Charlotte Property Management Weekly: Why Rent-To-Sell is “Hot, Hot, Hot” in Today’s Cold Real Estate Market

Q: Why do robbers rob banks?


A: Because that’s where the money is



Q: Why have home sellers shifted their vacant homes from “for sale” to “rent-to-sell”?

A: Because that’s where the future buyers are



It’s really that simple. I probably sound like a broken record, but I still see vacant homes trying to sell for full market prices. And it’s just not working. Let me repeat: it’s just not working.



My old economics professor always said that the lottery was a tax for people who didn’t pay attention in math class. He meant that the odds of winning are so astronomical that buying a ticket is just a waste of money.



In a way, I feel the same about most vacant homes. Let’s look at the math:



Find the number of houses that sold in your region last year (let’s call this number “X”). Now compare X with what the home sales numbers were annually in the past 5 years. X is comparatively low. That is obviously not good news for home sellers. Unfortunately, home sales have trended downward (and are expected to continue to do so).



Now take X and cut it in half. What? Unfortunately, half of X is distressed home sales (foreclosure, REO, short sale, etc.). This “half of X” gives us the true number of people who are now shopping for your home (if it is listed for sale at close to full value). That’s not good.



So the math is basically saying that there are way fewer (way, way, way fewer!) home buyers out there for houses that are not distressed.



Note: For non-math majors (and lottery enthusiasts), you can also gather this information informally; just ask “How’s the sale process going?” to anyone who has their non-distressed home currently on the market for sale. They may respond with a half-laugh, menacing glance, or a choice word (not a nice one).



Then ask anyone who is trying to get a home loan the same question. You’ll probably get a similar response.



So many vacant homes are for sale. And many buyers can’t get a loan to buy your house. How could a win-win situation be created here?



This is why the rent-to-sell method of home selling is hot. Or, if you prefer to stick with the old song, rent-to-sell is “hot, hot, hot.”



How does rent-to-sell work? Buyers, who can’t qualify for a loan now, rent your home for 1-3 years until they qualify. Then they buy it at market price when the real estate market has rebounded. This solves the problem of home sellers eating the mortgage on a vacant home every month and buyers not having a place to call their own.



Rent-to-sell can be a great solution to escape the cold, expensive reality of a vacant home that isn’t selling!



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: Lessons Learned from Holding Expensive Rental Homes Way Too Long: Why 1 -5 Years is Ideal

I wanted to share a dilemma I’ve had with an expensive rental home I’ve kept. But before I start, a good place to begin is my overall philosophy on “expensive versus cheaper rental homes”:




Expensive rental homes are ideal and appreciate greatly (cha-ching!!) in rising real estate markets, yet are more expensive to maintain, cash flow every month, and pay the mortgage during vacancies. Cheaper rentals are the opposite; they don’t tend to go up in value much, but are much cheaper to fix up, maintain, and positive cash flow every month.



And without further ado, here’s my personal tale of dealing with my big, expensive rental home:



It is a really nice home! When the economy and real estate market were soaring, my paper net worth (cue laughter) was awesome! Comparable sales in the subdivision kept going up which made me look like a genius with my home investment (I bought a pre-foreclosure at a great discount).



As a property manager, I put this home up for rent-to-sell and rental to a number of tenants over the years. The cash flow more than covered the mortgage and I was pretty happy with myself. The tenants kept the home in relatively good condition so maintenance and upkeep was minimal. I was living the real estate high life as prices in the subdivision continued to go up, and up, and up!



However, there was always normal “wear and tear” on the property. And as the years rolled by and tenants moved-in and out, the minor damages started to add up. Then it came to a point when I realized that the home needed to be updated, as tenants and buyers started turning their noses at it when it went on the market. So I mentally knew it was probably time to pay the piper; unfortunately, the costs started disturbingly revealing themselves (new paint, new carpet, new appliances, etc.). For larger homes like this one, it became clear that real money ($10-$20K) would need to be expended. What wasn’t clear was where this money was supposed to come from.



In a down economy, the expensive home becomes a weight wrapped around your neck; it’s much like the old Mighty Mouse cartoons where every episode had someone (something?) locked in a weighted treasure, sinking to the bottom of the ocean (of financial ruin). It’s tough! The clear answer is to sell the home, but stomaching the “investment” of all of this money to fix it up, waiting months (minimum) before it is sold at a depressed price, while paying the (expensive) mortgage every month is certainly not ideal. It’s also a question of remaining solvent while this selling process drags on.



That’s life, right? Suck it up! But maybe there are some lessons to be learned from this experience when buying an expensive investment home:



1. Always buy at a significant discount (preferably in a down economy, like now)

2. Target to sell it in 1-5 years, or before a significant fix-up investment is required

3. Selling it should be the ultimate, short-term goal. First, try to flip it if it is feasible. If it’s not, try the rent-to-sell method of selling (placing a rent-to-own tenant into the property who is targeted to buy it in 1-3 years); sell it to them, or put it on the market when they move out.

4. Don’t be greedy. Making money instantly is better than losing money perpetually.



Buy low, sell high, and don’t get caught fixing up expensive homes! Keeping cheaper rental homes for long-term investments is less risky, less stressful, and easier on the wallet in the long-term; use expensive rentals for a short-term (1-5 years) bounce in income.



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: Why Your First 2 Weeks of Dating are Exactly Like the First 2 Weeks Your Rental is Listed

Early impressions can be very telling. In relationships, they can save you a lot of time and heartache.




For example, when you first start dating someone, the first 2 weeks really are pivotal. One really wrong move and it is over, right? So, it is important to pay attention and try to figure out how to stand out (in a good way…). It’s also important to figure out what they really think of you, as they usually won’t tell you outright. Do they think your nervous tic is endearing or pathetic? When you bring up your issues, are they full of concern or pity for you? Do they plan to keep you around or jettison you when something better comes along?



Here are some potential early impressions and what they really mean:



1. “She hasn’t laughed at any of my jokes. However, her over-the-top cackles at the 16-year old valet’s tasteless joke, and then the waiter’s corny repartee, seem to mean that she is straight-faced with me only. I think she cracked a smile when I told my tried-and-true “dog-napping” story (10-minutes of absolute hilarity, if you ask me), but it could have been a result of the 12 text messages she had sent and received during its duration.”

Translation: You are really unfunny (to her, at least) and she is seeking more entertaining companionship elsewhere. Save yourself money and abort this relationship (before she drives off with the valet).



2. She is mesmerized by my every word. She can recall what I said last week in the greatest detail. She tells me that I am the greatest at everything. When I was fired yesterday, she swore that was incontrovertible proof my company didn’t deserve me. She says I’m smart to keep a belly because the winter months are coming and it is actually “sexy.” Hollywood actors and models are “fake”; she likes me because I’m “real.” My annoying idiosyncrasies are “cute” and I’m “untraditionally handsome.”

Translation: Carpe Diem! She likes you. Strike while the iron is hot and lock her up while she is still in this momentary fog!



So, early impressions from dating are good indicators of relationship success. The same is true of the signs received from the first 2 weeks your home is on the rental market.



1. No one is responding to the rental ads about my home. If your home had feelings, it would be locked in a bedroom alone eating bon-bons and watching “Bridges Over Madison County” right now.

Translation: The home is priced too high, the pictures in the ad are either non-existent or awful, there is potentially no contact information contained in the ad, the ad copy is off-putting, or a combination of the above. Fix and repost the ad.



2. I’m getting a lot of showings, but no one is applying.

Translation: The home is either priced a little too high and/or its condition does not back up what is presented in the ad.



3. I’m getting deluged with showings and applications.

Good! But your home is probably priced too low.



4. Real estate agents don’t respond to my follow-up calls and e-mails after they show my home.

Translation: Your home does not back up what is in the ad; typically, it is dirty and might look like a college fraternity house or an early 1800’s boarding home. They are upset that they wasted their time (and gas) to visit your home and look bad in front of their clients.



5. Your home gets a decent amount of interest and a good application is submitted and accepted within 30 days.

Translation: Your home was priced and marketed appropriately. Bravo!



Though early impressions are never 100% full proof, they are usually on point. Paying attention to them and making adjustments early can save you a lot of headaches, heartache, and money!



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: #1 Way to Fill Rental Homes Quickly

As homes for sale sit and rentals continue to gain prominence in the residential real estate market across the country, concerned owners are wondering how to best fill their rental properties quickly. So are property managers.




“Everyday my house is empty costs me money! Besides the mortgage payment, it’s the other things that are absolutely killing me- utilities with this unusually cold and snowy winter, HOA dues rising, you name it. I need someone renting (or buying) my home!” is a common lament from homeowners with a vacant home on the market.



As a real estate investor and property manager in Charlotte, I feel your pain. I don’t like vacancies anymore than you. But there is a simple way to make your home attractive. And it addresses the most heard complaint, by far, that I hear about houses and why prospective tenants pass on them. And just what is this revelatory nugget?



Cleanliness. That’s it. Houses are typically not clean. Actually, it’s not that they are not clean technically. It’s that they are not clean enough. Prospective tenants want to see sparkle. They want to see their unblemished reflections coming off of stainless steel. They want to be able to eat off the floors. They want to lap cool spring water out of the toilets (well, I may be pushing it now…). The point is that they really like the houses to be much cleaner than they would normally keep them.



Recently, we switched to a different cleaning service that was more expensive. I would never think of adding expenses to our owner clients (especially in this economy), but I felt that our homes were not standing out as the rental market continued to get more and more crowded.



And it worked. I noticed our rate of conversions of visits to completed applications went up dramatically. This has gone on for months. Thorough, deep-cleaning was more effective than lowering the rental price. This has been especially effective for our rent-to-sell program where people want to fall in love with the house they are potentially buying.



I would challenge you to give it a try. When a house has been on the market for a while and has been getting visits (but no completed applications), resist the urge to lower the price and just pay the dollars to give the rental home a thorough scrubbing (or do it yourself, though I recommend professionals). See if it works!



Cleanliness is next to godliness, the saying goes. Reap the benefits of a shorter courting period with prospective tenants!



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: 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!)