BDF Realty’s Pod System Manifesto: Property Management… Better!

Bring back customer service; let me speak to a human

Customer service is dead.

It’s so frustrating you can never get a live person to handle your question or complaint.

After several minutes of music and advertising, you might even hear “all our customer service people are busy… You might want to go to our website to handle your problem.”

The message is loud and clear: Corporate America does not want to talk to anyone, any time!

Richard Lynch (Charlotte)

From his “Letter to the Editor” Charlotte Observer

As a Charlotte property manager and owner of BDF Realty, I was thinking about our firm’s value proposition the other day in the context of the “Big 3”.  The “Big 3” value proposition is a formula that includes picking which two of the following a firm wants to excel at: Price, Quality, Customer Service

Realistically, no firm can excel at all three.  McDonald’s, for example, shoots to be great at customer service and price; however, they know the quality of their burgers is not exactly filet mignon (you would go to Ruth’s Chris Steakhouse for that).  On the same token, Ruth’s Chris Steakhouse wants to be great at quality of product and customer service, but know their prices are way higher than McDonalds; there are no Value Meals there! 

So any firm that tells you they are great at all of the “Big 3” is probably not being overly truthful (including BDF Realty!). 

So how does this boil down to property management?

Price: Most reputable property management firms compete on quality and customer service and forgo trying to position themselves as the lowest cost provider; BDF Realty is a member of this group.   It helps that home owners are typically too smart to go with the lowest cost property management companies as their home investments are typically in the hundreds of thousands of dollars.  Any mistakes in tenant screening, mismanagement, or prolonged vacancy would cost thousands of dollars and make any relatively negligible monthly savings on service quickly moot (without even mentioning health costs associated with a continuously elevated stress level!).

Quality in property management really boils down to technology and efficiency. Though very important, much of the impact of quality as a differentiator can be negated by software and hiring good people. 

Customer service is really where property management companies should be competing and where BDF Realty aims to shine.  Through BDF Realty’s innovative Pod System (PS), we look to eradicate the two biggest customer service killers: lack of personalization and lack of ownership.

Lack of Personalization

Michael Gerber’s book, The E-Myth, was a huge seller and really revolutionized the way businesses looked at systems.  It made a great case about writing out all job responsibilities and then plugging people into the positions with a detailed function (compartmentalization).  McDonalds was his textbook example of a restaurant becoming a multi-billion dollar company based on using systems that were so detailed that they could plug in high school kids and still turn out the same quality of product in any McDonalds restaurant in the world.  There was a detailed set of instructions for the fryer person, the burger flipper, the cashiers, etc.  Sounds efficient, right?

However, the one drawback to Gerber’s approach was the maddening lack of personalization when this process was taken too far.  Uber-Gerber disciples thought that all business functions could be compartmentalized for the sake of cost.  What resulted was the rigidness and lack of personalization we see when we interact with big businesses now. 

Take banks, for example.  A call to the bank to find out if your mortgage payment was received takes you through a number of menus and prompts.  Then an automated voice might tell you after five or ten minutes after you punch in your account information.  If you then want to see if there is a better mortgage rate available, you’ll need to go through even more voice prompts and wait to talk to a live person.  You’ll need to give them your account information again.  And if you want to let them know you’ll be travelling overseas so your credit card will work, and though they are the issuing bank, they’ll give you another number to call entirely!  And you’ll input your account information again!

It’s frustrating, but personal customer service costs companies more money.  To achieve personal customer service, companies need to pay and retain good employees who know you, what services you have, and what you like.  The higher employee wage cost and the perceived loss of efficiency (for not using compartmentalization) is why it is not prevalent in today’s business world.    

The bank example is not surprising because it is part of our everyday life; we’ve become largely numb to it.  On-line services have relieved some of the customer service inefficiencies, but this approach is even more impersonal than the phones!  Going on the website doesn’t make me feel any closer to the bank and neither does e-mailing support@bigbank.com.  Who is “support”?  If they don’t get back to me, do I follow up with Support’sImmediateSupervisor@bigbank.com?  Or how do I praise “support’s” handling of my issue?  Can I contact them directly next time and get the same competent person?  Will “support” remember who I am?

Of course not.  And I see property management companies setting up their businesses with similar structures.  The impersonal approach is simpler to manage when employee turnover is high.  It would be easier to just plug in another newly hired person and not worry about changing the contact information.

Lack of Employee Ownership

The other common issue is lack of complete account ownership in property management.  If customers have a problem receiving the monthly rent, they need to call the finance department.  If they have a question about the repairs being made on their property, they need to talk to the repair department.  If they want to know the progress of tenant placement into their property, they need to talk to someone else.  Then they often get parked into multiple voicemail boxes!  This can really be a headache.  What makes it worse is when the person they need to speak to is not Jim@PropertyManager.com, but rather Finance@PropertyManager.com. 

These “catch-all” e-mail addresses are making employees less accountable.  And with this lack of accountability, comes an incentive problem.  How do we tie in financial incentives to good performance when one property management account deals with so many different people?  Did they leave our company due to dissatisfaction with not getting their rental payments in a timely fashion, or our reports are not what they wanted, or the tenant fill times are too slow, or the communication was poor, or some other reason?  Did they stay and want to add other properties with us because of their work with a specific person?  It makes it much tougher to correct what is wrong and reward what is right when accounts are overly compartmentalized.  I don’t want to piece this information together from seldom filled-out, outgoing customer surveys!

So how is this fixed?

Let’s go back to the bank example and see how I would ideally like to deal with my bank.  When I want to find out if they got my mortgage payment, see if there is a better mortgage interest rate available, and let them know by credit card is going to be used overseas, I want to simply write this e-mail (or text message):

To: Jim.Anderson@BigBank.com (cell # 704-902-7777)

Hey Jimmy-

Hope you had a good time in Aruba!  And congrats on wife #2.

Could you check on a couple of things for me:

1.  Did you get my 10/13 mortgage payment?

2.  Is there a better mortgage interest rate available that I should be considering?

3.  I’ll be in London from 11/13-19 and need to be able to use my credit card without getting busted for fraud J. Can you let the “powers that be” know?

Thanks!

Brett

Why is this e-mail laughable based on service levels now?  A bank customer service employee wouldn’t even know how to begin answering this e-mail.

4 Requirements for an Ideal Customer Service Relationship

My customer service needs for an on-going business relationship (like property management) boil down to 4 things:

1.  I need a single point of contact for almost all issues (with a real name / e-mail / cell phone)

2.  I need to have the ability to reach them directly during business hours (my vendors are allowed to have a life outside work…)

3.  They need to know who I am by name and what business I do with them

4.  I need to know they care about keeping my business

BDF Realty provides these four requirements through our innovative Pod System!

Property Management Solution- The Pod System

So what is the property management solution for differentiated customer service?  BDF Realty strongly advocates and utilizes the Pod System.  It’s very simple.

At BDF Realty, every property is assigned a Pod Owner (PO).  PO’s are managed by a Pod Manager (PM).  The PO:

1.  Is the single point of contact for an assigned set # of properties

2.  Fosters a tight relationship with the owners and tenants (their clients)

3.  Handles all needs for the properties except:

a.  Prospective tenant inquiries

b.  Initial home fix-ups to prepare the homes for market

c.  Outside business hour repair requests

The incentives are in place where the PO has complete ownership and dictates their own earnings based on the financial performance of their pod.  The PM just keeps the PO’s on track and measures their activity with the following metrics:

1.  Active properties in their pod under management

2.  Commissionable items (lease extensions, tenant procurement, etc.)

3.  Google Reviews & customer feedback

Being that a BDF Realty PO’s earnings are based on their pod’s monthly financial performance, the PO has a direct incentive to:

1.  Treat owner clients well so they retain their management business, add other rental properties they have, and gain referrals

2.  Screen tenants well because non-paying tenants are not commissionable and this directly affects their monthly earnings

3.  Keep tenants happy so they pay rent and sign lease extensions

BDF Realty’s innovative Pod System promotes personal accountability and employee ownership in residential property management.  By increasing customer and employee satisfaction, a true customer service differentiator is achieved.

The Pod System does not reinvent property management; it just makes it… better!

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Reviewing the Lease: 3 Simple Things Good Tenants Should Do (And How to Check!)

As Charlotte property managers, we meet with each new tenant and review the rental lease packet (lease, maintenance addendum, move-in inspection form, and, if applicable, the pet addendum) with them before we both sign it.  We even send the lease packet via email to the tenants a week before move-in so they can review it and ask any questions prior to our meeting (before they potentially sign their lives away!).

This brings up the million dollar questions- 

1.  Is this largely a waste of time?

2.  Does anyone really read through up to 13 pages of legalese gibberish?

3.  Is it necessary to send it to them for early review and then go through it in person?

Answers:

1.  No…  it only feels like it sometimes…

2.  Some actually do read all of it and are prepared with questions (10% - 20%)

3.  Definitely!

Why “Definitely!”? 

I like sending the lease to the tenants for early review.  In the United States, ignorance is no excuse for breaking the law.  Providing a clear, reasonable path for tenants to digest, question, and understand the expectations of their lease agreement is a good thing.  This shifts the onus on knowing the lease from reasonable negligence (“I saw the lease for the first time when we sat down to get the house keys!  If I didn’t sign it, I wouldn’t have a place to live!”) to passive acceptance (“Hmmm… It was provided to me, but I chose not to read it over…”).

In terms of reviewing the lease in person with a new tenant, I don’t think it is necessary to go over it point-by-point.  Most of the things in the lease govern what would happen in worst-case scenarios; being able to answer any questions the tenants have about obscure items in the lease should suffice.  However, the following three things that make for a good tenant should be spelled out (and if the tenant screening is done correctly, we’ve already checked on these during the application process):

1.  Good tenants pay in full and on-time:  this is why we do credit checks (do they pay other people on time?), landlord checks (did they pay their previous landlords?), and employment and income checks (can they afford the place?) 

2.  Good tenants maintain the house: this is why we do landlord checks (did they keep and leave their prior place in good shape?) and include the maintenance addendum (the things they need to do to keep the house up- change air filters, mow the lawn, etc.)

3.  Good tenants get along with their neighbors and society at large: this is why we do criminal background checks, landlord checks (did you have any issues during their rental period?), and pet addendums (if your pet does things we don’t like, we can legally ask you to remove it from the home within 48 hours)

If you can narrow the focus to the lease signing (and tenant screening) to these 3 points, you should be in for an enjoyable tenancy!

Brett Furniss is President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords.  BDF Realty manages single-family homes, Uptown condos, and town homes in the Charlotte-Metro Area with services that include property management, home repairs, and home sales (including Rent-To-Sell).

Putting Your Vacant Rental Home on the Market? 3 Steps To Be Prepared

The news has been all positive for home sellers.  And some of you have been ready to sell some of your rental homes for the last 5 years!  

 

The thought equation about selling your rental home looks like this:

 

Desire to Sell + Rapidly Improving Market + Now Vacant Rental Home = Time To Go To Market?

 

That is the big question.  If the answer is “I think so!”, here are the next steps.

 

Talk to your property manager and have them run some comparables on your property.  If it is determined that you have the room (difference between your rental home’s value and loan balance) to walk away from a sale with a profit (or an acceptable loss), you may decide you want to make a go at it.

 

If this is your situation, how do you prepare?   Here are 3 easy steps:

 

1.  Make sure you have the needed liquidity (cash) - Part 1: You’ll need to fix up your home to market standards.  This may include a new paint job, new carpet, professional cleaning, and any other needed repairs.

 

2.  Liquidity- Part 2: You should have a minimum of 4 to 6+ months of mortgage, HOA dues, lawn care, and utility payments at your disposal so everyone still gets paid during this time of vacancy.  Unfortunately, you won’t have a tenant making the payments for you while it’s vacant on the market.

 

3.  Decide what your boundaries are:

A.  What is the lowest price you are willing to sell for (your property manager can help you factor in what your selling costs are)?

B.  How long are you willing to wait to sell it before going back to the rental market?

 

Once these 3 criteria are considered and you are comfortable with them, it is time to go to market and trust the marketing prowess of your property manager.  Then a new equation emerges:

 

Fixed-up home + Competitive Price + Funds Necessary to Execute the Sales Strategy = Sales Success!

 

Selling a rental home is a process that takes time and money.  Successful execution depends on having the necessary resources and patience to see it through.  Good luck!      

 

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. 

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. 

3 Reasons Why LeBron James Is Like A Superstar Tenant

 

“LeBron James Picks Heat; Cavs Owner Erupts”

(ESPN headline on 7/9/10 after “The Decision”)

 

When LeBron James, the best player in the NBA, chose to leave the Cleveland Cavaliers and sign with the Miami Heat in the off season before the 2010 season, it had big consequences for the rest of the league.  No one knew this more than Dan Gilbert, the owner of the Cavaliers.   His team, which had been one of the best teams in the league with James, was now left decimated and would wind up becoming one of the worst.

Gilbert was so upset that James left he couldn’t hide his disgust, disappointment, and anger in his letter to Cavalier fans.  "This was announced with a several day, narcissistic, self-promotional build-up culminating with a national TV special of his 'decision' unlike anything ever 'witnessed' in the history of sports and probably the history of entertainment.  Clearly, this is bitterly disappointing to all of us.  The good news is that the ownership team and the rest of the hard-working, loyal, and driven staff over here at your hometown Cavaliers have not betrayed you nor NEVER will betray you."

Gilbert’s reaction after losing his team’s superstar was raw, genuine, and understandable.

 

Good tenants are property managers’ superstars.  To be a successful property management company, superstar tenants need to stay put!

 

LeBron James is like a superstar tenant because he:

 

1.  Makes (property) management look good.  (Pays on time, takes care of repairs on their own, and get along with people in their community- no headaches)

 

2.  Brings more fans to the game to make the team more money.  (Happy owners bring referrals to the property manager)

 

3.  Makes winning look easy.  (“There never seems to be any issues and we’ve used this company for years!”)

 

4.  BONUS +1: Needs to be retained!

 

I can feel for Dan Gilbert.  As a property manager, I feel uneasy and disappointed when a good tenant leaves us to rent with another property management company too.  We are only as strong as the tenants on our team.  I want to make sure they know they are appreciated and that we want to keep them forever.

 

For organizations to be strong, they need superstars (like LeBron), be it in the NBA or a property management company in Charlotte, NC.  We should “erupt” too if someone poaches one of ours!   

 

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. 

“Will You Buy My Rental Homes Now?” Big Buyers Say, “Yes, But…”

The media is abuzz with news of springtime in the housing market!  Headlines trumpet:

 

Sales And Average Home Prices Are On The Rise Again!

 

Bidding Wars Are Back! 

 

Good times appear to be back in real estate land and you will soon see your local Realtors rolling around in the hottest and newest automobiles again (we don’t use the lowly term “cars”- that’s recession terminology).  Real estate school enrollment is up and the housing market is sizzling.  

 

And you’ve been holding on to your rental properties tightly, making the repairs, paying down the loan, and living the ups and downs of your tenants’ employment statuses for the past 6 years.  It’s been tough, but now it is time to get rewarded, right?  Based on news reports, it is time to sell your rental homes and make some dough.

 

Or is it?  As always, that depends.

 

The homes that are in bidding wars where buyers are making above asking price offers are typically in high-price, highly desirable areas, which are not where most rental homes are (it’s OK- those homes are tough to get to cash-flow on a long-term basis anyway).  But what about the average rental homes that we hold in our portfolios?  Can we sell them now?

 

One type of buyer that is very active in the market now says, “Yes, but not for the price you want.  But not so off the mark that you won’t consider our offer.”

 

This type of buyer is the big institutional investors (Big Buyers) who are invading the local real estate markets armed with tons of cash.  They employ some real estate agencies to find affordable homes for sale, send lowball offers (typical haircut of 30% from what I’ve seen), and snap up the ones that accept. 

 

I view this positively.  Besides the obvious disadvantage of below asking price offers, they bring a lot of advantages.  They pay all cash (it’s so nice when financing snags doesn’t crush deals in the last minute), close quickly, don’t ask for closing costs, and don’t ask a lot of questions.  They are really easy to work with; the deals happen rapidly and easily.  The only real question is if the price is acceptable to both parties.

 

So how does this work in practice?  Here are 3 examples on 2 houses we listed for sale (some details have been changed slightly):

 

House #1: On market for $89K

 

First big buyer (BB #1) offers $55K

We counter at $94K

BB #1 doesn’t dignify our counter offer with a response

 

BB #2 offer on house #1: $70K

The same day we receive word we have another offer coming in

We inform the BB #2 of the other offer and ask if they would like to submit their best and final offer

BB #2 responds that $70K is their final and best offer

We let them know the other offer was accepted and theirs was declined

 

House #2: On market for $105K

BB #3 offers $85K

We counter at $104K

BB#3 comes up to $90K

We counter at $100K

They come in at $95K final offer

Offer accepted at $95K

 

The BB’s are looking to accumulate properties and are not looking to nit-pick on repairs.  Sure, if something is majorly flawed, they will ask you to fix it and/or cancel their offer.  But the small repair requests that are typically negotiated by owner-occupants aren’t asked for; the BB’s just fix it up themselves.  As stated previously, when the price is agreed upon upfront, the deals typically fall into place easily.

 

To sell or not to sell?  That is the question.  But, for average rental homes, be thankful it is now an option!

 

Brett Furniss is President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords, managing single-family homes, 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. 

Section 8 Offers “Free Rent”? 5 Reasons Many Landlords Still Choose Not To Participate

I saw an ad for a Section 8 speaker touting their government-sponsored rental assistance program as “Free Rent” for landlords.  I had to laugh.  As we’ve been told our whole lives, nothing worthwhile is free.  And the Section 8 program is not an exception to the rule.

For the uninitiated, the Section 8 housing program allows people who earn under a certain income to receive a housing voucher to partially subsidize or pay for their rent in full.  This seems like a boon for landlords.

The process looks like this: For the tenants, they need to scour rental home ads and find landlords who are willing to accept Section 8 vouchers.  For the landlords, they need to willingly accept them.  The problem is that many landlords choose not to accept them, which seems strange.  The landlords do not want government-guaranteed “free rent”??  Well, maybe free isn’t always so free…

A big misconception is that the tenants are the reason landlords hesitate to accept Section 8 vouchers.  To me, this is patently false.  Some of our nicest and best tenants use Section 8.  Really, on our rental applications for Section 8 tenants, we run them the way we typically do, but deemphasize income and credit score requirements as Section 8 has them partially backstopped. 

So, if the tenants are good, why not accept Section 8?  The 5 main reasons many landlords choose not to accept Section 8 vouchers:

1.  Too much paperwork.  It’s not easy for landlords, especially non-real estate professionals, to navigate the process.

2.  The governmental standards for housing are really high and your house will fail the inspection.  Slum lords (ex: the type of people who ask if tenants really need clean, running water) are not the only people that fail; almost everyone fails the inspections.  I can speak from personal experience, anecdotal evidence, and conversations with the inspectors.  I asked one inspector what percentage of homes passed their first time and he laughed.  “Seriously?  Zero percent.  I’m not kidding.”  He went on to say that his own house wouldn’t pass a Section 8 inspection.  Our latest fail report had paint splatter on a strike plate and a loose electrical outlet as reasons it failed.  When there are hundreds of items that the inspectors are looking for, you are behind the eight ball.

3.  Customer service is typically unresponsive.  I don’t really blame the employees.  The workload that is saddled on them is immense.  I asked an inspector the other day a question about a failed item on the inspection report and she exhaustedly told me she couldn’t remember- she conducts 15 different home inspections every day!  So, bottom line, getting anything accomplished with them takes a lot of time, energy, and follow-up.  

4.  Waiting is the hardest part.  We had a house that took 5 weeks to get an initial inspection.  So, for 5 weeks, we ate the rent and utilities as the house stood vacant.  There was no “free rent” or sympathy.  After the home inevitably failed, there was another 2 week wait for a reinspection.  The combined 7 weeks of non-recoupable utility and mortgage payments hurt.  So did the vandalism that occurred as the house sat empty. 

5.  Re-inspection failures and rent abatement really hurt.  So, let’s say you pass the initial inspection and the tenant moves in.  At the ten-month mark of the tenancy, there is a reinspection where the Section 8 inspectors look for housing violations.  We used to occasionally pass these, but that hasn’t happened in the past few years due to stricter regulations.  The inspectors will find new things that happened during the tenancy; sometimes they find things they missed on the first inspection.  Our latest fail was partially for a loose banister.

The problem with failing reinspections is that you are given one chance to fix the items.  They provide a punch list so it should be as simple as giving it to a handyman to fix, right?  Well, the descriptions detailing what is wrong are nebulous and getting the inspectors on the phone to ask them to remember your home and a specific issue is not likely.  The handyman does the best he can, but when it fails, you enter into the unfriendly world of rent abatement.

Rent abatement is how property managers get fired and cash flow becomes difficult.  It starts with the failed second inspection.  This letter comes a week after the inspection letting you know what items you failed.  You are instructed to fix the outstanding items and then schedule a final reinspection.  During this time, not only is rent deducted for the abated period while waiting for the final inspection (your bank account is debited the following month on the 1^st when payments are made), there is no rent paid for the coming month.  For example:

Your rent due is $900/month and your abated 2-week period costs you ($450).

On the first of the month after abatement, not only do you not receive the $900 due (and the tenant is still living in your rental home and the bank wants your mortgage payment), you are clawed back $450 (payable immediately).  This essentially puts you in the hole $1,350 (not counting the funds for the repairs on the home).  Cash flow becomes a big issue.  This is when “free rent” becomes “free rent” for the government.  You’re a great citizen to do this, but you don’t feel so great when this happens. 

If you pass on your final reinspection, you will get the $900 back the following month (the $450 is gone forever).  If you fail, your contract with Section 8 is terminated and the tenant is free to leave.   This presents a much bigger problem as the tenant usually doesn’t have money to pay rent, Section 8 is not paying you, and the tenant needs to enter the arduous, time-consuming process of finding a new Section 8-eligible home (while living rent-free in yours).

In closing, Section 8 can be a good program if you know it well and have repair people very familiar with their changing requirements.  However, “free rent” for landlords is a gigantic misnomer and is about as far away from the truth as you can get.  It can be intelligently argued that Section 8 vouchers are much more risky than working with non-subsidized tenants.  “Nothing is free” is the true mantra!  

Brett Furniss is President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords, managing single-family homes, 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.  

Charlotte Property Management Monthly: 5 Crucial Expectations to Set Verbally With Your Tenants at Lease Signing

I’m a big believer in setting expectations in relationships; it seems to make things go more smoothly. If you know clearly what you’re supposed to do and I know what I’m supposed to do, there is less opportunity for hurt feelings and animosity. A beautiful, life-long relationship can blossom! (Cue the romantic music…)




This is why many married couples say the first year of marriage is the hardest. There is no book of set expectations for each partner; it’s created on the fly. The idyllic vision of married life begins to fade quickly when real life is thrust upon them. Who pays the bills? How many days are you staying out late with your buddies? You want me to iron the clothes? These fun questions need to be addressed and expectations of conduct need to be negotiated so both spouses are (mostly) satisfied. There is no marriage contract that explicitly spells this out.



Fortunately, a landlord-tenant relationship is governed by a set of rules known as “the lease”; this should theoretically make things easy! A lease is a perfect way to express your expectations to your tenant. That sounds good, but how come there often seems to be hurt feelings and bickering in leasing relationships? From the landlord’s perspective, the tenant should read the contract and follow it to the letter, right? If the tenants did everything the lease said, there would be no issues. So, of course, the issue lies with bad, rebellious tenants.



Wrong. The problem is a society who doesn’t have the time to read anymore. You are in the minority that you have made it past the Twitter-restricted 180 characters and are on to the fourth paragraph of this blog. Congrats! Pat yourself on the back!



And the standard lease is not exactly a page turner! It is legal jargon with no cool pictures or diagrams that goes on for page after long page…



If you want your tenant to know what you want them to do, you must verbally tell them. They will remember what you say and will usually act accordingly. Your leasing relationship will be the better for it! Guaranteed.



Tell the tenants what you expect (the Cliff Notes version please!) and what you are going to do for them (and won’t do for them!). The five most important things I make sure I cover with tenants in our lease signings:



1. The date the rent is due (the 1st of the month), the day it is late (it must be RECEIVED by the 5th of the month), and the day eviction is filed (the 16th) if we don’t hear from them and work something out. I also mention the late, bad check, and eviction fees that would be due in each scenario.



2. Where their security deposit is, what it is for, when it will be returned (within 30 days after move-out), and under what conditions some of it may be withheld.



3. Explaining that aesthetically the home is “as is”. When things stop working (HVAC, plumbing, etc.), what the repair process is and how it is handled.



4. I explain the 3 keys to a good tenancy: paying your rent on time, getting along with your neighbors, and keeping the home in good shape (including standard maintenance).



5. How early lease terminations are handled. Life happens and this is how you can get out of your lease and keep your credit intact. (Note: We ask that a 30-day notice be given along with 2 months of rent as a lease termination fee, in addition to the rent due up to the vacancy date)



6. Bonus item message to give for property managers: “We are not the owner of this home. We are the messenger. We don’t always like being the messenger, because messengers get shot sometimes. You don’t need to shoot us. We’d actually really appreciate it if you didn’t.”



This isn’t a comprehensive list, but it is important to remember that attention spans are not endless. These five points should be helpful in having a great relationship with your tenant!



Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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!)

Selling Rental Properties: 3 Free Steps To Determine Whether You Should

There’s been a lot of good news of rising home prices coming from the Charlotte housing market, as well as the rest of the country. For real estate investors, this news is a mixed bag. There are less great buying opportunities for them, but their net worth is increasing. It also presents a good opportunity to turn their home assets into cash.




Making money on selling rental homes is a nice aspect of the investment real estate game. Buy low, sell high. When a real estate investor is able to do this, life is good! It makes all the repairs, waiting for late rental payments, and extra tax work worth it!



Let’s face it, there are two main joys of selling investment homes:



1. A good amount of cash is transferred into your pocket

2. The worry about your extra home is gone and given to someone else!



So if you have an investment property that you may want to sell, here are 3 free steps to make a quick determination on whether you should:



1. Determine the value of your home: Ask your property manager or friendly Realtor a realistic range of values for your home. Why a range and not a fixed number, you ask? Real estate pricing is subjective. If your home is in great shape and in a desirable section of the neighborhood, your home should sell in the top of the range. If it’s been beaten by years of tenants and little fix-up has been done, it will be in the lower range of the values. Estimate low for this exercise.



2. Estimate selling costs: Nothing creates a bigger vacuum of air on the phone when I explain that owners should factor in 10-15% in selling costs. After the initial scolding pause, they ask the requisite question, “What? How do you figure that, brother?”



This general estimate of 10-15% is computed by:



6% Realtor fees

1% Miscellaneous seller closing costs

3-8% Less than list price offer and seller concessions (typically paying for the buyer’s closing costs)



For example, Mecklenburg County (Charlotte) currently has an average offer acceptance of 92% of the list price (and this is on the rise from 90% from last quarter).



3. Find out your loan balance: For a general idea, just look at the loan balance remaining on the monthly mortgage statement. If you don’t get a mortgage statement, you’ll really like this exercise!



Once these 3 figures are retrieved, the math looks like this:



Value of home (be a pessimist!) – Estimate the cost to sell (say 12%) – Your loan balance = Profit (or loss)



For example, take a $100K house with a loan balance of $60K:



$100K (home value) - $12K (12% of $100K) - $60K (loan balance) = $28K (Profit!)



This is a general estimate of whether it is worth putting your home on the market to sell. Now you can decide whether this approximate dollar figure works for you.



Selling homes can be a very good thing for your wallet! Just use this simple exercise to see if it is worth doing at any given point in time.



Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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 Monthly: Don’t Return Your Tenant’s Security Deposit Just Yet

As a Charlotte property manager, I am a big proponent of returning as much of the tenant’s security deposit to them as possible.  If the tenant took time to care for the property, did what they were supposed to do during their lease period, and paid all of their rent, they certainly deserve it back!  There is a reason property managers are required to put the security deposit into an escrow account; it is a reminder that the security deposit is not the landlord’s money, it belongs to the tenants.

However, that being said, I’m also a proponent of the “slow return.”  By NC law, the security deposit does not need to be returned to the tenant for 30 days.  And also according to the law, if the landlord is still figuring out repair costs and won’t make the 30-day deadline, they just need to notify the tenant that the payment will be delayed in writing and let them know the approximate cost of the repairs at that point in time.

Why would landlords delay the tenant’s security deposit return?  The most popular question asked (by far) when a tenant moves out is, “when can I expect the security deposit back?”  If you want to be a “cool” landlord, shouldn’t you just give it back after the walk-through?  You already know how much the repairs are going to cost (if there are any) and the tenant could use the money back.  You certainly want to be good to the tenants who were good to you, right?

Well, yes, but not exactly.  I recommend keeping the security deposit as long as possible.  Once it is given back, you really need to consider the tenant gone and their account closed.  You need to assume that you will never get any money from them again.

So?  They moved out already, right?

Yes, but…  Walk-throughs are an inexact science and sometimes things are missed.  Think about home inspectors; they are professionals that take hours doing a walk-through to write a comprehensive damage report and they still miss issues with the home.  I guarantee that landlords are not close to conducting several hour walk-throughs at the level of detail that they are (nor should they be).  Things get missed and that’s life.

However, you can provide yourself some extra time so missed things can get caught before it’s too late and you have to pay for it!  It may be one of the handymen working on your home that alerts you to new repair issues.  It may be a Realtor or marketing person who wonders why something looks off.  Or (usually) it’s the next tenant who moves in afterwards that lets you know what’s not up to par (and by the way, they want the issues fixed on your dime!).

Let tenants pay for damages they are responsible for.  And, unfortunately, the delay in returning the security deposit to them is a good way to ensure this happens.

Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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!)