, I would.

ERIC: [00:12:12] Yes, that's.

BEN: [00:12:13] Awesome.

ERIC: [00:12:13] I paid thousands for this.

BEN: [00:12:15] But but you know, that's where Matt, our portfolio manager, says he's trying to have that balancing act of like, look it. Sure, it's cool. It looks tons of fun, you know, But you got to if you want to appeal to the widest margin of people, you want to have the best chance of renting this. You got to pull those emotions out a little and say goodbye. To the giant silverback gorilla that's painted on the wall.

ERIC: [00:12:38] I've got countless stories of just so that's what I did for the better part of five or six years is doing what Matt is doing right. We're developing new business. We do owner appointments, driving, driving, house to house and saying, What do I need to do to my house to make it rent for more? And by the key word, you almost said it word for word, but it's you have to appeal to the masses. You have to appeal to the masses. Your pink wall, your jungle theme, your, you know, your. There's so many interesting upgrades and stuff. People do your blue countertops, like pretty cool, but they're from the seventies and they don't appeal to the masses now. You don't have to replace them, but if you don't, the price is going to be adjusted and you've got to take that into account.

BEN: [00:13:24] Unless you luck out and find the one tenant that wants like blue countertops and gorilla murals. And it's like, sure, yeah, you nailed it.

ERIC: [00:13:31] But otherwise we need to have some time. If you're listening, we need to have him on just to tell us, Hey dude, what are your top ten craziest appointments?

BEN: [00:13:41] Oh, he has the best stories. I mean, he told me another time we were talking about this the other day that he went to a house and this person didn't end up signing up, but he was like, there was literally poop all over the place in the house. And the person he's walking through says, I just think I need to clean the carpets. And he's like, No, there's there's poop everywhere. Like, you can't know what's going to rent a house filled with this.

ERIC: [00:14:08] Like, Oh.

BEN: [00:14:10] Yeah.

ERIC: [00:14:10] And I laugh because I'm just like, Oh, no. Totally happened. Yeah, yeah.

BEN: [00:14:14] And I mean, maybe that person is just not cut out to have an investment property, unfortunately, because they weren't willing to meet halfway on that standard.

ERIC: [00:14:23] But yeah, and some things like for us, like we, we have our office standard right, We call it the NQ Standard and it's like hey, if you're below this bar, nothing against you man, but we just it's not a great fit. But, but you know, sometimes that standard is not met. And it's funny because if you're a true real estate investor or you want to be an investor and change your mindset from This is my home to this is my investment, you have to step back and you have to be able to clean your carpets or paint or whatever.

BEN: [00:14:52] Listen to the people that are trying to tell you that that's what it's going to take to rent it.

ERIC: [00:14:57] Yeah, yeah. So and for me personally, it took me going through it as a landlord. I think last episode I was talking about, I used to self manage for years while working for and then owning a management company. I manage my own because I thought I was better. And then I realized like, man, I'm saving time, I'm saving money, I'm saving liability, all this stuff. And I realized I was over, over upgrading. I was wasting too much time and all that stuff. And so for us, yeah, Anyway, getting back to that, we got to have Matt on in the next few weeks.

BEN: [00:15:34] Oh yeah. He's got the best stories for sure. Well, I think we, we were kind of just touching on that, but that was going to be my next question was like, What do you think are the mistakes people make the number one? Like if you were like, Hey, pay attention to this. What mistakes are they making when they're turning their property into a rental?

ERIC: [00:15:53] So this sounds cliche, but a lot of it is just it's priced too high or they're not doing enough. And so one is just they're price too high. So I'll attack that first price is interesting because in the rental market it's different than the sales market. I've sold a lot of real estate. I continue to buy and sell and invest with clients and it's a different game. It's like when you're selling, you do not want to be that listing that goes to high for two weeks and then you lower it 25%. But when you're renting, it's different. You're playing, it's a short game, it's a matter of a couple of weeks. If you're not rented in five to 7 to 10 days, you've got to adjust the price with the assumption that the pictures and the marketing and everything is up to snuff. So number one is price. A lot of times people just aren't realistic and they shoot for the stars and they see the national media says it's the hottest rental market ever, but they don't realize that in Mesa, Arizona, this week there's an overabundance of inventory and you need to adjust. So I would say week to week it's very price driven are the mistakes. And so I always try and just tell the property managers, I'm so sorry, I'm beating a dead horse here, but you've got to get the owners to lower the price, offer an incentive, some sort of move in special 500 bucks off your first month's rent free rent or something. Just you got to stand out. A year ago, you didn't need to stand out, but now it's getting to where where you need to. The second thing is, they're just not they're doing too little, too late. So they'll tell Matt or our sales team, Hey, let's just try and rent it with the jungle wall. The pink wall or the the blue countertops or the windows with no blinds. And then two, three, four weeks go by. All of the feedback is, are those things right? There's no blinds, there's no backyard, there's no blah, blah, blah.

BEN: [00:17:50] Too many gorillas.

ERIC: [00:17:51] Yeah, there's too many gorillas on the wall. And now they're like, Hey, do you know what could that estimate you gave me a month ago? Let's go ahead and do that. So they've lost out on two or three weeks worth of time. We have to take it off the market. And so, you know, it is our job, at least to our clients, if we're managing it, is our job to emphasize and educate, hey, this is what you should do. So some that should be on us, but sometimes they just don't want to listen.

BEN: [00:18:17] Yeah, I think. And plus you can look at it. Does it matter where using us or your self managing or using another company? The interest is always going to be to rent the property. Nobody's making money, whether it's the property management company or nobody's making money if it's not being rented. Yeah. So if someone's telling you, Hey, the price needs to come down, then it's probably worth saying, okay, why? Why is this person telling me that?

ERIC: [00:18:42] Yeah. And I mean, you can run through a million examples. I almost wish I had a whiteboard so I could say like, say the rent is $2,400 a month. It's a pretty high rent. So every single day you're losing $80 a day. Every of opportunity rent the opportunity to collect rent. Let's say it sits vacant for a month. You lost out on $2,400. If you would have just lowered the price by $200 a month, you would have made the same gross income over the course of a year instead of you went vacant a month. Then you decided to adjust and then it went. Then it went down to maybe 23. I have to talk to investors all the time about, hey, your properties out on the market for three or four weeks. Let's break down your hard costs of your mortgage, your utilities, your lost opportunity of lost rent. And they sit there and they're like, oh my gosh, every day that goes by I lose $120. And I'm like, Yeah, so lower at 50 bucks or lower at 100 bucks or lower. Yeah, 200 bucks. And it's a joke within leasing and everything else. But leasing a property to a qualified applicant solves all problems, you know, as landlords with vacant property, it's just like you're stressed out. A lot of us are servicing debt on the property. We have utilities all on in our name, blow in AC all summer because it's got to be Schauble. You've got your water, you've got landscaping, you've got pest control, you've got pool service. If you have a pool and it's a black hole of cash, you know. And so what solves all of those problems is a qualified applicant moving in. So it's just wrapping your head around. Do you know what? Maybe I can get a higher rent at renewal next year, but let's just get this place rented.

BEN: [00:20:23] Yeah. Get someone in there.

ERIC: [00:20:24] Yeah.

BEN: [00:20:26] I had one more story I wanted to tell that Matt to me that I just remember.

ERIC: [00:20:29] I did. Yeah, I want to hear it. If you have one, two or three more, I'm ready.

BEN: [00:20:32] Yeah, it's similar to the gorilla house, but he said every bedroom in the house, including the master bedroom.

ERIC: [00:20:38] Is this the same house?

BEN: [00:20:39] No different house.

ERIC: [00:20:40] A different house.

BEN: [00:20:42] Had a Lego mural like, I guess, of the whoever's occupied that bedrooms favorite Lego character. So it was like one was all Harry Potter Lego. And he's like, these things were five feet tall, painted.

ERIC: [00:20:56] Stay on the wall. Staying with the house. Yeah.

BEN: [00:20:58] Yeah. They weren't. They weren't like, you know, like giant stickers or something. These are hand-painted murals. And the person was like, Well, no, they mean a lot to me. I don't want to paint over them. And it's like, But you're not going to live here. Yeah, they don't mean a lot to anybody else, like.

ERIC: [00:21:13] Peel and stick on something else, you know?

BEN: [00:21:15] Yeah, yeah. Don't don't get attached to Lego characters and lose money because, you know, you're not going to be able to afford now to paint new Lego characters on your new house.

ERIC: [00:21:24] Oh, no, I and I'll stop at this story, I think. But when you said that. So I was training Matt, I don't know. It's got to be almost five years ago, four or five years ago, and I'm pretty sure he was with me or I was covering for him, but I was actually wearing dark pants just like this. And I walk into this house totally normal, great neighborhood. It's actually in the neighborhood. You live in great neighborhood. And I walk in and there's no less than six or seven dogs just like yap and running around and stuff. And she's like shoeing all these dogs in this in this room shuts the door. I'm like, Oh, that must be the dog room. And I'm thinking like, okay, this is an appointment to rent out her rental somewhere else. No way. We're renting this house. Yeah, it is just torn apart by dogs, cats, whatever, gorillas. And I'm like, Hey, do you mind if we sit at your kitchen table or the couch or whatever? Because, you know, you have our 15, 20 minute spiel and going through stuff and she's like, Oh, wait, wait, don't sit down. You're wearing black. Oh, And she just got super annoyed with me like, Oh, why would you wear black to your appointment? And she comes out with a towel, lays it on the, lays it on the sofa, and it's like, there you go. And I'm like, Oh, this is so weird. Is it wet? And then I sit down and I'm like, Oh, there is caked dog hair everywhere.

BEN: [00:22:44] In every corner, in.

ERIC: [00:22:45] Every corner. And it's not so much to get after her for that. It's that when we started talking about renting it out, she's like, okay, what do I need to do to rent it? And I'm sitting there going. I mean, where do you start? Like, I don't want to offend her, but I also don't want this. I don't want it to come across that all she needs to do is vacuum and we can get this place out. Yeah. And so I said, Hey, how about we take a walk around and I'll tell you? And so afterwards I was like, Hey, I'm going to be frank with you. It's got to be a hole. All new flooring. Minimal. All new paint. You've got to patch up all these holes. You've got to do this. Obviously, the furniture will be gone. And she's like, No, I actually, I don't have a place for the furniture. So if they could keep it and I was sitting there going, the dog hair furniture cannot go. This is back when I was like I would say. You know, I was just trying to be nice, But then at some point, I was just like, Hey, do you know what? Let's do this.

ERIC: [00:23:42] And I just kind of gave her a list of things and said, If you're willing to do all this, I'll get you free estimates to do all this, this and this. And she ended up calling and saying, I can't remember what exactly it ended up being. But she came through and she called and was like, Do you know what? Thank you so much for being honest with me. We're just I don't think we're going to be able to rent it. We're just going to sell. And I was sitting there going, We did our job like we didn't get the client. I was kind of bummed because I'm like, Dude, I don't know if it's something I said We didn't get the client, but I don't think they were made up to be a landlord. It was like, Yeah, she didn't want to do the, the paint, the maintenance, the the upkeep and that sort of stuff, but it sticks in my head as Yeah, there was like ten pets in there, but it was also just manifest that not everybody is meant to be a landlord. Sure. Whether by accident or on purpose. It's like you have to want to do this to be successful.

BEN: [00:24:34] Yeah, I think that's a perfect place to sum it all up there. So I think that's about it. For this episode. We I think we covered it pretty well. The high level, you know.

ERIC: [00:24:45] Very high.

BEN: [00:24:46] Level, no dog hair. But we'll definitely we'll get mad on here and we'll dig in deeper in future episodes and go over some of those like really finer points of all the ins and outs.

ERIC: [00:24:57] Yeah, that sounds great.

BEN: [00:24:58] All right. Well, thanks for listening and we'll see you guys next time.