Wednesday, July 3, 2013

Selling Your Rental Home With 24’s Villain, Habib Marwan



I was watching an old episode of 24 last night (Season 4 for fellow aficionados) and was intrigued by the moves of Habib Marwan, the terrorist leader.  In order to distract Jack Bauer and the Counter Terrorist Unit (CTU), he proposes to trade captured CTU agent, Jack Bauer, for the teenage son (Behrooz) of known terrorists, Dina and Navi Araz.

 

Marwan actually has no use for Bayroos, but CTU doesn’t know that.  The trade’s main purpose is to distract and slow down CTU from figuring out the next stage of his nefarious plan (stealing a stealth bomber and blowing up of Air Force One with President Keeler).  He wants them to waste their time and resources going after the wrong lead trail with the Behrooz-Bauer exchange.  The purposeful misdirection almost works…      

 

I see this misdirection, though unintended, in home sales sometimes.  As a home seller, you don’t want to distract and slow down potential buyers for your rental home!  Like Marwan, you must decide who your real target is and focus.  Marwan never wavered on his priority on taking down Air Force One.  He used misdirection to achieve his main goal. 

 

However, don’t use misdirection when selling your rental home!  To avoid this, the decision must be made on whether to target owner occupants or investors; going after both (especially when the facts on your home won’t support a good selling proposition to one of the parties) is a waste of time and resources.  CTU didn’t have time to track leads to find Marwan AND conduct the exchange for Jack Bauer.  This misaligned strategy cost President Keeler his life and was a major intelligence failure.

 

How do you know whether you want to target an investor or an owner occupant as a buyer for your rental home?  The correct strategy to utilize hinges on the answer.

 

Here are a few questions to ask to determine the appropriate strategy to use:

 

1.  What is the ratio of the monthly rent versus the asking price?  In Charlotte, investors ask for anywhere from .008 and up.  To get this number, divide the rent by the home price.  Ex: On a home for sale for $100K and a rent of $995/month, the ratio is .00995.  A ratio near .01 is excellent.  A ration closer to .005 - .006 will make it tough to sell to a cash-flow investor.  For homes, subtract the monthly HOA dues (or annual dues pro-rated per month) from the monthly rental amount; this usually significantly lowers the ratio and is why many investors shy away from townhomes and condos.

 

2.  What type of discount can be offered on the home?  If it needs to sell for full retail, the owner occupant buyer is the way to go.  If there is room to discount the home off of retail price, it may be a good candidate for an investor.

 

3.  How much money can you afford to put towards fixing the home up?  If it is a lot, then you have the option of fixing up the home nicely and asking for full retail price.  If the funds are not available, investors are flexible on repairs if the deal on the home is enticing in terms of cash flow ratio (#1) and discounted off of retail price (#2).

 

4.  Is there a tenant currently in the home?  If so, this is a good candidate to sell to an investor and save the holding costs of vacancy.  It costs nothing to have a home on the market while a tenant is in it, though there are some logistical issues for showings.

 

So, the ideal selling conditions per buyer type…

 

Investor: good cash flow ratio, home discounted, limited repairs done, tenant in property

 

Owner-occupant: poor cash flow ratio, full retail price, fix-up completed, empty house   

 

Once it is determined who the ideal buyer is for your rental home, the marketing should flow from this decision.  So…

 

Investors: offering your home at local investment clubs, ad verbiage including “signed lease and expenses log provided” in the listing as well as other pertinent investment factoids, posting on real estate investment websites, informing property managers and Realtors who know investors looking to acquire rentals that your home is available and a good deal

 

Owner-occupants: MLS and other marketing a typical Realtor would provide

 

Having an aligned strategy to your target market will save money and in Marwan’s case, take American lives!  Fortunately for US citizens, Jack Bauer is good at focusing on his target (Marwan) as well…

 

Brett Furniss is President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords, managing single-family homes, Uptown condos, and town homes in the Charlotte-Metro Area.   BDF Realty’s services include property management, home fix-ups, and home sales, including Rent-To-Sell (“When You Need a New Solution to Sell Your Home”).  His newest book is 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!) which is available on-line now.