Charlotte Property Management Weekly: 2011 Should Be a Fun Year to Work in Real Estate! Really.

“What?? Are you crazy? Is moonshine still a big draw in Charlotte?” you may say.




Sure, I’ve read the news and understand the dire straits the housing market is in. And, no, there is no gold rush (that I’m aware of…) coming to Charlotte; we’re getting hammered like everyone else. My reaction is just based on the sheer need of buyers and sellers to transact real estate and what that means to real estate professionals.



Pat Riley, the legendary professional basketball coach, used to tell a story to his players before big games. He would talk about a small, blue-collar company filled with 9-5 workers; they would clock in, clock out, and never really form any real relationships with each other. Every day was filled with just going through the motions to earn a paycheck.



Then one day, it was announced that their company had won the bid to send the first rocket to the moon. And then, something strange happened. The largely unmotivated workers started coming to the office early and leaving late. They would meet up together after work and really started to get to know each other. Close relationships began to form.



At this point in the story, Riley would look his team in the eye and say, “You know why? They just wanted to make history.”



I tell this story because what is happening in real estate right now is historic. The gigantic number of buyers and sellers facing severe sales issues has never been seen before. But great problems create great opportunities. Innovation is always fostered in such situations.



And that sort of makes it fun if you care about learning in this profession. Things could be normal and the real estate business would have its usual flow of sales. Life would be fine and things would be controlled and steady. Yawn. And yawn.



Or there could be a broken market, problems abounding, millions of customers desperate for new ways to solve old problems, an industry in need of fresh innovation, and people open to trying anything that sounds like it has a chance of working. Billions upon billions of dollars and assets are ready to be disbursed to whoever can come up with the killer idea to fix overall market liquidity. And this idea can be thought up and disseminated from your computer, wherever you live, right now. That’s exciting!



And fun! Here’s wishing a profitable (and innovative) 2011 to you all. Thanks for reading!



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: Groupons & Free Property Management

I’m a big (recent) fan of these “Groupons.” What a great deal for consumers! Groupons are like regular coupons, except on steroids; they offer discounts of 50%+ to use at local businesses. I am impressed and now a big supporter.




Early last week there was a groupon for one of the top restaurants in Charlotte offering $60 worth of food for $25. What a great deal! I bought one and used it the next night. It was as advertised; we ordered the food, got the check, and gave them the groupon coupon (I’m a poet and don’t even know it). They took $60 off the bill and we left without any police following.



As a consumer, I was pleased. Make that very, very pleased. However, as a business owner, my stomach turned. Why would this great restaurant agree to take such a huge price concession? Are these the type of patrons they want to attract? Why are they trying to compete on price? That’s for McDonalds and Wendy’s, for crying out loud!



I always came from the school of marketing that believed that business differentiation is achieved on 3 playing fields: quality, customer service, and price. As a business, you pick the two you want to be good at. Most (sustainable) businesses are very good at one, few are very good at two, and none are very good at three. It’s impossible to do; I challenge you to name one business that competes at all 3 (customer service, quality, and price) very well. This is what this great restaurant was trying to do (albeit it was a promotion and not normal business operations)!



I’ve seen a similar promotional tool offering months of free property management for new customers. I can certainly understand the logic as we (supposively) are in a “new normal” that everyone is talking about. Customers are price conscious and free is always better than paying, right? So most customers will gravitate towards this type of deal; it’s just like the groupon I loved, right? Or is it different?



I would argue that good property management is much different than having a meal in a nice restaurant. Sure, discounts on both are nice. But you can eat at a restaurant and leave after paying for the meal, no strings are attached. The restaurant knows that you will only come back (and pay their regular prices!) if you really enjoyed their food, staff, and overall experience. If there is some bite-back of any kind (aka food poisoning), you would never come back.



However, with free property management, you are signing a minimum of a one-year contract. You are like the Huey Lewis song, “Happy to be stuck with you.” But it’s fine because you’re not paying anything, right? Well, that’s true for the first few months anyway. Or is it? What about if the property management company does something that costs you a bunch of money, like places a destructive, non-paying tenant into your home? Then the few hundred dollars of savings from “free” property management won’t be so free. Costs of eviction, non-payment, and fix-up can really add up!



The point is that if the property management company you are looking into is offering you months of free property management (or other “groupon-like” discounts), you may want to look at what that means to their quality and customer service. No company is good at all three, and quality and customer service cost money to implement and execute! Good people are not cheap! And relationships bought cheaply are usually just that.



Saving money is great on one-time deals, like buying a great, name-brand shirt or an expensive meal from a great restaurant! But be wary when saving a few bucks initially means entering into a long-term, contractual relationship!



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: Mr. Smith’s Appointment Implies Real Estate’s Future is in Rent-To-Own & Rent-To-Sell

“Since they collapsed into conservatorship in September 2008, Fannie and Freddie have received $151 billion in taxpayer assistance. More will certainly be needed.”







“If this Mr. Smith goes to Washington as head of FHFA (Federal Housing Finance Agency), he will face a monumental challenge at a crucial time: how to protect taxpayers from even greater losses incurred by Fannie and Freddie.”

(Gretchen Morgenson in this week’s NY Times)



So, it looks like NC’s own Joseph Smith, Jr. will be tapped to run the FHFA. Big deal! Somebody’s got to do it, right? And when you’re looking for employment, the government seems to be the only people hiring, so it’s a logical step for him.



Who is this guy? I really have no idea. He’s been in the papers recently due to this appointment; all of the articles about him say that he has a reputation as “friend and rugged defender of the taxpayer.” I pay taxes so that sounds okay to me.



He is taking over an agency that is losing roughly $6B A MONTH over the past 27 months! Obviously, this agency has to be part of the government because after the first $18B loss quarter (or $72B loss year), it would be tough to keep his job in the private sector.



Anyway, what does his appointment mean? Let’s play his first day on the job out.



The first thing Mr. Smith does on his first day of work is ask his new secretary where the bathroom is and how many vacation days he has a year (everyone knows you can’t ask this in the interview!). The second thing he does is call his top guys and ask them how the heck they are losing so much taxpayer money. Their answers probably can be succinctly summarized into one statement, “We guaranteed a lot of bad loans to people who were not qualified enough to have them.”



Mr. Smith rubs his chin and says, “So, going forward, we should probably start only guaranteeing loans to more qualified people, right?” As his top lieutenants vigorously nod ascent and genuflect, he dismisses them from the room. “Sorry fellas, gotta go. It’s time for me to take it street-side and hug some oppressed taxpayers.”



His lieutenants quickly gather and surmise that “more qualified” probably means that Mr. Smith is saying FHFA needs to require “higher credit scores and down payments for loan applicants.” They pat themselves on the back for this revelation and scan the Washington Post to see what new DC restaurants would be good for lunch.



Back on Main Street, “more qualified” means a lot more people won’t be able to get loans to buy homes. It also means that a lot more people won’t be able to sell their homes (it takes two to tango, right?). And, furthermore, it means that real estate agents need to get used to doing even less brokerage business.



So all real estate agents need to pick up their equipment and go home? Hardly! Consumers still need to be able to transact real estate; the last time I checked, people are still marrying, divorcing, transferring, investing, having kids, sending kids into the real world, etc. They need to be able to acquire and dispose of homes.



The opportunity for real estate agents in the next few years will be placing potential buyers (who can’t get a loan now) into homes they will buy when they qualify for one; this means setting up rent-to-own (aka lease option or lease purchase) transactions. On the same token, it means opening up listings of vacant homes to rent-to-own tenants (also known as “rent-to-sell”).



Mr. Smith will be doing everything he can to stem massive loan losses. He is implicitly communicating to the real estate community that rent-to-own and rent-to-sell transactions will be the way to help customers achieve their goals over the next few years.



Will you change your business accordingly?



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: Do You Want Rent-To-Own With That Rental Home? CAN YOU AFFORD TO MISS OUT?

Oh, the joy of the successful up-sell! Ask a simple question many times to many customers and make a ton more money! This is what all corporations pine for:




1. McDonalds: “Do you want fries with that?”

2. Amazon: “7 more dollars and get FREE shipping!”

3. Dominos: “Order 2 pizzas at regular price and get free cheesy bread!”



Mix in a little doubt from a good salesperson and if gets even better!



1. Meineke: “Sure, you could wait to replace your brake pads for another few months, BUT IS YOUR FAMILY’S WELL-BEING WORTH TAKING THAT CHANCE?”

2. Bank of America: “Sure the market has been awful. But with your money sitting on the sidelines, COULD YOU STOMACH MISSING OUT ON THE BIGGEST STOCK MARKET JUMP IN HISTORY?”

3. John’s Learning Center: “Yes, your child is doing well in school and is up to his grade’s reading level now. BUT WITH GLOBAL COMPETITION FROM INDIAN AND CHINESE CHILDREN, SHOULDN’T YOU BE ADDING TUTORING HOURS FOR LITTLE JIMMY INSTEAD OF SCALING BACK?”



The same tactics can be utilized in the rental home space.



You can up-sell your renter with: “Is this a house you might want to buy in the future? Do you want to lock into a rent-to-own arrangement and start building equity now?”



And then add a little doubt with: “Yes, it will be tough getting a loan in the next year or two, but what about after that? DO YOU WANT TO MISS OUT ON BUILDING UP A DOWNPAYMENT AND CLOSING COSTS NOW VERSUS THROWING YOUR MONEY AWAY JUST RENTING FOR THE NEXT TWO YEARS?”



“Up-selling” and “creating doubt” are not dirty sales terms; they are the backbone of successfully providing customers with the options they need to fulfill their personal goals. Ever been happy about being up-sold (like when the waiter in Paris told you to try their delicious signature dessert?)? Or happy about someone planting a seed of doubt (“You may want to re-think buying that computer. It graded really poorly in “Consumer Reports.”)?



Let’s look at the facts:



Many people want to rent, but even more people want to own! The banks just aren’t cooperating for most people currently.



And most property owners in this economic environment, who are renting out their homes, are open to selling them; at least that is what the feedback I’ve been getting from clients. I mean who couldn’t use a little more liquidity these days?



Up-selling and casting doubt on the customer’s current situation creates value, rather than detracts from it. And when more value is created, more revenue can be earned!



YOU WOULDN’T WANT TO MISS OUT ON MAKING MORE MONEY HELPING YOUR CUSTOMERS MORE, WOULD YOU?



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: Charlotte Headlines Say Real Estate Market is on Rebound? Or Not?

“There are no facts, just interpretations.” Friedrich Nietzsche




On a whole, I like honesty. I like it when people tell me what they really think (within reason). And if they don’t have anything interesting or worthwhile to say, omission works well for me too. I like things clear and easily understood.



So it came to my chagrin when I was reading a headline of an article this week that blared, “N.C. foreclosure sales drop 42%.” Wow!! 42%? That’s almost half! Is the job market trending up in our southern paradise? 2011 must be when the US economy really rebounds led by the Tarheels of North Carolina! Charlotte is ready to do its part! This must mean that home price stabilization is around the corner and real estate will start picking up and lead our country to another streak of prosperity!



But wait… I really hadn’t heard anything about the local real estate market getting noticeably better; rather I’ve continued to hear the opposite. Homes sales in Charlotte have continued to dwindle (I read another headline saying that Charlotte home closings were down 23% in 10/10 when compared to 10/09!). Well, I guess that has nothing to do with people actually staying in their homes. So less foreclosed homes equals better capitalized consumers, which equals more consumers with jobs, which equals a better economy, which equals a more robust (and rising!) real estate market? Cool!



And then I actually read the article. The 42% foreclosure decrease was due to the halting of foreclosures due to questionable bank procedures. That explains it! So, this statistic is artificial and misleading. We’ll soon see a headline in the coming months saying that foreclosures are up 42%+ to make up for the halted foreclosures now.



And now that I think about it, our firm did have some closings that were held up because of this foreclosure freeze. So what does that mean about the 23% decline in home sale closings statistic compiled from 10/10 (when compared to 10/09)? Does that make that statistic artificial and misleading as well?



The clearest answer is “yeah, probably.” Who can figure out what’s going on? Maybe this is what Wall Street legend, Peter Lynch, was talking about when he said, “The man who studies macroeconomics for 15 minutes a year wastes 10 minutes.” There are too many moving parts to get a true picture of reality!



It’s like the rock band that labors through the reading of their 2,000 word concert review in Rolling Stone magazine and only wants to know one thing: “Do they think we rock?” I just want the same type of clarity from the headlines I read.



Are things getting better or worse?



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: Pricing Rental Homes- List Above, At, or Below Market Value?

I have to admit, pricing rental homes is an issue that I struggle with. As a property manager in Charlotte for the past 6 years, I really should have a good grip on the right approach; however, I’m still constantly debating myself over the correct way to do it. And my therapist says this self-banter does not mean that I’m crazy.




So… it is safe to say that pricing is an inexact science. It is simply impossible to know what the optimal dollar figure is for any product or service. For example, let’s say you are a manager at The Gap (with the traditional logo intact). You put 5 sweaters on the rack for sale at $50 each. It takes 5 days and they all sell. Is this good? Was $50 the optimal price?



You’ll never know! Maybe you could have priced them at $55 each and still sold them in 5 days. Then you would have really screwed up; retail has been a tough field to be in for the past few years and the extra $25 in profit would have really helped The Gap’s stock price! Or maybe the sweaters should have been priced at $45 and they would have sold in 1 day. In this scenario, the lower profit would have been offset by the larger saving in inventory costs. But then again, who knows? Maybe at $45 each, customers would have perceived the sweater’s quality to be less and they would’ve taken 10 days to sell. It’s tough to figure out!



With rental homes, the confusion is similar. Below are the 3 pricing options available to every property owner:



1. Price Above Market Value: This is good if prospects will actually visit the rental; they may just look at the other rentals listed at or below market value. However, if the prospect visits and says they will take the place if the rent is knocked down a bit, that’s fine! The price can still be at or slightly above market value and the prospect is ecstatic they can tell their friends that they got a great deal.



2. Price at Market Value: An average amount of prospects will visit the rental and someone will take it in due time. The only issue is if the prospect says they will only rent the home if $100 is taken off of the monthly rent amount. Now the owner must decide if they want to lock into a below-market rate for a year, or roll the dice and wait for another qualified prospect. (Note: Rent negotiators usually turn out to be good renters. Unqualified or barely qualified prospects rarely try to negotiate the rental price. That takes chutzpah! It’s like getting into a bar at age 17 and arguing over the prices of shots.)



3. Price Below Market Value: Prospects will flock to the house and applications should roll in. Some people will still try to negotiate rent, but being that so many people are interested, these requests can be quickly (and justifiably) rebuffed. Locking into below market rates isn’t great in terms of ROI, but does provide the piece of mind of an occupied property with a good tenant (you can be choosy!).



So what’s the right answer? It depends. I know that’s not an overly helpful answer, but I’m not trying to be evasive. There are many factors that need to be considered besides the obvious ones (risk tolerance and financial wherewithal of the owner). Here are a few to ponder:



1. If the property is 1 of 15 rentals in a neighborhood, pricing below market value could be a good point of differentiation. Conversely, if the rental is the only one in the neighborhood, it may be wise to price above market value.

2. If it is probable that a real estate agent will bring a tenant in on a property, the pricing should be above market value. The reason? They will probably look to negotiate the rent down. If the tenant will probably come in from an ad, pricing at or below market value is probably the best strategy because they will be focused on the list price.

3. If a downturn of activity is expected because of seasonality (like the Thanksgiving holiday through New Years), it would probably be smart to price below market value for the first few weeks of November. Having an empty house in November and December is going to kill the ROI; a rental reduction upfront in November will definitely have a better total net return than a month or two of extra vacancy.



So the moral is that pricing rental homes ain’t easy. Different times and situations call for different strategies. One size rarely fits all!



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: The Options Available to Owners of Vacant Homes

As a Charlotte property manager specializing in lease options (rent-to-own and rent-to-sell), we get many calls from home sellers “exploring their options” about their vacant properties (unlike Obama, my puns are typically not intended). So, as a public service, I’ll run through the available options:




1. Strategic default (I think this is what it is being called): Stop paying the mortgage and taking the credit score beating like a man

2. Put the property on the market for sale: If the home is special and priced well, it will sell in some period of time. If not, eat the mortgage every month until the banks start lending again.

3. Rent the property out: Get most of the mortgage paid every month by the tenant. Keep a tenant in the property until the market comes back and then place the home up for sale.

4. Rent-to-sell the property: Put a rent-to-own tenant into the property who will pay the mortgage and potentially buy the home during their lease period.

5. Rent out the property and then put it on the market: In my experience, this leads to disappointed sellers and upset tenants.

6. Arson: Not recommended. And, no, this is not a service we offer!



All of these approaches obviously have pros and cons (like jail time). Depending on each respective person’s needs and tolerance for risk, each approach could be the appropriate one.



And to conclude the public service announcement, please contact your local property manager for further details.



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!)