Charlotte Property Management Weekly: Wouldn’t You Want the Market to Know Your Rental is For Sale?

As a Charlotte property manager, we work with many clients who are looking to rent-to-own a home. As the banks continue their non-lending ways, this group of clients continues to grow.




To find homes for them, we look through many sources. Homes listed for rent-to-own (aka lease option or lease purchase), homes for sale, and rental homes. We approach the agents of these homes and ask if their client (the seller) would be open to a lease option arrangement; some of them are and some of them aren’t. Lately, obviously, sellers are more open to this arrangement.



Asking agents of rental homes and homes for sale whether their clients are interested in rent-to-own can be a timely process. The manual effort of calling and leaving messages, and then waiting for responses when the rent-to-own client wants to see the home now, makes it a very arduous process. Then the discussion of actual terms makes this go on forever.



However, in an increasingly illiquid market, most wanna-be sellers are turning to the rental market to decrease the short-term pain of monthly payments on their vacant homes. What they really want to do is sell (and not of the short variety).



If this is true, doesn’t it make sense to have a discussion about this prior to listing the property? The conversation would start with, “Hey, we’ll put your home on the rental market even though I know you really want to sell. Taking this into consideration, we should also communicate to the market your willingness to sell it through a tenant-buyer purchase (aka rent-to-own, lease purchase, or lease option). To do this, we need to sort out three things upfront:



1. Monthly rental price- OK, we got this already

2. Option money required upfront for lease option- 1-3% of the home price is good

3. Rent-to-own sales price- 3-5% appreciation a year probably works



By including this in the listing copy, the market now knows how serious your client is about selling (aka rent-to-selling) the home. This now turns into a potential win-win-win scenario.



Win- Seller sells their home

Win- Tenant-buyer locks into the home they want and are building up a down payment (upfront option fee) and closing costs (monthly rent credit) to purchase in 1 to 2 years

Win- Agents get paid on rental and sale



Note: Your pricing upfront for rent-to-own can also signal to the market how uninterested your client is in selling. If your client asks for a $300 rent premium per month on the rental, 20% upfront option fee, and 15% annual home sale price appreciation, it is clear that they have no interest in rent-to-selling. Actually, this would be good for other agents to know as well!



Ask and you shall receive. Don’t ask and the logic still works!



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. You can contact him directly at Brett@BDFRealty.com.

Charlotte Property Management Weekly: 52 Consecutive Weeks of Writing- Some Random Thoughts on the Real Estate Industry

Writing a blog every week is hard! My hats are off to the people who write multiple times a week, and especially to those that do it every day- kudos!




My thoughts haven’t changed in the past year on the near future of short-term residential real estate (next 1-2 years). Rent-to-own and rent-to-sell (as well as short sales and working with serious investors) seem to be what the main growth areas will be.



As foreclosures continue to rise, banks will not even pretend to relax lending guidelines.



As the US economy sputters, FHA loans will not become more affordable or easier to get. It will actually be the opposite. Fannie and Freddie have lost and continue to lose a lot of money!



People, in general, have less money. For people disbursing it (banks, government, property managers), the pressure of delivering it is on much more than usual.



More real estate offices will close as technology and business realities (aka less revenue and customers) continue to hit. Office virtualization will continue to grow.



I don’t like the thought of owning a business in a downtrend industry. There, I said it. Being involved in high growth industries is much more exciting (and profitable). Property management is a good growth industry with steady income, but the margins are not close to those of brokerage. You live off of property management and vacation from the brokerage business.



The biggest market for rent-to-own and rent-to-sell prospects will continue to be $250K+ homes. These owners (especially those over the FHA maximum loan amount) need solutions for their homes!



Rental (and especially rent-to-own) tenants are plentiful in this market!



Other people are still the best source of blog material!



Is social media going to continue to trumpet it’s ROI in anecdotal format? Has anyone made any money on Twitter on a consistent basis? Let’s see the numbers, not hear stories!



On that token, one of my favorite quotes on social media is, “Conversation is king. Content is just something to talk about.” Twitter is a bit one-sided (aka no conversation), no?



Here’s to another 52 weeks…



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. You can contact him directly at Brett@BDFRealty.com.

Charlotte Property Management Weekly: Rent-To-Own- Just like Burger King for Buyers and Sellers

A lot of banks don’t like Burger King. Why do I say that? It’s simply because they don’t want you to “Have it Your Way.”




I’m obviously a fan of rent-to-own. It’s sort of a nice change from the rigid rules that mortgage underwriters make clients go through. For example, banks have rules like:



1. Must have 3.5% down and it must be meticulously sourced

2. Credit is now run the day of closing. Anything on that report that the underwriters don’t like will cause the loan to get kicked.



This has caused much client consternation. Some have been left in moving trucks in front of what they thought were going to be their homes; then the homes don’t close and they have to go back to their the old homes. I’ve heard that this isn’t a fun experience.



But, rent-to-own on the other hand, is really flexible. There are no rules that wouldn’t allow a tenant to move in. For example:



1. As long as they have the money, who cares where it comes from?

2. If the house is vacant, they could move in the next day (after a tenant screening)

3. If they need additional time to get qualified for a loan, the lease can be extended indefinitely

4. There is no reason for the seller to wait to make financial moves. As long as there is a signed lease, they can submit this to the bank and do what they want.



Rent-To-Own is like Burger King, for both the buyers and sellers. Both can “have it their way” when they negotiate the rent-to-own transaction.



So have fun and put together rent-to-own deals that benefit both parties. And, while you’re on a Burger King kick, get the French toast sticks while you’re there; they are really good!



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. You can contact him directly at Brett@BDFRealty.com.

Charlotte Property Management Weekly: Making Rent-To-Sell’s Story Sound like BP’s

The following are two descriptions of a $99.00 special on the same hotel suite on the Gulf of Mexico:




1. Come to our wonderful beach hotel on the Gulf of Mexico (get a suite at a discounted rate!). Yes, there is oil washing up on the beach and don’t think about eating the seafood. Please feel free to bring your own firewood as we will be burning BP’s management team in effigy at our nightly bonfire.



2. Our waterfront suites, which are normally $1K a night, are now heavily discounted and available immediately! Enjoy our two Arnold Palmer-designed golf courses, five-star restaurants, and five pools.



Which one sounds better?



Now read these two descriptions about the same service:



1. Instead of losing $2K a month on your mortgage, we can have a qualified tenant move in and make these payments for you! This is a net gain of $41K for you in their 18-month lease period! They are working with credit repair to buy your home within 18 months and are willing to put down $5,000 upfront (yours to keep). If they don’t buy your home, they’ll move out at the end of their lease. It’s a true win-win in these tough lending times.



2. Misery. Agony. It will definitely lead to eviction which means years of court battles that will make the OJ trial seem like a traffic ticket. Once the tenant moves in, your life will be drastically different. It’s like having another child; be prepared to be over to your old house weekly at 1 AM to fix the toilet. I feel I must present this offer to you, but I would highly recommend against it. Someone in my firm told me that these deals never work out. Even though there are still 19 other houses in your neighborhood for sale (including 3 foreclosures and 4 short sales), your house is the best and will get the $50K premium over what the other houses are selling for.



Now which one sounds better?



It’s amazing to see how the same exact thing can either be desirable or non-desirable depending on what version of the story is heard.



Rent-to-sell often falls into this category. And rent-to-sell has a good story to tell.



Rent-To-Sell is simply allowing a rent-to-own tenant (who wants to buy your home) move-in and pay your mortgage every month. If they qualify to buy your home, they probably will. If they don’t, then they move out at the end of their lease.



Another way to explain this is that rent-to-own and lease options are the same things. “Lease option” is a combination of a lease (we know what this is) and an option (they have the exclusive right to buy your home while they live in it). Isn’t that reasonable?



I am an unabashed proponent of rent-to-selling vacant homes; I don’t see my optimistic view as idealistic. BDF Realty is a property manager; we place tenants (and rent-to-own tenants) all the time. Almost all of the tenants we place pay rent every month. Almost all of the tenants we place treat their homes with respect. Some of the rent-to-own tenants in our properties buy the home they are in before their lease expires; some don’t. This isn’t rocket science.



The thing that I’m pessimistic about is a vacant home that is on the market for months on end. That’s expensive and will bleed you dry.



So, maybe I’m a simple guy. Playing 36 holes and lounging by the pool all day for $99 a night sounds like a good deal.



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. You can contact him directly at Brett@BDFRealty.com.