How to NOT Rent your South Austin Home

Yesterday I was pulling up lease and sales listings for a client who wants to either buy or rent in Southwest Austin. I came across a lease listing in a great neighborhood in MLS area SWW that has been on the market for more than 130 days. Sylvia was sitting at her desk and I remembered that she had shown that house to a leasing client several months ago. “What’s up with that house on {Street name}?” I asked her. “It’s been on the market for 135 days!”

Sylvia said, “It’s in bad condition, the fence is rotted and falling down, the carpet is dirty and stained, it stinks inside, the yard isn’t taken care of, it’s outdated with ugly pink decor and bad wallpaper, it needs paint and it’s over priced”. OK, that explains it.
Are there really Property Owners and leasing agents who are so out of touch with reality that they allow this to happen? Absolutely. Cheapskate owners and incompetent Realtors seem to find each other on a regular basis in the Austin real estate market. The outcome is rarely good.

I showed the house yesterday anyway, partly because there were only a handful that fit my client’s search criteria, and I wanted to see it for myself and let the client rule it out herself instead of just not showing it. Upon viewing the property, it now has a new fence, and there are paint cans and supplies in the middle of the floor in the garage, but everything else Sylvia said is still as she described. Looks like the rental market may be slowly teaching the landlord a lesson, but it’s still pretty late in the game to be hearing the wake-up call, and the home needs much more than a new fence and some paint.

The home came on the market in November of 2006, priced at $1700/mo., which is about $300 per month too high. After 35 days on the market, it was dropped to $1500 per month. The online listing has only 2 photos (8 are allowed), and much to my amusement (but not surprise), the second photo is an identical duplicate of the first, which is a poor shot of the exterior showing mostly the garage doors. Any agents searching the MLS, or renters searching public sites will, instead of viewing attractive photos displaying the features and design of this home, get two nice looks at the garage doors. It may be, in this case, photos would do more harm than good, but there is still no reason, in my opinion, that any listing should not have a full array of photos depicting what the renter will see upon viewing the home. If good photos can’t be taken because of the condition of the home, that should be telling the owner or agent something.

The comments section of the listing, where agents normally try to sell the agent/renter on the attributes and great features of the home, simply says “CALL LANDLORD FOR INFORMATION, SHOWINGS & AVAILABLITY {phone number listed}. Former model home.Great location.”

Wow. I’m never surprised by anything in this business, but this one’s pretty amazing. The comments should describe the layout and make the reader more interested in seeing the home. Why would I want to call the landlord? The home is vacant and has a lockbox and is listed as a “Go” in the showing instructions of the listing. Amazing.

Assuming a market value of $1400 per month (about $47 per day), this investment property owner has now incurred $6392 in lost rent (vacancy loss) for the home. That doesn’t include ad costs and utilities. When it eventually leases, there will be leasing commissions added to that number. If I were walking through this home with the owner, and estimating the cost of putting it into proper condition, I would say it needs about $3,000 in expenses to strip the wall paper throughout, repaint throughout, clean it up properly, have the carpets cleaned, stretched and deodorized, have the yard put into shape and trimmed up, and make sure all the light fixtures, bulbs, appliances, etc are in working condition.

In other words, a properly prepared rental home in Austin must present to the market a vibrant, inviting, fresh feeling home that renters will drive up to and immediately start to like, then walk into and start to like even more. At present, it’s completely the opposite. The house looks shabby from the outside and it gets worse after you go in.

This case study proves and once again validates something I’ve observed for many years in the rental property business in Austin. That is, cheapskate rental property owners who try to save money and cut corners on repairs and make-ready expenses usually end up losing way more money that they think they will save. Greedy (or simply overly optimistic) landlords who over-price their rental homes are usually punished with extended vacancy. Combine the two and you have what we have here.
The rental market in Austin is very efficient and absolutely punishes incompetent and/or poorly advised landlords and their agents. Renters aren’t stupid. If you rent a home from an owner who isn’t even willing or able to put the home into a basic rental market condition, what will happen when your air conditioner breaks, or you need a plumbing repair? This is not the type of owner you want to have as a landlord, and good smart renters (the kind you want) know it and will keep looking.

This listing needs to be taken off the market, all the work done such that it is put into move-in condition, then put back on the market with an experienced leasing agent or Property Manager who knows how to rent homes in Austin.
What’s the lesson here? Keep your rental property in top condition and price it right. If you’re going to have an agent help you, hire one who knows how to properly advise you and who knows how to market the listing, or hire a Property Manager to handle your property turn-key.

Posted by Steve
9 years ago

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Michael - 9 years ago


What is truly unfortunate about this scenario is when the property finally leases, it will most likely be leased to an unqualified resident(s) who will only add to the demise of this “investment”. Why? Experience has shown that people who look at a property like this and say “I like this obviously poorly maintained home, I think I’ll rent it” are people who accept the property’s poor condition as being “normal”. Since the applicants don’t seem “too bad” to the owner and given that the home has been vacant an extensive amount of time, the owner approves the applicants and takes a chance.

When the resident(s) finally vacate the home (or are evicted) they will most likely return the home in worse condition then when they moved in. The owner is then forced to complete another make-ready, thus adding to their frustration with the poor performance of his/her “investment”. Typically, these type of residents are so hard on a property that after a few years the property begins to look tired and worn out.

When the owner finally decides to sell the property, the amount of abuse, deferred maintenance and damage that has accrued and will substantially impact the gain in value (if any) they receive from their “investment”. In my twenty plus years of property management, I’ve seen this situation play out over and over many times, “Penny wise, dollar foolish”.

Mare - 9 years ago

Better yet, why make improvements if the tenet is willing to pay to improve the property?

For the last two years of my high school, my parents rented the home we lived in. It was in a decent neighborhood, everyone kept up their home, etc. After seeing $400+ electric bills for several months, and the owner not doing anything about the AC, my parents paid, on mulitple occassions, for a repairman to come out. Finally, my parents purchased a new unit. Same issue with the dish washer and garbage disposal. I think my parents found it was cheaper to do that than to seek litigation; regardless, they maintained that home as if it were their own, because we had to live there and they thought it was the right thing to do. My dad was in a car accident and had been seriously injured, and the business that he had just started (and put everything into) went under shortly after the accident. They were in a tough financial spot and wound up with a landlord that took advantage of that.

Austin Realtor's Wife - 9 years ago

Steve, what a great column you have here!

What is even more ridiculous is that this happens in listings FOR SALE also!!!!! Like Michael pointed out, many investors are out to save the almighty penny and don’t take into account the ultimate losses they will suffer. Not improving an investment to bring it AT LEAST up to par nets a negative profit- why bother investing?

You’re right- investors that find themselves with a home in this condition are either greedy or stupid and often have a like-minded agent holding their hand. Like you said- a cheap make ready crew to clean and a new coat of paint and you CAN charge that ridiculous amount you wanted. It’s CRAZY!!!

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