Charlotte Property Management Weekly: The Cheap Rental Home Game: A Saga of Ups & Downs- 10 Tips for Survival
Cheap rental homes remind me of buying electronics off the street.
Street Urchin: “$50 Bucks! Flat screen television for $50! Why are you even thinking about it? This is a great deal- CHEEP!!”
My mind (definitely thinking about it): “Hmmm… I need a flat screen, but this thing is either stolen or a piece of garbage. But, if it’s not (and his uncle really died and bequeathed it to him), this is a great deal!”
My mouth: “OK, I’ll give you forty-five for it.”
This is the type of deal I see people making to buy homes for as little as $10K. It’s really a gamble, but can be a lucrative one if it works out. I mean, the ups can be great!
For example, a $20K house’s payments come to approximately $130/month (believe it or not, there are no HOA fees to worry about!). The home can rent for $400. That’s a positive cash flow of $270/month, which is not bad! With a $100K credit line, this could equal 5 homes. I like the math, $270 multiplied by five homes equals $1,350/month. That’s a monthly return of 13.5%. Oh yeah! So the flat screen works and works well! I’ve got a great television and an even better story of my tough negotiating tactics to match.
But then, there are the down times. The house is cheap and old, and things start breaking down. The tenants (savvy to the system) call the city’s code enforcement department, who find a lot more stuff that’s not at code. The landlord is required to fix them (or face fines) which eats into the return. Several of the tenants think that requests for rent are merely suggestions; they promise payment, but it never comes (even after thousands of dollars in repairs are done). Evicting them is a double-whammy as no rent is coming in and the attorney fees are going out. The house becomes vacant and vandals begin to smash windows; neighborhood kids start using the home as a party pad. After filing ineffective police report after police report, it’s clear that the police don’t want to be in the neighborhood unless absolutely necessary. Then again, neither does the landlord.
So now “you get what you pay for” begins to ring true. The flat screen has stopped working and has somehow completely shot the electric system of my condo. A detective from the police department has left a business card on my door. Unfortunately, I threw away my old television set (“Good riddance, 20th Century!” I said…) and am now forced to read a lot more.
So how do people make money off of cheap homes? Well, the margin is there so some savvy investors have figured it out. A guy I used to work with told me his system:
1. Thoroughly inspect to see what’s broken and on the verge of wearing out. Include this in the upfront cost of the home.
2. Leave the home broken up until someone moves in. Then repair it.
3. Never have carpet in the house; always use vinyl or a hard surface that cleans off well for flooring.
4. Get tenant referrals from good existing tenants
5. Find out when pay day is and show up in person on that day. Accept cash and carry a gun.
6. Find a handyman who lives in the community to take care of the needed maintenance/repairs.
7. Understand that evictions and losses are part of the game sometimes. There will rarely be months where something doesn’t happen. It’s not upsetting, it’s business.
8. The homes will probably never go up significantly in value and will be difficult to impossible to sell on the market. This is purely a cash flow play.
9. Buy these homes in bulk and spread the gains and losses across many homes.
10. Make enough cash flow to hire someone else to do the dangerous duties (aka visiting the properties).
Cheap homes are meant for the savvy investor with a system, not the guy looking for a deal on an inexpensive set on the street. A steel stomach doesn’t hurt either!
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: Is “Final Tenant Approval” Desirable For Landlords?
As I was thinking about this question the other day, I had a flashback to my high school history class. The first thing I learned from this trip down memory lane was that it is indeed possible to daydream about hours of daydreaming.
The second thing I learned was the strange applicability of our class’s discussion on democracy in regards to approving prospective tenant applications. The question was whether a true democracy (everyone makes the decisions) or a representative democracy (“experts” were voted in to make the decisions) was better.
The effectiveness of a true democracy was illustrated by a story that Aristotle told. It goes something like this:
You’re on a big cruise ship with 100 other passengers. Everything is going fine until it is clear a major storm is on the horizon. The ship is about to navigate a tight channel where it could easily be dashed upon the rocks if steered incorrectly. Any wrong move would spell imminent disaster for all the passengers. What to do?
A true democracy would offer a vote to everyone on the ship to determine which way to steer the rudder (“Raise your hand if you think we should steer right. Okay, after the final count of hands, the ‘Lefts’ have it.”). Aristotle said he’d prefer to rely on the captain and his crew to make that decision. This discourse lead to our founding fathers (many years later) settling on a representative democracy as America’s form of government; a true democracy sounds better, but wouldn’t work as well in practice. The captain, due to his experience and expertise, would know best.
Tenant selection is one of the most important duties a property manager performs for landlords. Tenants make or break (unfortunately, literally sometimes) a rental property. They will pay and treat the property well, or they won’t. Knowing who they are as people and their background greatly mitigates this risk. This is why the front end tenant screening by a property manager is so vital. And experience in tenant selection counts!
Some landlords want to be hands-on in this process. I don’t have an issue to this prior to going to market. But if the hands-on treatment is expected to go on for the duration of the tenant selection process, there is little need for a property manager. I would recommend posting a few rental ads and going the “do-it-yourself” route. This works for some people. It also (potentially) saves money, but greatly increases the risk.
It reminds me of my favorite all-time television show, 24. Kiefer Sutherland (Jack) would only try to bandage people with life-threatening injuries in the field if it was an absolute emergency. Most of the time he would just send them to CTU’s medical clinic for treatment. And, at no point did he ask Chloe (from CTU’s IT staff) to give him pointers on bandaging the wound. He trusted the professionals.
And so should landlords. “Final tenant approval” can be used as a cop-out by property managers. If things go south with a tenant, “final tenant approval” makes it very easy for the property manager to say, “Well, you gave final approval for the tenant we placed, so what happened isn’t really my fault.” I even sometimes see property management companies advertise this “feature”, making it appear to be desirable! All I can say is that if my sister died on the operating table and the doctor came to me and said, “You know, I asked you for “final removal approval” on which part of her organ to cut out… you said ‘OK’…” I would be incredulous! I mean, what do I know about medical procedures? Why would he ask me what to do? I’m paying for his expertise!
True democracy may sound good, but a representative democracy works much better in practice. Let the “final tenant approval” come from the expert you hired!
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: “Free” Repair Quotes on Rental Homes Can Cost You Money
Everyone wants to save money! But to what lengths (and for what) does it make sense to find “deals”? It really depends on the urgency level of the need. Here are three scenarios of high, middle, and no urgency:
High urgency (nurse): “Your daughter needs the heart transplant now! Do we have your consent? …I don’t know how much it costs, sir… it will be itemized on your bill later, I suppose… No, there is no AAA discount on this procedure… I’ve never seen a coupon like that- it looks like you typed up ‘50% OFF’ and then wrote ‘Group-On’ on top of it… No, I suppose we don’t want to lose your business to a competitor… We’re losing her!! Yes, we do validate parking.”
Middle urgency (property manager): “The house needs one bedroom painted, the carpets cleaned, and the outside power washed before we can put it on the market… You said you want 3 quotes per repair?”
No urgency (sales clerk at Best Buy): “The new iphone detachable screen is really cool! You’re a loser if you don’t get one! We only have 10 million of these left, but when they’re gone, we’ll call our factory in China to make more… $199 for a screen to put on top of your screen (that already works) is a bargain. This is as cheap as it gets (until next week when ‘Detachable Screen Mini’ comes out). There is no discount; it’s under $200 bucks already, man! Go to another store then! …Fine, don’t call me crying when you are shunned socially and professionally for your weak iphone accessorizing…”
So the point of these scenarios is to illustrate that “high urgency” scenarios need to be acted on immediately, with no time to haggle. And “no urgency” scenarios allow time to shop vendors for price; time is on your side (yes, it is)!
But what about “middle urgency” scenarios? We run into these sometimes when tenants move out and the rental home needs to go back on the market. Houses need to be repaired, and some landlords want to quote out every repair multiple times to get the lowest price. This sounds reasonable, even prudent. The repairs do need to be made in a reasonable time, but not tomorrow or next week. Time is on their side (yes, it is?) to get repair quotes. Right?
Well, it’s a “middle urgency” scenario (not a “no urgency” scenario) because there are other factors in play. Every investment home has some combination of costs that accrue every day it’s vacant: mortgage payments, HOA fees, lawn care, utilities, property taxes, etc. For easy math, let’s say these come to $900/month. $900 split into a 30-day month is $30/day. This is a very real cost; the meter is running daily.
For this example, let’s say the initial repair quote comes in at $500. After getting 3 quotes per repair item, the repair quote is whittled down to $400. Congratulations- that’s a 20% savings of $100!
But, wait, is it really? Getting those additional quotes took 10 days. 10 days of vacancy multiplied by 30 days equals $300. So, to save $100, it cost $300. The net loss is $200, plus all the time and headaches it took to coordinate vendors and sort through repair quotes.
Unfortunately, this is not the totality of the loss sometimes. Empty homes are risky! Talk to any police officer and ask them whether they have any problems with vacant rental homes being broken into in this economy. If this happens, stolen appliances and break-in damages escalate the costs upward substantially. Remember: the longer the home is vacant, the higher the risk.
“Free” repair quotes can cost a lot! Don’t over-quote yourself into a financial loss!
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: Tenant Stories Often Raise Red Flags
“If you have to ask how much it costs, you can’t afford it.” Maxim of the Wealthy
“If you have to ask for a payment plan for the home’s security deposit, you can’t afford it.” Maxim of the Intelligent
We are approached by potential renters a few times a month with something like the following:
“We love this house! We want to take it! We would call our lives “complete” if we could inhabit this home with our children! We get goose bumps just imagining the daily ingestion of pure beauty that permeates from each nook of this stunning domicile. We have the first month’s rent ready to put down now! Where do we bring it? We will treat this house like our very own with weekly carpet baths and loving dustings!
But… The only problem is that we are a little short on the security deposit. Will the owner accept breaking this payment into 3 months? Let the owners know we are good for it and I will be praying that they be blessed this Sunday at each of the church services we regularly attend.”
Thinking like a property manager, how many red flags come up in this beautiful soliloquy? A few come to my mind:
1. Lack of funds: I dare to call this the number one tenant screening technique; this is the collection of the application fee, pet fee, security deposit, and the first full month’s rent upfront and in full. This really is the number one way to find out if they have cash on hand. If they can pay it, they probably have money. If they can’t, they probably don’t and won’t apply.
2. Offer of the security deposit in a payment plan: This ties into red flag #1, but there is another issue. If they don’t pay it upfront, you are left with absolutely no leverage to get it after they move in. You can’t evict them because they are paying rent. Please don’t take payment plans! I’ve done it a few times (because it seems so easy and the tenants seem so sincere…), but they rarely keep up with them. Moving is always more expensive than they realize and cash was already short. They won’t give you the money simply because they don’t have to. They duped you on the front end and will now avoid your calls and hollow threats.
3. Effusive praise over a rental home: I like it that you like it, but let’s not go overboard. When you tell me that you’re going to take meticulous care of it, that’s great; but I’ve never had a tenant tell me that they were planning to systematically destroy their rental before moving in.
4. I like it that you’re into church: But I wonder why you’re telling me this when you’re applying for a rental home?
Red flags don’t mean you need to wave a white one. Be diligent in your screening process and the right tenant will come along!
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: Lessons Learned from Holding Expensive Rental Homes Way Too Long: Why 1 -5 Years is Ideal
I wanted to share a dilemma I’ve had with an expensive rental home I’ve kept. But before I start, a good place to begin is my overall philosophy on “expensive versus cheaper rental homes”:
Expensive rental homes are ideal and appreciate greatly (cha-ching!!) in rising real estate markets, yet are more expensive to maintain, cash flow every month, and pay the mortgage during vacancies. Cheaper rentals are the opposite; they don’t tend to go up in value much, but are much cheaper to fix up, maintain, and positive cash flow every month.
And without further ado, here’s my personal tale of dealing with my big, expensive rental home:
It is a really nice home! When the economy and real estate market were soaring, my paper net worth (cue laughter) was awesome! Comparable sales in the subdivision kept going up which made me look like a genius with my home investment (I bought a pre-foreclosure at a great discount).
As a property manager, I put this home up for rent-to-sell and rental to a number of tenants over the years. The cash flow more than covered the mortgage and I was pretty happy with myself. The tenants kept the home in relatively good condition so maintenance and upkeep was minimal. I was living the real estate high life as prices in the subdivision continued to go up, and up, and up!
However, there was always normal “wear and tear” on the property. And as the years rolled by and tenants moved-in and out, the minor damages started to add up. Then it came to a point when I realized that the home needed to be updated, as tenants and buyers started turning their noses at it when it went on the market. So I mentally knew it was probably time to pay the piper; unfortunately, the costs started disturbingly revealing themselves (new paint, new carpet, new appliances, etc.). For larger homes like this one, it became clear that real money ($10-$20K) would need to be expended. What wasn’t clear was where this money was supposed to come from.
In a down economy, the expensive home becomes a weight wrapped around your neck; it’s much like the old Mighty Mouse cartoons where every episode had someone (something?) locked in a weighted treasure, sinking to the bottom of the ocean (of financial ruin). It’s tough! The clear answer is to sell the home, but stomaching the “investment” of all of this money to fix it up, waiting months (minimum) before it is sold at a depressed price, while paying the (expensive) mortgage every month is certainly not ideal. It’s also a question of remaining solvent while this selling process drags on.
That’s life, right? Suck it up! But maybe there are some lessons to be learned from this experience when buying an expensive investment home:
- Always buy at a significant discount (preferably in a down economy, like now)
- Target to sell it in 1-5 years, or before a significant fix-up investment is required
- Selling it should be the ultimate, short-term goal. First, try to flip it if it is feasible. If it’s not, try the rent-to-sell method of selling (placing a rent-to-own tenant into the property who is targeted to buy it in 1-3 years); sell it to them, or put it on the market when they move out.
- Don’t be greedy. Making money instantly is better than losing money perpetually.
Buy low, sell high, and don’t get caught fixing up expensive homes! Keeping cheaper rental homes for long-term investments is less risky, less stressful, and easier on the wallet in the long-term; use expensive rentals for a short-term (1-5 years) bounce in income.
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: 2011 Should Be a Fun Year to Work in Real Estate! Really.
“What?? Are you crazy? Is moonshine still a big draw in Charlotte?” you may say.
Sure, I’ve read the news and understand the dire straits the housing market is in. And, no, there is no gold rush (that I’m aware of…) coming to Charlotte; we’re getting hammered like everyone else. My reaction is just based on the sheer need of buyers and sellers to transact real estate and what that means to real estate professionals.
Pat Riley, the legendary professional basketball coach, used to tell a story to his players before big games. He would talk about a small, blue-collar company filled with 9-5 workers; they would clock in, clock out, and never really form any real relationships with each other. Every day was filled with just going through the motions to earn a paycheck.
Then one day, it was announced that their company had won the bid to send the first rocket to the moon. And then, something strange happened. The largely unmotivated workers started coming to the office early and leaving late. They would meet up together after work and really started to get to know each other. Close relationships began to form.
At this point in the story, Riley would look his team in the eye and say, “You know why? They just wanted to make history.”
I tell this story because what is happening in real estate right now is historic. The gigantic number of buyers and sellers facing severe sales issues has never been seen before. But great problems create great opportunities. Innovation is always fostered in such situations.
And that sort of makes it fun if you care about learning in this profession. Things could be normal and the real estate business would have its usual flow of sales. Life would be fine and things would be controlled and steady. Yawn. And yawn.
Or there could be a broken market, problems abounding, millions of customers desperate for new ways to solve old problems, an industry in need of fresh innovation, and people open to trying anything that sounds like it has a chance of working. Billions upon billions of dollars and assets are ready to be disbursed to whoever can come up with the killer idea to fix overall market liquidity. And this idea can be thought up and disseminated from your computer, wherever you live, right now. That’s exciting!
And fun! Here’s wishing a profitable (and innovative) 2011 to you all. Thanks for reading!
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: Groupons & Free Property Management
I’m a big (recent) fan of these “Groupons.” What a great deal for consumers! Groupons are like regular coupons, except on steroids; they offer discounts of 50%+ to use at local businesses. I am impressed and now a big supporter.
Early last week there was a groupon for one of the top restaurants in Charlotte offering $60 worth of food for $25. What a great deal! I bought one and used it the next night. It was as advertised; we ordered the food, got the check, and gave them the groupon coupon (I’m a poet and don’t even know it). They took $60 off the bill and we left without any police following.
As a consumer, I was pleased. Make that very, very pleased. However, as a business owner, my stomach turned. Why would this great restaurant agree to take such a huge price concession? Are these the type of patrons they want to attract? Why are they trying to compete on price? That’s for McDonalds and Wendy’s, for crying out loud!
I always came from the school of marketing that believed that business differentiation is achieved on 3 playing fields: quality, customer service, and price. As a business, you pick the two you want to be good at. Most (sustainable) businesses are very good at one, few are very good at two, and none are very good at three. It’s impossible to do; I challenge you to name one business that competes at all 3 (customer service, quality, and price) very well. This is what this great restaurant was trying to do (albeit it was a promotion and not normal business operations)!
I’ve seen a similar promotional tool offering months of free property management for new customers. I can certainly understand the logic as we (supposively) are in a “new normal” that everyone is talking about. Customers are price conscious and free is always better than paying, right? So most customers will gravitate towards this type of deal; it’s just like the groupon I loved, right? Or is it different?
I would argue that good property management is much different than having a meal in a nice restaurant. Sure, discounts on both are nice. But you can eat at a restaurant and leave after paying for the meal, no strings are attached. The restaurant knows that you will only come back (and pay their regular prices!) if you really enjoyed their food, staff, and overall experience. If there is some bite-back of any kind (aka food poisoning), you would never come back.
However, with free property management, you are signing a minimum of a one-year contract. You are like the Huey Lewis song, “Happy to be stuck with you.” But it’s fine because you’re not paying anything, right? Well, that’s true for the first few months anyway. Or is it? What about if the property management company does something that costs you a bunch of money, like places a destructive, non-paying tenant into your home? Then the few hundred dollars of savings from “free” property management won’t be so free. Costs of eviction, non-payment, and fix-up can really add up!
The point is that if the property management company you are looking into is offering you months of free property management (or other “groupon-like” discounts), you may want to look at what that means to their quality and customer service. No company is good at all three, and quality and customer service cost money to implement and execute! Good people are not cheap! And relationships bought cheaply are usually just that.
Saving money is great on one-time deals, like buying a great, name-brand shirt or an expensive meal from a great restaurant! But be wary when saving a few bucks initially means entering into a long-term, contractual relationship!
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 More