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Wednesday, October 4, 2017

Good or Bad Home Warranty Company: Who’s Taking the Call?




“My mom always said life was like a box of chocolates. You never know what you're gonna get.”

Forrest Gump

 
I like to play basketball at the local recreation center.  I often wind up with “Jim” on my team which I’m ambivalent about (and don’t ask Jim what he thinks about having me on his team…).  What I mean is that some days, having Jim on my team is a pleasure.  He’s a virtual scoring machine; he just doesn’t miss any shots! I feed him the ball and just watch him go to work.  We’ll call that “Good Jim”.

 

But then there is “Bad Jim”.  I’m not sure if he has a split personality, or if he and his wife have an “on again/off again” relationship, or what, but other days he just doesn’t have it.  He is disinterested, doesn’t play any defense, passes up easy shots, and turns the ball over constantly.  Frankly, it’s disheartening.  I feel like we are destined to lose when Bad Jim is on my team.

 

Do you want to know what reminds me of Jim?  Home warranty companies.  Some of our Charlotte property management clients utilize them to handle their repairs.

 

For the uninitiated, home warranty companies charge owners an annual fee (usually around $500) to handle any repairs.  So when tenants have an issue, we (or the tenants) call the home warranty company, pay a service call fee (usually $50 -$100), and they will send vendors to fix any major component or appliance issue in the home (including, if necessary, the replacement of them) that are due to normal wear and tear.  It doesn’t sound like a bad deal, especially for an older home.

 

But, like Jim, there is “Good Home Warranty Company” and “Bad Home Warranty Company”.

 

When Good Home Warranty Company is on, the vendor they put us in touch with gets back to us right away, schedules with the tenant, and takes care of the issue.  It can be a good experience (though it makes it difficult to establish any type of service record with a particular company as their vendors change often).

 

But when Bad Home Warranty Company shows up, it makes it really tough on the property management company and the tenants.  We recently had a refrigerator that took around 35 days to get fixed from the initial call(!) and an air conditioning issue that took a week to resolve (a long time to put up with excessive heat in the South during the summer!).  The problem is that the home warranty companies have a vendor list and they send you one that you have to work with (and some are not so reputable).  Sometimes these vendors call you back right away and other times they wait for days.  As a property manager, it’s tough to push vendors you don’t know and have no prior relationship with. 

 

Fortunately, 95%+ of our clients do not use home warranties.  It allows us to use our own vendors who we have worked with for years; we use them because all of them care whether our tenants have to spend the night without air conditioning or don’t have a working stove to cook with.  I think it’s important to have strong teammates who you know consistently have your customers’ best interests at heart.

 

Jim is a nice guy, but just not someone I like to have on my basketball squad because he’s too erratic; I never know if Good Jim or Bad Jim is going to show up at the gym.  I feel the same about using a home warranty company.  Not knowing whether Good Home Warranty Company or Bad Home Warranty Company is taking the call makes either of them difficult to rely on.

 

Happy Landlording!

Friday, September 8, 2017

Higher Rental Rates Could Be a Problem for Landlords?





It’s been a busy season for property management in Charlotte.  The market is hot, activity is high, and rental prices continue to escalate. 

 

So this sounds like good news in our arena!  Higher rents, bigger profits for landlords, and faster turn-around times to fill rental homes is the new normal.  Property managers are looking great!  Everyone is happy!

 

Well, maybe not everyone.  Tenants are seeing rents go up dramatically and they generally aren’t making much more money to offset the increase.  This is really making some of our traditional tenant screening criteria, like debt-to-available-credit and rent-to-income ratios, go off the charts of even marginal acceptability.  Truthfully (and this comes from screening a lot of applicants over the past few years), many of the applications didn’t have great ratios to begin with then.  But as rents have moved up, things have begun to look even worse.  Example:

 

Tenant makes $3,500/month.  Old rent was $900/month and the rent of the new house they want is $1,250.  Credit card debt is $8K out of $10K available.

 

For the rent to income ration:

$900/$3,500 = 26% (pretty good- we try to keep it around 25-33%)

$1,250/$3,500 = 36% (marginal)

 

But the real kicker is more of a common sense question.  If the prospective tenant isn’t living within their means with almost maxed-out credit cards with a $900/month rental rate, what happens when the rent goes up $350/month?

 

Some landlords might say, “So what?  I’ve got enough problems of my own.  Let them deal with it.”  But I’m reminded of a quote from the billionaire John Paul Getty:
 
"If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem."
 
So if we slightly revise this for the Charlotte property management genre:
 
“If your tenant’s car breaks down, your tenant has a problem.  If your tenant is living paycheck-to-paycheck and has no cash reserves or available credit and his car breaks down and he can’t make rent, that’s the landlord’s problem.”

 

So what’s the answer?  Well, I actually have two for you, and you won’t like one of them.  In fact, I’ll put it second so you would read a little longer before abandoning this blog.

 

  1. Screen a lot of tenants and don’t compromise your standards.  However, this is easier said than done.  When your rental home is sitting empty and you already have done 20 showings that generated 10 applications and you haven’t accepted any, you’re tired because it’s a lot of work.  And by the way, expect angry phone calls and e-mails because prospective tenants DO NOT like being turned down.

 

  1. (Gulp) Price the rental house at the lower end of the market.  I know, I know- I’m hearing it already:

 

“But, Brett, that’s heresy!!  I’m here to make as much money as possible!  Do you understand how investments work?  I’ll give to charity on my own!  Top dollar or new property manager!”

 

That’s harsh.

 

We recently had a rental home where we ran through 7 relatively bad applications in a few weeks.  We were priced near the top of the rental rates in the area.  We lowered the rent $45.00 and received two great applications that were both easily approved.  Now they lovingly share the house together (kidding- we sadly had to turn one away).  Good tenants find good deals.

 

When I’m running comparables on rental properties, it seems like the large institutional investors always have filled their properties for the highest rental rate (by a good margin).  It’s seriously impressive and I almost feel like less of a man because I wouldn’t even attempt some of the rental rates they have asked for (and gotten!).

 

But, being that some of them are public companies, they had to release their occupancy and eviction rates to their investors.  They had a 25% eviction rate (1 out of every 4 tenants!).  That’s really high.  Evictions are expensive.  Their model works because they can spread these expenses over thousands of units at higher than market rents.  However, this wouldn’t work well economically (or emotionally) for the typical landlord who owns south of 5-10 units.  One eviction can really hurt.

 

Higher rental rates are limiting the “safer” tenant pool.  Screen wisely and (at least think about) keep the line at the rental rate.

 

Happy Landlording!

Wednesday, June 14, 2017

Golden State Warriors's Recipe for Property Management Excellence




The Golden State Warriors won the NBA Championship!  They displayed a level of dominance that the league had never seen in its history by winning 16 out of 17 games in the playoffs.  And in the only game the Warriors lost, the Cleveland Cavaliers had to set several offensive records to beat them.

 

How did they do it?

 

The easy answer is the players.  They certainly have great ones- Charlotte’s own Steph Curry, Kevin Durant, Klay Thompson, Draymond Green, etc.  With that amount of talent, it could be argued that they could win by managing themselves.  From a property management perspective, if you have great tenants who pay rent on-time without being asked and do their own repairs, it makes the job much easier!

 

But there is something to be said about the ownership group and management (including coaches) that make for a winning organization.  It is truly a top-to-bottom effort to become a champion.  Ownership and management need to be supportive of each other and have a common vision.   

 

Owners Supporting Management

 

The majority owners, Joseph Lacob and Peter Guber, treat their employees and players well.  When their head coach, Steve Kerr, had back problems the last 2 years (which caused him to miss half of last season and most of the playoffs this year) ownership showed unwavering support.  They put no timelines on his return; they just wanted him to come back when he was ready.  There was no coaching change controversy.  They believed Coach Kerr was the right man for the job and he’s brought them 2 NBA Championships in the last 3 years.

 

Property management can be viewed the same way.  Property managers work for home owners.  And sometimes property managers make mistakes.  We recently had a longer term tenant who we believe started running an illegal business out of the rental home; we don’t know why and exactly how it started.  However, instead of getting angry and blaming us, the owner offered support as we worked to get the tenant out of the home as quickly as possible. We do our best, but will inevitably fail at some aspect of management.  Having ownership support gives us the ability to do what needs to be done to right the ship and get back to a profitable equilibrium.

 

Owners Making Strategic Investments (aka Spending Money)

 

When the Warriors fell short in the NBA Finals last year, management felt they needed to improve the team; that meant spending and reallocating money on other players.  With complete ownership buy-in, management went and signed Kevin Durant to a $54M guaranteed 2-year contract in the offseason.  They were willing to spend money to potentially get better.  There was no guarantee that Durant would mesh with the existing players (who had already won a championship 2 years prior without him).  But they spent the money anyway.  And Durant wound up winning the NBA Finals MVP!

 

Property management is no different.  No one likes to spend money; I certainly don’t enjoy spending money on my personal rentals.  But strategic investments are necessary to maintain and improve rental properties to keep them competitive against other rentals.  When property managers make recommendations to spend owner funds, it is difficult to win when there is constant owner pushback.  I guarantee Golden State ownership had financial questions about investing in Kevin Durant, and that is understandable!  But no organizations can succeed in the long haul by practicing persistent parsimony (how’s that for alliteration!).  And, really, it is much easier to not recommend needed maintenance and upgrades.  The Warriors only missed winning the NBA Championship last year by losing Game 7 (so close- and they were even up 3-1 before eventually losing)- but everyone in San Francisco is ecstatic now that the organization didn’t rest on its laurels and aggressively pursued Durant.

 

The Golden State Warriors and successful property managers share a common recipe for consistent excellence- owners and management working together to make smart decisions for the long haul. 

 

Happy Landlording!

 

Brett Furniss is a property manager at BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Wednesday, May 10, 2017

Rental Home Marketing: Kim Kardashian or Jennifer Lawrence?




“There are pitfalls, lack of privacy, loss of privacy, and that’s not for everyone. For me, I can handle it.” Kim Kardashian (60 Minutes, October 2016)

“I teeter on seeming ungrateful when I talk about this, but I’m kind of going through a meltdown about it lately. All of a sudden the entire world feels entitled to know everything about me, including what I’m doing on my weekends when I’m spending time with my nephew. And I don’t have the right to say, ‘I’m with my family.’ … If I were just your average 23-year-old girl, and I called the police to say that there were strange men sleeping on my lawn and following me to Starbucks, they would leap into action. But because I am a famous person, well, sorry, ma’am, there’s nothing we can do. It makes no sense … I am just not OK with it. It’s as simple as that. I am just a normal girl and a human being, and I haven’t been in this long enough to feel like this is my new normal. I’m not going to find peace with it.” Jennifer Lawrence (Vogue, September 2013)

So, fame is a  mixed bag.  So many people work to be rich and well-known, and then realize they just want to be residential property managers (OK- not true- but it sounds like Jennifer Lawrence may potentially be convincible if we were able to get her at her lowest point).

But who cares about us?  What about our rental properties?  Should they be like Kim Kardashian, “handling” (if “handling” and “relishing” now mean the same thing) the pressure of being well-known?  Or like Jennifer Lawrence, shunning the spotlight?

In Kim’s world, our property manager is a marketing dynamo!  The rental property is on every website imaginable!  We see people using our marketing ad as a screen saver.  The magazine racks at the grocery store have publications with our property in there!  #502THEMainStreetCharlotte is trending and its master bath has its own Twitter handle!  Strangers are liking our home on Facebook and we’re getting rental inquiries from abroad!  Strange men are following our employees to Starbucks to get the inside scoop (“It even has dual vanities???  Crown molding!  I couldn’t even tell from the revealing Instagram photos!”)!  The management office looks like it is having a telethon. 

In the J Law (as the insiders refer to her as) world, the rental property would be left alone and no one would even know it was available..  “Shhh… it’s a pocket listing, I think.”  The only way to find it is to do an exact address search on www.BDFRealty.com (and if you mess up on spelling or spacing, you’re probably out of luck…).  Digital tumbleweed blows through your rental ad’s corridors.

So the Kardashian marketing method, though unnecessarily audacious, is probably the best plan to get a good renter quickly.  But what about if your rental marketing is producing the privacy J Law craves and is your new normal?

Try these things:

  1. Google “rental homes in your town” and post the rental ad on the top 3 websites that allow you to do so.
  2. Get the property on the local MLS that Realtors use
  3. Put a sign up in the yard
  4. Post the rental to your social media accounts

Here’s a bonus: make sure your property maps correctly on MapQuest and Google Maps.  We’ve occasionally run into some J Law results in our marketing, and upon some research, realized that the mapping companies had the rental property showing up on an ISIS air field (OK- not really- but you get the point).

“There’s only one thing in the world worse than being talked about, and that is not being talked about.” Oscar Wilde


Keep up with the Kardashians and Happy Landlording!

Wednesday, March 29, 2017

Trump’s Cabinet Means You Should Invest in Charlotte Real Estate




The stock market will always go up eventually.  Historically, it keeps happening.  Most wealthy people (aka the people who make the rules- check out Trump’s cabinet of billionaires) have much of their wealth tied up in corporate ownership (stocks).   It’s almost a sure thing.  If the stock market crashed and stayed down permanently, our country would be in mayhem.  And the dollars under the pillow and gold bars stashed in the attic wouldn’t mean much.  Food would be the main currency.

So why do investors get fearful when the stock market goes down?  It will go back up, right?

After 9/11, the stock market tanked.  Billionaire New York City Mayor, Mike Bloomberg, had a message for his constituents.  He essentially said,” People always ask me for investment advice so they can become billionaires.  I don’t often offer it, but today is different.  Take all of your available money and buy stocks now.”

The Dow dropped to under 9,000 in 2001, and almost to 7,000 in 2002.  It is now over 20,000.  Too many powerful forces have a vested interest in the stock market doing well for it to flounder long.

Charlotte’s population is forecasted to go up 50% in the next 10 years.  All of those people need a place to live.  Statistically, 2/3 will buy and 1/3 will rent.  Housing demand will continue to drive rents and prices higher.

So, investing in real estate in Charlotte is a slam dunk?  As much as investing in the stock market is, especially with a Trump administration.

So that leads to 2 questions:

  1. When is a good time to buy in Charlotte?
For long-term holds, anytime really should be fine.  The best time to buy is when the market gets hammered (see 2008-2012 when we didn’t get many buying inquiries, but many of our clients were looking to unload their homes and became reluctant landlords).  For short-term holds and flips, this might not be a great time as competition is fierce for good properties; it’s clearly a seller’s market now.  But financing is easy and historically cheap right now.

  1. Where should I buy in Charlotte?
Once again, for long-term holds, anywhere within city limits will work; really the surrounding counties seem pretty good too.  When I was a newbie investor 10-15 years ago, my first two purchases were in areas that were considered “war zones”.  I bought them very cheaply ($27K & $39K) and now they are considered to be in “hot areas”.  Note: I wouldn’t recommend this, especially for newer investors.  The fix-up and tenant issues were challenging and I wished I didn’t own them for years due to the headaches.  But there are plenty of Charlotte houses that are in better areas that will make coveted rentals for years and years.  I’d recommend buying houses that are more expensive (the market is pretty good at pricing houses based on risk).  The homes I bought over $100K were much easier and safer investments that have also appreciated.

Much like investing in the stock market as a whole, Charlotte real estate is a great long-term hold that doesn’t require a large amount of analysis.  And Trump’s cabinet members (and President Trump himself) own a lot of real estate too… 


Happy Investing & Landlording!

Tuesday, January 31, 2017

Rudy is a Great Movie, Just Not a Great Rental Application




Rudy Ruettiger (aka “Rudy”) was the subject of a great movie in 1993 about his improbable story of getting into Notre Dame and then playing on their football team.  It’s a true testament to the human spirit as he played high school football (not recruited), went to the Navy for two years, worked at a power plant for two years, and then after not getting into Notre Dame for low grades, went to Holy Cross College for two years before being admitted to Notre Dame on his 4th try!  Whew!

Then he walked on to the football team and made it(!), got beat up on the scout team every day at practice, and then got on to the field his last game and picked up a sack.  What a story!

Of course Hollywood embellished the story a little bit as Joe Montana, a freshman quarterback at Notre Dame at the time, said in an interview.  No players were taking off their jerseys demanding that Rudy get in the game, it was typical for seniors to get into the last home game, and the players carrying Rudy off the field in triumph were just playing around.  And Rudy’s legendary work ethic?  “He worked his butt off to get to where he was and do the things he did.  But not any harder than anyone else,” Montana said.

The truth is that Rudy should have never gotten into Notre Dame due to his bad grades (4 tries!  Where did he get the money to pay the college application fees?  Does “no” ever mean “no”?  Did he finally get an admission officer who was napping?).  He never should have been on Notre Dame’s football team (He was 6 years older than everybody else.  He was 5-foot 6 inches tall and 165 pounds!  He’s lucky he didn’t get killed in practice.).  “Rudy” should have never happened and a movie was made about him because somehow it did.

As a Charlotte property manager, we sometimes get rental applications that I feel might have been inspired by Rudy.  And I’m not saying that to be mean.  I really feel that if we approved some of the applications we received, we’d essentially be ruining the applicants’ lives.  For example:

We had a rental house on the market for $1,400.00/month.  We received an application where the prospective tenants had several credit cards almost maxed out, they had been late 8 of the past 12 months on rent, and the rent they were currently paying was $1,000/month on a smaller house.  How was adding $400.00 in additional rent (not to mention higher utility costs for a bigger house) a responsible move for anyone- landlord or tenant?  It would just have made life much harder for everyone.

Even as romanticized as Rudy was, the chances are no one would have wanted Rudy’s life prior to running through the tunnel and getting into his one Notre Dame game.  He was studying all the time to pass classes that were too difficult for him, while walking around with a beat-up body from banging into guys that were too big and strong for him to compete against.

Rudy may have learned character, perseverance, and many other worthwhile traits (while being the subject of a great movie!), but it was a hard journey.  He was able to walk away with a Notre Dame degree, a great memory, and a lucrative speaking career after the movie came out.  But I’m not sure there are any rewards for taking on more housing payment than one can afford.  It’s stressful, and hurts families and relationships.  Usually, it leads to evicted tenants and fired property managers.

We all want to root for the underdog, but Rudy is best seen in the theaters and not experienced in real life.  Denying unworthy applications can sometimes be a great act of kindness.


Happy (& Responsible) Landlording!

Thursday, January 5, 2017

The Rental Bachelorette: What is She Looking For?





"I would just want someone who is genuine and makes me laugh and is my best friend and ultimately someone who is going to love me as much as I love them.”
Former Bachelorette JoJo Fletcher

JoJo apparently found that “someone” in the arms of NFL quarterback Aaron Rodger’s brother, Jordan, in the last season of the Bachelorette (so says the cover of a tabloid magazine next to Harris Teeter’s cash register).  Good for her!

Many people have differing ideas on what women want from prospective male suitors.  I’ve seen some lists as short as:

  1. Rich
  2. Good-looking

This list is written for the rich, good-looking guys typically by the less rich, less good-looking, jaded guys.

And there are some deeper lists written for the less affluent, average-looking guys (who might buy magazines with articles like this).  This “Top Ten” list is courtesy of www.topyaps.com:

  1. Not being desperate or clingy
  2. Being a friend first
  3. Manners & hygiene
  4. Respecting her space
  5. Chivalry
  6. Sincerity & loyalty
  7. The ability to protect
  8. Sense of humor
  9. Intelligence
  10. Honesty

Wow!  That’s a much tougher list to mull over.  At first glance, it seems like I’ve blown it in the past by actually following items #1 and #4 by “not caring” and “being distant.”   But I digress…

As a Charlotte property manager, this is a question we get often from potential tenants:

“Before I spend $75.00 on a non-refundable rental application, what are you looking for?”

The three things we are looking for in potential tenants for our properties:

  1. Pay rent on time: #1 criteria
  2. Maintain the property: change air filters, mow the lawn, make reasonable repairs on your own, etc.
  3. Get along with the neighbors (and property manager!)

If tenants can do these 3 things, we will like them a lot and the tenancy should go very smoothly.

Tenants do not need to be rich or good-looking, but we’re always impressed with chivalry and a sense of humor.

Happy Landlording!


Brett Furniss is a property manager at BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!