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Category Archives: business of real estate

Unintended Landlords… A Little Help Here…

Thursday, 12 May 2011 08:44
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Monument to David Berry, a good landlord of wh...

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One of the things that I see a lot of, especially with “unintended landlords” is a failure to look at the big picture.

And Unintended Landlord is a seller that is unable to sell their home and turns to renting it out in order to stem the cash flow blood-letting

I often see properties where the listed rental rate is too high.  Often, the rental rate sellers (landlords) are asking is based on their own financial needs… like the mortgage.  The bottom line is that the market and the mortgage might not be lined up.

And then a prospective renter comes along and offers a rate that is a little below their liking… maybe even a lot below their liking.  And it is rejected.  But let’s look at the bigger picture here.

Let’s say that the house payment is $1500/mo. and so the landlord is trying to cover it… and asking for $1500.mo for rent.  Along comes a possible renter offering $1250/mo for rent.  The landlord looks at the offer and rejects it… he doesn’t want to lose $250/mo.  But instead, he is losing $1500/mo. Maybe he can get it rented for more soon… but what if he can’t?  If the house sits vacant for 2 months, the landlord has lost the same amount of money as they would have in a year if they rented the house at $1250/mo.

This advice is ONLY for unintended landlords.  For those that are buying properties for the purpose of holding them as part of a rental portfolio… you should NOT have this problem.  If you do, you paid too much or you didn’t put enough down… or you need to renovate your property to increase its value on the rental market.  “Professional” landlords NEED to have properties that are cash-flow positive.

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Wayback Wednesday… Value Pack, a Twofer

Wednesday, 11 May 2011 08:00
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ingredients

Image by finestationery via Flickr

Not one, but two whole posts this week for Wayback Wednesday.

I wrote a couple of posts a couple of years ago about valuations.  They were back to back then, and I really think they do best when read together.

My Home is Worth What?

But Zillow Says…

Even from the titles, it is easy to discern that the posts are related, and they really are.

The first post, My Home is Worth What?, is a bit of a rundown about the various ways properties are valued, ranging from appraisals to real estate agent derived tools like CMAs and BPOs (read the post for more about these).  But, all of the valuation models… even real estate agents… are missing one key ingredient.  And even though I know exactly what it is, I can’t add it to valuations that I do… that is the tragic flaw in evaluating properties.

 

Image representing Zillow as depicted in Crunc...

Image via CrunchBase

The second post, But Zillow Says…, explores a little more about Zillow’s Zestimate, their AVM (Automatic Valuation Model).  It is an amazing tool, but has some serious limitations.  There are a lot of real estate agents that do their best to dismiss, ignore or even outright kick the Zestimates.  I think the problem is that they don’t understand the limitations and parameters of them, so they don’t know how to talk about what they mean.  It is a shame, because they are such a useful tool… especially on a wider basis.

 

I hope you have a chance to check out both post

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Craigslist Annoys Me…

Monday, 09 May 2011 08:43
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Craigslist

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I use Craigslist to post listings…  I use Craigslist to cruise listings, too.  And I get annoyed almost every time I open the site…  I expect that you do, too.

The real estate ads seem to be the worst.  And real estate professionals are right in the thick of it.  I think it gives a bad name to all of us when so many of our peers have a flagrant disregard of the terms of use for the service.  If they don’t like the rules, don’t use the site.  If they still think that the exposure is valuable, follow the rules.

There are a few things that my peers do that are over the edge…

  • Spam/Overposting. Craigslist rules limit re-posting of an ad to once every 48 hours.  Yet, when I log in, I see some ads re-posted as many as 20 times in a single day.  Real estate agents aren’t the only people violating this rule… but we might be the biggest group.
  • Mis-categorization. This comes in two flavors.
    • Flavor one is posting service ads in real estate categories.  It isn’t that hard to figure out… an ad promoting YOU as a real estate agent is NOT the same as an ad for a property.  There is a place for you to advertise yourself.
    • Flavor two is posting ads in the wrong category on purpose… to try to get renters to buy.  And the worst type of this is where the poster doesn’t actually disclose that they are talking about a “rent-to-own” house rather than a rental.  When someone calls, they put out the hard sell to get them into any property that they have available.
  • Failure to Disclose. This one is an actual licensing law violation.  Whenever a real estate agent or broker places an ad, they HAVE to disclose that they are licensed, and the name of the brokerage where the license is held.  There also has to be a number to contact the brokerage.
  • Blind Ads. These are a variation of the failure to disclose… but the agent (not always a licensed agent, though) will post a REALLY vague ad and then just use anyone that calls as a lead and see what they might be able to sell them.  Often they don’t even know of a property that matches the ad they posted.

There are a few things that we (as real estate professionals) and you (as consumers) can do to turn the tide.  We need to police ourselves so that we can all have a better experience.

When I talk with agents that use these tactics, they always give the same responses… they are doing it to get a leg up on the competition.  So, we agents need to make a decision to NOT use these types of tactics.  As brokers, we can stop our agents from using them.  People post their ads over and over in order to keep them on page one.  Well… if you post YOUR ad there 6-20 times a day, and everyone else does that too, you HAVE to post it over and over because there are now 6-20 times more ads.

As consumers… and agents… flag the rule breakers.  When their ads go away, they don’t get ANY leg up.  At some point, CL will start banning IPs from posting and killing accounts of spammers.  Heck, maybe they already do.  But, when these folks start having big issues with their “Craigslist Domination Strategy” and they get nothing because of their behavior, they will change.

And we all get a better experience…

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Dear Builder… I’ve NEVER heard…

Monday, 25 April 2011 08:41
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Typical America 'Two-car Garage' (detached type)

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Dear Builder,

I’ve NEVER had a buyer client tell me that they thought the garage was too big.  Granted, most of my buyers are “car people”, so the deck is a bit stacked, but not all of them are.  In fact, I’ve had clients with little interest in cars… and they still wanted a garage that was just a little bigger.

You see, lots of people use their garages for a lot of different things.  Many of my clients like to build cars or weld something back together in their garage, but others just want to be able to fit two cars and their riding lawnmower.  Some people might want to move the cars out and build a nice piece of furniture.  Others need a place to store their camping equipment while they are back in civilization.

Of course, square footage is valuable, especially as margins are squeezed, but homes with more generous garages might also sell a bit quicker.  And that helps the margin, too.  Turning over inventory faster lowers carrying costs.  And while we’re at it, can we have a couple more outlets in the garage?  I’ve seen too many garages lately that only had one outlet (aside from the one for the garage door opener).  One.  Even my 40 year old house has four outlets…

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Photo Friday… Have You Tested Your Lifeboat?

Friday, 15 April 2011 08:12
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Last week for Spring Break, we took a quick cruise.  It was a wonderful time, and the kids were thrilled at all of the new experiences.  And there were a few things that I hadn’t noticed before.

One of them was the crew pulling lifeboats and testing them while we were in port in the Bahamas.  It was a simple thing, really.  The would drop a boat and motor it around for a while, then switch out for a new one.  The ship (from another line) parked next to us was doing the same thing.

Truthfully, it was somewhat comforting.  At the beginning of the cruise, we did the mandatory lifeboat drill.  After parading down from the stateroom, we lined up on the deck, under the lifeboats.  It was nice to know that the next link in the chain was tested regularly, and that the crew had some practice operating them.  The last thing any of us would want would be for the crew to have to read the instructions in order to launch the lifeboat…

And it got me thinking…

Have I tested MY lifeboat?  And the answer is that I don’t really have one.  I am up on the high wire without a net…  Obviously, I need to make some changes to MY life plan.

BTW, it was a gorgeous day and a wonderful cruise.  We were on the Disney Dream, and had a great time.

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