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Landlord Struggles to Find Qualified Tenants - WSJ Article

The LPA would like to thank Jane Hodges, The Wall Street Journal / Real Estate Journal and LPA member Jeff Jones for the following article:

A Landlord Struggles
To Find Qualified Renters

By Jane Hodges

Jeff Jones spent his first two months as an investment-property owner making $7,000 worth of improvements to the $275,000 house he bought in April 2004 in South Seattle's Lakeridge neighborhood. He's done renovation and cosmetic work upfront because he believes the improvements will help him attract high-quality renters -- people with good credit able to pay $1,365 a month.

With these people in mind, he's spent his weekends pulling custom paneling decorated with animal and hunting images from a hallway and removing excessive towel racks from the main bathroom. He's learned the hard way how to prime and paint over grooved wood paneling in the living room -- a task he might not repeat because of the difficulty of priming the crevices between the panels -- and hired contractors to handle specialized jobs, like exterior painting. He painted the dark brown living-room paneling a warm beige color called "maize" and coated the dark living-room ceiling in a shade of white to lighten up the room. He's also begun planning a major landscaping project for the yard, kickstarted when he paid a tree service to remove a 30-foot tree blocking the lake view.

"I thought I'd spend a great deal of time just working on making things presentable," says Mr. Jones. "I think it looks 100% better."

But two months and thousands of dollars later, Mr. Jones hasn't found a great renter. In a way, it doesn't matter -- yet. He's set aside a four-month financial cushion to cover his mortgage and doesn't need a renter until Sept. 1. Even after he finds a tenant, the rent won't completely cover the $1,850 mortgage. With tax deductions, Mr. Jones won't lose much money and could break even, but he won't consider the property an "income" property for several years, when he can fetch a rent that surpasses his mortgage payment. He knows that won't happen for awhile.

For now, his task is just to find qualified renters -- and sell them on an under-the-radar neighborhood in a city where the rental market is soft and home sales are hot and a state where the unemployment rate is higher than average.

Knowing he faces some obstacles, Mr. Jones decided early on to work with some established resources. He signed up with a national organization called The Landlord Protection Agency ( so he could download official rental-application forms, participate in online landlord forums and save $10 on the sign-up fee for the LPA-affiliated AMSties Credit Reporting Bureau, which can run credit checks on his prospective renters. If he ends up with bad tenants, LPA will help him report rent delinquencies to credit bureaus. The site also has a "deadbeat" database to help landlords with the screening process.

As Mr. Jones worked on improving the house, he also began formulating a marketing strategy for it. He took a grassroots approach: To find renters, he tried to think like one. When considering where to advertise his house, he first went to the Web search engine Google, where he ran a search on "house and rent and Seattle" -- the terms he assumed a prospective renter would use. The search turned up several Web sites where he decided to advertise his property, including:

Mr. Jones says the sites vary in terms of monthly charges and feedback capabilities. Craig's List, for instance, was frustrating because rental listings are organized by the date they're posted rather than by other criteria such as price, neighborhood, or lease start date. However, listings there are free and his ad has produced leads. Other sites, such as Yahoo! Classifieds, give him tools to see how many people are viewing and acting on his ad, a valuable service should he decide to tweak its language, change photos or adjust the rental price. Generally, he's paying for the most deluxe listings possible on some of the Web sites.

For now, Mr. Jones says he's avoiding posting "For Rent" signs around the neighborhood and in area retail stores, though he may resort to this later. Instead, during the first month and a half, he's run listings for his house that included an e-mail address and several photos with the hope that he could avoid a lot of phone calls. That approach brought him only one or two e-mails a day -- not enough -- so he added his phone number to the ads. That led to four or five calls a day, but some callers never followed up to make a visit. Others made appointments to tour the house but never showed up. It's a 12-mile drive that can take up to 30 minutes in heavy traffic for Mr. Jones from his home to the rental property.

In the process, though, Mr. Jones says he's learning a lot about which aspects of his house need more work and what sort of renters he can realistically expect in the neighborhood. Some Section 8 renters -- people who hold vouchers from the U.S. Department of Housing and Urban Development to help pay their rent -- have approached him, and he's learned that if he leased his property to them he'd need to collect part of the rent from a government agency. He would also have to set a rent within certain levels so that his property would be considered affordable for low-income renters, a strategy he'll pass on for now.

He's also learning from visitors' gut responses. In June, for instance, a woman came by with a friend to check out the house.

"They were honest: They said it's nice, it looks great, but 'the tile sucks and the light fixtures have to go,' " he says.

Another woman brought her boyfriend to see the house. They turned it down because of the boyfriend's reservations.

"His answer was 'We just don't know enough about the neighborhood.' He also said, though, 'People seem to be taking care of their houses here'," Mr. Jones says.

So Mr. Jones decided to find out more about the neighborhood. Given that Lakeridge is an area still finding its identity and that there's lots of competition throughout Seattle to attract renters, he wanted to highlight something special about the neighborhood. What he came up with was some history: The area was once a logging camp, and many of the properties were cabins built around 1910 from locally cut wood. It wasn't much, but it was an interesting story he could tell renters.

"It's a stretch, right?" Mr. Jones admits, noting he's drawn in a few renters with his story.

Four renters have reached the application stage, and Mr. Jones has doggedly followed up. He's approved renters with good credit -- such as a flight attendant who liked the combination of water views and airport proximity -- only to see them choose someone else's property. He's called references and sent even the most unsuitable of prospective renters polite rejection letters if they made it to the application stage.

One pair of 23-year-olds approached him about the house and filled out an application. Despite their dismal credit, which he checked through the AMSties database, they had positive landlord references. Too positive: Mr. Jones ran an online reverse phone look-up of one of their "landlord" references only to learn he'd just talked to the applicant's brother.

"I just let it go," Mr. Jones says, chalking it up to experience.

Another prospect, a couple, ages 29 and 30, liked the house's large open basement -- a space big enough for their mammoth television set and recreation equipment. The renters even came with good credit, geographically convenient jobs in South Seattle and lots of cash. Mr. Jones learned, though, that their landlord had paid them to move out early. Their landlord, also an investor, had gotten an offer for his house that he couldn't refuse and broken the lease. Though the landlord and couple's parting was amicable, the abrupt move was an inconvenience the couple didn't want to relive. Despite Mr. Jones's assurances that he wouldn't flip the house out from under them, they decided to move elsewhere.

So it goes in Landlord-land.

While there have been complications, Mr. Jones says he's learning, and he's glad, as an owner, he's learning now how to position his property.

"It's been a great experience learning about the market," Mr. Jones says.

He's discovered, for instance, that many of his renters have dogs, so he's tweaked his classifieds to say "Pets Negotiable" -- with an extra $300 security deposit. Many Seattle apartment buildings don't allow dogs, or place weight restrictions on pets that permit only cats, so Mr. Jones is discovering pet owners are a niche he can target.

He's also considering employing a few new marketing tactics -- perhaps offering a free month's rent to entice someone to his home, which rents for a little more than the $1,000 a month most two-bedroom houses fetch in the area. (Mr. Jones knows -- he's posed as a renter and made phone calls.)

"I'm just looking for a renter who will pay on time and preserve the place," he says. "This is the hardest part, getting your first renters in."

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