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: What Does it Take to Sell a House in this Market?
Most of the calls for our rent-to-sell program (rent-to-own tenant placement into vacant homes for sale) are about addressing one primary need; unfortunately, that need is not for our rent-to-sell program (per se)! The need they are addressing is selling their home as quickly (and for as much money) as possible. If a company existed that could do this consistently, they would be inundated with business (and profits)! It would be like owning the only service station with gas in city limits.
Every real estate company says they can sell a home quickly and profitably for a variety of reasons:
“We have an 11-point marketing program for new home buyers!”
“I’ve forgotten more about Google search engine optimization than my competitors have ever known combined. Your house will be on top of the search engines!”
“My astrological sign is telling me that whatever I touch will sell. Like ‘Tommy Boy Sr.’, I could sell a ketchup popsicle to a woman in white gloves!”
Alas, most of these claims have limited validity in terms of their actual effectiveness. What really works in this economy is having:
1. A special, unique house in a desirable area that people really like
2. One of the lowest prices for sale on the block
These are the two extremes of the spectrum of houses for sale. One end has great, unique homes offered at full price; the other end has abandoned (or trashed) homes offered at fire sale prices (foreclosures, auctions, short sales, etc.).
What about the millions of houses for sale in the middle of the spectrum? That is, regular homes that can’t be severely discounted by the owners?
That is the million dollar question. As of now, there are no sure-fire ways to sell regular houses within 90 days and for near full price. For these homes, selling is largely a waiting game depending on a degree of luck.
How are regular houses being sold? After all, some do sell everyday somewhere in the world!
These sales are usually happening due to a relaxation of one of the two major contract terms- time or money. This type of trade off is necessary to make sales happen.
To sell within 90 days (time), the price (money) has to be lower than other comparable homes for sale. To sell for full price (money), the time needed to sell must be much longer (think years!).
For owners of vacant, regular homes that can’t discount steeply (and don’t want to eat their mortgage every month), we are recommending the rent-to-sell method of selling. Rent-to-sell is creating a market of willing buyers and willing sellers and putting them into lease option (aka rent-to-own or lease purchase) relationships. Or said more simply, rent-to-sell is placing wanna-be buyers (people who can’t qualify for a bank loan right now) into the homes of wanna-be sellers (owners who have their vacant, regular homes languishing on the market). The wanna-be buyers then rent the home for sale until they can buy it.
So how do you sell a regular home in this market? The answer is to either give in on price (huge cut) or time (rent-to-sell). It’s that simple.
What trade off are you willing to make to sell your home?
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: Mr. Smith’s Appointment Implies Real Estate’s Future is in Rent-To-Own & Rent-To-Sell
“Since they collapsed into conservatorship in September 2008, Fannie and Freddie have received $151 billion in taxpayer assistance. More will certainly be needed.”
“If this Mr. Smith goes to Washington as head of FHFA (Federal Housing Finance Agency), he will face a monumental challenge at a crucial time: how to protect taxpayers from even greater losses incurred by Fannie and Freddie.”
(Gretchen Morgenson in this week’s NY Times)
So, it looks like NC’s own Joseph Smith, Jr. will be tapped to run the FHFA. Big deal! Somebody’s got to do it, right? And when you’re looking for employment, the government seems to be the only people hiring, so it’s a logical step for him.
Who is this guy? I really have no idea. He’s been in the papers recently due to this appointment; all of the articles about him say that he has a reputation as “friend and rugged defender of the taxpayer.” I pay taxes so that sounds okay to me.
He is taking over an agency that is losing roughly $6B A MONTH over the past 27 months! Obviously, this agency has to be part of the government because after the first $18B loss quarter (or $72B loss year), it would be tough to keep his job in the private sector.
Anyway, what does his appointment mean? Let’s play his first day on the job out.
The first thing Mr. Smith does on his first day of work is ask his new secretary where the bathroom is and how many vacation days he has a year (everyone knows you can’t ask this in the interview!). The second thing he does is call his top guys and ask them how the heck they are losing so much taxpayer money. Their answers probably can be succinctly summarized into one statement, “We guaranteed a lot of bad loans to people who were not qualified enough to have them.”
Mr. Smith rubs his chin and says, “So, going forward, we should probably start only guaranteeing loans to more qualified people, right?” As his top lieutenants vigorously nod ascent and genuflect, he dismisses them from the room. “Sorry fellas, gotta go. It’s time for me to take it street-side and hug some oppressed taxpayers.”
His lieutenants quickly gather and surmise that “more qualified” probably means that Mr. Smith is saying FHFA needs to require “higher credit scores and down payments for loan applicants.” They pat themselves on the back for this revelation and scan the Washington Post to see what new DC restaurants would be good for lunch.
Back on Main Street, “more qualified” means a lot more people won’t be able to get loans to buy homes. It also means that a lot more people won’t be able to sell their homes (it takes two to tango, right?). And, furthermore, it means that real estate agents need to get used to doing even less brokerage business.
So all real estate agents need to pick up their equipment and go home? Hardly! Consumers still need to be able to transact real estate; the last time I checked, people are still marrying, divorcing, transferring, investing, having kids, sending kids into the real world, etc. They need to be able to acquire and dispose of homes.
The opportunity for real estate agents in the next few years will be placing potential buyers (who can’t get a loan now) into homes they will buy when they qualify for one; this means setting up rent-to-own (aka lease option or lease purchase) transactions. On the same token, it means opening up listings of vacant homes to rent-to-own tenants (also known as “rent-to-sell”).
Mr. Smith will be doing everything he can to stem massive loan losses. He is implicitly communicating to the real estate community that rent-to-own and rent-to-sell transactions will be the way to help customers achieve their goals over the next few years.
Will you change your business accordingly?
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: Santa Claus, Unicorns, & Risk Free Transactions (Or “How to Risk Manage Yourself Out of a Living”)
“I can’t do lease options. They are way too risky!” (Concerned Charlotte Realtor)
“That’s why it’s a short cut. If it was easy, it would just be the way.” (Paulo Costanzo in Road Trip)
Learn MoreCharlotte Property Management Weekly: Getting Paid- A Growing Problem for Everyone! (Except Realtors & Clients Doing Lease Options)
The biggest symptom of our current economic problems is that people don’t have the money to pay their bills. Think about it. Why is the FHA in trouble? It’s because the home owners they lent to couldn’t pay. Why did the banks need to get bailed out? It’s because the clients they lent to couldn’t pay. Why are many businesses going under? It’s because their customers are businesses that are going under (because they didn’t get paid).
Learn MoreCharlotte Property Management Weekly: A Realtor’s $100K Case for Rent-To-Own- It’s All About the BATNA
Example: OK, Mark just asked you out. Do you say “yes” and go out with him this week? He’s average looking and needs to trim his nose hair, but he seems sort of funny. If you say “yes”, you’ve got a date (and a free meal) on Friday night. If you say “no”, you might be sitting at home alone (again) this weekend watching TV and listening to your friend, Molly, complain about her awful life for an hour over the phone. Oh geez, it could get worse; Molly might feel inclined to stop by if she knows you’ll be home…
Learn MoreCharlotte Property Management Weekly: The Tipping Point is Coming- Are You Prepared for Lease Purchase?
“I understand that qualified buyers are becoming scarcer by the day. More and more houses I list are sitting vacant on the market while the owner eats the mortgage every month. Do I just tell them to wait for the market to come back or is there something I can do?” (Charlotte Realtor)
“In sociology, a tipping point or angle of repose is the event of a previously rare phenomenon becoming rapidly and dramatically more common. The phrase was coined in its sociological use by Morton Grodzins, by analogy with the fact in physics that adding a small amount of weight to a balanced object can cause it to suddenly and completely topple.” (Wikipedia definition of “tipping point”)
“The Times They Are A-Changin’” (Bob Dylan)
Learn More