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: Importance of Getting Paid from Rentals in the Next 5 Years

“Go to where the money is.” (Business Axiom)




According to an article in Barron’s this month, the future of the real estate market is in rentals for the next five years. Most real estate agents are hoping this news is akin to the Bush White House claiming the existence of Iraqi weapons of mass destruction (WMD); hopefully, it is just another example of faulty American intelligence.



However, the supporting information for a rental uptrend (as well as brokerage to be on a continued, extended downtrend) is pretty compelling; if this is what is going to happen, then anyone in the field of residential real estate needs to start thinking about how they are going to operate in this type of future. And then think about how they are going to operate in a rental-dominated market.



And let me clarify. When I say “how to operate”, I mean “how to make money” and “how to stay employed in the real estate industry.”



With rentals, this means creating:

1. Quantifiable value

2. Your fee structure

3. A narrative to explain why you should earn your fee



So what does this look like? What is the quantifiable value of a rental tenant? What is my fee? What story (narrative) am I telling to back up my fee? An example:



If I bring a tenant paying $2K/month and they sign a 2-year lease, I just created $48K (24 months X $2K/month in rent) in future cash flows for you, Mr. Owner (this is the quantifying the value). What is this worth? 10%. Why? How about because that is what the commercial agents charge for leasing fees (the narrative)? If so, that’s a $4,800 commission to you.



A tried and true business model in any industry is to take a percentage of the money you bring in. It works for hedge funds (they take 20% of the money they earn for their client off the top), real estate firms, and any other commissioned salespeople.



So, to recap:



1. How much money are you bringing in to your client? (total quantified value)

2. What percentage of it is your fee? (your value)

3. Why? (the narrative)



Those that adapt will survive!



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. You can contact him directly at Brett@BDFRealty.com.