Charlotte Property Management Weekly: Recruiting Great Tenants- Your Team Is Only As Good As Your Players
It’s been said the most important part of major college coaching is recruiting. A team’s ultimate potential is limited by their talent level. Sure, good coaching can make good players better, but great players are the reason teams win championships and are consistently good.
I started thinking about this the other day when a friend of mine called. He told me that a friend of his bought a property management company inCharlotteand it is proving to be a nightmare. The company he bought has sloppy books, awful employees, and a large cache of substandard properties that are in disrepair. But most importantly, they have a lot of tenants that have not been paying rent and have stayed in the houses rent-free for months. His friend is watching his investment go up in flames as he tries to salvage what’s left.
This made me think. What would be the characteristic that would be most important to measure the strength of a property management company? Is it good employees, growing cash flow, long-term contracts in place, sound business procedures, or something else? They are all obviously very important. But what’s the ultimate key to success?
As I thought more about it, my head began to hurt and my mind drifted to sports:
Why did Coach Nick Nolte agree to buy Ricky a new truck in the movie, Blue Chips? Why are there so many recruiting scandals in college athletics? Why do I read about “tampering” charges in the professional leagues when teams illegally contact players when they are not allowed? Why are college coaches only allowed to send potential recruits a limited number of text messages and are restricted on how often they can call them? Why do coaches work harder in the offseason traveling to visit recruits than they do during the season? Why do the Charlotte Bobcats think they can rebuild the team with late round draft picks?
Then the answer occurred to me. The players are the most important thing. They directly dictate the success of a coach. If a team has great players, they will be a good team (no matter the coaching quality). That is why recruiting is so important and organizations are willing to push the envelope on wooing potential stars.
As a rule, every top-tier athletic team puts a premium on signing great players. And this is the same mentality that top-tier landlords and property managers, like you, must have to build a strong property management company and investment portfolio. It’s about getting great tenants for your properties. They will directly dictate your success.
When a great tenant applies for a property, it is imperative to let them know that you want them. You need them. You will treat them like gold if they would just sign with you (on the lease). Text and call them every hour (there are no contact restrictions in business, only the weirdness factor of over-communication). Add incentives. Buy them the pony they always wanted, as long as it is munching the grass in your rental home’s yard! Let them know your love will never end if they can out down a deposit today.
Great tenants provide so many great benefits! They pay on-time and in full providing consistent cash flow. They take care of the properties so they don’t fall into neglect. They let you know if your employees are lacking or slacking. They even take care of minor repairs on their own!
Your team, investment, and/or company is only as strong as the players it has signed. Maniacally pursue the best, get them under contract, and rest will take care of itself!
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: #1 Way to Fill Rental Homes Quickly
As homes for sale sit and rentals continue to gain prominence in the residential real estate market across the country, concerned owners are wondering how to best fill their rental properties quickly. So are property managers.
“Everyday my house is empty costs me money! Besides the mortgage payment, it’s the other things that are absolutely killing me- utilities with this unusually cold and snowy winter, HOA dues rising, you name it. I need someone renting (or buying) my home!” is a common lament from homeowners with a vacant home on the market.
As a real estate investor and property manager in Charlotte, I feel your pain. I don’t like vacancies anymore than you. But there is a simple way to make your home attractive. And it addresses the most heard complaint, by far, that I hear about houses and why prospective tenants pass on them. And just what is this revelatory nugget?
Cleanliness. That’s it. Houses are typically not clean. Actually, it’s not that they are not clean technically. It’s that they are not clean enough. Prospective tenants want to see sparkle. They want to see their unblemished reflections coming off of stainless steel. They want to be able to eat off the floors. They want to lap cool spring water out of the toilets (well, I may be pushing it now…). The point is that they really like the houses to be much cleaner than they would normally keep them.
Recently, we switched to a different cleaning service that was more expensive. I would never think of adding expenses to our owner clients (especially in this economy), but I felt that our homes were not standing out as the rental market continued to get more and more crowded.
And it worked. I noticed our rate of conversions of visits to completed applications went up dramatically. This has gone on for months. Thorough, deep-cleaning was more effective than lowering the rental price. This has been especially effective for our rent-to-sell program where people want to fall in love with the house they are potentially buying.
I would challenge you to give it a try. When a house has been on the market for a while and has been getting visits (but no completed applications), resist the urge to lower the price and just pay the dollars to give the rental home a thorough scrubbing (or do it yourself, though I recommend professionals). See if it works!
Cleanliness is next to godliness, the saying goes. Reap the benefits of a shorter courting period with prospective tenants!
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: Pricing Rental Homes- List Above, At, or Below Market Value?
I have to admit, pricing rental homes is an issue that I struggle with. As a property manager in Charlotte for the past 6 years, I really should have a good grip on the right approach; however, I’m still constantly debating myself over the correct way to do it. And my therapist says this self-banter does not mean that I’m crazy.
So… it is safe to say that pricing is an inexact science. It is simply impossible to know what the optimal dollar figure is for any product or service. For example, let’s say you are a manager at The Gap (with the traditional logo intact). You put 5 sweaters on the rack for sale at $50 each. It takes 5 days and they all sell. Is this good? Was $50 the optimal price?
You’ll never know! Maybe you could have priced them at $55 each and still sold them in 5 days. Then you would have really screwed up; retail has been a tough field to be in for the past few years and the extra $25 in profit would have really helped The Gap’s stock price! Or maybe the sweaters should have been priced at $45 and they would have sold in 1 day. In this scenario, the lower profit would have been offset by the larger saving in inventory costs. But then again, who knows? Maybe at $45 each, customers would have perceived the sweater’s quality to be less and they would’ve taken 10 days to sell. It’s tough to figure out!
With rental homes, the confusion is similar. Below are the 3 pricing options available to every property owner:
1. Price Above Market Value: This is good if prospects will actually visit the rental; they may just look at the other rentals listed at or below market value. However, if the prospect visits and says they will take the place if the rent is knocked down a bit, that’s fine! The price can still be at or slightly above market value and the prospect is ecstatic they can tell their friends that they got a great deal.
2. Price at Market Value: An average amount of prospects will visit the rental and someone will take it in due time. The only issue is if the prospect says they will only rent the home if $100 is taken off of the monthly rent amount. Now the owner must decide if they want to lock into a below-market rate for a year, or roll the dice and wait for another qualified prospect. (Note: Rent negotiators usually turn out to be good renters. Unqualified or barely qualified prospects rarely try to negotiate the rental price. That takes chutzpah! It’s like getting into a bar at age 17 and arguing over the prices of shots.)
3. Price Below Market Value: Prospects will flock to the house and applications should roll in. Some people will still try to negotiate rent, but being that so many people are interested, these requests can be quickly (and justifiably) rebuffed. Locking into below market rates isn’t great in terms of ROI, but does provide the piece of mind of an occupied property with a good tenant (you can be choosy!).
So what’s the right answer? It depends. I know that’s not an overly helpful answer, but I’m not trying to be evasive. There are many factors that need to be considered besides the obvious ones (risk tolerance and financial wherewithal of the owner). Here are a few to ponder:
- If the property is 1 of 15 rentals in a neighborhood, pricing below market value could be a good point of differentiation. Conversely, if the rental is the only one in the neighborhood, it may be wise to price above market value.
- If it is probable that a real estate agent will bring a tenant in on a property, the pricing should be above market value. The reason? They will probably look to negotiate the rent down. If the tenant will probably come in from an ad, pricing at or below market value is probably the best strategy because they will be focused on the list price.
- If a downturn of activity is expected because of seasonality (like the Thanksgiving holiday through New Years), it would probably be smart to price below market value for the first few weeks of November. Having an empty house in November and December is going to kill the ROI; a rental reduction upfront in November will definitely have a better total net return than a month or two of extra vacancy.
So the moral is that pricing rental homes ain’t easy. Different times and situations call for different strategies. One size rarely fits all!
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: Importance of Getting Paid from Rentals in the Next 5 Years
According to an article in Barron’s this month, the future of the real estate market is in rentals for the next five years. Most real estate agents are hoping this news is akin to the Bush White House claiming the existence of Iraqi weapons of mass destruction (WMD); hopefully, it is just another example of faulty American intelligence.
Learn MoreCharlotte Property Management Weekly: Wouldn’t You Want the Market to Know Your Rental is For Sale?
However, in an increasingly illiquid market, most wanna-be sellers are turning to the rental market to decrease the short-term pain of monthly payments on their vacant homes. What they really want to do is sell (and not of the short variety).
Learn MoreCharlotte Property Management Weekly: Which is Better? Colts or Saints? Sale, Rental, Rent-To-Own, or a Combination?
Super Bowl time is here which means there will be rampant speculation about which team is better. Most people from Indianapolis don’t think there is anyway Peyton Manning will let them lose, while New Orleans fans think that destiny is on their side. Of course, no one knows exactly who is right, but that doesn’t stop them from arguing about it non-stop for two weeks.
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