Jayden Daniels Football Card Worth $1K? Simple Rental Home Pricing

 

My 11-year old son has become very interested in football cards.  He used to just like finding players on his favorite team (The Tampa Bay Buccaneers- ugh!  If it wasn’t going to be the Carolina Panthers, could he not pick a team in another division???), but now he has expanded his interest in what the cards are “potentially” worth.

 

Now his old man had similar interests in his younger years, except mostly with baseball cards.  I’d get the Beckett price guide and add up how much my cards were worth.  And, of course, I dreamed of when I was much older and the rookie cards of players like Barry Bonds and Roger Clemens would be worth millions when they made the Hall of Fame (cough, cough).

 

My son excitedly pulled me aside one day and showed me a Jayden Daniels (rookie quarterback for the Washington Commanders) card he had just pulled from a new pack.  On my wife’s phone, he had found a page that showed that the card’s value was around $1K- wow!  Next to the value was an eBay button where one could post it for sale with the push of a button. 

 

Our conversation:

Me:  Very cool!  Push the button and sell it for a $1K!

Son: Now way, Dad!  That’s low.  It will be worth much more later.

Me (thinking of the old baseball cards I had in our house with virtually no value): Are you sure?  $1K of real money gives you a lot more options.

Son: Nope.

Me: What if Dad sweetens the pot and will give you another $100 on top of the $1K if you can really get close to $1K for it?

 

He still wasn’t going for it.

 

In my mind, I wanted to put this estimation of value to the test.  Was there really someone willing to pay $1K for this new card?  I was doubtful.  What was the real market if he was bent on selling it?  Ebay, in theory, pulled this valuation from past sales somewhere.  I’m thinking that it was worth much less, like single digits.  Unfortunately, short of listing his card for sale on the sly, I’ll never know for sure.

 

I find rental home pricing to be similar.  Property managers dig up comparable sales, factor in the differentiating house features, look at the available competition that is renting in the area, and then formulate a price.  This price is an educated guess and is compiled in order to get good tenants applying, in a relatively short amount of time, at the highest possible price. 

 

But we don’t really know how many houses are truly on the market for rent.  There are many rental websites.  Recently, we thought we had priced a home for rent well, only to find that there were almost 10 others on the market in the neighborhood on another website we hadn’t seen- and they were all listed at the price we recommended!  That type of similar inventory makes for a logjam.

 

So what’s the right price?  Does it matter how many Jayden Daniels cards are on the market?  How can one know how many houses and cards are for sale out there?  And how much they sold for?

 

It does matter, but there is no real way to know everything going on.  However, there is a way to know for sure whether a price is good or not.  And it’s really simple.

 

Putting the home on the market for a reasonable amount of time is the surest way to find out.  If the house is listed with decent exposure to the market and the valuation is right, it will rent.  If Jayden Daniels’s rookie card was listed at $1K and it sold for $1K, the price was right (or too low).  If it didn’t sell, the price was probably too high.  Simple stuff.

 

The market sets the price.  And the market is constantly changing.  But it is pretty efficient.  If it didn’t sell, the market declared that the price was too high at that time.

 

Will my son’s card sell for $1K?  There’s only one way to know!  I just need to convince him to list it and see.

 

Happy Landlording!

The “One Mistake” Case Against Rental Home Self-Management

 

“You don’t know what you don’t know.”

Socrates

 

It has been a life-long learning process for appreciating professionals in my adult life.  Most of the time, this teaching did not come easily to me.

 

From fixing cars and watching them break down at inopportune times.  Feeling physically poorly for months until I went to a doctor who had me better in days.  Using bug spray to get rid of termites only to see them come back with a hungry vengeance until a proper exterminator was employed. 

 

To be fair, fixing things on my own outside of my sweet spots isn’t always a losing effort.  I’m always proud of myself when I can pull off some repair successfully in my house or submit some legal paperwork without any help.  Go me!

 

Likewise, in property management, there is some definite positive reinforcement for self-managing:

 

“The last tenant I placed paid on time and left my rental home spotless!”

“No one is going to love my property like I do.”

“I do a lot of the repairs myself and save money.”

“Property managers are expensive!”

“The house is right by my house.” (writer’s note: that’s a double-edged sword…)

 

It is estimated that around 50% of all rental properties are self-managed, so it is prevalent. But despite the “tenant domination” stories told by some landlords at parties, it is not all roses.  There really are midnight calls for stopped up toilets, tenants not paying rent that need to be evicted, and disgusting houses dropped into a landlord’s lap when a tenant leaves in the middle of the night.  There is actual effort and stress in managing rental properties; to do it well requires time, sweat, and educational investment.  No one can say it isn’t doable, though.

 

The biggest driver for self-management is saving money.  I get that!  There is a certain joy when all the money generated from the rental home goes directly into the bank account without any property management fee deductions.  Months (or years) that this happily goes on is certainly a case for self-management; it probably comes to a few thousand dollars in potential savings per rental house a year. 

 

But where things sometimes go awry in this calculation is that there is the “One Mistake”; this one miscalculation erases all accrued property management savings.  Whether it is a legal one where a security deposit dispensation is not sent out in 30 days and the tenant who destroyed the house has the legal right to get it all back.  Or when needed (or, sometimes it turns out, unneeded) repairs are made and the time and monetary investment keep ballooning due to unfamiliarity.  Or a trusted vendor was employed who actually shouldn’t have been trusted.  Or a tenant court date that keeps being pushed farther out due to not sending out proper notices while, concurrently, no rent is being paid.  

 

The one-offs of learning the property management business can erase all the realized monetary savings and just leave uncompensated time that could have been better spent.  That can be frustrating! And that’s the tough case against self-management.

 

The problem with avoiding the costly “One Mistake” is that it could happen in so many different areas.  And sometimes things turn into “Two Mistakes” or more…

 

Property managers aren’t full-proof, but experience does offer some benefit for steering clear of these costly errors.

 

Happy Landlording!

Is it OK to Visit My Rental Properties if I Have a Property Manager? I’m Sort of Curious To See Them…

 

Answer: Yes!  We live in the United State of America.  If you’re the owner, you are always welcome to visit your properties.  This right is usually written into the lease as well. 

 

This is a very short answer (and makes for a very short blog)…

 

For a longer discussion… the question could be whether it is advantageous for owners to visit their properties if they have a property management company managing them already.

 

Let’s look at 3 scenarios of an owner rental home visit.  Keep in mind (especially after COVID), at least one of the tenants will probably be home at some point during the home inspection:

 

Scenario #1 (Happy Time):

Owner knocks on the door.  Tenant enthusiastically answers and there is a warm greeting.  They tour the home together. 

Owner: “My, you keep my home up beautifully!  How did you get the cracks so clean between the countertop and backsplash? 

Tenant: “Oh, it was a trick my mother taught me- gently scrub a paste of baking soda mixed with lemon juice in with a toothbrush.”

Owner: “Splendid!  And thank you for always paying early!”

Tenant: “You’re welcome!  Have you met my 4-year old daughter, Ivory?  Honey, come say ‘hi’ to our landlord!” 

Owner: “She’s so cute!”

Tenant: “Thank you!  Can I get your number if I have an emergency and can’t get in touch with the management company?  They’re sort of slow sometimes.” 

Owner: “Sure!”

 

Upside: Owner has firsthand knowledge of the property and a budding friendship?

Downside: It might be necessary to evict the tenant and her young daughter.  A personal connection makes this tougher.  The tenant now has an influential third-party to go to when the property manager’s answers are not to the tenant’s liking (the old “Go to Mom when Dad says ‘no’” trick).

 

Scenario #2 (Unhappy Time):

Owner knocks on the door- no one answers.  Owner keys into the property.  Family is eating dinner.  Tenant has been late on the rent.  The home is really messy and not maintained.  Owner speaks to the tenant.  Tenant had a tough day at work and complains about repair issues with the house.  An unhappy conversation ensues.  No one is happy when the owner leaves.

 

Upside: Owner has firsthand knowledge of the property

Downside: The relationship with the tenant is potentially complicated.  There are negative feelings on both sides that may lead to sub-optimal choices that erode the relationship further.

 

Scenario #3: (Normal Time):

Owner knocks on the door- no one answers.  Owner keys in and no one is home.  Owner walks through, inspects all the rooms, and takes a few notes.  Owner is preparing to leave and the tenant arrives home with her daughter from basketball practice.  Owner and tenant cordially greet each other and then each continue along with what they were doing.  Owner leaves. 

 

Upside: Owner has firsthand knowledge of the property

Downside: None

 

As a property manager, our goal is to maximize our owner client’s investment; a large part of that is creating a drama-less relationship where rent is paid, the home is maintained, and needed repairs are done.  We want to create an environment where tenants want to extend their leases and have no landlord-related reasons on why they wouldn’t.  They are free to enjoy their rental home and live their lives.  If at some point we need to file for eviction, the decision is based more on a business case as opposed to any emotion either way.

 

It's a boringly successful relationship for all parties.  Ran correctly, it’s a beautifully benign operation.

 

And it is entirely possible that an owner visit would not affect the tenant relationship at all!

 

But… going back to whether owner property visits are actually advantageous, we still don’t recommend them as the safest move seems to let things be.  It doesn’t seem wise to add any potential disruption of this boring relationship when there is no tangible upside. 

 

Owners are always welcome to visit their rental properties for any reason, including curiosity!  There just seems little to be gained and much to be potentially lost.  Why take an unnecessary risk? 

 

Happy Landlording!

McAlister’s Deli “Service Fee” Strategy: Applicable to Rental Homes?

 

The (FTC) complaint alleges that (a large property management company) advertised monthly rental rates that failed to include mandatory junk fees that could total more than $1,700 yearly… These undisclosed fees ranged from “services” such as “smart home” technology and “utility management,” to air filter delivery and internet packages. Renters could not opt out of paying these fees.

(www.FTC.gov)

 

Some friends and I meet for a Bible study on Monday nights at the local McAlister’s Deli.  After buying my sandwich one night, I started to peruse my receipt after paying.  I was trying to figure out why my regular sandwich cost so much and looked at the bottom of the receipt.  I saw the tax amount (can’t dodge that!), but above it was an itemized “Service Fee”.  And here I thought I had just picked the sandwich up at the counter…

 

I clicked on an icon next to the aforementioned “Service Fee” and it offered a fuller explanation.  “This fee is used to help pay for the restaurant’s app and website.”  Surely, companies can’t charge for that as a mandatory fee.

 

Wait- or can they?

 

I always thought companies were only allowed to upcharge under the condition that they added more value.  If McAlister’s allowed me to add another slice of cheese to my sandwich, I’m fine with them charging me more.  If I wanted a bigger drink than what is in their value meal, I’d expect to pay more.  But ordering on their app or website?  Isn’t maintaining the on-line ordering portals the cost of doing business in today’s environment?  And isn’t it cheaper and easier for them if I use them?

 

The line on chargeable value has gotten blurred in rental real estate as well.  As property management companies have piqued Wall Street’s interest of late, maximizing revenue is being stressed and companies are getting really “creative”.  Now I’m all for “revenue enhancement” as making more money is generally good.  However, fees should be generated by providing tenants voluntary options that could make their lives easier or give them greater flexibility; mandatory fees for unwanted or unwarranted services could easily cross a line (see the FTC blurb above detailing the “value-added services” that incurred a $48M fine).

 

We are starting to have tenants ask us things like, “Is the rent really $1,800/month or are there hidden fees that are not mentioned?”.  Being that these questions are being asked at all means this practice is becoming prevalent; legislation and more enforcement is probably on the horizon.

 

Landlords and property managers all aim to maximize revenue for their real estate investments and rightly so.  However, we need to be cautious and make sure a fair value proposition is made.   If any fees are questionable and wouldn’t withstand scrutiny, they should be scrapped.  Landlords should be on notice and make sure general business practices on add-on fees stay on the right side of the law.  “Service Fees” for common technology usage may only work in the food industry.

 

Happy Landlording!

How Much Do You Know About Thanksgiving? And Your Rental Home?

My 9-year old daughter, Emme, decided she wanted to have a family “Thanksgiving Trivia” game this year.  She dutifully came up with some questions about the holiday that we’ve celebrated every year.  Just through osmosis, I figured that the adults would know most of the answers.  How hard could it be?  I pictured Pilgrims eating turkey and corn with the natives while celebrating the bountiful harvest together with some boats in the background.  That’s at least the sanitized version of events I thought we’d cover.  And it would be multiple choice!  How hard could it be?

 

Well, she didn’t take it easy on us.  Some actual questions:

 

1. How many women were the first Thanksgiving? (5, 7, or 10?)
2. How long did the first Thanksgiving last? (3, 5, or 7 days?)
3. How long was the Mayflower’s voyage from England to America? (66, 77, or 81 days?)
4. How many countries celebrate Thanksgiving?  (11, 16, or 20?)

 

As each person filled out their trivia sheets, it became apparent that we didn’t know Thanksgiving quite as well as we may have thought.  Our ancestors would not have been very proud!

 

It made me think of how well we really know our rental homes.  Sure, we may know how many bedrooms and bathrooms they have.  The advanced landlords may know how many square feet and how large of a lot it has off of the top of their heads.  But what about the aspects that would really make people interested in it?

 

One of the key aspects of marketing is differentiation.  Why would a potential renter pick one 3 bedroom / 2 bathroom house with a .25 acre lot over another with the same features?  Most of the rental homes in Charlotte were built in subdivisions that offer a large degree of uniformity.  Why would one cookie-cutter home be more desirable than another cookie-cutter home? 

 

Price and availability are certainly two differentiators.  If one home is on the market for $2,000/month and one that is close to the same is $1,800/month, the $1,800/month house obviously presents better.  Or if there is only one house available in a desired subdivision, that would also work well- one can only take what they can get!

 

But if there are five rental houses in a subdivision that are available and priced similarly, what would make one stand out?

 

As a Charlotte property manager, one of the questions we ask our new clients is what made them buy their house in the first place.  What were the special characteristics that made them want their house over all the others that were available?  Some have some great insights on why and that really helps in marketing; usually they had lived in it at some point.  Others don’t know.

 

For those that don’t know, that’s okay.  But as the people who are responsible for positioning their home in the marketplace, we need to come up with this differentiation.  What’s special about this rental home that we want potential renters to focus on that other rental homes don’t have?  “This home’s large, manicured backyard boasts a built-in, outdoor gas BBQ and covered back patio making it perfect for outdoor gatherings with friends!” is an example.

 

This also plays into what type of home renovations to do between renters.  Do we want to focus repair dollars on the making the kitchen really nice so we can use something the effect of “Enjoy the smell of simmering cocoa on the new stainless steel stove while leaning against the new granite countertops in your spacious gourmet kitchen!”  I remember picking a hotel to stay at in the mountains during one winter that highlighted the “recently renovated bathroom with heated bathroom floors” as its point of marketing emphasis.  It sold me on an otherwise non-descript room.

 

To consistently succeed in a crowded rental market, smart landlords will know their rental home well enough so they can highlight point(s) of differentiation to entice prospective tenants.  It’s tough to win the Thanksgiving trivia contest by only knowing the basics of the holiday!

 

By the way, the correct answers to the trivia questions above are respectively: 5, 3, 66, & 11.

 

I hope you had a great Thanksgiving & Happy Landlording!

High-Tech Taco Joints & Missing Landlord Reports: Do People Matter?

 

I went to a newly-opened Mexican restaurant the other day to meet a friend for lunch.  When we entered, I was expecting a nice hostess to say “hello”, take us to our table, and hand us some menus.  Instead, we were greeted with some imposing automated ordering machines.  I looked at my friend and asked him if he knew what to do.  He shook his head “no” and then stepped forward to start pecking at the screen.

 

Meanwhile, a manager saw these inquisitive middle-aged men jabbing their fingers into the machine and saw that we may need assistance.  She dutifully came over and began to give us a tutorial on how one would go about ordering.  I told her we had never been there before and wanted to know what she would recommend.  She looked at me quizzically and seemed to recommend that I get with the program and push the screen enough times properly to actually order something.  Fair enough.

 

The prices seemed pretty high for standard taco fare (couldn’t I buy 3-4 large pizzas for this?), but we were past that point.  The machine already had a nice tip in mind for me, automatically applied it to the bill, and was prompting me to just tap a credit card and get moving.  As my card registered with a beep, I was prompted to enter my cell phone number.  When I complied, a text message buzzed with the order number (telling me to pick up a table marker with the corresponding number), my receipt, and a link to sign-up for some restaurant points system.

 

The manager brought us our drinks and told us our food would be out shortly.  One minute later, the tacos were on the table.  We ate.  The manager came back out and asked us how the food was.  I told her it was fine.  She then made a heartfelt plea for a 5-star Google review.  I was non-committal, but she showed me how easy it was to access the review page by asking for my phone and pressing a card with a Google logo against it.  Nothing happened.  Once she discovered that I was an unenlightened Android phone user, she gave up and told me to visit their website when I had time.

 

For a tech person, this restaurant may have been nirvana.  It took the people component largely out of the restaurant experience.  For me, it was a sure sign of the downfall of western civilization.  These types of restaurants are not my thing.

 

I guess I should have done my own investigation and saw what this new place was about before I went.  It had a non-corporate name, but my friend told me they had locations all over the place in other states.  He had asked around and done his homework!

 

To the real estate front… this situation made me think about how few landlord reports we get asked for nowadays when our tenants vacate.  We used to regularly get other landlords contacting us to ask to see what type of tenants they were for us; there was an importance to it!  Like homework, it wasn’t something that anyone really liked to do- it takes effort to pick up the phone, track down the past landlords, send the required information consent forms, get the questions answered, and look into housing gaps in a landlord history.  But, to me, it might be the most valuable tool we have to assess incoming tenant quality and identify red flags.  Past landlords will largely tell you how it is.

 

Like the restaurant business, property management has always been a people business.  If tenant assessment is only done on a spreadsheet level, important (re: costly!) things can be missed.  Asking around and digging in further than a credit score and criminal report can pay big dividends.  Upfront effort can lead to the long-term benefits of finding a great tenant for a smooth tenancy. 

 

High-tech taco joints and algorithm property management can sound good on paper.  But smart landlords (and restaurant owners) know that old-fashioned, low-tech people interactions can prove to be the most vital component of repeat business and successful leases.

 

Happy Landlording!

Prince Rents Out an NBA Player’s Home: Worry or Opportunity?

 

Being in the industry, high-end home rental stories are interesting to me.  I read a good one from former NBA player, Carlos Boozer, who wrote about the time he rented out his house to the famous singer, Prince, of Purple Rain fame.

 

Boozer had recently bought an 18,000 square foot, 10 bedroom/13 bathroom house in Bel-Air, California.  Apparently it had once been owned by the president of Interscope Records (this wasn’t Uncle Phil’s house…) and was pretty gaudy.  But he wasn’t going to realistically live there any time soon; he played for the Utah Jazz so he had a house in Salt Lake City during the basketball season.  It was going to sit vacant for a while.

 

His real estate agent got a call from a party inquiring about renting it.  He wasn’t interested at all; he just paid to decorate it and hadn’t even lived there yet!  But the interested party was adamant and then he threw out what he would pay- $75K/month for 8 months- that’s $500K+ in rent for less than a year.  Boozer was sold.  He flew out to meet the new tenant who happened to be Prince.  Prince was convinced he needed to write his new album in this house because it inspired him.  Boozer handed him the keys and went back to Utah.

 

A few months later, Boozer was back in the Los Angeles area on business and stopped by the house.  His mouth dropped when he went inside.  The entire house had been remodeled, repurposed, and redecorated.  Purple was everywhere.  The carpet was replaced with a different color.  The couches were different.  A bedroom was made into a hair salon (how did they run water into there???).  The weight room was a dance club.  It was crazy!  There were a ridiculous amount of lease violations.  He called the tenant immediately.

 

Prince would not take or return his calls.  Boozer didn’t know what to do.  All the advice he got was to file a lawsuit against Prince to protect himself.  He had been ignored for two months and he could barely recognize his mansion anymore.  His biggest fears had been realized; a great opportunity had turned into a nightmare.

 

As a Charlotte property manager, we get the opportunity to manage high-end rentals on occasion (though the numbers are much, much lower than Bel-Air!).  One of our main jobs in these instances is to lower the owner’s risk as much as possible.  That really boils down to two main things:

 

1. Screen the tenants thoroughly.  A good tenant can leave the house looking better than when they took it over.  A bad tenant can cause much more damage than the rent intake due to the sheer cost of a larger, more opulent residence.
2. Make sure the rent is high enough to exceed the risk.  The good news for very high-end rentals is that there is a limited number of them on the market typically.  This allows for a certain degree of pricing power.  And there is only a certain subset of people who are willing or able to take on a large rental payment; if they like the rental home, the price is not usually the primary reason they would pass on it.

 

I’m not sure what I would have done in landlord Boozer’s shoes.  I really hope we would be able to settle it outside of the courts like Boozer stated he wanted to do.

 

As a postscript, Prince eventually returned his calls.  He was in Asia on his world tour and wasn’t getting messages.  Prince assured him everything would look exactly the same when he got his house back; then he wired him another $500K to reassure him (that brought the total rent tally to $95K/month for the duration of his stay!). 

 

As Boozer tells it:

 

Once Prince’s lease was up, CeCe (Boozer’s wife) and I flew to L.A. to survey the damage, like parents coming home from a weekend to find their kid has thrown an absolute rager. Pulling up, the gate symbols and the purple exterior carpeting were gone. Inside, harsh purple and black had faded back to the neutral palette CeCe had selected. The furniture and other decor were where we had left it. The discotheque was gone, as was the hair salon. My weights were where they were supposed to be. Everything was back in its place, down to the silverware. Prince kept his word.

 

All’s well that ends well?  The worry is worth the opportunity?  Granted, the risk versus reward is important to balance upfront, but most house stories do have happy endings if structured properly.  Plus, you may get a cool story out of it!

 

To read the story in its entirety from Boozer’s book, click here.

 

Happy Landlording!