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:
- 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.
- 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!
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