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!

Crushed by Cumulativeness: Rent Increases and Why the NFL Player Didn’t Sign Your Kid’s Football

 

“What a jerk!  All he has to do is just sign his stupid name to ONE football and it would mean the world to Little Johnny.  But instead he needs to hurry to the locker room to recount his millions of dollars!”

(Reaction of many parents after their child’s autograph request is snubbed)

 

I was talking to a local college football player (a kicker, if you must know) about what he was doing after he graduated in May.  He said he was starting to figure that out being that he finally had some time to think about it.

 

Some time?  He’s in college!  I was thinking of how wasting time was sort of what my friends and I did during our undergraduate tenures…

 

“You don’t have any time?  How did you get so scheduled out?”

 

He pulled out his team-issued iPad.  “Do you see this?  I had to look at this every day for the last five years; it told me where I was supposed to be and what I was supposed to be doing every hour of every day… Now, honestly, I’m adjusting to doing life without it.”

 

Wow!  That sounds pretty demanding for a college kicker at a small-time football school.  If I were him, I think I would have opted for intramural soccer.

 

Now let’s think about NFL players.  There are even more football activities than college.  They are travelling for training camp and games.  If they don’t do well, they can be cut at any time.  If they want to get better, they need to take the time to practice, lift weights, and study the playbook and game tape on their own.  Then they have family, faith, friends, financial, and other real-life commitments- and everyone likes them and wants to be near them because they are wealthy and famous.  They are super busy! 

 

And then there are constant, on-going demands for their time.  Want to be on a weekly talk show (aka NY Jets quarterback, Aaron Rodgers)?  Make sure you cut an hour or two of every week for that.  Endorsements?  Autograph shows?  Dinner with your wife?  Your kid’s basketball games?  Team functions?  Mailing back football cards kids send them to sign?  Your college wanting you to come back to accept an award on an off-week during the season?

 

If it was signing one football, that would be one thing.  But it is signing one football in addition to an overpacked schedule.

 

So how does football player busyness fit into rent increases in today’s world?

 

A landlord may be heard muttering, “If a tenant can’t come up with an extra 5-10% for rent every year, maybe they shouldn’t be in the property in the first place!”

If it was just $100.00/month extra for rent every year, that would be one thing.  But rental increases are not happening in a vacuum.  Tenants have been absorbing increased rents in addition to increased costs for almost everything else they consume.  Food, gas, car prices, car insurance, plane fares, restaurants, NFL tickets (another 4% increase in ticket prices was just announced by the worst team in the league, Carolina Panthers), etc..  Netflix just went up by another $2.00/month, for goodness sakes!  Like small papercuts that keep happening, the bloodletting becomes very real eventually.

 

Cumulativeness can be crushing! 

 

Property managers and smart landlords need to balance potential rental increases with killing the golden goose.  Good tenants are an asset that maintain the property and pay down the underlying debt.  Dumping another increased expense on them can be detrimental to both parties, especially if the tenant moves and the property needs to be repaired and put on the market again.

 

Good news!  The college and NFL players don’t hate your kid.  If they had an iPad with lots of empty time slots and/or few other commitments, I’m sure they would happily sign footballs most every time!  And if rental increases are measured, good tenants will be able to absorb them and continue to be a reliable monthly partner.

 

Happy Landlording!

 

What Vacant Rental Home Fix-Ups Should a Landlord Do (or Not Do)?

 

My wife and I were looking at renovating our primary bathroom so we had someone come in and give us a quote.  We weren’t looking for anything overly-extravagant; I’d say it was much more on the practical side of replacing some older bathroom pieces.  I thought the proposed work was relatively basic and was more concerned about the inconvenience than the cost.  Then the quote came in around $50K.

 

To me, the quote was a lot; $50K for a practical bathroom renovation is significant.  For that, I’m thinking heated tiles, a sweet hot tub, and a roomy, rainwater shower equipped with a state-of-the-art entertainment center.

 

If we take this out of the “splurge on myself” category (where things like this are sometimes justified on a personal residence- note: not in this case…) and put it into the “rental home investment” category where the numbers need to make actual sense, we could do a quick calculation of making this potential investment:

 

With a renovated primary bathroom, we’ll say the rent can go up an additional $500.00/month; that seems high to me, but we’ll go with it.  At $6K extra rent coming in annually ($500 for 12 months), we’re looking at the payoff time for a $50K bathroom investment to be roughly 8 years (8 years multiplied by $6K = $48K).  That’s a long payoff period, especially if a destructive tenant moves in and degrades it quickly.

 

This type of repair figure, post-COVID, is not crazy though.  The question then is how much home fix-up is a justifiable expense for a landlord?   That’s a tough question as it is really an answer that has to be made on a case-by-case basis.

 

But philosophically, my answer would be to spend as little as possible with several caveats if the rental home is a long-term hold:

 

1. Don’t skimp on preventative maintenance
2. All home systems need to be functioning per the lease agreement
3. The home needs to be desirable to rent near the market rental rate (no major red flags aesthetically)
4. The home needs to be very clean and pest-free

 

This is much more of an art than a science.  The issue is that when new things are installed in an older house, it makes the older things look even older.  For example, if one room gets fresh paint, the rest of the unpainted rooms scratches look even worse.  Replacing one appliance can make the other ones look 10 years older.  What not to renovate can be more important than what to renovate.

 

And different aesthetic issues are going to make the home unrentable to certain people; it helps to be a bit thick-skinned if some potential tenants are critical of certain aspects of the home.  New construction and/or complete renovations appeal to everyone!  But most owners and tenants are either not willing or able to pay for that.

 

I want to be clear- a home is always easier to rent and will rent at a higher rate if everything is renovated.  If the financials can be made to work, this is the best option by far.  It is really nice to offer rental homes that have the best of everything!  It makes a property manager’s job much easier!

 

However, for others, $50K of renovations may not be a viable investment strategy; the numbers are usually tough to justify on a standard rental home.  Smart landlords learn to be judicious in what they choose to fix-up (or do not).

 

Happy Landlording!

Be a Shark Tank Landlord: Invest in Spotless Tenants!

 

“Cleanliness is next to godliness.”

(attributed to several authors)

 

“We feed the eagles and starve the turkeys.”

(Heard in several sales job interviews circa 2000)

 

I have to admit that I’m a fan of the television show, Shark Tank.  For the uninitiated, it’s a show where entrepreneurs pitch their companies to several accomplished business people (the “Sharks”) in order to entice them to invest in their fledgling enterprises.  After the entrepreneur’s presentation pitch, the Sharks begin to pepper the business owner with questions. 

 

One of the main lines of questioning that comes up in the “Shark Tank” revolves around how the owners calculated the sales prices for their companies.  Questions like: How are you computing a $5M valuation with only $150K in sales this year?  Why are you forecasting such aggressive sales growth?  What are you doing to lower your unit cost?  How is this going to produce enough free cashflow so I can get my initial cash investment back in a reasonable amount of time?  Why is this a business I should have a multi-year involvement with?  What is the industry growth forecasted to be?

 

Even after all these questions, it is tough for anyone (even experienced Sharks!) to know how well the companies will do in the future and whether the money they choose to invest will produce dividends.  However, the entrepreneurs are sure.  They come in loaded with enthusiasm and sell their companies as the next big thing- they will be successful!  But as much as they sell themselves and their companies, the proof will be in the pudding at a much later date- do they deliver as promised or not?

 

It's risky investing in start-up businesses.  They are largely unproven and are really just selling future promise.  Statistically, most will fail.  But the allure is, that if successful, the returns can be more lucrative than investing in established businesses.  The fun part for these investors is when a start-up does well, matures, and becomes an established, valuable company.  This allows them to ride its profits for its lifespan.

 

This reminds me of rental tenant selection in a way.  Property managers look at prospective rental applications, process the information, and ask follow-up questions in order to pick a winner.  The applicants are all very optimistic and claim they will be great tenants.  Property manager “Sharks” will decide who they want to “invest in” (aka approve the application and sign a lease), but the ultimate success in the tenant selection will be discovered down the road.

 

Successful tenants pay their rent on time, get along with their neighbors (no drama), and maintain the property.  But what tenant characteristic should landlord Sharks look for that might generate the best future returns?  After many years of residential property management, I’m convinced it is finding and keeping the meticulous ones who keep their rental homes spotless.

 

A certain tenant of our comes to mind.  When we perform our bi-annual home inspections, the house is immaculate.  You could make the argument that it barely looks like it has been lived in, and this is after several years of occupancy.  The HVAC air filter is always fresh and the appliances look to be meticulously maintained.  To re-rent this house, I imagine our fixup would be minimal to none.  What is the dollar value of that?

 

For example, if we calculate the life of carpet at 7 years, what is the value if a tenant cares for the home so well it stretches it to 10+ years?  Or if we don’t need to paint it on the next vacancy turn?  Or if the HVAC unit lasts an additional 5 years due to its care?  It’s estimated the average house needs to spend 3-5% of its value in maintenance costs each year.  What is the value if that figure is reduced to 1% due to meticulous care?  I don’t know, but it’s a lot.  It’s substantial enough for us to really want these people to stay!

 

Like the Sharks, real estate investors want to maximize the return on their rental homes as well.  When meticulous tenants who love to keep their homes spotless come on board, smart landlords will look to lock them up and ride the profits (realized and unrealized) for many merry leases to come.

 

Have a Merry Christmas & Happy Landlording!

Take it From NFL Quarterbacks: Be Thankful for Your Vendors

 

“…the Chiefs quarterback opted to go big with his show of appreciation for his offensive line with this year’s presents.  Mahomes hooked up his protectors with sets of TaylorMade golf clubs, complete with custom bags featuring their jersey numbers and a box of balls for good measure.”

(Nick Selbe in Sports Illustrated: 12/21/22)

 

“Hi, I'm Dan Marino, and if anyone knows the value of protection, it's me.  So I take care of the hands that take care of me with Isotoner gloves.”

(Ace Ventura 1994)

 

“Rejoice always, pray without ceasing, in everything give thanks; for this is the will of God in Christ Jesus for you.”

(1 Thessalonians 5:16-18)

 

Every year I see articles talking about what Christmas presents NFL quarterbacks give to the members of their offensive line (typically around 10 guys).  Looking at past gifts from the quarterbacks below, they seem to be pretty nice items and run the gamut:

 

Mac Jones (New England Patriots): Bitcoin

Carson Wentz (Indianapolis Colts): Bourbon, some meats, & Yeti coolers

Jalen Hurts (Philadelphia Eagles): Louis Vuitton travel bags

Dak Prescott (Dallas Cowboys): Air Jordan 11 Retro sneakers

 

These are not cheap gifts.  When your livelihood (and long-term health!) depends on these offensive lineman preventing defenders from taking your head off, it is imperative to make sure they know they are appreciated.  And now all the starting quarterbacks in the league make it a point to give nice gifts to the guys that try to keep them upright every game.

 

On that vein, I was listening to a video the other day and the instructor was talking about running a property management company.  He reasoned that the main component of success was the ability to retain tenants; then he began his discourse into specific reasons why tenants did not re-sign their leases.  The #1 reason, by far, was that repairs were not completed in a timely fashion.  He argued that fixing things promptly is the silver bullet to keep tenants.  Landlords can try other things like offering gift cards or flat screen TV’s as lease re-sign bonuses, but they offer little benefit if a tenant’s heating system hadn’t been functioning for 3 weeks the previous winter (like a now ex-neighbor told me recently had happened to him).  To his point, most dissatisfied tenant’s Google reviews against property managers stem from delayed repair resolutions.

 

How does a landlord avoid lingering repair issues?  First of all, work orders must get off the landlord’s desk and be directed to the appropriate vendors ASAP.  Then, it’s all about vendor quality that will drive tenant satisfaction and property management success. 

 

So, the lesson is… hire great vendors!  Hire vendors who care.  Hire vendors that realize that having the heat go down on a Friday afternoon means that it is going to be an awful weekend for the tenant if the work order is pushed until Monday.  I’m amazed (and thankful!) that many of our vendors voice disappointment when they can’t get there the same day or a repair they made didn’t hold.  They have empathy that it could be their families who are shivering at night or have no working plumbing.  It takes a servant’s heart to put someone else’s family before your own.

 

Once a landlord finds these core, caring vendors and puts them to work, it is time to play the role of the thankful NFL quarterback.  I’m not sure that necessarily means Louis Vuitton travel bags or TaylorMade golf club gifts (maybe some Isotoner gloves?), but I’d recommend the following four things we try to give our vendors:

 

1. Loyalty: We give most of our business to our best vendors and keep it there
2. Payment: We make sure invoices are paid consistently, in full, and when expected.  They should be able to worry about their jobs, not exerting energy to collect due funds from us.
3. Grace: Everyone messes up from time to time.  Taking off people’s heads for honest mistakes isn’t going to help anyone.  And when you do this long enough, you know that grace is a two-way street. 
4. Thankfulness: Let them know how much you appreciate their effort on a day-to-day basis.  We all like to feel like what we do is noticed positively.

 

NFL quarterbacks may have millions of dollars to shower their guys with Bitcoin “thank you” gifts, but sometimes the smaller gestures above can go even further.  Give thanks and take care of the hands that take care of you!

 

Have a wonderful Thanksgiving & Happy Landlording!

“100% Guarantee For Your Rental Home!” Delightful or Sour?

 

Tommy:  Here's how I see it. A guy puts a guarantee on the box 'cause he wants you to feel all warm and toasty inside.

Ted:  Yeah, makes a man feel good.

Tommy:  'Course it does. Ya think if you leave that box under your pillow at night, the Guarantee Fairy might come by and leave a quarter.

Ted:  What's your point?

Tommy Boy (1995)

 

My 9-year old son was eating frozen blueberries a few weeks ago and started to complain about them.  “They’re so sour!  Gross!” 

 

I advised him, “Well, that’s too bad.  You get some good ones, and you get some bad ones.  It’s the way life goes…”  Then I patted myself on the back for imparting some timeless, Forest Gump parenting advice.

 

Sometime later, he complained again- and then three or four other times after eating these blueberries.  Finally, I grabbed the package off the table and saw it was the “Great Value” Wal-Mart brand.  My eyes narrowed on the “Great Quality.  Great Price. Guaranteed.” guarantee printed on the back.   Verbatim, it read:

 

If for any reason you aren’t happy, we’ll replace it or return your money.  Whichever you prefer.  All of you need is the package.  It’s that simple.  Guaranteed.

 

Now was the time to teach my son about the advantage of paying attention and reading the fine print!  “Son, we’re going to Wal-Mart and you’re going to take care of it.”  “Dad, are you sure we can bring this package in and they’ll give us the money back?  I’ve already eaten half of them…”  “Yes, son.  It’s that simple.  Guaranteed!”

 

After my son negotiated that he could keep the $2.99 windfall and put it towards a pack of football cards, he signed on to this gambit.  We drove over to Wal-Mart and, from a distance, I watched my son explain to the customer service person that the blueberries were sour and that he wanted a refund.  After a minute or so, he walked away from the counter, defeated, and let me know that we could swap it out for another bag of (sour) blueberries; there was no option of getting football card money instead.

 

Now Dad was sure there was a misunderstanding!  It’s guaranteed!  It’s simple!  And it’s a $2.99 charge to a multi-billion dollar conglomerate!  Well, yours truly fared no better when I approached the customer service desk and was promptly (but nicely) shut down.  If I didn’t have the receipt or credit card it was bought with, their hands were tied.  There was nothing that could be done.

 

Undeterred, as my young kids trolled the Wal-Mart aisles unattended, I called the #800 number that was located under the guarantee.  After a 14-minute phone call of providing serial numbers, date of purchase, and personal information, the customer service representative (who was also very nice) said that we would receive a $5.00 Wal-Mart gift card mailed to us within 2 weeks, but no cash.  When we got home, I sent a message through the “Great Value Guarantee” website and they referred me to the in-store customer service desk for any refund requests.   I wrote back saying that was where it all started!  Then I never heard back.  Ugh!

 

If for any reason you aren’t happy, we’ll replace it or return your money.  Whichever you prefer.  All of you need is the package.  It’s that simple.  Guaranteed.

 

The final scorecard read: (1) in-store visit, (1) 14-minute phone call, (1) web inquiry, & (1) 2-week wait for a $5.00 store credit.  So, obviously, it’s not that simple.  And it’s far from guaranteed.  And we are talking about getting $2.99 back from Wal-Mart which they explicitly stated was a sure thing on the package itself.

 

Great story!  But what’s your point?  What does getting a cash refund for a sour bag of Great Value frozen blueberries have to do with property management?

 

A lot, actually.  It’s about the danger of relying on corporate guarantees when picking vendors, especially in real estate.  Whether it is for home warranty insurance against bigger ticket items breaking down (HVAC systems, roofing, appliances, etc.), costly property management occurrences (eviction, pet issues, etc.), or just getting money back from poor work (a flooring vendor recently), it is difficult to get companies to honor them.  No company wants to pay (not even $2.99!) and there is always a reason why the guarantee doesn’t apply.  It’s frustrating, (super) time-consuming, and borderline unethical at times.

 

But that doesn’t stop them from being ubiquitous:

 

1. Home warranty companies: “If your HVAC system goes down and it can’t be fixed, we’ll buy you a new one!  It’s so simple.  Guaranteed!”   
2. Property management companies: “If there is an eviction or pet damage, we’ll cover the costs- It’s so simple!  Guaranteed!”
3. Wal-Mart: “If for any reason you aren’t happy, we’ll replace it or return your money.  Whichever you prefer.  All of you need is the package.  It’s that simple.  Guaranteed.”

 

Life is too short.  The best bet is to pick a company that consistently offers quality blueberries instead of trying to be compensated on the backend when they are sour.  Getting the $2.99 back is arduous at best, and unfortunately, usually fruitless.  Be wary of upfront guarantees and concentrate more on established track records of excellence!

 

Happy Landlording!

Ohio State Football Recruiting Similar to Great Tenant Selection?

 

“He has shown you, O mortal, what is good. And what does the LORD require of you? To act justly and to love mercy and to walk humbly with your God.”

(Micah 6:8)

 

“No Shoes, No Shirt, No Dice.”

Spicoli in Fast Times at Ridgemont High

 

Ohio State college football has been a dominant program for a long time.  In the last 10 years, they have a record of 106 wins and 13 losses while winning 2 National Championships.  This makes them one of the top programs in the country as they have set a standard of excellence few teams can match.

 

To have a perennially highly-successful football team, Ohio State has been able to get great players to come to their school; great players make great programs!  But how does Ohio State determine what high school football players will actually become great college football players?  What do players need to demonstrate?

 

Like every college football program, coaches will look at all the on-field performance measurables: how many yards, touchdowns, tackles, etc. each player had in high school.  And then the physical measurables:  how fast, big, agile, and strong each player is.  And then there is mental aspect where players will take tests and answer questions showing off their “football IQ”.

 

These are all very important metrics and are heavily considered; the top recruits all grade very well on most or all of the criteria.  But what gives players who measure out well in the criteria above the edge over one another?  I remember reading something about that from former head coach Urban Meyer.  He said that one of the most important things he looked at in recruiting was how the high school player played in the biggest games and versus nationally-ranked players in one-on-one match-ups; he was looking for what he considered true greatness.  Did their performance ramp up to meet the challenge or was it pedestrian?  Did most of the players noteworthy performances come against average teams or did their biggest, statistic-rich games come against the best players in the most high-profile games?  Did they look forward to and excel in the most competitive situations and will their team to win?  Coach Meyer believed that getting the types of players who had the ability to rachet their games up a notch was paramount to Ohio State winning national championships.

 

In property management, tenants are the big-time recruits!  Landlords are looking for tenants who pay on time, maintain the rental homes well, and stay out of trouble.  If landlords can secure great tenants, property management can be really easy!  This is why great landlords spend considerable resources on tenant screening.  We look at all the measurables of the “Big 4”:

 

1. Employment & Income
2. Past Landlord Reports
3. Credit Check
4. Criminal Background Check

 

Measurables tell most of the story and tenants who grade out highly in these areas can provide a solid program.  But what about in situations when there are many tenants applying for one house?  Who is the best one when all the measurables look good?  Who is going to take care of the house?  If some bad event happens, who is going to remain steady and still pay rent?  Bottom line, how can great tenants be found?

 

These are tough questions.  The right tenant roster can make or break a landlord.  What to do?

 

I tend to pay extra attention to 2 things:

1. Debt level (and the corresponding available credit): How extended is the tenant?  Hard times: If there is a sudden job loss or car issue, can they absorb it?
2. Past landlord reports: What did they think?  Did they like the tenant or was the tenant difficult to deal with?  How did the house look when they moved out?  Would they rent to them again?

 

At the end of the day, Ohio State football and smart landlords are looking for great players.  Great recruits win championships and profitably pay off rental houses.  Pick wisely!

 

Happy Landlording!