The Property Management Shop
By Marc Wilson
Q. I find that renting my apartments is taking longer. What is the story with this rental market? What can I do to increase the likelihood of a quick “turn around” on vacant apartments?
A. I was showing one
of my apartment-buildings-for-sale listings last week and one of
the prospective buyers indicated that he had five vacancies this
month and three of them had been vacant for over two months. He
explained he had been advertising and showing the apartments but
no one had rented them yet. Over the past five years in San Francisco,
we have not experienced vacancies of this duration in our market
for apartment buildings. The total number of prospective tenants
clearly has declined while the total number of available apartments
has increased. This fundamental change in supply and demand has
resulted in some lower achievable rents and longer vacancy periods.
Whether and when this trend will continue, level off, or reverse
is anyone’s guess. The bottom line is that it is a little more
difficult to rent apartments today than it was six months ago.
I do not think there is any “magic” to renting apartments.
You just need to return to basics. Any potential renter will have
seen five or ten other available apartments in their price range.
They will offer to rent the unit that is the best value. I would
suggest the following tried-and-true strategies:
1. Always be sure that the vacant unit is in perfect condition—and I mean perfect. Clean paint, clean appliances, clean windows and clean carpet and/or hardwood floors. Take the opportunity to remodel the kitchen or the bathroom if they are “tired.” Have the unit professionally cleaned before you show it to potential renters. If you have the best-looking product for the best price, you will be able to select the best tenant. You will be able to choose a highly educated, hard-working person whose intention is not to reside in a 700-square-foot apartment for the rest of her/his life—in short, someone who will live in the apartment for three or four years and then move out so that you can raise the rent. Make sure you do not bring vacant apartments to market that are in less than perfect condition.
2. Lower your asking security deposit. Last year, most of us were charging the maximum legal amount (equal to two months’ rent). The total move-in cost then for a Western Addition one-bedroom apartment was $5,700 and that seemed almost obscene. If you have a good prospective tenant, there is no real advantage to getting a security deposit that exceeds $500 more than the monthly rent. Your lower move-in cost will be a definite selling point.
3. Pay for an ad in the Chronicle in addition to advertising in all the free media publications such as Metro Rents and Rent Tech. Time and again, I have found that the extra exposure is worth the cost.
4. Last but not least, you should lower the rent. I believe the days of $2,000 one-bedroom apartments in the Haight, the Western Addition and other comparable areas are over for now. Prospective tenants are very price sensitive today. They will rent an apartment if it is $25 less per month than the next alternative. Know your market, research the competition, and price your unit properly. Even with today’s slight slowdown, you should receive at least three applications as a result of a two-day weekend open house. If you receive less, either your unit is overpriced, not clean enough, or both.
For now, you must return to basics if you want to stay in the San Francisco rental market. A little competition never hurt anyone, except for the weaker operators. I have to admit, during the last great California real estate recession (1992-95), the foreclosed apartment buildings that I saw were poorly managed. No matter what you pay for an apartment building, you can still “screw it up” if you do not properly manage the property.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Marc Wilson has been managing and selling San Francisco apartment buildings for 15 years. Please send your questions concerning property management and/or apartment building sales to Marc Wilson at 1699 Van Ness Avenue, SF, CA 94109. He can also be reached at 415-229-1275. © Copyright 2001