Charlotte Property Management Weekly: Rental Home Walk-Throughs: 4 Ways to Protect Yourself
“You know you have a good compromise when both sides are slightly unhappy.” (Many Authors Credited)
As a Charlotte property manager, my least favorite part of the job are the end-of-lease walk-throughs; that is, when the tenant moves out, and we visit the property to check out its condition. If there are damages, we need to decide whether they are “normal wear and tear” (no charge to the tenant) or damages that need to be repaired from the tenant funds. It’s very subjective.
There are three scenarios when it comes to these property manager walk-throughs. The house is left in:
1. Great condition: The tenant gets their security deposit back and the owner doesn’t have to pay much to get the home in market shape. Everyone is happy.
2. Mediocre Condition: Some of the damage is normal wear and tear, and some of it was caused by too much rough play by the tenant. This is where the greatest conflicts occur between owner and tenant.
3. Poor Condition: The security deposit is basically conceded by the tenant. They know they don’t deserve anything back and hope that there is no future contact concerning the property. The owner is able to use the security deposit to mitigate repair costs.
I’m going to focus on the most challenging situation, the home left in “mediocre condition”. This can elicit two different responses from the same walk-through report:
Owner: “You’re killing me! That tenant treated my home like a kid’s tree house and they are only being charged $500 for damages? Add a zero please! They should be put in jail! Did they ever think to cover the food in microwave so it didn’t erupt all inside of it? Did they decide to save money on towels and wipe their hands on the walls? The carpet was new when they moved in! You’re being easy on them! You represent me, remember? Why do you like them so much?”
Tenant: “You’re killing me! I treated that home like my own! I cleaned it daily. We took our shoes off when we were inside (which we shouldn’t have even bothered with, being that the carpet was shoddy-looking when we moved in- I told you this!! Remember??) There might have been a couple things wrong, but I could have fixed them for like $50! $500? Are you crazy?? I thought you liked me! This is highway robbery! You’ll be hearing from my attorney!”
Property managers are really trying to do the right thing, but are stuck in the middle of competing interests. It’s sort of like being friends with both the wife and the husband when they are in the midst of a divorce. You want to be friends with both (like usual), without either of them feeling slighted. Practically-speaking, that can be tough to do!
To make this experience as clean and easy as possible, I’d offer the following four suggestions to landlords:
1. Trust your instincts- there is no “right” answer and it is usually impossible to make both parties entirely happy
2. Be specific on damages and document repair costs
3. Have a consistent methodology on how costs are assessed
4. Take pictures or use video during the walk-through so tenants can see the damages they are being charged for
Though rental home walk-throughs can’t always be pain-free, there are ways to limit potential fall-out from this necessary part of the property management business.
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Why Can’t Property Managers Guarantee How Long it will Take to Fill a Vacant Property?
Question from client: “How long will it take for you to fill my home with a tenant?”
Answer from property manager: “It should be in the next month or two, but I obviously can’t guarantee that.”
Comment from client: “Okay, I completely understand. I wouldn’t want you to speculate about the result of an action that you do for a living and your company has executed repeatedly well for the past 19 years (according to your ad).”
Question from hungry patron: “When will my eggs be ready?”
Answer from waiter: “It should be in the next 10–20 minutes, but I obviously can’t guarantee that because I’m not the cook.”
Comment from client: “You lazy imbecile! I’m starving- shake a leg! It should take 2 minutes- tops! Tell your guy back there to skip a smoke break and crack a couple eggs!”
What’s the difference? Clearly, it’s customer expectations. In some industries the expectations are really high, and in others it’s low. It’s just the way of the world.
So why don’t property managers guarantee the time it will take them to fill a rental property? Is it because they can’t (obviously)?
If you’re an experienced cook, you know approximately how long it takes to cook something. You’ve got to track down the ingredients, mix them up, and cook them for some length of time. It can be estimated (within a few minutes) of how long this will take. The “Guaranteed 10-Minute Breakfast or It’s Free” promotion should be easy to execute without giving away the farm.
The same should go for a property manager, right? If they know:
1. What time of the year it is
2. How fluid the current market is
3. The condition of the home
4. The rental price
It should be enough information for a tighter estimate of when to expect. There are just not that many variables to consider and factor in! So why are there no guarantees then? And why is it “so obvious” that a property manager could never give one?
Q. When will this basketball game be over?
A. Sometime today, but I obviously couldn’t guarantee that
Dominos Pizza did the “20 Minutes Guaranteed, or it’s Free” delivery promotion for years and they were able to pull it off with many more variables to consider (traffic, events going on in the city, number of orders, employees not showing up to work, weather, etc.).
So why not property managers? Are filling a home time guarantees a matter of can’t, or won’t?
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Rent-To-Sell Your Home? Best Time is Now
“Wow! How disingenuous! Could you think that because you create rent-to-sell transactions for living? Isn’t that like asking a barber if you need a haircut?”
At least that’s what I’d be asking as a reader. We live in a skeptical age, and that’s okay.
Let’s start with a story:
An average man meets a beautiful, energetic woman. He is taken. “If I could spend the rest of my life with her,” he thinks, “My life would be complete and I’d truly be happy! Just having her on my arm…” He knows he wants to marry her.
So why doesn’t he just ask her point blank? That answer is easy. She’d think he was crazy! She doesn’t know anything about him; and the one thing she knows is that he isn’t that attractive! There are much better suitors out there! So what does he do?
He courts her. He asks her on a date. He asks her on many dates. He buys her flowers, takes her to expensive restaurants, listens to her stories, compliments her, and tries to show that he is an amazing man. She doesn’t fall in love with him at first, but day by day, she grows fonder and fonder of him.
Then, sometime later in the future, when she is vested and knows (almost) everything about him, she professes her love. And, at that point, he knows he is close to getting what he has wanted since her first laid his eyes on her. He picks the right moment and proposes. And she says, “…Yes!”
I’ll take a short pause so you can collect yourself, grab some tissues, and kiss your spouse.
This story is just like rent-to-sell (okay, huge transition here!). Home owners want to sell their homes more than anything. Buyers are scarce and selling in a short time period for full price is almost impossible. Cheap flings (focus on “cheap”) are the rage as neighbors’ houses are being sold for half price (short sales and foreclosures). Home owners are desperate and have to give their homes away and accept the consequences of future damaged credit.
Home owners just want to sell their homes, much like the man just wants to get married. But, with this economy, the reality of that happening quickly on good terms is almost crazy. So what to do?
Rent-to-sell (placing rent-to-own tenants into vacant homes for sale) is the courtship process. These tenant-buyers get to live in the house, work on improving their credit scores, make the home improvements they want, and work on building up a down payment so that they can buy (when the time is right).
And why is it the best time now to rent-to-sell? This is simply because the banks will have to lend more money out in the future! This stagnant housing market is killing their earnings. They will need to find a way to jumpstart this part of the business by lending to responsible parties (aka like tenants who pay their rent on time for 1-3 years, have improved credit scores, and a nice down payment?).
The time to put rent-to-own tenants into vacant homes for sale (rent-to-sell) is now. When the tenants are ready to buy, the future market should be looking a lot better for successful (loan and sale) consummation!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Big Bank Lessons: How to Sell More by Charging More- It’s All in the Ask
It’s not how much you charge, but how you ask.
“Even in this ‘new economy’? Everyone is so price conscious!”
A friend of mine was going to Mexico and I wanted to surprise her by giving her some Mexican pesos for the trip. Being that Charlotte (drum roll, please) is the 2nd largest banking city in the country, I didn’t think it would be a big deal; I only planned on getting 20 dollars worth of pesos.
I walked into Wachovia across the street and asked for the twenty dollars worth of pesos. They said there was a $15 fee, so it probably wouldn’t be worth getting it from them. They suggested the airport, a travel agency, or Bank of America. I found it interesting that they suggested a competitor; good for them!
I walked a few blocks to Bank of America and figured I’d cut through the chase. I immediately asked the bank teller what they charged for exchanging dollars for pesos. She said they didn’t charge anything; the conversion cost was factored into the exchange rate (aka lowering it). That sounded swell to me.
The question is: how much money did Bank of America make on this transaction? I really have no idea. But they got the sale! The real exchange rate could have been 20 pesos to the dollar, and they gave me an exchange rate of 10 to the dollar. That’s robbery (of course), but I didn’t know it. I just knew I wasn’t paying a $15 conversion fee on top of the $20 of pesos!
So I thought about this in the context of a la carte real estate pricing, specifically in property management. When I tell a customer that our fee for power washing their house is a 15% “project management fee” on top of the real cost, it does not come off very smoothly. The customer feels the exact amount of our fee and how it is increasing their total cost. There is always a strange pause after this pricing explanation, but I thought it was worth it as it provided a high level of transparency on how and where we make our money.
However, can a case be made to present this differently? If power washing costs us $70, and we tell the customer it will cost them $100 to do it, that’s not dishonest. I mean, do you e-mail the Gap and ask them what the actual price the shirt you bought from them cost? Or ask McDonald’s what your soda actually cost? Of course not! You either like the price and buy the product, or you don’t, and you walk.
That conversation with no added fees goes a lot smoother. I mean, what sounds better: $100 cost with no “hidden fees” or $70 plus a 15% fee? Surprisingly, the $100! The profit margin of the first presentation method (which sounds better) is approximately 66% more! And the customers are happier and not triple-checking their monthly statement to make sure the 15% was computed correctly.
In conclusion, the way pricing is offered is important. It’s a way to have your cake and eat it too, a true win-win-win. You can charge more, while selling more, while making your customers happier!
There might be a reason that big banks generate so much revenue; they know how to ask their customers for it!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Why Your First 2 Weeks of Dating are Exactly Like the First 2 Weeks Your Rental is Listed
Early impressions can be very telling. In relationships, they can save you a lot of time and heartache.
For example, when you first start dating someone, the first 2 weeks really are pivotal. One really wrong move and it is over, right? So, it is important to pay attention and try to figure out how to stand out (in a good way…). It’s also important to figure out what they really think of you, as they usually won’t tell you outright. Do they think your nervous tic is endearing or pathetic? When you bring up your issues, are they full of concern or pity for you? Do they plan to keep you around or jettison you when something better comes along?
Here are some potential early impressions and what they really mean:
1. “She hasn’t laughed at any of my jokes. However, her over-the-top cackles at the 16-year old valet’s tasteless joke, and then the waiter’s corny repartee, seem to mean that she is straight-faced with me only. I think she cracked a smile when I told my tried-and-true “dog-napping” story (10-minutes of absolute hilarity, if you ask me), but it could have been a result of the 12 text messages she had sent and received during its duration.”
Translation: You are really unfunny (to her, at least) and she is seeking more entertaining companionship elsewhere. Save yourself money and abort this relationship (before she drives off with the valet).
2. She is mesmerized by my every word. She can recall what I said last week in the greatest detail. She tells me that I am the greatest at everything. When I was fired yesterday, she swore that was incontrovertible proof my company didn’t deserve me. She says I’m smart to keep a belly because the winter months are coming and it is actually “sexy.” Hollywood actors and models are “fake”; she likes me because I’m “real.” My annoying idiosyncrasies are “cute” and I’m “untraditionally handsome.”
Translation: Carpe Diem! She likes you. Strike while the iron is hot and lock her up while she is still in this momentary fog!
So, early impressions from dating are good indicators of relationship success. The same is true of the signs received from the first 2 weeks your home is on the rental market.
1. No one is responding to the rental ads about my home. If your home had feelings, it would be locked in a bedroom alone eating bon-bons and watching “Bridges Over Madison County” right now.
Translation: The home is priced too high, the pictures in the ad are either non-existent or awful, there is potentially no contact information contained in the ad, the ad copy is off-putting, or a combination of the above. Fix and repost the ad.
2. I’m getting a lot of showings, but no one is applying.
Translation: The home is either priced a little too high and/or its condition does not back up what is presented in the ad.
3. I’m getting deluged with showings and applications.
Good! But your home is probably priced too low.
4. Real estate agents don’t respond to my follow-up calls and e-mails after they show my home.
Translation: Your home does not back up what is in the ad; typically, it is dirty and might look like a college fraternity house or an early 1800’s boarding home. They are upset that they wasted their time (and gas) to visit your home and look bad in front of their clients.
5. Your home gets a decent amount of interest and a good application is submitted and accepted within 30 days.
Translation: Your home was priced and marketed appropriately. Bravo!
Though early impressions are never 100% full proof, they are usually on point. Paying attention to them and making adjustments early can save you a lot of headaches, heartache, and money!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Mr. Smith’s Appointment Implies Real Estate’s Future is in Rent-To-Own & Rent-To-Sell
“Since they collapsed into conservatorship in September 2008, Fannie and Freddie have received $151 billion in taxpayer assistance. More will certainly be needed.”
“If this Mr. Smith goes to Washington as head of FHFA (Federal Housing Finance Agency), he will face a monumental challenge at a crucial time: how to protect taxpayers from even greater losses incurred by Fannie and Freddie.”
(Gretchen Morgenson in this week’s NY Times)
So, it looks like NC’s own Joseph Smith, Jr. will be tapped to run the FHFA. Big deal! Somebody’s got to do it, right? And when you’re looking for employment, the government seems to be the only people hiring, so it’s a logical step for him.
Who is this guy? I really have no idea. He’s been in the papers recently due to this appointment; all of the articles about him say that he has a reputation as “friend and rugged defender of the taxpayer.” I pay taxes so that sounds okay to me.
He is taking over an agency that is losing roughly $6B A MONTH over the past 27 months! Obviously, this agency has to be part of the government because after the first $18B loss quarter (or $72B loss year), it would be tough to keep his job in the private sector.
Anyway, what does his appointment mean? Let’s play his first day on the job out.
The first thing Mr. Smith does on his first day of work is ask his new secretary where the bathroom is and how many vacation days he has a year (everyone knows you can’t ask this in the interview!). The second thing he does is call his top guys and ask them how the heck they are losing so much taxpayer money. Their answers probably can be succinctly summarized into one statement, “We guaranteed a lot of bad loans to people who were not qualified enough to have them.”
Mr. Smith rubs his chin and says, “So, going forward, we should probably start only guaranteeing loans to more qualified people, right?” As his top lieutenants vigorously nod ascent and genuflect, he dismisses them from the room. “Sorry fellas, gotta go. It’s time for me to take it street-side and hug some oppressed taxpayers.”
His lieutenants quickly gather and surmise that “more qualified” probably means that Mr. Smith is saying FHFA needs to require “higher credit scores and down payments for loan applicants.” They pat themselves on the back for this revelation and scan the Washington Post to see what new DC restaurants would be good for lunch.
Back on Main Street, “more qualified” means a lot more people won’t be able to get loans to buy homes. It also means that a lot more people won’t be able to sell their homes (it takes two to tango, right?). And, furthermore, it means that real estate agents need to get used to doing even less brokerage business.
So all real estate agents need to pick up their equipment and go home? Hardly! Consumers still need to be able to transact real estate; the last time I checked, people are still marrying, divorcing, transferring, investing, having kids, sending kids into the real world, etc. They need to be able to acquire and dispose of homes.
The opportunity for real estate agents in the next few years will be placing potential buyers (who can’t get a loan now) into homes they will buy when they qualify for one; this means setting up rent-to-own (aka lease option or lease purchase) transactions. On the same token, it means opening up listings of vacant homes to rent-to-own tenants (also known as “rent-to-sell”).
Mr. Smith will be doing everything he can to stem massive loan losses. He is implicitly communicating to the real estate community that rent-to-own and rent-to-sell transactions will be the way to help customers achieve their goals over the next few years.
Will you change your business accordingly?
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Do You Want Rent-To-Own With That Rental Home? CAN YOU AFFORD TO MISS OUT?
Oh, the joy of the successful up-sell! Ask a simple question many times to many customers and make a ton more money! This is what all corporations pine for:
- McDonalds: “Do you want fries with that?”
- Amazon: “7 more dollars and get FREE shipping!”
- Dominos: “Order 2 pizzas at regular price and get free cheesy bread!”
Mix in a little doubt from a good salesperson and if gets even better!
- Meineke: “Sure, you could wait to replace your brake pads for another few months, BUT IS YOUR FAMILY’S WELL-BEING WORTH TAKING THAT CHANCE?”
- Bank of America: “Sure the market has been awful. But with your money sitting on the sidelines, COULD YOU STOMACH MISSING OUT ON THE BIGGEST STOCK MARKET JUMP IN HISTORY?”
- John’s Learning Center: “Yes, your child is doing well in school and is up to his grade’s reading level now. BUT WITH GLOBAL COMPETITION FROM INDIAN AND CHINESE CHILDREN, SHOULDN’T YOU BE ADDING TUTORING HOURS FOR LITTLE JIMMY INSTEAD OF SCALING BACK?”
The same tactics can be utilized in the rental home space.
You can up-sell your renter with: “Is this a house you might want to buy in the future? Do you want to lock into a rent-to-own arrangement and start building equity now?”
And then add a little doubt with: “Yes, it will be tough getting a loan in the next year or two, but what about after that? DO YOU WANT TO MISS OUT ON BUILDING UP A DOWNPAYMENT AND CLOSING COSTS NOW VERSUS THROWING YOUR MONEY AWAY JUST RENTING FOR THE NEXT TWO YEARS?”
“Up-selling” and “creating doubt” are not dirty sales terms; they are the backbone of successfully providing customers with the options they need to fulfill their personal goals. Ever been happy about being up-sold (like when the waiter in Paris told you to try their delicious signature dessert?)? Or happy about someone planting a seed of doubt (“You may want to re-think buying that computer. It graded really poorly in “Consumer Reports.”)?
Let’s look at the facts:
Many people want to rent, but even more people want to own! The banks just aren’t cooperating for most people currently.
And most property owners in this economic environment, who are renting out their homes, are open to selling them; at least that is what the feedback I’ve been getting from clients. I mean who couldn’t use a little more liquidity these days?
Up-selling and casting doubt on the customer’s current situation creates value, rather than detracts from it. And when more value is created, more revenue can be earned!
YOU WOULDN’T WANT TO MISS OUT ON MAKING MORE MONEY HELPING YOUR CUSTOMERS MORE, WOULD YOU?
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: The Options Available to Owners of Vacant Homes
As a Charlotte property manager specializing in lease options (rent-to-own and rent-to-sell), we get many calls from home sellers “exploring their options” about their vacant properties (unlike Obama, my puns are typically not intended). So, as a public service, I’ll run through the available options:
- Strategic default (I think this is what it is being called): Stop paying the mortgage and taking the credit score beating like a man
- Put the property on the market for sale: If the home is special and priced well, it will sell in some period of time. If not, eat the mortgage every month until the banks start lending again.
- Rent the property out: Get most of the mortgage paid every month by the tenant. Keep a tenant in the property until the market comes back and then place the home up for sale.
- Rent-to-sell the property: Put a rent-to-own tenant into the property who will pay the mortgage and potentially buy the home during their lease period.
- Rent out the property and then put it on the market: In my experience, this leads to disappointed sellers and upset tenants.
- Arson: Not recommended. And, no, this is not a service we offer!
All of these approaches obviously have pros and cons (like jail time). Depending on each respective person’s needs and tolerance for risk, each approach could be the appropriate one.
And to conclude the public service announcement, please contact your local property manager for further details.
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
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Charlotte Property Management Weekly: Delayed Rental Walk-Throughs Cost Everyone Money
Unfortunately, I’m yawning as I’m writing the title of this article. I’m not sure how to jazz it up a little (maybe “Lindsey Lohan falls for property manager during rental walk-through! Then she heads back to rehab.” I’m intrigued at least.
Learn MoreCharlotte Property Management Weekly: Another Ploy in Rental Home Fraud
Perhaps the next “big thing” in rental fraud is high-jacked rental house ads. We just started managing a property and were surprised when potential tenants started contacting us about a different Craig’s List ad on the same house (at a much lower rental rate); they were wondering which of the Craig’s List ads for this rental house was legitimate.
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