Purpose of Upside-Down Nametags and Fewer Rental Home Photos
Early in my business career, I attended a networking event at a local restaurant. I went to the sign-in table and was enthusiastically greeted by Susie. “Welcome! What’s your name?”
As Susie found my name on the sign-in sheet, she dutifully checked a box and pointed me to a nearby table with white sticker nametags and black Sharpie markers on top. “Write your name, your business name, and go meet some great people!” Then she quickly repeated the same spiel to the fellow behind me.
I did what I was told and uncomfortably started to mill around the room while simultaneously straining to read the other attendees’ nametags around me.
Me: “Hi, Jim. I’m Brett. What do you do for Hillman’s Autobody?”
Jim: “I fix cars. What does ‘BDF’ stand for? Oh, that’s really interesting…”
It was painful for me, as it was for Jim. As I moved on in the room, I saw a slightly overweight, middle-aged man standing by himself against a far wall with his nametag on upside-down. I went over to him and then unwittingly stepped into his trap.
“Excuse me… Joel?” I tried to awkwardly read his name by crooking my neck. “Your nametag is on upside-down. I just wanted you to know.”
“Oh, thanks! What a klutz I am, Brett!”, he appreciatingly said while reading my nametag. He then unstuck his nametag and put it on correctly.
“But do you know what else is klutzy? Not having life insurance, Brett! Let me tell you about it.”
And that was the opening that of his 10-minute monologue. He was very concerned that my grief-stricken family members would potentially being stuck paying for my funeral costs (thousands of dollars!) and what a stain that would be for my deceased self’s legacy.
When the conversation came to its merciful conclusion, I politely excused myself and headed to the exit. When I got to my car, I realized I had forgotten my coat and backtracked back to the restaurant. I retrieved my coat from its hook and was on my way out when I saw Joel standing by himself again… with his nametag on upside-down.
Wait a minute…
So I fell for Joel’s little ruse. I definitely felt duped. But, to Joel’s credit, he knew why he was there and what he was trying to do. Sales is a numbers game. His purpose was to talk to enough people and expect that one would be in the market for life insurance. The right conversation with the right person would lead to a sale.
In the rental home game, landlords are trying to find qualified tenants to apply for and rent their homes as quickly as possible. So, they set the bait in the form of on-line rental ads.
Prospective renters visit these on-line rental home websites with the purpose of finding the best home for their needs. To do so, they add some filters to the search criteria (cost, # of bedrooms, size, area, etc.), look through these narrowed down rental home listings, and then click through the details of specific homes to find a few finalists. Then they schedule times to see these top choices in person before applying for them.
In my mind, the purpose of rental ads is to be one of the homes that is visited in person, not just a home clicked on thousands of times. The more in person visits, the more chance that a home will be applied for and rented. Most people do not want to keep visiting rental homes without picking one. If a landlord can create intrigue with the promise of a renter finding their “diamond-in-the-rough” property, this intrigue can generate more visits.
So how does a landlord create intrigue? One way is to use fewer photos. As the saying goes, “you don’t know what you don’t know”. It may seem helpful to prospective renters to be able to narrow down properties by seeing 50 photos and a virtual tour, but landlords shouldn’t want their properties to be narrowed down and eliminated from consideration. If only 8-10 great photos are posted, it can create a taste of a property that can only be sated by a home visit. More photos can actually bring up more reasons to cross a rental home off a list, especially in light of hundreds of available homes to choose from.
The purpose of Joel’s upside-down nametag was to start conversations to ultimately generate life insurance sales. Smart landlords remember that the purpose of landlord rental ads is to generate home visits to induce rental applications.
Happy Landlording!
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Trump Versus Institutional Homebuyers: Opportunity for “Landlords on Purpose”?
“Every adversity, every failure, every heartbreak, carries with it the seed of an equal or greater benefit.”
(Napolean Hill)
In recent news, President Trump is working on banning institutional homebuyers (firms owning 1,000 or more residential homes) from buying more homes. These institutional buyers (IB’s), like Progress Residential, Invitation Homes, American Homes 4 Rent, and others, own about 3% of the homes in America.
The Trump administration rationale is that IB’s with unlimited checkbooks are outbidding families for the same homes which makes achieving the American dream of homeownership harder for regular citizens. IB’s are typically vultures in the market eagerly trying to buy affordable homes (around $200-400K in Charlotte), so there is truth in that. After they buy them, they usually fix them up (laminate wood flooring, new paint, new stainless-steel appliances, etc.) and make them higher-priced rental homes. Then instead of a family owning a home, the family is paying high rent to an IB.
The picture painted above of an IB is not a glamorous one! IB’s would tell the story a little differently than the Trump administration. They would say that they provide liquidity for the home sales market as a motivated buyer; this helps American families move on to buy other houses or cash out on their real estate investments. They would say they fix up houses that are in disrepair and introduce new, needed rental homes to the market for American families to live in. They are an instrumental partner in keeping American housing stock current and from neighborhoods incurring decay from dilapidated and abandoned homes.
As someone who regularly sells homes in this price range, I like dealing with the IB’s. They always pay cash, don’t quibble with repairs, and close on time. They are in the business of accumulating homes that fit their investment profile and they are good at it. The agents who work for them are cordial and non-emotional; they don’t hold a grudge when we reject their offer initially and they are still willing to make a deal months later if we call them out of the blue. Their offers are not usually outlandishly low; some are actually above what we expected to get from a non-IB buyer. They are a nice option for sellers to have!
In short, I think IB’s are both bad and good. But I don’t make the rules! I just try to work my best within them for our landlords, their rental homes, and the tenants.
If IB’s are banned, there will be fewer rental homes available. And in Charlotte at least, we need more rental homes for the influx of 157 people a day that are moving into our metro-area. Where will they come from? The Trump administration says they expect the void to be filled by Mom & Pop investors (aka you and me).
So here is the opportunity. I saw a statistic the other day that said that 51.5% of all US mortgages are below 4%. I also saw (and have experienced) that the home sales market has been relatively stagnant for the past 3 years. Many people believe the past low mortgage rates are causing the slow market. This has been labeled as the “lock-in effect” where sellers don’t want to lose their low interest rate to buy a house with a much higher interest rate. Their great past interest rate is “locking” them into their existing house. That makes sense to me.
Reviewing the information below:
IB’s being banned or curtailed would create fewer rental homes (less supply)
Strong rental home demand continues as experts say that not enough homes have been built and there is undersupply (strong demand)
Previously bought homes with sub-4% mortgages can cashflow better than buying investment homes now at higher interest rates (lower monthly cost)
Buying a new home in a buyer’s market is favorable (lower prices, more negotiation room, & less competition)
Real estate is considered a great investment that adds portfolio diversity while hedging against inflation
I would conclude (drumroll please), it might be a great time for smart investors to rent out their “locked-in” rate house and buy a new one to live in! There are families ready to rent them.
As opposed to an “Accidental Landlord” who is forced to turn a non-selling home into a rental, a “Landlord on Purpose” could be a profitable way to ride today’s market trends.
Happy Landlording!
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A Pair Should Beat a Full House? Reassessing Security Deposit Wear Guidelines
“Where there are no oxen, the manger is clean…”
(Proverbs 14:4)
I remember several years back we had a couple come in and apply to rent a home from us. They had eight children and seemed abnormally well-rested and together. I was an admirer of these parents who were gracefully taking care of business with almost three times the youth constituency I’m currently trying to navigate. Warriors!
This was going to be a full house! Fair housing laws prohibit any type of discrimination based on family size, so the sheer number of inhabitants wasn’t a factor on their application decision. But common sense dictated that a house with ten people was going to have more wear than a house with two. And wear on a house costs landlords money.
In rental home poker math, a pair should beat a full house. Less occupants means there is less potential for things to break and be worn down. Avoiding and accounting for wear has come more to the forefront as repair and renovation costs have skyrocketed post-COVID.
I started to think about the wear assumption while I was out in the field doing interior home inspections earlier this month. I hadn’t done this many personally since pre-COVID and things were different this time around! I visited around 25 rental homes during business hours and was shocked that 85% of the homes had people present. Schools were in session and it was not a holiday of any sort. I thought most people would be working outside of the home. This was not the case.
The last time I was out doing inspections, almost all of the homes were vacant when I stopped in; the process was sort of robotic and boring. This time it was nice to be able to see some of our tenants and talk. But it was unexpected. And it made me think of how much more foot traffic these houses take now than then.
Wear is probably less of a function of how many people are in a house, but how many hours people are in a house actively using it. So if ten people are living in a house but travel for work and school most of the week, there is not going to be much wear. But if these ten people never leave the house, the wear rate would be very high.
When calculating wear expenses for deduction from a tenant security deposit, property managers will use general guidelines for the life of new carpet or paint (typically 7-10 years); these guidelines have been around for a long time. But if adult tenants are not leaving their homes during work hours, should these numbers be adjusted downward (6-9 years)? Rental homes are incurring a higher rate of wear after COVID jolted the work system and it’s not cheap to renovate.
Wear rate will never be an exact science! I remember doing the walk-through after the aforementioned ten-person family vacated after several years of occupancy. The home looked better than it did when they moved in. Go figure.
But, generally-speaking, wear has increased in rental houses post-COVID. Smart landlords will reassess their security deposit deduction guidelines periodically as wear has become an even larger expense driver.
Happy Landlording!
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Savannah Bananas Redux & Tenants: Getting Stuck Until the Game is Over
Savannah Bananas Event Schedule:
- Early Merchandise Sales: 10:00 AM – 1:00 PM
- Pre-Game Party & Player Appearances: 2:00 PM
- “Before the Peel” Show: 3:00 PM
- Gates Open: 4:30 PM
- Show Starts: 6:30 PM
- First Pitch: 7:00 PM (ET)
As I had written a few months ago, my family had the “privilege” of buying tickets to the Savannah Bananas baseball game in Charlotte earlier this month. We had never been and the Charlotte community was whipped into a frenzy for this event at Bank of America Stadium. It was sold out for both nights in the 74,000-capacity stadium! Local social media was ablaze:
Were you one of the lucky ones who were able to buy tickets in the lottery that started 6 months prior???
Oh, you’ve never been?? It’s such an amazing experience! So funny! Fun for the whole family! Better get there early! The Pre-Game Party is not to be missed!
Now that my family had the “golden tickets”, logistics had to be sorted out. Real life things such as: how are we getting there (traffic will be a nightmare in Uptown), what time should we actually show up (2 PM is the start of the vaunted “Pre-Game Party”, but the game itself didn’t start until 7 PM), how long could the family with younger children last at this event (is 2 PM – 10 PM realistic?), and what and when were we eating?
Complicating the situation was a small disclosure at the bottom of the hype material:
The Pre-Game Plaza is a ticketed space, fans must have tickets to the game to access the Plaza. Re-entry after exiting the venue is prohibited.
I thought we had a chance of success if we could float in and out of the 5-hour pre-game activities. But reentry was apparently not an option. The “Pre-Game Plaza” was held on the closed down roads and area directly outside of Bank of America Stadium. We would have to go through security (bringing in no outside food and drink) and then stay on premises once admitted. Once we were in, we were in, until we were out for good.
After some serious thought, the executive decision was made that we would take the marketing at its word and get the fullest Savannah Bananas experience we could. We were going to go early by light rail and take it all in!
We made it to the stadium around 3 PM. Initially, there was much fanfare and excitement! Yellow everywhere, buzzing children, ear-to-ear smiles all around!
Then real life set in. It was really hot, the Pre-Game Plaza was mostly in the sun (unless you packed in where the stadium’s shadow offered some shade), the pre-game show on the stage was not visible for shorter folk (re: my kids), and it was not overly interesting to us. I looked at my watch showing 3:45 PM and wondered how we were going to make it until 6:30 PM. At least we were being paid to be there (wait a sec…).
It turns out the way one kills three disinterested hours in the hot sun is deflecting complaints and taking down multiple $15.00 drinks and burgers. With a captive audience (no pun intended), the only other choice was to leave and cut losses. In hindsight, I wish I had shown a little more discipline and did some research deeper than soaking in Savannah Banana marketing e-mails. Once we got there early and had our ticket scanned, we were stuck and needed to stick it out.
In a way (with my Charlotte property manager hat on), it reminded me of the importance of placing quality rental tenants.
Landlords have these nice houses that they spend a good amount of money preparing for tenants. Then the rental home goes on the market and prospective tenants fill out applications highlighting what good candidates they would be. If one cares to listen, tenants will tell you how they will pay on time and meticulously care for the home. And they proclaim they have the first month’s rent and security deposit in hand and are ready to move in ASAP once they get the go-ahead! Their marketing pitches can be very convincing as landlords have rental properties that are costing them money each vacant day.
But once the lease is signed and the tenants move in, there is “no reentry” until their tenancy is complete; once they are in, they are in. The landlord is stuck with them until lease expiration or they are forced out by eviction. The house could be taking heavy wear, misuse, and late/missing payments. For an investment in which the landlord should be making money, it can turn into one that is costs them even more. A rushed decision based on emotion and fear can turn out to be financially and mentally draining.
Much like prospective tenants, the Savannah Bananas proclaim they are the greatest show on Earth and will be one you never want to forget! But things do not always turn out as well as advertised. Smart landlords will make sure to do the requisite research and ensure it is a game with tenants they want to be stuck with!
Happy Landlording!
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Jayden Daniels Football Card Worth $1K? Simple Rental Home Pricing
My 11-year old son has become very interested in football cards. He used to just like finding players on his favorite team (The Tampa Bay Buccaneers- ugh! If it wasn’t going to be the Carolina Panthers, could he not pick a team in another division???), but now he has expanded his interest in what the cards are “potentially” worth.
Now his old man had similar interests in his younger years, except mostly with baseball cards. I’d get the Beckett price guide and add up how much my cards were worth. And, of course, I dreamed of when I was much older and the rookie cards of players like Barry Bonds and Roger Clemens would be worth millions when they made the Hall of Fame (cough, cough).
My son excitedly pulled me aside one day and showed me a Jayden Daniels (rookie quarterback for the Washington Commanders) card he had just pulled from a new pack. On my wife’s phone, he had found a page that showed that the card’s value was around $1K- wow! Next to the value was an eBay button where one could post it for sale with the push of a button.
Our conversation:
Me: Very cool! Push the button and sell it for a $1K!
Son: Now way, Dad! That’s low. It will be worth much more later.
Me (thinking of the old baseball cards I had in our house with virtually no value): Are you sure? $1K of real money gives you a lot more options.
Son: Nope.
Me: What if Dad sweetens the pot and will give you another $100 on top of the $1K if you can really get close to $1K for it?
He still wasn’t going for it.
In my mind, I wanted to put this estimation of value to the test. Was there really someone willing to pay $1K for this new card? I was doubtful. What was the real market if he was bent on selling it? Ebay, in theory, pulled this valuation from past sales somewhere. I’m thinking that it was worth much less, like single digits. Unfortunately, short of listing his card for sale on the sly, I’ll never know for sure.
I find rental home pricing to be similar. Property managers dig up comparable sales, factor in the differentiating house features, look at the available competition that is renting in the area, and then formulate a price. This price is an educated guess and is compiled in order to get good tenants applying, in a relatively short amount of time, at the highest possible price.
But we don’t really know how many houses are truly on the market for rent. There are many rental websites. Recently, we thought we had priced a home for rent well, only to find that there were almost 10 others on the market in the neighborhood on another website we hadn’t seen- and they were all listed at the price we recommended! That type of similar inventory makes for a logjam.
So what’s the right price? Does it matter how many Jayden Daniels cards are on the market? How can one know how many houses and cards are for sale out there? And how much they sold for?
It does matter, but there is no real way to know everything going on. However, there is a way to know for sure whether a price is good or not. And it’s really simple.
Putting the home on the market for a reasonable amount of time is the surest way to find out. If the house is listed with decent exposure to the market and the valuation is right, it will rent. If Jayden Daniels’s rookie card was listed at $1K and it sold for $1K, the price was right (or too low). If it didn’t sell, the price was probably too high. Simple stuff.
The market sets the price. And the market is constantly changing. But it is pretty efficient. If it didn’t sell, the market declared that the price was too high at that time.
Will my son’s card sell for $1K? There’s only one way to know! I just need to convince him to list it and see.
Happy Landlording!
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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!
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What To Do When Elon Musk & Bill Gates Both Apply for Your Nice Rental House
In this month’s edition, we have a riveting property management fairy tale! Once upon a time in a nice, far-off place called “Charlotte, NC”, a nice landlord put a nice, vacant rental house on the market. Now the market was not too hot, not too cold, but just right…
The next day, a nice rental application was submitted for it. And the day after that, another nice rental application was submitted. The nice landlord dutifully ran the applications and found that both applicants looked to be fully qualified:
Tenant #1:
Elon Musk
802 credit score
Criminal record: 3 traffic tickets in last 3 years
Employed: CEO of X, SpaceX, & Tesla, Inc.
$221.4B net worth
Homeowner: no recent personal landlord history
No pets
Move-in date: 35 days from today
Length of lease desired: 2 years
Tenant #2:
William (“Bill”) Gates III
814 credit score
Criminal record: None
Employed: CEO of Bill & Melinda Gates Foundation
$127.3B net worth
Homeowner: no recent personal landlord history
Pets: 1 cat (10 pounds) & 1 border collie (60 pounds)- aware of non-refundable pet fees
Move-in date: immediate upon acceptance
Length of lease desired: 1 year
The nice landlord has a very nice problem! Two well-heeled applicants want his rental property. They have 800+ credit scores, no criminal background issues, plenty of income, and no landlord issues. That is great!
But outside of the nice fairy tale, is it really great? How would a regular landlord pick a winner and a loser? He may have to be not so nice?
The Musk application has many positive aspects with it having no pets and wanting to lock into the property longer with a 2-year lease request. But there is a 35-day wait for occupancy (each vacant day costs money!) and there is a criminal record (frequent speeding tickets can signal risky behavior).
On the other hand, Gates wants to move in right away (cha-ching!) and has a higher credit score than Musk. But he does have a lower net worth and who knows the damage the 2 pets could do to the house especially if he leaves after the initial lease ends.
So under normal circumstances and with no one else involved, both tenants would easily be approved for the property. But there is only one home. And they probably don’t want to share it. So what to do?
It’s a tough one and it happens every so often. Unfortunately, the non-approved person usually gets upset. But a decision has to be made.
I don’t think there is perfect methodology for this. Some landlords use tactics such as:
- First application in gets first dibs on the house: I like this one due to its simplicity and it seems to have the “get in line” logic that most adults can appreciate. Its major flaw is that a property manager really needs to pick the best available applicant for the owner client, regardless of who was first. If a marginal candidate applied first and then Bill Gates submitted an application, should I be married to the marginal candidate? I don’t think so.
- Make the applicants give their “highest & best” offer: The rent is listed at $2K/month. “How much rent are you willing to pay if we let you have the house- $2,500/month? Will you sign a 3-year lease? Move-in right away?” We’ve done this on occasion and it’s a lot of effort and most people don’t want to play (I’m not sure I would either). Due to the bad feelings it creates, I largely tend to shy away from doing this.
- Have some sort of points system based on all quantifiable application information. Add up the points and whoever has the highest score wins the house. This does not take into account any non-quantifiable information (or “soft skills” for lack of a better term) which tend to matter a lot with tenant relations.
Trying to make a choice between great tenants can be a good problem to have if handled properly (in and out of fantasyland). But I think I’d go with Musk application on this one. It’s very nice!
Happy Landlording!
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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!
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Building God’s Temple & Lease Extensions: Are You Ready?
“King David rose to his feet and said: “Listen to me, my fellow Israelites, my people. I had it in my heart to build a house as a place of rest for the ark of the covenant of the Lord, for the footstool of our God, and I made plans to build it. 3 But God said to me, ‘You are not to build a house for my Name, because you are a warrior and have shed blood.’”
(1 Chronicles 28:2-3)
“If you fail to plan, you are planning to fail.”
Benjamin Franklin
King David loved God; they were tight. Towards the end of his life, he wanted to do something grand for God- so grand that he aspired to build the greatest temple in the world for Him! David shared this with Nathan, his resident spiritual advisor, and asked him to see if God would approve. Nathan inquired and relayed that God was not amenable to King David doing it; however, He told him that Solomon, his son and future successor, could build it.
King David did not use this as an excuse to sit on his hands. He asked God exactly what He wanted and proceeded to write down specific plans for Solomon to use. He not only detailed plans to build the temple and the surrounding buildings themselves, but for the all the items that would be kept in the temple. He mapped everything out precisely, even the weights of the lamps and tables and how the priests who would work there would contribute. All Solomon would need to do is dust off the plans and enact them when he was coronated. He would be ready to go!
For smart landlords, this is how lease extensions should be approached. When leases are expiring in the near future or tenants are proactively in contact about extending their leases, landlords should not be scrambling! A well-thought-out plan should be in place ready to be enacted.
As a Charlotte property manager, retaining good tenants is paramount. If we don’t hear from tenants prior to 80 days before their leases’ expiration, we start the “Lease Extension Plan”. This begins by running the nearby comparables to determine market price, checking their payment ledger to ascertain tenant quality, and making a recommendation to the owner on what we feel the lease extension price and terms should be.
Once we have finalized our lease extension offer, we e-mail it to the tenants somewhere between 60-75 days prior to lease expiration. This gives them plenty of time to ask any questions and make a decision. We also incentivize tenants to commit earlier as the proposed rental price is offered in tiers based on when they let us know their plans (example: “Let us know by 6/15, and the price will be $1,500.00/month… or if after 6/15, the price will be $1,600.00/month.”). We also offer options for month-to-month lease extensions (at a 10-20% premium to the existing rent based on current market conditions) and multi-year extensions (incentivized by allowing the rent to stay the same over the life of a longer lease term).
Other important factors we incorporate in the “Lease Extension Plan”:
- The new lease is written on the latest version to make sure that the owner has the best legal protection incorporating any recent changes to landlord law
- The tenant information is updated: Did anyone leave or is now joining the household? Did anyone get married/divorced? Name change(s)? New children? New pets to be accounted for?
- Are there any issues that we want to address with the tenant (or vice-versa) before we reup with them for another year or more?
Though King David was disappointed he would not be the one to build the temple, he made sure approved plans were prepared and ready when Solomon got the green light. Smart landlords will follow his example! With increased repair costs on rental home turnovers, keeping tenants by signing lease extensions is becoming more and more important to achieve rental home ROI.
Happy Landlording!
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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!
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