2 Points & Hot Chicks- The Rental Market According to Stanford Financial

“I know the market rent is $1,195/month, but I need to bring in at least $1,300.  Can’t we list my home at $1,400/month?”

Allen Stanford, the founder of the now disgraced Stanford Financial, had a fail-safe method on how to bring new clients into his firm.  He would place ads in South American magazines that had scantily-clad Latin women promising investors a two-percent return above the market rate.  The calls flooded in.  He hired a MBA for his marketing department and she wanted to expand the marketing message.  “No,” Stanford snarled, “Two points and hot chicks- that’s it!”

And it worked.  Investors loved the idea of making more money than the going market rate that Stanford Financial promised.  Unfortunately, Stanford Financial couldn’t deliver.  The guy who uncovered this massive fraud said it took him 30 minutes; all he did was take Stanford’s financials off of their website, cut & paste them into an Excel spreadsheet, and saw that it was impossible for them to offer the extra returns they were advertising.  Investors lost everything.

The inability to deliver on things too good to be true is as applicable on the “buy-side”, as it is on the “sell-side”.  When you advertise something at a price that is above market rate, the only people responding will be those who probably can’t deliver.  For example, if you try to sell a hamburger for $100, the only buyer will probably be Wimpy (yes, of Popeye fame) who will gladly pay you Tuesday for a hamburger today.  Except, as you find out, Wimpy left the country on Monday and has no forwarding address.

Back to the original question…  If you offer your home over the market rate at $1,400/month, this is the scenario that will play out 90%+ of the time:  You’ll receive no/few calls, get anxious, someone will finally apply, you’ll be elated, the application will be poor, you’ll be willing to overlook the 460 credit score and time in the Federal pen, the tenant will move in, the tenant will stop paying in month 2, you’ll accept partial late payments for months as they get further and further behind, you will finally file for eviction, after 6 weeks the tenant will be out, the house will need thousands in repairs to get it market-ready, you’ll be unhappy.  Your plan to make extra money will have turned into thousands of dollars of losses (and some unhealthy stress).

Allen Stanford might not deliver the two points to you, but I will:

Point #1:  Price your home at a competitive market rate

Point #2:  See point #1

 This will offer you the best overall return, even if the hot chicks tell you differently.      

Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company” (www.BDFRealty.com and www.RentToSell.com).  You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://twitter.com/bdfrealty.  He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.renttosell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this difficult real estate market.