Charlotte Property Management Weekly: Your Rental Home Wants You to Wait Until It’s Ready

Every client we’ve ever had has wanted as little vacancy time for their rental as possible. Zero days are optimal; every day after zero winds up costing them money in utilities, mortgage payments, and maintenance. Not wanting to lose any money leads to a mentality of getting the home on the market as soon as possible, regardless of condition and resident situation.




So some clients want us to put their homes on the market prior to them being ready for occupancy. What I mean by this is that the home has not been completely repaired and there are still personal items in the house. They (or their current tenants) also are within the process of moving.



The rationale, by itself, is sound. The greater the length of time the house is on the market, the greater amount of potential tenants that can see it. If more potential renters see it, the law of large numbers would dictate that someone at some point would love it and want it.



However, does this really work? I would argue it doesn’t. Huh? Why’s that? Isn’t it common sense?



Simply, the American consumer’s mind works differently now. There is an inundation of information being flung at them on a constant basis. Most of it is ignored; however, there are some marketing messages that get through (like a rental listing). If the consumer takes the time and makes an inquiry to visit the property, there is typically one shot to get them. Their attention span is limited.



This one shot means that the house has to look perfect. This visit needs to conclude with the prospective tenant loving the house. If they see or feel something they don’t like, it will probably turn them off and they will want to find another home. And there are many other rental houses on the market that look very similar. The competition is fierce!



So why does this matter? Maybe the diamonds in the rough that aren’t turned off by the home’s uncleanliness will be unearthed and they’ll take it. It’s certainly possible. But are renters who don’t care about the condition of the home desirable? If so, there may be disappointment when move-out time arrives and the home doesn’t look so great. Clean people typically want clean homes.



The other main reason is that once the marketing of the property begins, momentum is started. The rental is on the top of all the searches from rental websites, people who are waiting for a rental are told about it by their property managers, and it is fresh. This is when things typically happen for an average rental home- the first two weeks. Interested calls, inquiring e-mails, and subsequent showings come quickly. They need to be harnessed and converted into applications and security deposits.



But when the rental house isn’t up to the task, momentum is stunted. Interested, potential renters see the property in less than ideal shape and compare it to better kept homes on the market. The home loses out. Or the current tenant in the home is packing boxes to move and glares at the renter who is interrupting their evening after work. The house looks horrible and the vibe is bad. Potential renters flee to the next home. Can you blame them?



With rental homes, it’s more about quality time on the market and less about total time. Make sure the rental home is ready and most inviting when the most people want to look at it!



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!)

Charlotte Property Management Weekly: 3 Approaches to Fixing Up a Rental Home

We sometimes take over management of homes that have been treated in, diplomatically-speaking, less than desired regard. It’s frustrating for the owners (and the property management company), especially in difficult economic times when cash is scarce.




The purpose of this article is not to talk about the root cause of this destruction (usually poor tenant screening), but rather the options available when faced with a rental home in bad shape.



It comes down to 3 potential approaches:



1. Total Fix-Up: This is when everything is fixed so the home is in tip-top shape. New carpet, new paint, new everything! The upside to this approach is that the home will command top rent and a top tenant, while the downside is that it will demand top dollar to be spent by the owner. ROI on a 1-year rental with this approach is debatable.



2. Partial Fix-Up: This is when the most pressing demands of the house are met. The house is cleaned well, the walls are touched up with paint, and the carpet is steam-cleaned. The goal is to make the house look like a good rental, not a show home. The upside to this approach is that it is much less expensive and will entice a good renter, while the downside is that it will not command top rent and the tenant will usually not be a neat-freak (we love neat freaks!!).



3. No Fix-Up: This is when the home goes to market “as is.” Little to nothing is done to fix the home aesthetically and the tenant is asked to “have an open mind” and the property is listed as a “handyman’s special.” The upside to this approach is that repair costs are low and the home can be put on the market immediately. The downside is tough. Rents have to be lowered considerably, the quality of tenant suffers, and the house will be in even worse shape (think catastrophic) when the tenant moves out (evicted or otherwise).



So which is the best approach? The answer is the universal response in business school to any question- “it depends.” At different times and situations, each approach is appropriate. Many times this answer is dictated by finances. I mean, if you have no extra money, you are forced to use approach #3, right? And if your rental home has gotten to the point that it is absolutely disgusting, you probably have to opt for approach #1 at some point.



Generally-speaking, I’m a fan of approach #2. I try to stretch #2 as long as possible before I’m faced with the decision that the house has to go to approach #1 (or #3). Once I’m at that point, my preference is approach #1 (if finances allow).



The approach chosen for home fix-ups is a huge component on their ROI. One size does not fit all (as some are wont to do). Choose carefully (and profitably!)!



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!)

Charlotte Property Management Weekly: $200 Rental Application Fees- Genius?

I don’t find myself being amazed at things very often, but I have to admit I was taken aback when I saw a large property management firm change their application fee from $25 to $200.




My initial thoughts were, “who is willing to pay that?” and “how can I justify charging that much for a rental application fee?”



I don’t know why they changed their rental application fee, but I have a guess- they got way too many applications from candidates who would never qualify to rent! Their people were inundated! So they used common sense.



In general, if a company wants less people to apply, then all they have to do is raise their application price. Corporations in every industry do something like this to control demand. If they want to sell less sweaters ($50 retail), then they raise the price to $100. If they want to sell more, they lower the price to $25. Simple.



But a smaller number of applicants equal less people who may rent the house. That’s bad! Maybe… But what if the tenants are screening themselves so that the non-qualifiers don’t even bother applying? If the probable non-qualifiers know they are borderline applicants, they still may be willing to gamble away $25 on an application fee. But $200? Not very likely!



Another thing I liked is that the property management firm refunds the $200 application fee if the tenant is approved. Now, good applicants know there is no risk to applying at $200 a pop. This property management firm is using price to lower the amount of resources needed to screen applicants (by lowering the number of applicants themselves!). They are also freeing their people up to work on higher margin activity (like filling the rental properties with their smaller, but better, applicant pool).



What’s not to like? Should every firm go to $200 per rental application?



As I racked my brain to figure out why I shouldn’t raise our rental application fee to $200, I came up with several reasons:



1. Applicants who don’t qualify will get really angry; not $25 loss angry, but $200 loss angry (which could equal the money earned in several days of work). This can really stress out employees and make it so they want to work for someone who has $25 application fees and not get screamed at everyday.

2. Employees would need to be prepared to be doggedly challenged on turned-down applications. That means the tenant screening process would need to be super- tight and really easy to explain. This would also remove some (in my opinion) much needed subjectivity in the application screening process.

3. The main objective of changing the application price is to save time. Unfortunately, almost every person that calls is new to the firm. That means the $200 rental application fee will have to be explained in every phone call! I’m getting a headache just writing that.



I still think it’s a great idea; I’m curious to see how it will work in practice. I’m still a middle-of-the-road $75 rental application fee believer, but am ready to be convinced otherwise!



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!)

Charlotte Property Management Weekly: Delayed Rental Walk-Throughs Cost Everyone Money

Unfortunately, I’m yawning as I’m writing the title of this article. I’m not sure how to jazz it up a little (maybe “Lindsey Lohan falls for property manager during rental walk-through! Then she heads back to rehab.” I’m intrigued at least.




That would be a nice segment into this! Instead, coming in a close second in terms of excitement, I’ll give the definition of the walk-through so we’re all on the same page: A walk-through is simply visiting a rental property after a tenant moves out and assessing the damages. Then, one would deduct the damages from the tenant security deposit and mail the tenants the check.



I figured I’d write on this topic after a friend told me he’s still waiting for his rental security deposit back 7 weeks after move-out. Yes, a property manager holding it this long (without a written explanation) is illegal in North Carolina, but that’s not the point. It just doesn’t make any sense financially.



Let’s look at the stakeholders when a walk-through is not done in a timely manner:



1. Tenant: He wants his money back! He now thinks unfavorably of your property management company and is actively plotting his revenge against you (sad, but true).



2. Rental home owner: He is footing the bill everyday the property remains vacant; vacant properties are generally tough to fill if they are not cleaned up and put on the market (requires a walk-through…). If owners are withheld cash for long periods of times, they tend to find property managers who disburse it to them on more regular intervals.



3. Property manager- this is the primary loser in this game for many reasons.



First of all, there is the oft-cited statistic that the #1 reason why 90% of businesses fail is due to lack of cash flow. And vacant houses don’t typically bring in any cash flow; however, they certainly have the potential to! Let’s look at the revenue that a vacant house can bring in. The fee list includes (but is not limited to):



1. Fixing the home up fees

2. Application fees from tenants

3. Tenant procurement fee

4. Monthly management fee

5. Potential brokerage fee if the house is also on the market for sale



None of the above money-making happens until a walk-through occurs.



Also, there is a lot of talk about the vital importance of working capital; this is the money that is in your bank account that funds day-to-day business operations. Experts say to collect money faster from clients and pay vendors slower in order to keep this account flush (because without money in it, you’re essentially out of business).



If this is the case, it behooves property managers to conduct walk-throughs as soon as the tenant moves out! It pushes up the earning of cash flows from vacant homes and makes customers happier.



I mean, why wait seven weeks to start getting paid when you can get the cash now?



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!)

Charlotte Property Management Weekly: Another Ploy in Rental Home Fraud

At this point, most people are aware of the rental scam where a prospective tenant answers your ad and:




1. Loves your house and wants to move in soon

2. Asks you if you will accept a year in rent upfront (duh- yeah!) by certified check (double yeah!!)

3. Then they send you several thousand dollars more than the one year rent (by accident…) and asks you to send the balance to Texas via Western Union

4. After sending the balance (real money) to their Western Union account, your bank notifies you that their certified check was from a bank that doesn’t exist (fake money)

5. You’re out a tenant and a couple thousand bucks



This scam was highly successful and snagged many people. A warning about this scam is included in most rental websites; that’s how successful it was!



Perhaps the next “big thing” in rental fraud is high-jacked rental house ads. We just started managing a property and were surprised when potential tenants started contacting us about a different Craig’s List ad on the same house (at a much lower rental rate); they were wondering which of the Craig’s List ads for this rental house was legitimate.



Below is the content of the e-mail response from the fraudulent guy after a potential expresses initial interest (Note: the real rental rate for this house is $1,300 - $1,400/month):



Thanks for your response and interest in my house. Calvary greetings to you, also to your household (sic).






The house is very much available and it is a large 3 bedrooms and 2.5 bathrooms house. Which was formally occupied by me and my wife before we left for Nigeria for a pastoral duty, we left for a volunteer mission together with other missionaries for a development program with the aim of developing the people of west Africa physically and spiritually as God as directed us. We wanted to sale the house initially but we later changed our mind after we discovered that we wouldn't be spending more than 3 years here in Africa. So I contacted the agent back and requested for my keys and documents. Later we decided to have the house rented out, we would have give the same agent this job also but the truth of the matter is that the agent would want to handle it professionally and the occupant may not be able to reason along with him later. If you notice, you will discover that the price we are offering is far below standard price, this is enough for you to know that we are not after the rental fee but the absolute care for the property.






So as you know where the house is located at XXXXXXXXXXX which my family and I have spent so much time and money to maintain it up till its standard. We have been trying our best to make the house as clean as possible, because am a clean person and we don't like dirt around our surroundings and also the Bible says cleanliness is next to Godliness.






So we are looking for a well-behaved, clean and honest tenant to rent out our house too. So will like you to give us your word and promise us that you will take good care of our house so that we will be happy when we come to visit you in the future... We accept short or long-term rent and month to month also.... All the utilities are included in the rent... Pets are allowed. So kindly get back to us with this information below.






RENT APPLICATION FORM


Full Name_________________________________________________


Home Phone_____________________


Date of Birth_________________________________


Other Phone ________________


Current Address __________________________________________________


Reasons for Leaving_Foreclosure___________________________Rent $__________Phone ( )____________


Are you married________________Yes____________


How many people will be living in the house____________________________


Do you have a pet___________Yes_________________


Do you have a car___________Yes_________________


Occupation____________________________


Your Exact move in date____________________________


How soon can you make the deposit payment________________________


How soon do you want to receive the keys and documents of the house________________________






Looking forward to hear from you with all this details so that I can have it in my file in case of issuing the receipt for you and contacting you. Await your urgent reply so that we can discuss on how to get the document and the key to you, please we are giving you all this base on trust and again I will want you to stick to your words, you know that we do not see our self's yet and only putting everything into God’s hand, so please do not let us down in this our property and God bless you more as you do this. I am looking forward to hear from you.


Best Regards


Note: the Rent is $800 and security deposit is $700






Total Move-In Cost: $1,500


Pastor XXXXXXX


Please call me at +234-704-147-8446 or 011-234-704-147-8446



Be careful! Cyberspace can be a dangerous place!



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!)