August 24, 2015
Today’s New York Stock Exchange activity was historical.
We may be in for continued volatility for the near term in the equity markets, which reminds me of how this relates to your rental properties…
When I speak with new potential clients, the conversation usually goes something like this….
Property Owner: “I’d like to rent out my house, but I need to get at least $1500 a month because we bought it at the height of the market in 2008 and owe too much on the mortgage still to sell it. Can we get that amount for the house?”
Me: “Well, according to the market comps and the demand for your house, I don’t think we can get anything higher than $1300 a month.”
Property Owner: “But you don’t understand. I NEED $1500 a month in rent.”
Me: “I certainly appreciate your needing to maximize the revenue from your property. Every landlord wants this. However, your house is like a share of Apple stock.”
Property Owner:”Huh? You lost me…”
Me: “Let’s say you bought 100 shares of Apple stock on July 16 when it was $128.57 a share. And you found out you needed to sell it all today to pay for your kids braces, or to buy a new car, whatever. Apple’s price today is $102 a share. So, you’d have a loss on the sale of $26 a share to cash in the stock today.”
“Your house rent value is the same as the stock market. Your cost basis is irrelevant to the market value when you want to rent or sell. Nobody cares what you need to net, they only care that it’s worth what they’re paying for it. Nobody is going to pay you a premium for Apple stock just cause you need that amount per share.”
“So, you have a decision to make….”
It’s a tough conversation to have with owners of rental properties. But it is an honest conversation.
Dan Baldini is the Founder of Polaris Real Estate & Polaris Property Management, LLC and has been an Adjunct Professor in the College of Business Finance Department at Butler University in Indianapolis where he taught Real Estate Investing.
Dan focuses his practice on the residential real estate markets including Indianapolis, Carmel, Zionsville, Fishers and other surrounding areas. Dan continually seeks out new resources for Team training and education in order to keep all the Team members skills on the leading edge of real estate best practices. He is an active real estate investor himself, owning and managing a portfolio of investment properties in the Indianapolis markets.
A resident of the Northside area since 1979, Dan has extensive intimate knowledge and experience of the market forces that dominate the Zionsville, Carmel, Fishers, and Indianapolis real estate markets. He has been active in real estate since 1996 with a specific focus on North side properties. Dan is an active networker in his local communities as well as with top agents nationwide