property manager

Is it OK to Visit My Rental Properties if I Have a Property Manager? I’m Sort of Curious To See Them…

Answer: Yes!  We live in the United State of America.  If you’re the owner, you are always welcome to visit your properties.  This right is usually written into the lease as well.

This is a very short answer (and makes for a very short blog)…

For a longer discussion… the question could be whether it is advantageous for owners to visit their properties if they have a property management company managing them already.

Let’s look at 3 scenarios of an owner rental home visit.  Keep in mind (especially after COVID), at least one of the tenants will probably be home at some point during the home inspection:

Scenario #1 (Happy Time):

Owner knocks on the door.  Tenant enthusiastically answers and there is a warm greeting.  They tour the home together.

Owner: “My, you keep my home up beautifully!  How did you get the cracks so clean between the countertop and backsplash? 

Tenant: “Oh, it was a trick my mother taught me- gently scrub a paste of baking soda mixed with lemon juice in with a toothbrush.”

Owner: “Splendid!  And thank you for always paying early!”

Tenant: “You’re welcome!  Have you met my 4-year old daughter, Ivory?  Honey, come say ‘hi’ to our landlord!” 

Owner: “She’s so cute!”

Tenant: “Thank you!  Can I get your number if I have an emergency and can’t get in touch with the management company?  They’re sort of slow sometimes.” 

Owner: “Sure!”

Upside: Owner has firsthand knowledge of the property and a budding friendship?

Downside: It might be necessary to evict the tenant and her young daughter.  A personal connection makes this tougher.  The tenant now has an influential third-party to go to when the property manager’s answers are not to the tenant’s liking (the old “Go to Mom when Dad says ‘no’” trick).

Scenario #2 (Unhappy Time):

Owner knocks on the door- no one answers.  Owner keys into the property.  Family is eating dinner.  Tenant has been late on the rent.  The home is really messy and not maintained.  Owner speaks to the tenant.  Tenant had a tough day at work and complains about repair issues with the house.  An unhappy conversation ensues.  No one is happy when the owner leaves.

Upside: Owner has firsthand knowledge of the property

Downside: The relationship with the tenant is potentially complicated.  There are negative feelings on both sides that may lead to sub-optimal choices that erode the relationship further.

Scenario #3: (Normal Time):

Owner knocks on the door- no one answers.  Owner keys in and no one is home.  Owner walks through, inspects all the rooms, and takes a few notes.  Owner is preparing to leave and the tenant arrives home with her daughter from basketball practice.  Owner and tenant cordially greet each other and then each continue along with what they were doing.  Owner leaves.

Upside: Owner has firsthand knowledge of the property

Downside: None

As a property manager, our goal is to maximize our owner client’s investment; a large part of that is creating a drama-less relationship where rent is paid, the home is maintained, and needed repairs are done.  We want to create an environment where tenants want to extend their leases and have no landlord-related reasons on why they wouldn’t.  They are free to enjoy their rental home and live their lives.  If at some point we need to file for eviction, the decision is based more on a business case as opposed to any emotion either way.

It’s a boringly successful relationship for all parties.  Ran correctly, it’s a beautifully benign operation.

And it is entirely possible that an owner visit would not affect the tenant relationship at all!

But… going back to whether owner property visits are actually advantageous, we still don’t recommend them as the safest move seems to let things be.  It doesn’t seem wise to add any potential disruption of this boring relationship when there is no tangible upside.

Owners are always welcome to visit their rental properties for any reason, including curiosity!  There just seems little to be gained and much to be potentially lost.  Why take an unnecessary risk?

Happy Landlording!

McAlister’s Deli “Service Fee” Strategy: Applicable to Rental Homes?

The (FTC) complaint alleges that (a large property management company) advertised monthly rental rates that failed to include mandatory junk fees that could total more than $1,700 yearly… These undisclosed fees ranged from “services” such as “smart home” technology and “utility management,” to air filter delivery and internet packages. Renters could not opt out of paying these fees.
(www.FTC.gov)

Some friends and I meet for a Bible study on Monday nights at the local McAlister’s Deli. After buying my sandwich one night, I started to peruse my receipt after paying. I was trying to figure out why my regular sandwich cost so much and looked at the bottom of the receipt. I saw the tax amount (can’t dodge that!), but above it was an itemized “Service Fee”. And here I thought I had just picked the sandwich up at the counter…

I clicked on an icon next to the aforementioned “Service Fee” and it offered a fuller explanation. “This fee is used to help pay for the restaurant’s app and website.” Surely, companies can’t charge for that as a mandatory fee.

Wait- or can they?

I always thought companies were only allowed to upcharge under the condition that they added more value. If McAlister’s allowed me to add another slice of cheese to my sandwich, I’m fine with them charging me more. If I wanted a bigger drink than what is in their value meal, I’d expect to pay more. But ordering on their app or website? Isn’t maintaining the on-line ordering portals the cost of doing business in today’s environment? And isn’t it cheaper and easier for them if I use them?

The line on chargeable value has gotten blurred in rental real estate as well. As property management companies have piqued Wall Street’s interest of late, maximizing revenue is being stressed and companies are getting really “creative”. Now I’m all for “revenue enhancement” as making more money is generally good. However, fees should be generated by providing tenants voluntary options that could make their lives easier or give them greater flexibility; mandatory fees for unwanted or unwarranted services could easily cross a line (see the FTC blurb above detailing the “value-added services” that incurred a $48M fine).

We are starting to have tenants ask us things like, “Is the rent really $1,800/month or are there hidden fees that are not mentioned?”. Being that these questions are being asked at all means this practice is becoming prevalent; legislation and more enforcement is probably on the horizon.

Landlords and property managers all aim to maximize revenue for their real estate investments and rightly so. However, we need to be cautious and make sure a fair value proposition is made. If any fees are questionable and wouldn’t withstand scrutiny, they should be scrapped. Landlords should be on notice and make sure general business practices on add-on fees stay on the right side of the law. “Service Fees” for common technology usage may only work in the food industry.

Happy Landlording!

How Much Do You Know About Thanksgiving? And Your Rental Home?

My 9-year old daughter, Emme, decided she wanted to have a family “Thanksgiving Trivia” game this year. She dutifully came up with some questions about the holiday that we’ve celebrated every year. Just through osmosis, I figured that the adults would know most of the answers. How hard could it be? I pictured Pilgrims eating turkey and corn with the natives while celebrating the bountiful harvest together with some boats in the background. That’s at least the sanitized version of events I thought we’d cover. And it would be multiple choice! How hard could it be?

Well, she didn’t take it easy on us. Some actual questions:

1. How many women were the first Thanksgiving? (5, 7, or 10?)
2. How long did the first Thanksgiving last? (3, 5, or 7 days?)
3. How long was the Mayflower’s voyage from England to America? (66, 77, or 81 days?)
4. How many countries celebrate Thanksgiving? (11, 16, or 20?)

As each person filled out their trivia sheets, it became apparent that we didn’t know Thanksgiving quite as well as we may have thought. Our ancestors would not have been very proud!

It made me think of how well we really know our rental homes. Sure, we may know how many bedrooms and bathrooms they have. The advanced landlords may know how many square feet and how large of a lot it has off of the top of their heads. But what about the aspects that would really make people interested in it?

One of the key aspects of marketing is differentiation. Why would a potential renter pick one 3 bedroom / 2 bathroom house with a .25 acre lot over another with the same features? Most of the rental homes in Charlotte were built in subdivisions that offer a large degree of uniformity. Why would one cookie-cutter home be more desirable than another cookie-cutter home?

Price and availability are certainly two differentiators. If one home is on the market for $2,000/month and one that is close to the same is $1,800/month, the $1,800/month house obviously presents better. Or if there is only one house available in a desired subdivision, that would also work well- one can only take what they can get!

But if there are five rental houses in a subdivision that are available and priced similarly, what would make one stand out?

As a Charlotte property manager, one of the questions we ask our new clients is what made them buy their house in the first place. What were the special characteristics that made them want their house over all the others that were available? Some have some great insights on why and that really helps in marketing; usually they had lived in it at some point. Others don’t know.

For those that don’t know, that’s okay. But as the people who are responsible for positioning their home in the marketplace, we need to come up with this differentiation. What’s special about this rental home that we want potential renters to focus on that other rental homes don’t have? “This home’s large, manicured backyard boasts a built-in, outdoor gas BBQ and covered back patio making it perfect for outdoor gatherings with friends!” is an example.

This also plays into what type of home renovations to do between renters. Do we want to focus repair dollars on the making the kitchen really nice so we can use something the effect of “Enjoy the smell of simmering cocoa on the new stainless steel stove while leaning against the new granite countertops in your spacious gourmet kitchen!” I remember picking a hotel to stay at in the mountains during one winter that highlighted the “recently renovated bathroom with heated bathroom floors” as its point of marketing emphasis. It sold me on an otherwise non-descript room.

To consistently succeed in a crowded rental market, smart landlords will know their rental home well enough so they can highlight point(s) of differentiation to entice prospective tenants. It’s tough to win the Thanksgiving trivia contest by only knowing the basics of the holiday!

By the way, the correct answers to the trivia questions above are respectively: 5, 3, 66, & 11.

I hope you had a great Thanksgiving & Happy Landlording!

No Hard Appointments: Can Property Management Be Easy?

“If it is possible, as far as it depends on you, live at peace with everyone.”

Romans 12:18

I remember when I started my first “real” sales job.  It was all about making quota, that is reaching (and hopefully exceeding) the required number of sales my company wanted me to achieve each month.

Now, for me, working in sales was hard.  And doing sales in New York City was even harder.  I would tirelessly cold call people on the phone, show up at business offices, blast faxes to lists of businesses, mail out postcards, and send out weekly e-mails to prospects- whew!  All this effort was to generate the blessed “appointment”; a set time with a decision maker to sit down and offer my wares to a potential buyer.  “Appointments set” was the goal that management had us chase because appointments were expected to inevitably generate sales.

Sales Manager: “Furniss- how many appointments did you set today?”

Sales Manager (regardless of the number I replied): “You (really stink)!  I’d have gotten double that number in half the time.  More calls!”

When I did finally get an appointment in my early tenure, it was even harder.  I had to look some adult in the eye and try to solicit a need for my product.  After listening to my spiel, they would then poke holes in my nascent presentation with “objections”.  Objections were good I was told- it meant that they were paying attention and should be considered to be “masked buying signals”.  Things that were considered bad were visible apathy, frequent phone checking, over-agreeability, and yawning.

However, I didn’t see it that way.  Objections were bad for me; I had no idea what to say most of the time.

Decision Maker: “Your product is too expensive!” 

Me: “Uh… yeah, I guess it does cost more than the other guys- you got me there.  Do you mind if I circle back to you if we ever cut our price by 50%?”

I needed help, and fortunately, my sales manager was a self-professed sales closer.  I wanted to see how someone of his ilk could set aside difficult objections to score big deals.  So I asked him if I could accompany him to one of his harder sales appointments to see how it was done.

Sales Manager:  I wish I could help you with that, Rowboat (a nickname for having no “sales”), but that is an impossibility with me.

Me: It’s impossible for you to take me on a sales call?

Sales Manager: No… I just can’t take you an any “hard” sales calls, Rook.  They’re all easy.

At the time, I thought his response was a way to dodge being exposed as a sales pretender while still expanding his aura of cockiness.

However, after being there for a few years and looking back, he really didn’t have any hard appointments.  As a sales manager, he had kept a decent amount of large, longtime clients that he brought lunch to and visited often.  He knew the decision makers very well and brought a humble attitude (one he did not share with his underlings) of empathy and service.  When opportunities for new sales came, his clients were bringing it to him, and not vice-versa.  And as long as they stayed in their current roles, their existing business with him was never going to a competitor- they loved him.

As I got into property management in Charlotte, I began to realize how hard it could be.  Our owner landlords had ideas on how things should go, our tenants had others, and the property management company sometimes had a completely different version.  We could constantly be fighting with everyone and make every day a battle.  Or we could try to facilitate an easier environment, a land of “no hard sales calls”.

Property management, like sales appointments, can be easy (or at least easier).  But it does take a continued, humble effort of empathy and service to pull off.

Happy (Easy) Landlording!

Fix or Replace Broken Appliances? Factoring in Sunk Costs at Carowinds

I remember several years ago my out-of-town, 6-year old niece was coming to visit.  My wife wanted to make sure that she had a great time, so we were brainstorming a list of activities:

Bowling?  No, that could be done anywhere.

Movies?  Same thing.

Family board games?  No, she might beat us…

Hiking?  Not a bad plan, but…

How about going to Carowinds, the local amusement park?  Yeah!  It’s a bit pricey (around $50/person) but Carowinds is a legitimate, massive amusement park and would provide fun for the entire day.  And this would make her trip memorable.  It was decided!

The big day came and we excitedly ushered my niece to Carowinds.  It went well at first; the first few rides were a blast!  But then 30 minutes into our adventure, my niece says (something to the effect of), “Well, that was fun!  Where are we going next?”

This was not a question I was expecting.  Of course, the real answer was (something to the effect of), “There is no “next”.  For 50 bucks a person, we are staying at the amusement park for the next nine hours.  In addition, you are going to love every moment of it and be bragging for years about how visiting your Charlotte-based aunt and uncle was your childhood’s crowning experience.”

However, from a marriage perspective, I recognized that “my real answer” and “the real answer” given to my niece could possibly be different; I wasn’t sure what my wife’s appetite for niece appeasement was yet.  And from an economic perspective, it was close to immaterial.  The Carowinds tickets were a sunk cost regardless (we already bought the tickets).  If we left the amusement park and went hiking (free), it was a wash.

To me, this story feeds into how we handle broken appliance repair calls from tenants in our Charlotte property management company.  When we get these calls, we are left with the choice to either send an appliance repair person or just buy a new replacement appliance.  What’s the best way to handle them?  Sunk costs are part of the decision-making process.

The economic analysis on these starts with the appliance repair company.  The way they bill is that it costs roughly $100 for them to show up at the house and diagnose the issue (this is the sunk cost- we bought it when we called them).  If we choose to approve the quote for their recommended repair, the $100 is credited towards the repair.  If we think that an appliance is too costly to repair, we can just thank them for the diagnosis, refuse the repair recommendation, and pay them their $100 service call fee.

Lower-end appliances in the Charlotte market usually cost somewhere between $500 – $1,000 when shipping, taxes, installation, and old appliance removal fees are factored in.

Some of these decisions are common sense.  If a new stove costs $800 and an older stove is found to need $700 in repairs to fix, we’re going to replace the stove.  However, for math purposes, the cost for a new stove is really $900 ($800 for a new stove + $100 appliance repair company diagnostic fee).  Tacking on the sunk cost of the diagnostic fee will make replacing appliances cost more.

In turn, the math goes down when repairing appliances.  If the same stove is found to need $250 worth of repairs, the real differential is $150 (the first $100 is a sunk cost).  This usually makes repairing appliances a better proposition unless there are other mitigating reasons to replace them (beat-up looking, opportunity to homogenize mismatched colored appliances, etc.).  $150 versus $800 makes taking the chance that the repair would keep the appliance operating for a while very appealing.

The harder decisions are when the cost of the repair is 50% of a new appliance.  I tend to go towards the repair.  It requires less money outlaid initially and I’ve found that older appliances seem to be built better than the newer, low-end ones.  The only problem is when an older, repaired appliance breaks down near-term for a different reason and I’m left eating the loss on the larger sunk cost of the repair (and holding a bag of regret).

Smart landlords factor in sunk costs when in appliance “repair or replace” dilemmas.  Smart uncles also factor them in to assuage anger when one is unexpectedly hiking Crowders Mountain after paying to ride the Fury 325.

Happy Landlording!

Sportsbook & Tenant Application Gambling- Now Both Live in NC!

Sports betting became legal in North Carolina on March 11.  This may be news to non-residents.  To residents, it’s been hard to miss the blatant and ubiquitous advertising bombarding us both in real life and digitally.  My 10-year old son starting asking me about sports gambling after repeatedly seeing billboards on the interstate.

Son: Dad, what’s a 5-team parlay?

Dad: It’s a type of bet that either turns your college fund into a full ride or enters you into an indentured servant relationship with the college of your choice.

Son: Oh… Thanks…

Gambling is a funny thing.  In the back of your mind, you know you’re going to lose.  Logically, casinos and sports gambling entities don’t become massive conglomerates by paying out more than they take in.  Quite the opposite!  They know that if they can keep you gambling, you will lose.  So why does anyone choose to gamble when the odds are that your money is going to find a new home?  I mean, it is an optional activity that millions of people choose to participate in every day.  What’s the appeal?

Well, some people do win big, cash out, and have a lot more money than when they started.  The rest just write off the expected losses as an “entertainment expense.”

But what about when it’s a real-life situation and you need to win?  It’s not about entertainment; it’s about having a house for you and your family to live in.  And I’m not talking about sports gambling, but about tenant rental applications.

Especially now, many tenants do not have good credit, good reports from former landlords, and/or sufficient income to afford higher-priced rental homes.  But they need to have a place to live.

So, tenants with substandard credentials are submitting rental applications that cost around $75 per adult.  They know, especially with homes marketed by property managers, that it will be an uphill battle; most will uncover negative information and have standards that the tenants know they cannot meet.  And there are not enough owner-managed homes where there is little tenant screening and where they can give a “down-on-my-luck” narrative and get a sympathetic owner to approve them (and this does not often work either).  So they have no choice but to gamble and keep applying, though it is draining their finances one turned down application at a time.

But what if they could stack the odds in their favor and win?  That would be appealing!  And this what we’re seeing and hearing about.  Don’t have good credit?  Buy a false credit and criminal report.  Need income?  Photoshop paystubs that show more.  Need a former landlord to say something nice?  Create fake landlord reports.

It’s raising the stakes.  If a landlord winds up approving a wayward applicant, the costs can be significant if the tenant reverts to previous ways and does not pay.  Not only is there a loss of rent, but now there are court costs and attorney fees for filing for eviction.  To boot, public tax dollars are funding pro bono lawyers to congregate in the courthouse to train tenants to appeal the rulings regardless of whether justice was served or not; this can make the process go on indefinitely as cases enter an overwhelmed court system, while the tenants stay in the rental houses.  And when a court victory eventually happens, the landlord is often left with costly fix-up of a battered house.

The prospective tenants may be gambling on false rental applications ($75), but the real gamblers are the landlords who are not screening their tenants thoroughly ($10K+).

Legal sportsbook gambling may be new to NC, but attempting to illegally improve the odds is not a new concept.  Smart landlords will run their screening checks thoroughly or outsource to a property manager whose job it is to keep up on the latest schemes.

Happy Landlording!

Crushed by Cumulativeness: Rent Increases and Why the NFL Player Didn’t Sign Your Kid’s Football

“What a jerk!  All he has to do is just sign his stupid name to ONE football and it would mean the world to Little Johnny.  But instead he needs to hurry to the locker room to recount his millions of dollars!”

(Reaction of many parents after their child’s autograph request is snubbed)

I was talking to a local college football player (a kicker, if you must know) about what he was doing after he graduated in May.  He said he was starting to figure that out being that he finally had some time to think about it.

Some time?  He’s in college!  I was thinking of how wasting time was sort of what my friends and I did during our undergraduate tenures…

“You don’t have any time?  How did you get so scheduled out?”

He pulled out his team-issued iPad.  “Do you see this?  I had to look at this every day for the last five years; it told me where I was supposed to be and what I was supposed to be doing every hour of every day… Now, honestly, I’m adjusting to doing life without it.”

Wow!  That sounds pretty demanding for a college kicker at a small-time football school.  If I were him, I think I would have opted for intramural soccer.

Now let’s think about NFL players.  There are even more football activities than college.  They are travelling for training camp and games.  If they don’t do well, they can be cut at any time.  If they want to get better, they need to take the time to practice, lift weights, and study the playbook and game tape on their own.  Then they have family, faith, friends, financial, and other real-life commitments- and everyone likes them and wants to be near them because they are wealthy and famous.  They are super busy!

And then there are constant, on-going demands for their time.  Want to be on a weekly talk show (aka NY Jets quarterback, Aaron Rodgers)?  Make sure you cut an hour or two of every week for that.  Endorsements?  Autograph shows?  Dinner with your wife?  Your kid’s basketball games?  Team functions?  Mailing back football cards kids send them to sign?  Your college wanting you to come back to accept an award on an off-week during the season?

If it was signing one football, that would be one thing.  But it is signing one football in addition to an overpacked schedule.

So how does football player busyness fit into rent increases in today’s world?

A landlord may be heard muttering, “If a tenant can’t come up with an extra 5-10% for rent every year, maybe they shouldn’t be in the property in the first place!”

If it was just $100.00/month extra for rent every year, that would be one thing.  But rental increases are not happening in a vacuum.  Tenants have been absorbing increased rents in addition to increased costs for almost everything else they consume.  Food, gas, car prices, car insurance, plane fares, restaurants, NFL tickets (another 4% increase in ticket prices was just announced by the worst team in the league, Carolina Panthers), etc..  Netflix just went up by another $2.00/month, for goodness sakes!  Like small papercuts that keep happening, the bloodletting becomes very real eventually.

Cumulativeness can be crushing!

Property managers and smart landlords need to balance potential rental increases with killing the golden goose.  Good tenants are an asset that maintain the property and pay down the underlying debt.  Dumping another increased expense on them can be detrimental to both parties, especially if the tenant moves and the property needs to be repaired and put on the market again.

Good news!  The college and NFL players don’t hate your kid.  If they had an iPad with lots of empty time slots and/or few other commitments, I’m sure they would happily sign footballs most every time!  And if rental increases are measured, good tenants will be able to absorb them and continue to be a reliable monthly partner.

Happy Landlording!

Be a “Shark Tank” Landlord: Invest in Spotless Tenants!

“Cleanliness is next to godliness.”

(attributed to several authors)

“We feed the eagles and starve the turkeys.”

(Heard in several sales job interviews circa 2000)

I have to admit that I’m a fan of the television show, Shark Tank.  For the uninitiated, it’s a show where entrepreneurs pitch their companies to several accomplished business people (the “Sharks”) in order to entice them to invest in their fledgling enterprises.  After the entrepreneur’s presentation pitch, the Sharks begin to pepper the business owner with questions.

One of the main lines of questioning that comes up in the “Shark Tank” revolves around how the owners calculated the sales prices for their companies.  Questions like: How are you computing a $5M valuation with only $150K in sales this year?  Why are you forecasting such aggressive sales growth?  What are you doing to lower your unit cost?  How is this going to produce enough free cashflow so I can get my initial cash investment back in a reasonable amount of time?  Why is this a business I should have a multi-year involvement with?  What is the industry growth forecasted to be?

Even after all these questions, it is tough for anyone (even experienced Sharks!) to know how well the companies will do in the future and whether the money they choose to invest will produce dividends.  However, the entrepreneurs are sure.  They come in loaded with enthusiasm and sell their companies as the next big thing- they will be successful!  But as much as they sell themselves and their companies, the proof will be in the pudding at a much later date- do they deliver as promised or not?

It’s risky investing in start-up businesses.  They are largely unproven and are really just selling future promise.  Statistically, most will fail.  But the allure is, that if successful, the returns can be more lucrative than investing in established businesses.  The fun part for these investors is when a start-up does well, matures, and becomes an established, valuable company.  This allows them to ride its profits for its lifespan.

This reminds me of rental tenant selection in a way.  Property managers look at prospective rental applications, process the information, and ask follow-up questions in order to pick a winner.  The applicants are all very optimistic and claim they will be great tenants.  Property manager “Sharks” will decide who they want to “invest in” (aka approve the application and sign a lease), but the ultimate success in the tenant selection will be discovered down the road.

Successful tenants pay their rent on time, get along with their neighbors (no drama), and maintain the property.  But what tenant characteristic should landlord Sharks look for that might generate the best future returns?  After many years of residential property management, I’m convinced it is finding and keeping the meticulous ones who keep their rental homes spotless.

A certain tenant of our comes to mind.  When we perform our bi-annual home inspections, the house is immaculate.  You could make the argument that it barely looks like it has been lived in, and this is after several years of occupancy.  The HVAC air filter is always fresh and the appliances look to be meticulously maintained.  To re-rent this house, I imagine our fixup would be minimal to none.  What is the dollar value of that?

For example, if we calculate the life of carpet at 7 years, what is the value if a tenant cares for the home so well it stretches it to 10+ years?  Or if we don’t need to paint it on the next vacancy turn?  Or if the HVAC unit lasts an additional 5 years due to its care?  It’s estimated the average house needs to spend 3-5% of its value in maintenance costs each year.  What is the value if that figure is reduced to 1% due to meticulous care?  I don’t know, but it’s a lot.  It’s substantial enough for us to really want these people to stay!

Like the Sharks, real estate investors want to maximize the return on their rental homes as well.  When meticulous tenants who love to keep their homes spotless come on board, smart landlords will look to lock them up and ride the profits (realized and unrealized) for many merry leases to come.

Have a Merry Christmas & Happy Landlording!

Don’t Be a Desperate Housewife (or Landlord), Just Push the Right Buttons

“Desperate times call for desperate measures.”

Hippocrates

Typing the word “desperate” makes me think of the old TV show, Desperate Housewives.  The story centered on four suburban women who were neighbors.  They found themselves making risky choices in order to look good, be fulfilled, and live the lives they thought would make them happiest.  This made their lives hectic and drama-filled.  And it also made it one of the most successful shows on TV for its 8-year run.

However, no one really wants to live the way they did; it may be entertaining to watch, but it’s not peaceful.  Desperate is not desirable.

Desperation can elicit hopelessness and cause knee-jerk reactions:

I never think anyone is going to marry me!  So I’ll lower my standards and date anyone and try to make it fit. 

I don’t have any money and lots of debt.  I’ll rob a bank.

We need to win a championship this year or the fan base will be calling for my head.  I’ll trade away future draft picks, get a marginally better player now, and hope it works out.

We see it in all walks of life in many different situations.  Desperate situations make people feel that they have little choice but to make hasty and risky decisions.  And these decisions generate results that usually share one common trait- they are poor.

For landlords, they typically begin to feel desperate when their rental properties are vacant and they need tenants to move-in and start paying rent.  Things look bleak as time rolls by and there has been:

1. Financial bleeding: mortgage payment, management costs, utilities, lawn mowing
2. Vandalism and/or squatting while vacant
3. Only substandard applicants applying

It’s tough.  There is pressure on landlords to accept the first person that has the deposit and first month’s rent to put down.  “Just move in quickly, please!!  We need this off the market to get the rent coming in!”

As a Charlotte property manager, we are not immune to this either.  We get some version of this at times:

Aren’t you the professional??  Why is my property empty? What does your marketing look like?  It doesn’t seem to be working, bud!!  I could do better than this myself!

Desperation can take hold… And it takes discipline to stick to the fundamentals and not succumb to the pressure.

When a property has sat on the market for longer than expected, the key is not to panic!  Slow down, take a breath, and push the right buttons:

If there are no showings of the property:

1. Double-check the marketing, add/replace pictures, make sure the home is coming up in on-line searches.  Then see if any showings happen.  If not, go to step #2.
2. The price is too high.  Lower it ASAP.  Prospective applicants are not seeing the value on-line versus other homes.

If showings are being generated:

1. Ask people who have seen it why they are not filling out an application.  It will usually come down to some cosmetic issue.  Take care of the issue!  Note: Some “cosmetic issues” are personal preference- if it is not a major flaw and only one or two people comment on it, it might not make sense to address it if it is costly.  If almost everyone mentions it, it either needs to be fixed or the price needs to be lowered (or both).

I remember we had a large house on the market that “desperately” needed work.  We did not want to pay for it (it was going to cost a lot to get to market shape) and we were hoping we could slide by with one more rental cycle before ordering the major (cosmetic) fix-up.  We went a few months with several showings, but no approvable renters from those who filled out an application.  Most non-applicants who visited the home cited a few issues they wanted addressed.  What to do?

The easiest way path is to give in to the desperation, roll the dice, and approve a risky tenant.  In contrast, experienced landlords will reject substandard tenants, double-check the marketing, fix any reasonable home repair issues, and lower the price.  It’s better to wish you had a tenant than wish you didn’t.

Don’t fall for the feeling of desperation and press the panic button!  Stick to the fundamentals and your future self will thank you for dodging the money/time/emotional sinkhole of the eviction process.  Don’t let yourself become another desperate resident of Wisteria Lane!

Happy Landlording!