Property Management, Indeed

Had to let my property management company go. I won't mention names, as I don't think it was their fault; it's just the nature of the beast. I hired them a month ago, when I had 3 vacancies and was over 1500 miles away from them. I NEEDED a PM to make it happen.

Well... a month later.... nothing. And no tenants in sight, either. I've been posting my own ads, screening tenants, and referring them to the PM. I realized yesterday why NOTHING has been happening.

This is how they (and many PMs) work things:
A potential tenant calls. The PM tells them to come to the office to pick up a key. The tenant gives a deposit and a copy of their driver's license in exchange for the key.

THEN.... the potential tenant (aka Your Money, Your Bread and Butter, Your Life Line) goes into your house.................... ALONE!

Ok, we'll get to the liability issues on that in a moment.

But the real issue is that it's NOT going to get rented under these circumstances.

A good tenant will have questions about the property. A good tenant will need someone to help them close the deal! Excited about your new home? Sorry! You'll have to wait for the excitement to wear off before you do anything about it. And, OH! I am SOOO sorry. We're closed for the day. Come back and sign tomorrow!

As far as "good business" goes, if I was a property manager (whose money source depends on filling vacancies) I would want to be RIGHT there in the action, hearing comments like, "If only the bathroom was a different color I would rent it...." or "I really need something bigger than this."

Comments that can be referred to the Owner in order to make necessary repairs and upgrades; AND comments that the PM can use to move a tenant into the RIGHT house!!

Amazing.

[Liability issue that I promised I would get back to: Potential tenant enters house, turns on all the lights, and the heat, and the water... Oh, that explains THAT bill!... forgets to lock the door... someone else comes in and walks off with the appliances.... and that's the end of getting that place rented.]

So, I posted some ads on Craigslist yesterday; got a bunch of phone calls. Showed two of three vacancies. Got one application faxed in. And have one family ready to go as soon as the references check out. A tenant a day? Not bad!

Further--we found out why it's taken so long to get one of the houses rented. Rent price is $1200. Anything above $1200 right now is NEW construction, big, etc. Anything below $1200 is slummy, scary, small, smelly, etc.

This particular house doesn't fit into either category. It's old with all new upgrades. It's small, but well planned. A+ in character and "cool." So, we may have gotten more views if we put the price at $1250, and then offered utility incentives to put it at a more realistic price.

Would not have learned this important tip about the rental market if we had not SHOWN the house ourselves. Yes, it took 30 minutes to show the house; but I don't mind getting paid $1200 for 30 minutes of work. Do you!?

Buying smart in a buyer's market

Everybody knows it's a real estate buyer's market. That doesn't mean, however, every house on the market is a good buy nor does it mean that buyers should be buying everything on the market. There is a fundamental question that every would-be buyer needs to ask: "What is my purpose in buying real estate?" Buyer A may want long term capital growth. Buyer B is looking for a way to shelter some income from tax consequences. Buyer C is attempting to generate a nice chunk of change on a flip and Buyer D is just looking for a way to generate monthly cash flow. No matter how good a buy a property might be, unless it meets the buyer's goal, it won't be a happy experience. For example, my comfort level in investment property is limited to whether or not anticipated rental income is sufficient to service the mortgage, property taxes, insurance and upkeep. That means I resist buying a vacant lot or acreage no matter how underpriced it may be, because it won't generate the monthly income needed to pay the cost of holding on to the property. Others with deeper pockets and a penchant for a greater risk to greater reward ratio might jump at the chance to tie up that lot. For those with nerves of steel and a desire for fast returns, the market is ripe with opportunity. This is a time when list prices must be ignored and fear of insulting a seller set aside. A buyer that fits this category should be having the time of his/her life while driving a realtor insane with crazy low-ball offers and creative strategies that only a few sellers would even consider. Keep in mind two very important factors: 1. We don't know if the market has bottomed out yet. 2. You make money in real estate on the purchase, not the sale. Whether you are an investor or just looking for a new place to call home, now is the time to buy.

Special contribution from Larry Refsland, who makes a practice of shocking realtors and sellers.

Bad Decisions in Real Estate

I remember hearing the story of a wealthy man of few words. He was miserly with his resources and that included the number of words he would dispense for advice or explanation. When asked how he made his money he replied, “Good decisions.” The interviewer pressed on with a follow-up. “How did you make good decisions?” The man of means answered, “Experience.” Which of course forced the next question: “How did you gain the experience?” To which he grunted, “Bad decisions.” In real estate, there are unlimited opportunities to gain experience. Unfortunately, as the wealthy man implied, experience is often gained as a result of bad decisions. A lot of folks wish they could turn back time and reverse a decision to buy a property or at least choose a different loan product. While experience can often be painful, it isn’t the end of the world. The trends of real estate values and all the forces that influence those values are easier to track than the forces of nature that drive global warming/cooling. One thing is certain: Values are sure to rise over time. Even a bad decision today can make you look like a genius given enough time. Talk to anyone that bought property in the 1960’s. Most people that bought their first home in those days were stretching their financial limits to buy a $12,000 3 level split entry house on a cul-de-sac. Even if their neighbor bought the same house for 20% less, in the end they all came out smelling like roses as long as they held the property long enough. One must keep in mind the amount of actual investment and not the purchase price to accurately reflect on whether or not the experience gained was from a good or bad decision. The best way to correct a purchase at the top of the market is to buy another property at the bottom of the market. So, what are you doing reading this when you should be out looking for a bargain?

Contribution by Larry Refsland, who has seen many properties go from good to better, with a little patience. He has real estate in Minnesota and Texas.

What’s a nice home like you doing with a Realtor like that?

In today’s more challenging market, it’s more important than ever to have a strategy on selling your home. Even with all the technology available to market your own home, most folks can use the assistance of a good real estate agent. Alas, that is the dilemma. How can you tell if the agent you sign a six month listing with is the right one for the job? My suggestion is to conduct a job interview with a variety of agents. If you don’t know a realtor, stick a FSBO sign in your yard and start setting up interviews with the agents that have the courage to call. The interview is pretty simple. It should go like this: “Tell me what you are going to do everyday for the next 30 days to sell this house.” If all you get for an answer is, “Put a sign in your yard, a lockbox on the door, put it on MLS and an ad in the paper,” keep looking. I would challenge anyone that wants the listing to come back with a 30 day marketing plan. If they can’t come up with 30 ideas to expose your home to prospective buyers, they are what is known as “order takers.” In this market, an order taker will make more money taking orders at McDonald’s. I’m not saying coming up with 30 ways to sell a home is as easy as the 50 ways to leave your lover that Paul Simon set to music. You might try it yourself and find yourself drawing a blank slate after the 7th or 8th day. But you’re not the one that claims to be worth anywhere from 5 to 7% of the sale price of your home.

Contribution by Larry Refsland. He was that realtor who had the courage to call FSBOs, and he took a lot of sales away from long-time realtors by presenting a 30 day marketing plan, when all they had was a "plant and pray" plan.