When an Owner overprices their Home – 5 things to consider

I work with a lot of home owners that are looking to put their property into rental or sale service. One common problem is that owners believe that their house should rent or sell for more than their competition and insist on placing their home on the market for higher than our recommended price.

What owner’s don’t understand is that by overpricing your home, you are creating a bigger issue for your home. Here are 5 things to consider when faced with the fact that your agent wants price your home lower than you would like:

1.   Potential buyers/renters won’t even see your property. Typically buyers & renters are looking for a specific price point. If you are not in their target range, then your home will not be found. If your home is in a higher price point than your competition, they will see the difference and pass over your home.

2.   Multiple price reductions can make you look desperate – inviting even more negotiation.

3.   The longer it is on the market, the “staler” it gets. Most sites share how long it has been since it was originally listed. Sometimes it is best to get a new listing, but this can be costly as most sites require that you start from scratch for all the advertising versus just renewing which costs less.

4.   If selling – your home may not even appraise. If you are lucky enough to find someone to purchase your home, you may be required to reduce it anyway if the home doesn’t appraise.

If renting – you will end up helping to rent your competitors home before yours and you will have to pay the additional mortgage payments while you wait for a renter to bite on your home. Typically 1 month’s holding cost will pay for the small difference in price that we recommend.

5.   It will cost you more money in the long run by overpricing your listing. When you take into account all of the factors above – length of time on the market, the additional negotiation from the buyer/rent for concessions, additional advertising costs that you may have to pay and the fact that you may be forced to reduce the price anyway – all translates to lost time and value.

Even knowing all of this, I am still amazed at the number of owners in this market that want to over price their homes. When I try and share this information with them up front, they state something like – “well let’s try my price and then we can always reduce it.” After weeks of no showings, they are upset and don’t know why their home isn’t selling/renting. Listen to the professionals – it will pay off!

5 Real Estate Investing Tips

We had a meeting with some experienced investor friends last week. These were some of the people that I know had a great business sense, but got caught in the downturn of the market. Some of them lost everything: all their rental portfolios as well as their personal homes. Yet when asked if they were OK and still interested in real estate investing, they stated without hesitation – YES!

They know that real estate investing is still the best way to make long term money and true wealth. They stated that they were just going to have to do things differently in the future.

Here are some investing tips that Mark and I want to share with those of you either interested in getting into rental real estate or for the pros that just need a little refresher.

1-      You make your money when you buy the property. If you purchase the property for too much money, it is almost impossible to recoup your investment.

2-     Know your exit strategy. What do you want to do with the property? Rent it? Sell it for a profit either through wholesale or retail? The answer to this question will then help you determine your numbers and your financing strategy.

3-     If you are going to sell for a profit – know your market! We are still in a buyer’s market. Your home needs to be priced aggressively so that you can compete with the other sellers in your market.

4-     If you are going to rent it out – know your market! Use a professional property management company to work with you to determine the popular rental areas and the best rental prices. Solid Source Property Management has a team of agents that helps investors find properties in great areas to make sure that the investment is solid. Also, we provide an incentive for management when we help with the purchase.

5-     If you are going to buy a foreclosure or short sale to sell, don’t over-rehab it because you want a project. I see this over and over again. The investor takes too much time and over improves will lose money every time. You can never recover from long buy, sell & hold costs, nor will improving a property beyond what the comps will support.

Criminal Background Checks on Tenants

Although it can be very lucrative, buying rental properties as real estate investments carries a number of risks. Not only do you have to worry about collecting rental payments, you also have to be concerned about damage to your rental properties, as well as the actions of your tenants toward other renters and guests. For these reasons, it is crucial that you conduct criminal background checks on applicants before allowing them to move into your rental units.

A criminal background check will let you know about any criminal convictions that a potential renter has incurred, including arson, battery, and other serious offenses. In addition, it will tell you about any minor criminal charges. Knowing this information will help you make educated choices regarding the applicants you select for your rental units.

One of the most important aspects of conducting criminal background checks is that it will alert you of sex offenders that may be seeking residence in one of your properties. While sex offenders are required to update their residences with governmental agencies in most states, they do not always do this. If you choose to rent a unit to a registered sex offender, you will be required to notify your state government within 30 days of completing the contract. If the sex offender has not complied with his or her notification requirements, he or she may end up in jail, which means that you will be unable to earn rent from a unit until you find suitable tenants.

Keep in mind that while you can refuse to rent a unit to a prospective tenant on the basis of a criminal conviction, you must be careful not to base the refusal on the applicant’s status as a protected class. This means that if you allow a convict to rent a unit, you cannot deny another similar person the right to rent a unit, regardless of that person’s race, creed, religion, sexual orientation, or gender. For this reason, it is best not to provide housing for anyone with a criminal record, to avoid the possibility of having a future applicant claim that you refused to rent a unit based on a protected characteristic.

Borrows who Walk Away from Mortgages May Face 7 Years of Credit Impact

Yesterday there was an announcement by Fannie Mae that they were going to extend the penalties for borrows who walk away from their loan obligations. In the announcement, you can read that if Fannie Mae determines that a borrower walked away when they had the ability to pay, they will be ineligible for Fannie Mae Loan for a period of 7 years. 

In addition, Fannie Mae is putting in place policies to monitor and then pursue borrows who are in default. This was stated in the announcement – “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.” 

So what option does an owner who needs to sell but can’t have? They are going to think long and hard about the ramifications of their decisions. If they can work with their mortgage holders through a loan modification, a short sale, or even deed-in-lieu, they may be able to reduce the time down to three years instead of seven.   

The question then becomes how does Fannie Mae determine who has the capacity to pay? It will be interesting to see how this plays out in the marketplace over the next couple of years. I would be interested to know your thoughts on this new development and how you think it will impact the current housing crises, so add a comment and I will publish them. 

To read the full announcement, you can go to Fannie Mae’s site.

Life Lessons from Lexie

I was watching my little dog Lexie this morning. You see Lexie is a Miniature Schnauzer and a very skilled huntress. She loves to hunt, she has a laser like focus that allows her to hone in on what she wants and then go after it full force. We could learn a lot from her abilities to focus & execute.

This morning, something in particular (not sure what exactly, probably a skink or maybe a chipmunk) had crawled in a hole under the sidewalk in the backyard. I had gone out to check on her and her brother Mason and heard a really strange sound. I found her with her snout all the way under the sidewalk and she was creating a blow horn noise to scare whatever it was out of hiding. I thought she was choking only to find that she was fine as her tail was just going a mile a minute in her pursuit of a conquest.

Summer is a busy time for property management companies. Most tenants relocate this time of year due to school being out. So we find ourselves very busy with move in and move out evaluations, scheduling contractors for work, coordinating HVAC repairs due to the hot weather, coordinating pool access for tenants, evaluating lawn maintenance, advising owners & tenants of potential issues in regards to lawn, and many more things as well. We are BUSY and at times feel a little crazy.

It is easy to get carried away with all the tasks and responsibilities, but here is what I learned this morning from my dog.

1. Have a laser focus. Don’t try to do too much all at one time & don’t allow another person or dog sway you from your goal. Lexie completely ignores me in her pursuit.
2. Enjoy each task as you are working on it.
3. Be persistent. If you run across a stumbling block, go to the other side of the sidewalk and try from another angle.
4. Know that there will be time for fun later.
5. Don’t allow others to tell you that you shouldn’t pursue your goals.

So live life all out and don’t forget to enjoy the process!

Craiglist Scammers – What You Need to Know

We got a call today from another web scammer. So we are sad to say that we don’t use Craiglist anymore. Over the past year, we have had more problems with scammers stealing our ads and reposting them at ridiculous prices in the hopes that some unsuspecting resident will turn over an application fee or even a deposit to hold the property. 

It has gotten to the point that we have to spend so much time policing our ads rather than finding people actually interested in renting our homes. It is such a shame that people take a good thing and use it destructively to the point that it ruins it for others. 

If you are not aware of how the scam works, we have explained it below. In addition, we are going to share tips for tenants who are looking for quality rentals and how to avoid the scams. 

THE SCAM: 

We post a legitimate advertisement on Craigslist. We make it nice with pictures, showing instructions, our brokerage information, and information about how to apply. 

The scammer takes our ad and copies the whole thing. They change the price and place their contact information in place of ours. Sometimes they add in additional incentives like all utilities included, second month free rent, etc. Typically there is only an e-mail address and no phone number. 

A prospective tenant finds the ad and is amazed at the great price that it is listed for and also the nice owners have decided to include all the utilities. How awesome is that? 

Since the tenant can’t call to find out more details, they e-mail the “owner” and the “owner responds. Great love to have you rent it, send me $XX.00 to apply for the property. Believe it or not there are people who because it is a great deal, will send the money. Of course they never hear from them again and the money is now gone. 

VARIATIONS: 

We have seen where scammers are also taking vacant homes/ bank foreclosures and doing a similar scam. 

RED FLAGS: 

Don’t Proceed if – 

• There is not a number to speak with someone.
• The number that they give you is out of the country.
• You can’t find out information about the person or company.
• They ask for money before you even view the property. 

MYTHS: 

There are a lot of people who share with you to never send money before you meet someone. At SSPM, we don’t meet our tenants at the property. We don’t meet tenants to collect applications/ application fees. We require money to be in the form of a money order or cashier’s check. We are a legitimate property management company. We have established these policies in order to maximize our time and resources. 

So, what can you do to make sure that you are dealing with a reputable firm? 

TIPS:

In today’s information age, there are plenty of ways to verify information: 

Search Craigslist for the address of the property to see if there are multiple ads. If there is one with a higher rent amount – it is a scam. 

Google the address of the property. Are there other ads for the same address for more money? Is there another contact listed? If so, you may want to contact those people and ask about the rental. 

Google the contact phone number of the advertiser. What comes up? If it is a legitimate business, you will see other ads or information about the company. 

In Georgia, there are real estate license laws that need to be followed. If a company manages more than 1 owner’s rentals, they need to be licensed by the real estate commission. Go to the site for the real estate commission and look for the firm – http://www.grec.state.ga.us/clsweb/company.aspx 

If a company, is there are professional website with information about the company and the company executives? 

Most experienced landlords have written applications process and guidelines. Ask for a copy of them before your apply. 

First and foremost, trust your instincts. If something sounds too good to be true, it probably is.

Protecting Your Blind Side in Property Management

I watched the movie – The Blind Side with Sandra Bullock about the touching story of the Tuohy Family and Michael Oher. If you have not seen the movie, I encourage you to do so. The short story line is about a wealthy family in Memphis helping a poor black 16 year old boy to become all that he was intended to be. It is based on a true story which makes it even better. 

In the movie there is a scene where Leigh Ann Tuohy (Michaels’ adoptive mother) is watching Michael learn to play football. You see even though Michael was over 6 feet and more than 300 pounds, no one had really taught him how to play football and he was against any type of violence since he saw that all his life. 

Michael has afraid to block and really didn’t understand how to play the game and do what the coach wanted him to do. Seeing that the coach wasn’t able to get through to Michael, Leigh Ann goes onto the field takes Michael aside and tells him – “protect him”, dragging the quarterback in front of Michael, “as if he were me. Don’t let anyone get near him or hurt him.” She then pulled another player in front of Michael and said, “this is Collins (Leigh Ann’s daughter) protect him as you would Collins.” 

The point Leigh Ann was making was to do well in the game, you had to protect those in your family, your team.  You protect the quaterback’s blind side which is where the name of the movie came from. 

So what does this have to do with real estate and property management? Glad you asked. As a property manager, we are your Michael Oher. We are there to protect you against things you don’t even know are coming. When I speak with an owner about what a property manager does, I share with the owner that we do all kinds of tasks – over 100 of them to take care of the day to day, but I also talk about protection. 

Protection comes into play in the form of insurance, HOA disclosures, legal documents, how to interact with the tenant, forms, etc. 

Sometimes that means protecting the owner from themselves. You see we know more about the possibilities and pitfalls of owning rental properties than most owners.  When we advise an owner about something, it is usually from the experience of a decade of experience. In addition to having managed hundreds of homes over a long period of time. 

So when you are considering a property management firm, ask them – Do you personally own rental properties & how many? Have you ever used a property management firm for any of your rentals? Are you a member of NARPM to gain insight from other property managers across the country so that you can learn from their experiences? At Solid Source Property Management, we can answer YES to all of these questions.

Atlanta Property Management Company Shares- What is Involved with Property Management?

So you’ve decided to start a real estate investing career by purchasing properties and renting them to tenants. You are now a Property Manager. If you’re new to investing, you might have assumed that you will take on all of the property management tasks involved with rentals yourself. However, it is important to understand how much time and effort it can take to manage rental properties, so you can make an informed decision about how you will handle your property management tasks.

First, you will be responsible for marketing your properties to locate tenants for your properties. While this might seem like an easy task, the challenge is to find tenants who are qualified to rent from you – that is, who have sufficient credit and incomes as well as have a positive rental history. By adequately screening tenants up front, you will help minimize the time you spend collecting rent and making repairs to units damaged by irresponsible renters.

In addition to finding tenants, you will be responsible for managing your renters. You will need to collect deposits and rental payments, respond to service requests, and deal with tenants who cause disruption in your properties. These disruptions can come in many forms, from domestic arguments, to all night parties, to HOA violations, not caring for the lawn, etc.

You will also need to manage repairs and upgrades to your rental properties. Your property management duties may include interior repairs, building upgrades, and maintenance of lawns and landscaping, among many others.

It is easy for real estate investors to spend the majority of their time on property management tasks, rather than on activities that are direct money makers. You might find that hiring a property management company to handle these tasks will allow you to be more productive, and to make more money with your real estate investing ventures. When you are looking for investment properties, it is a good idea to consult with an experienced REALTOR who owns and manages their own rental properties. Then that can help you navigate the process of either assisting you or can provide assistance in locating and hiring a reputable property management company.

Atlanta Property Management Company Discusses What Happens When A Landlord Forecloses

In today’s market, we are seeing more and more owners go into default on their mortgage. This leaves a lot of unanswered questions for tenants who are not sure how to proceed. Anne Lackey, Broker of Solid Source Property Managers shares some things to know if you find out your landlord has gone into foreclosure.

Atlanta Property Manager Discusses Why Solid Source Property Management Will Only Market Vacant Homes

As a professional property manager, I get this question a lot: Can you market my property while I am still living in the property? To which I reply “it doesn’t work very well” for several reasons. 

Here are the things to consider. 

Most tenants are not planners. I can’t tell you how many times we move people days after they apply for a property. They want immediate move in times. Rarely do we have a tenant who looks at a property and is able to wait more than 2 weeks. Most owners don’t want to move that fast. So that actually reduces our chances of being able to place tenants. So we end up wasting our marketing dollars and then the owner isn’t happy because the tenant won’t work on their time schedule. 

Most tenants in Atlanta want to view a property on their own time schedule and have the freedom to visit without an agent. We accommodate them with a lockbox and have a system in place for them to self show. If an owner has personal property in the home, we can only show via an agent. While there are more agents now showing rental property, it is because we are in a down market. Once the market turns, agents won’t want to spend their time showing rentals when they can be working with buyers for commissions that pay 10 times the amount of commission. This significantly reduces the number of people who can see the property and therefore, significantly reduces the chances that it will be rented. 

There isn’t enough time to make repairs in between the owner’s vacating the property and when a tenant needs to move in. While most owners believe that their homes are rent ready, inevitably, there are items that need to be done prior to occupancy. Cleaning and carpet cleaning are among the typical, but it might also require some touch up paint and other minor repairs. A tenant is not going to overlook minor items. They have high expectations especially in a down market. 

So when you add all of those factors together, we have made the decision that it is best for everyone to only market vacant properties. This will allow us to quickly find a suitable tenant, protect the interests of the owner, all the while being able to provide the tenant with a guaranteed date of occupancy.