rental homes

Extend the Lease AND Sell? That’s Not “The Way”

“You can have it all.”

(1980’s Michelob Light Advertising Slogan)

 

I was (attentively) listening to a teacher’s presentation at my children’s school and she referenced the movie, Twister.  I nudged my wife and whispered, “That movie is probably 20 years old now.”  “Yeah, at least…”, she quietly agreed while discreetly double-pointing to the stage to redirect my attention back to (arguably) more important points of the on-going monologue.

 

But it got me thinking about older movies and Road Trip came to mind.  In short, it is about a group of Ithaca College (NY) students racing against time trying to get across the country to the main character’s girlfriend’s dorm in Texas before her mail arrived.  It was going to be close so they needed the quickest route to get there.

 

There was the route that took all interstates and would definitely be the safest way.  But would it be fast enough?  Preliminary math on the mileage didn’t look promising.  However, there was another path that was more closely aligned with “how the crow flies” that would cut considerable time off of the trip.  It would take them on unproven, side roads.  It was the classic “risk versus reward”.

 

One of the quotes from the movie that I still remember is from the character, Rubin, when he was defending taking the unproven route:

 

“It’s supposed to be a challenge, it’s a shortcut!  If it were easy, it would just be the way.”

 

The point that I take from this is that if something is straight-forward with the least amount of risk, it is “the way”.  It’s a “best practice”; there is no short-cut needed.  If they could have made it to Texas in plenty of time on the interstates, they would have been cruising in the fast lane there (though it would have made the movie less interesting…).

 

The way may be boring, but it is effective.  And it requires good planning in advance.

 

As a property manager in Charlotte, we ask our owners approximately 75 days prior to lease expiration whether they want us to extend a tenant’s lease and for ideally how long of a time period (one year or multi-year).  If the rental home is being kept as a long term investment, then “the way” is to offer to sign a lease extension for a long period of time.  If the owner wants to sell it in the near future, “the way” would be to sign a shorter-term lease and/or let the current lease expire and go month-to-month until a notice to vacate is needed.

 

In a perfect landlord world, tenants would be in leases all the time (no vacancies!), but landlords could still sell the home and have the tenants vacate when the buyer wanted.  But, alas, the world doesn’t work like that.  We live in a world of tradeoffs.

A lease is legally binding regardless of who owns it.  The main trade-off made with long term leases is that both the tenants and owner are sacrificing flexibility for security.  The tenants now cannot move out (without incurring financial penalty) if Uncle Joe calls in a few months and offers a free house to stay in.  They are stuck in a lease.  And, on the same token, if the owner loses his job and wants to move back into the house, he cannot kick the tenants out and take the house back.  On the plus side, the tenants can feel confident that their kids will be able to go to the same school for the life of the lease.  And the owner can count on monthly rental payments.

 

There is security for both parties, but not flexibility.

 

You usually can’t have it all, no matter what Michelob Light says.

 

But what if the owner did extend the lease and then decided he wanted to sell the home right away?  We still live in the United States of America and no one can tell someone they can’t sell an asset that they own.  However, when selling, the prospective buyer would be purchasing the home SUBJECT TO the existing lease.  In short, the buyer would be stuck with the tenants at the terms of the lease for its duration.  For investors, that may be acceptable (or preferable!).  For someone who intends to live there, not so much.

 

That’s when Rubin’s “shortcut” would be needed.  And that is when it can be a challenge.  Solutions include trying to find investors to buy the home subject to the lease, letting the tenants out of their lease and encouraging them to find a new house, and/or negotiating a financial settlement to entice the tenants to move.  It can be tricky (and not always successful).

 

However, shortcuts sometime work out.  The Ithaca students were able to get to the incriminating piece of mail before the girlfriend could get to her mailbox.  But it was a stressful “road trip” and success didn’t seem likely during most of it.

 

I don’t know about you, but I generally prefer the calmness of the way; “boring” property management works well for me!  It’s good to make lease extension decisions thoughtfully now to avoid having to take uncertain shortcuts later.

 

Happy Landlording!

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Good Landlords & the Golden State Warriors: A Deep (Vendor) Bench Matters

The Warriors won the NBA title this month in an exciting series versus the Boston Celtics.  Steph Curry, the star of the team (and local Charlotte product!), won NBA Finals MVP and fellow starters Andrew Wiggins and Klay Thompson played well.  But one of the major reasons they were able to pull off a series victory was the play of their bench.  Less heralded Warrior’s players- namely Jordan Poole, Kevin Looney, and Gary Payton, Jr.- gave the team great minutes while the starring players weren’t on the court.  “Strength in Numbers” was the team’s slogan during the regular season and it continued in the playoffs leading to an NBA Championship.

 

This is also applicable for landlords utilizing the vendors they have to do maintenance and repairs on their rental homes.  I got a call last week from someone interested in our property management services.  When asked what prompted the call, she said that her handyman had gone back to the workforce; this left her without anyone she trusted to do the work on her rental home in a timely, well done, and reasonably-priced manner.   I could empathize.

 

When COVID hit, many people who had little time to make home improvements suddenly became very interested in their homes.  Part of it was being home and seeing many of the issues their homes had that they had ignored.   Some of it was just making improvements so they could enjoy their home as they were around much more.  Either way, it led to vendor demand to increase which led to scarcity of vendor availability and price increases.  This hit property managers as well.  The advantage swung to vendors as they had more work than they could handle, putting them in a position to refuse jobs and not call prospective customers back.  This trend continues now.

 

The good news for experienced property managers is that most have a deep bench of vendors.  While we use many of our “stars” regularly to service our homes (and have for years), it is helpful to have a list of secondary vendors who are proven to do good work.  Going to Google as sudden needs arise and hoping that a vendor is going to provide tenants a good experience is not ideal.  It is far better to incorporate new vendors on a regular basis on smaller jobs to ascertain if they meet expectations.  Cultivating a good vendor list is an asset that makes a property manager’s job much easier and keeps owner clients and tenants happy.

 

Though property managers have a built-in advantage of managing large number of homes which can make working with them attractive (repeat business), smaller landlords can also build good vendor lists by:

 

1. Being courteous with vendors and trying to make things easy for them
2. Paying quickly and in full
3. Providing pictures and details upfront of what needs to be done so they can minimize trips and maximize their revenue
4. Working with their schedules and only accelerating issues that are truly time-sensitive
5. Providing referrals to them from friends and family that need similar services
6. Writing 5-Star Google reviews (when warranted)

 

The Warriors would arguably not have gone far in the playoffs and won a championship if they did not allow their bench players to play meaningful minutes and make them feel like a valued part of the team.  Smart landlords should do likewise and use secondary vendors on occasion so they are in the fold and can be utilized when the need arises.

 

Happy Landlording!

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As Landlords (Temporarily) Rejoice, Renting Still Has Its Merits

“Every cloud has a silver lining” & “The grass is always greener on the other side”

(Popular Axioms)

 

I’m not sure I’ve ever read an article that talked about the “joys of renting.”  I’m sure it exists somewhere.  Maybe it’s because I’m saturated with a bunch of real estate industry communications that always tout “the dream of homeownership” and how everyone should strive for it. I’m bombarded by banter like, “There’s no feeling like stepping over the front door threshold for the first time and knowing that you own the home”*.

 

* As my uncle likes to point out, it must be the warm feeling that comes from knowing that your bank actually owns most of it.

 

The way home prices and rents have shot up, the pro-homeownership articles seem to have a lot of merit!  After sorting through all the mail and texts from investment groups hungry to buy homes, it is sometimes shocking to see what prices they are offering.  It makes me think, “I don’t think I have much money, but these people are telling me I’m sort of rich…”

 

But as a veteran of leaner landlord times when rent barely covered the mortgage (and often went negative when repairs and vacancy happened) and it was hard to sell a house, life wasn’t always so rosy.  I often thought of how renters had it pretty good in many respects:

 

1. No fear of a $10K repair call at any moment
2. If something major breaks, call the landlord and let him deal with it
3. If you want to live somewhere else at any time, just move.  No fuss, no muss.

 

That all holds true today.

 

So, though it seems landlords have a better situation now, things change.  Renting will always have merit and hot markets always turn sour at some point.

 

Homeowners and landlords are able to enjoy current market conditions (and they should!), but renters shouldn’t feel totally left out.  Things always swing back and forth and renters always have some built-in advantages in any market that owners never get to enjoy.

 

But, for now, landlords should rejoice!

 

(Very) Happy Landlording!

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Rental Tenant Interviews: 3 Additional Questions To Ask

“Winning is not a sometime thing; it’s an all the time thing. You don’t win once in a while; you don’t do things right once in a while; you do them right all of the time. Winning is a habit. Unfortunately, so is losing.”

Vince Lombardi (former Green Bay Packers Head Coach)

 

With low unemployment numbers, job applicants seem to really have the upper hand in the hiring process now.  The stories are interesting, if not shocking, to someone who remembers pleading for employment back in the day.  I remember it being nerve-wracking going into interviews and then wondering how things went afterwards:

 

Did they like me? 

I might have blown question #3; I hope that doesn’t sink me

How long should I wait to get a call back before following up?

Where’s a stamp to send a “thank you” letter for the interviewer?

My greatest weakness?  Oh, sometimes I just work too long and hard and forget to eat…

 

But now, the onus seems to be on the companies.  They need workers!  They ask:

 

What kind of coffee would you like?  We have lots of different kinds and sweeteners!  Oh, you want Gatorade instead?  No problem!  I like your style already!

When did you say you could start?

Do you prefer a car service to work or did you just want to work from home?

Is this person going to show up or did we get “ghosted” again?

 

Fortunately, for property managers in Charlotte, the advantage is with the landlords (for the time being…).  There are a smaller number of Charlotte-area rental homes available for prospective renters, especially those priced on the lower side.  It is not uncommon to get many rental applications on the first day a rental home comes on the market.  Tenants compete to secure these homes.

 

But with so many applications, how does one choose a winner?

 

Sticking with the basics is paramount- credit and criminal background checks, landlord history, employment/income verification.  These are the backbone of finding the best candidate.  However, there is often a lot of grey area left after finding out this basic information, especially when several potential renters have very similar background results.  It can be tough to figure out who to approve.

 

So what to do?

 

There’s a common saying in human resources that the job interview begins at first contact; so what has the prospective tenant shown us so far in our dealings?  Here are three questions that may be helpful in further assessing closely qualified candidates:

 

1. Were they on-time (or early!) if we met them at the property?
2. How long did it take for them to provide any documentation we needed to run their application?  Did we need to ask several times?
3. (And what I think is the most telling) Have they been pleasant to interact with?

 

As Coach Lombardi said, “you don’t do things right once in a while; you do them right all the time.”  It’s a habit.  Regular background checks will reveal much of the habits of applicants.  We want tenants with good ones!  And courtesy, responsiveness, and (especially) pleasantness are other habits that are invaluable to landlords.

 

Happy Landlording!

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Still Gotta Buy Cereal… Lease Renewal Discounting Opportunities

Grocery store prices have really gone up!  Whether it’s due to inflation, the war in Ukraine,  gas prices, Will Smith punching Chris Rock at the Oscars, or whatever explanation mega-corporations think the public will best swallow, it’s been sort of shocking how much more things cost percentage-wise.

 

This leads to an issue in my house.  My son is a picky eater (following the youthful pattern of his old man, unfortunately…); finding things he is willing to eat is difficult.  Fortunately, Honey Nut Cheerios have been on his acceptable list for a while now and are a go-to for at least 1 meal a day.  But prices have gone up and substitute store brands don’t pass muster, so we are in a conundrum.

 

General Mills’ stockholders are pleased as we are forking over a dollar more per box.  I’m somewhat positive their actual increased costs are a fraction of that, but “never let a crisis go to waste” has long been part of good business acumen.  So we grit our teeth and pay it so the young tyke can survive.

 

Tenants are in a similar situation now.  As their existing leases are coming up for renewal, they are finding that the rental prices offered to extend them are much higher than their current rate.  This leads many to quickly try to locate the greener pasture of a cheaper rental home.  But these homes are largely non-existent as most landlords have followed suit and raised their rental home prices as well.  They find the rent they are currently paying is a huge bargain to what their new rate would be, but, unfortunately, also to what other homes are renting for.  What to do?

 

The old answer would be to take this rental market and shove it!  Become a home buyer!  Build wealth!  Get a fixed rate mortgage so that the monthly costs of the home would never go up!  But the only thing harder than the rental market currently is the “for sale” market.  Talk to anyone who has tried to buy a house in the past few years.  Mission (almost) Impossible- and, if successful, you’re not buying a bargain!

 

So, again, what to do?

 

For tenants, it’s a tough situation.  I’d recommend being qualified to purchase and then to scour deals for sale and rent; then look to see and apply/make offers on a lot of houses.  A less stressful strategy would be to just batten down the hatches and wait things out until there is an inevitable housing market downturn.  It’s the “stay put and stay solvent” strategy.

 

But, as a landlord, what is a good strategy on lease renewals?  Landlords are in a good spot in today’s housing environment.  I think there is a temptation to raise the rent to or above market rate to maximize cash flow.  And then hope the tenant stays (and can afford it).

 

However, I’d offer a contrarian strategy of not putting existing tenants over a barrel.  True, it might be difficult for them to find another place to live so there is an inherent advantage that wouldn’t be exercised.  But if they have been good tenants who take care of the house and pay on time, I’d recommend pricing the lease extension rate 5-10% below the prevailing market rate for a vacant rental.

 

But why?

 

Several reasons:

 

1.  Fix-up and vacancy costs will probably push the payback period to over a year.  If the new tenant leaves after their 1-year lease expires, it’s a lot of activity to produce a loss.

 

2.  When tenants examine the rental market (and they will!), they will see that the renewal terms are a relatively a good deal and will be more inclined to stay.

 

3.  Good tenants are worth their weight in gold!  Continual cash flow from good tenants pays down landlord mortgages and reduces wear on homes.  And call me soft, but good tenants do deserve some type of positive consideration for keeping their part of the lease.  It’s good business.

 

Higher prices are hitting different groups differently, but people still gotta have somewhere to live and afford cereal too.  Housing discounts aren’t as ubiquitous as Cheerios coupons, so use lease renewal discounting as an opportunity to keep good tenants.

 

Happy Landlording!

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Santa’s Influence & Rental Home Inspections: Naughty or Nice?

He’s making a list
He’s checking it twice
He’s gonna find out who’s naughty or nice
Santa Claus is coming to town

(“Santa Claus Is Comin’ to Town” written by J. Fred Coots and Haven Gillespie)

 

Oh, Santa Claus!  He’s the mythical man who causes such delight and fear in the hearts of children (and some misinformed adults).  He can be a best friend who showers good kids with gifts, or a cold, disapproving, gift-withholding coal-dispenser.

 

Parents have long used Santa’s inexplicable worldwide influence to ply good behavior from their children, especially in the month of December.  There are several proven manipulations:

 

1. Santa the Spook: He’s watching you… all the time… his values are perfectly aligned with your parents… you could blow this Christmas big-time if there are any incidents… he sees all- yup, even that…

 

2. Santa the Bully:  Do you want to get any presents???  Do you??? Then you better be good!  Do you think Santa is playing?  He’s been doing this forever and knows payback better than anyone.  Do you feel lucky, punk???  Don’t try Saint Nick …

 

3. Santa the Eager Rewarder: Santa loves you- he really does.  He wants to get you those Legos… but if you take the screws out of your sister’s bed, how is he going to justify giving you the galactic mother ship when Mrs. Claus asks?  Even the reindeers would revolt if you were rewarded for that behavior.  Just make it easy, be good, and let the Lego ship will fly down your chimney on Christmas Eve…

 

The Santa illustration can be carried over to our bi-annual home inspections.  For clarity purposes, our rental home inspections include an on-site visit of approximately 10 minutes where we have a checklist of things to look at (air filters, smoke/CO detectors, pets, smoking, etc.) and we take some pictures of the interior and exterior.  And, yes, we check our list twice.

 

The question is: “Are home inspections naughty or nice?”

 

As a property manager, I initially wasn’t a huge fan of conducting home inspections and had them on the “naughty” list.  I figured the tenants were going to be staying in the home largely regardless of what we saw (short of some major discovery at the home) for their lease duration, so I wasn’t sure what we were trying to accomplish.  Badgering tenants into compliance also seemed to be a loser’s battle.  And, to boot, tenants did not like the home inspections either and would gripe.  The whole thing seemed like a waste of time and resources to me.

 

But we did them anyway.  As time went on and we had years of home inspections under our belts, visiting the homes twice a year proved to be really beneficial!  At first take, there were some smaller, auxiliary benefits for our owner clients.  We were able to catch some repairs early and head off some more major issues.  We had a good idea of what a home was going to look like after the tenants moved out.  We could eyeball certain tenant complaints in person and see if they had merit.  We built better personal relationships with some of the longer term tenants we would visit.  And we elongated the life of HVAC units as we made sure the air filters were changed regularly.

 

But the largest benefit was that we got the homes back in better shape.  And I would attribute that to the “Santa” influence effect.  If people think someone cares and is actually checking, people tend to put more thought and time into their efforts.  Home inspections are a good reminder that the landlord cares how the rental house is kept and the tenants should too.  And most of them do!

 

Rental home inspections seem to limit naughtiness.  So Santa (and this property manager) now put them firmly on the “nice” list.

 

Merry Christmas & Happy Landlording!

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Getting Rental Turns Right the First Time with Perfect Practice

“Never mistake activity for achievement.”

John Wooden (legendary UCLA basketball coach)

 

A popular maxim says that if you want to be wealthy, keep things old:

 

1. Old Car
2. Old House
3. Old Wife

 

When you get things right the first time, it saves a lot of money!  I’d also add “Old Tenant” to the list…

 

It’s also been said that “practice makes perfect.”  Athletic gurus (originally attributed to Green Bay Packers coach, Vince Lombardi) have amended that to “perfect practice makes perfect.”  The reasoning is that if poor technique is being practiced, more practice could potentially make one worse.

 

The same can be said of turning homes for rent (I’d say selling them too, but it seems like if your house was on fire in Charlotte, it would still receive multiple offers).

 

It makes sense that the longer a rental home is on the market, the better the chance is that it will rent.  More potential exposure equals more showings which would equal more applications and a quicker turn between tenants.  More time on the market (practice) automatically equates to better results (perfect).  But I don’t think that the market always bears this out.

 

So having a home on the market for rent for a longer time can be sub-optimal?  Why?

 

Most of the time, to increase the days on market, the days are taken from when the rental home is tenant-occupied or while it is vacant and repairs are being completed.  This is usually when the house is not in optimal condition.  So rental ads are urging people to see a home that isn’t in great shape.

 

This matters for several reasons:

1. Great tenants care about the condition of the house.  They are very interested in their living environment and value well-kept domiciles.  These types of tenants typically return the home in as good or better shape than when they moved in.  We really like these meticulous tenants!  They usually pay before the 1^st of the month too.
2. The manner in which the internet home search game works warrants putting out the best product first.  Prospective tenants typically set up search parameters and are alerted when rental homes come to market that fit their profile.  So when a home is initially put on the market, this should precipitate the biggest surge of showings.  If the home is hard to get into (tenant-occupied) and/or looks disgusting (being cleaned and repaired), they will visit and pass on the unit.  Or the wrong type of tenants who aren’t bothered by the poor condition will put an application in.
3. Homes on the market for a long time tend to get stale.  People wonder what is wrong with the house when it keeps coming up in searches for months and hasn’t been snapped up.

 

A caveat to this: I don’t have a big issue going to market while a home is tenant-occupied (this does not factor in COVID considerations).  If the tenant that is there is cooperative with showings, it is essentially free time to market the house.  It’s a great feeling to approve a tenant during this time and time their move-in a week after the current tenant vacates (allowing time to get the home in shape for a new occupant).  But #1 above can still apply if the home is in poor shape.

 

In short, for optimal results, wait until the house is fixed up and at its best, then go to market.    Get the rental house right the first time and practice perfectly!

 

Happy Landlording!

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Competition is for Sissies: Buy Straw Hats in Uptown Charlotte

“Buy straw hats in the winter because summer will surely come.”

Bernard Baruch

 

The competition for Charlotte-area homes is relentless from the buy-side.  One local statistic really drives home the point: there is currently an 18-day supply of homes for sale (and 120-days worth is considered a healthy market)!  That’s badly seller-skewed.

 

And I saw a Linked-In post last week from a member of our local Realtor Association, Jonathan Osman:

 

There are now more than 13,788 Realtor members in our local association of Realtors… and only 1,633 homes for sale in a 7-county region surrounding Charlotte.  Happy Monday everybody!

 

That’s a lot of agents and buyers fighting over a few pieces of cheese.  And that doesn’t even factor in the i-buyers like Zillow, OpenDoor, and real estate investment hedge funds that have non-licensed agents scouring the market for unlisted homes to buy.  If they are not consistently buying a large quantity of homes, they are not doing their jobs.  Supply versus demand is in full effect- Prices continue to climb!  20-30 offers per listing coming in fighting for attention!  Competition is fierce!

 

But there seems to be a bastion of discounted properties located right in the heart of Charlotte in the 28202 zip code that sit undisturbed- Uptown condos!  They’re nicely adorned living spaces located in beautiful, tall buildings in what was considered prime real estate.  And no one seems to have any interest in them as prices drop.  OpenDoor has no current interest and Zillow’s instant offer is at a steep discount to market price.

 

So why is this packet of Charlotte real estate getting the cold shoulder?  I can foster a few guesses:

 

1. “It’s the pandemic, stupid! Everyone is “Zooming” from home and Uptown (and downtown areas in cities everywhere) are obsolete now.  Who wants to live in the City when you can be in your PJ’s in the ’burbs?”

 

Rebuttal:

1. The suburbs (and home) can enjoy their time in the sun.  Cities are still cool and have lots to do.  Companies still value in-person collaboration.
2. Huge organizations (Bank of America, Wells Fargo, Duke Energy, Carolina Panthers, etc.) don’t have billions of dollars in leases and real estate office holdings that are going to sit empty one more minute than they have to.  When things are thought to be feasibly safe, doors are opening.
3. Here’s the path to never getting promoted at work: when the Uptown office opens up and the option comes to work from home or go in, take the home option and continue to work by video.  All top leadership will be required to be in the office, so your co-workers will enjoy lunching and working closely with the decision-makers in-person.  I wonder who gets promoted… The person who they laugh with at the water cooler or the person they have to sit through yet another Zoom call with to see and never seems to be around?  Hmmm…

 

 

1. It’s tougher to cash flow condos with high monthly HOA fees and, to boot, rents seem to be lower.

 

Rebuttal:

1. True that on the HOA fees to a point.  Just keep in mind a few expenses that HOA fees save owners from paying: buying a new roof, monthly insurance, exterior house maintenance, pest issues, water/sewer bills (when vacant), and the threat of vandalism.  The actual hit is lighter than it seems.
2. Rents are lower because the demand is not there right now to live in Uptown Charlotte with offices largely closed.  But that’s why investors buy those straw hats in the winter!

 

 

• There are a lot of Uptown condos for rent. There have not been any new Uptown condo buildings built in over a decade, but many apartment buildings have been.  That’s a lot of rental competition!

 

Rebuttal:

1. But the rental price points on the newer apartments are higher (and need to be due to higher land/construction costs when they were built and investment cash flow required for the financial institutions who own the buildings).
2. The newness factor has largely worn off and now the older units for rent are on largely equal footing (most with better locations)
3. There are not many Uptown units that can actually be owned. To your point, no condo buildings for private owners have been built for over a decade.  At some point as renters come back to Uptown, they will want to be owners and have limited supply to choose from.

 

Competition is for sissies!  Investors may want to buy the unpopular Uptown condos now and then wait to reap the benefits in the summer when straw hats are back in vogue.

 

Happy Landlording!

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Property Management: Changes for the Better in 2021?

“Everything in moderation, including moderation.”

Oscar Wilde

 

“…The man who fears God will avoid all extremes.”

Ecclesiastes 7:18

 

Let me start off by saying I’m not a big clothes shopper.

 

I was minding my own business the other day at home and my phone buzzed.  I looked down at an alert from Amazon Photos with the “From 10 Years Ago” tag; it was a photo of my beautiful wife and I on a date at a Panthers game (awww…).

 

Two things struck me:

1. Look at that guy with his gorgeous, flowing mane of hair (what happened???)!
2. The UNC sweatshirt and wooly I was wearing looked eerily familiar… When I glanced in the mirror, I realized I was currently wearing the same exact outfit.  I tend to view these things from an optimist perspective (I still fit in my clothes- nice going!  Carolina blue really has always really accentuated my eyes…) as opposed to reality (Buy some new clothes, cheapskate!).

 

OK, sometimes things should be changed; buying some new attire from time to time never hurt anyone.

 

And sometimes not changing things can hurt people.  In 2020, COVID made changing certain in-person business practices necessary for safety reasons; this really accelerated the use of certain technologies in property management, especially self-showings, video virtual tours, and virtual lease signings.  These methods have been used and adopted by many in the industry to varying degrees:

 

1. Self-Showings: This is where a prospective tenant is able to access keys through a lockbox to show themselves a property without a company representative being present.

 

At first take, it seems risky to have strangers in a vacant home when they could just take desired pieces of the property with them when they leave.  But this trend has been building and is now commonplace.  I think a real estate agent provides limited value being on rental showings.  Renters don’t need to be sold into making a decision.  At the end of the day, they are taking time to look at rentals because they either want to or have to move; I don’t see a lot of rental home tire-kickers.  They want to like the property and get it done with, as opposed to new home buyers who sometimes look for perfect.

 

However, there obviously needs to be some controls in place (avoiding the “open-barn” theory).  It’s important to know who is going into the house and have some concrete, confirmed contact information that can be given to the police if something goes awry.  Done properly and moderately, self-showings are efficient and allow renters to view homes on their own schedule.  It can work really well.

 

2. Video Virtual Tours for Rentals: I’m still not on the bandwagon on this one.  I really want people to visit the rental in-person so they can make sure it is right for them.  If someone wants to buy a home from across the country sight unseen, that is fine with me (we live in America, right?); they can spend their money anyway they choose to.  But if they wind up disliking the home after purchase, they have no one to complain to.  With rentals, they can complain to their landlord for a year or more.  No thanks!

 

I want to provide enough information for people to decide if they want to see the property (pictures, accurate property information, price, etc.).  But I’m still not convinced that videos can replicate being there.  I also want to be cautious abut adding an expense to our owners to get a tenant we may wind up in a forced bad relationship with (“I don’t like the neighborhood”, “The building is too loud”, or “You purposely videoed away from the wall in the dining room to hide the scuff marks.”).

 

3. Virtual Lease Signings (E-signing Documents): I like this trend, to a point.  We’ve used it for a few years for lease extensions with existing tenants and paperwork for our owner clients who needed to add properties.  Since COVID, we have even started to e-sign the lease documents prior to meeting the tenants at the property to give them the keys as a precaution.

 

However, I think this trend has gone too far.  It seems like it is a ready excuse not to talk or meet.  I like to meet with the tenants and review the lease in-person.  There is value to attaching a person with a (masked) face.  If we’re going to the property to get our sign and lockbox anyway, why not (safely) say “hello”?

 

Anyway, in property management and in life, change isn’t always good or always bad- and it often does not need to be wholesale!  Treading moderately with new technologies can be the best path forward.

 

So I think that means I can still wear the sweatshirt and wooly as long as I mix in some new pieces of clothes occasionally, right?

 

Happy Landlording in 2021!

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COVID-19 Rent Collections: OK to Say “I Don’t Know”?

“Dewey Defeats Truman”

Chicago Daily Tribune headline on 11/3/48

 

“Even fools are thought wise if they keep silent, and discerning if they hold their tongues.”

Proverbs 17:28

 

My 6-year old son is tasked with completing school assessment tests this week on the computer.  It’s a stressful time for him!  Not only does he have to deal with new questions about numbers and words, he has to figure out how to use a mouse for the first time.  It’s a lot for a new, aspirant student.

 

My wife thinks some of the questions may be out of the scope of a Kindergarten-educated child.  “Three-digit subtraction questions?  Scandalous!  How could he know such things at this point?”

 

So he’s tackling an assessment question like:

 

Q.  What is 100 – 80?

1. 35
2. 20
3. I don’t know!
4. I really don’t know!  (Can I watch TV now?)

 

The truthful answers for him are clearly 3 or 4 (with a hard lean on 4).  But for us educated folk who have been taking tests all our lives, we know at minimum we need to answer 1 or 2.  Nobody gets any points for offering “I don’t know” on a test!  We only get points for knowing (or acting like we know and guessing correctly).  But we really should know stuff, right?

 

Or maybe that’s the limitation with tests when we implement this methodology in real life.  With tests, there’s always one right answer that is evident if the data is studied and understood.  But reality can be very different.

 

For example, take this COVID-19 situation for property managers.  We’re asked questions from clients like, “Do you expect tenants to pay rent next month?”  Or, more directly, “Will my tenants pay rent next month?”  As someone in the property management field for the past 16 years, I should be able to answer that question, right?

 

Well, I read the same articles that everyone else did with statistics from large apartment provider associations saying 33% of tenants didn’t expect to be able to make their rental payments this summer.  Wow!  1 in 3, that’s bad.  Then I received calls from a few of our tenants telling me about their job losses and wondering if any of our owner-clients would be offering “Free Rent” until things were back to normal.  Data was not promising, both empirically and anecdotally.

 

All of this must have meant that we were going to experience some rough times with the rental properties we manage in the Charlotte-Metro area, right?  So I jotted off letters every month this summer to our owner-clients telling them to expect some rental disruption.  I thought I knew what was going to happen and then I relayed this to our clients.

 

So what happened?  Everyone this entire summer paid (with the exception of literally 1 tenant who is moving out).  And the number of late paying tenants was half of what we usually have.

 

What do I know?

 

What is 100 – 80?  Fortunately, I can help with that one.  But are tenants going to continue paying on time and in full next month?  I really don’t know.  (But I hope so!)

 

Happy Landlording!

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