Good morning, Everyone! Here is your weekly 5 Minute Friday, highlighting a couple of the questions or issues posed to me this week. From Terri: Does offering a house fully furnished change how much I can charge for rent? My Response: Terri–Thanks for the question. The short answer is Yes, it can and will change how much you can charge for rent…..or rather, a better answer is it can and will change how much you will earn in rental revenue. Here’s some things to consider when choosing to offer a property fully furnished or completely unfurnished: What is the actual market for furnished rentals in your area? In most market segments across the country, especially in SFR’s (single family residences), furnished rental demand is a small sliver of the total demand. As in less than 10%. So, if you have a 4 bedroom home, if you offer it only fully […]
The Backstory to Now…. Clients who hire me to coach them before and during their first investment property transaction ask how and when and where all the money came from Wall Street to buy so many thousands of rental homes. Answering them takes patience and detailed explanations as this is the first time in history such a platform of investment has occurred on such a massive scale. This WSJ article does a solid job of discussing the backstory, the history, and leads with some hints about where the industry of property leasing is headed. After all, big investors have plopped $40,000,000,000 into buying 200,000 houses as rentals. Some questions for you to ponder as you read the article: As a small, private investor: How can you compete with these powerhouse-landlords on pricing, marketing, and profit margins? As a property manager: What lessons can you take away from the article on […]
The Indiana General Assembly finally passed clarifying language on occupancy standards. If you’ve had to battle this issue with prospective tenants applying for your property, crack open an adult libation to celebrate. This new language offers you better protection from Fair Housing lawsuits alleging discrimination due to disparate impact against families with children. Beginning on July 1, 2017 the below state-wide occupancy standard will go into effect. Sec. 7. (a) The residential landlord-tenant statute (as defined in IC 32-31-2.9-2) does not prohibit an owner or landlord from refusing to rent a rental unit on the basis of a reasonable occupancy standard. (b) For purposes of this section, an occupancy standard is presumed reasonable if: (1) it permits two (2) individuals per bedroom; and (2) the owner or landlord: 9100 Keystone Crossing, Ste 725, Indianapolis, IN 46240 (A) does not include infants less than one (1) year of age in the […]
A number of years ago, I went to the Indy 1500 Gun Show with a buddy. He was in the market for a specific rifle; I was looking to buy a .40 caliber pistol. We wandered for two hours among the booths and tables and came upon a re-seller dealer from northern Indiana who was selling almost exclusively Glocks. And they were priced very aggressively. (Side note: If you’ve never been to a gun show, it’s truly one of the bucket experiences to complete, even if you’re not a firearms enthusiast. You have thousands of people walking around buying and selling and trading everything from firearms to ammunition to hunting and camping and survival gear to even jewelry. And every single person is on their best behavior saying,”pardon me” or “I’m sorry” or “excuse me” when they accidentally bump into you. Very polite and well-mannered people.) Anyways, I find a […]
52 out of 100 largest U.S. cities were populated by more renters than homeowners in 2015, according to U.S. Census Bureau data. Think this may, just may, have serious financial implications for landlords, investors, and other stakeholders in these communities and beyond? Uhhhh, Yup. Here’s the full article published 3/23/17 about this trend: http://m.nreionline.com/multifamily/renters-now-rule-half-us-cities?NL=NREI-21&Issue=NREI-21_20170324_NREI-21_750&sfvc4enews=42&cl=article_4&utm_rid=CPG09000005928948&utm_campaign=8879&utm_medium=email&elq2=2497704fe62a40cbac47d1c8bd97e3b9 So, what’s the takeaway for you? We are in the midst of another mega demographic shift, but this time from multiple age groups. Both baby boomers and Millennials this time around are contributing to this shift. The rental market should stay extremely strong through 2030. That’s another 13 year bull market run for landlords. Home inventories will remain tight for renters to buy. This means your renters who will soon become home buyers, will certainly be looking for an option to do an early lease termination. Smart landlords will have their leases updated to offer this […]
The title of today’s post is derived from the famous scene in the movie, The Godfather. It takes place when Michael Corleone rebukes his brother about an impending action the family is about to take to avenge the shooting of their father, “It’s not personal, it’s just business.” If it’s been awhile since you’ve enjoyed the movie, here’s a link to the clip…The Godfather. If you’ve been a landlord for more than one week, you know human beings, at times, can be messy. Messy in their housekeeping. Messy in their organizational ability to pay the rent on time and plan their household expenditures. And finally, messy emotionally as they juggle the demands placed on them by work, family, finances, and societal expectations. That is part of the human condition. It’s best to accept these shortcomings and embrace them for tremendous success in your rental properties. Or don’t accept these shortcomings and get […]
If you own or are considering owning high end apartments as rental properties, do yourself a favor and check out this article from the WSJ. When a reporter uses vocabulary including “rough conditions” and “slash rents” and “deep concessions” and “glut of supply” ALL in the same sentence, that’s a not-so-subtle hint of the valuable information in the news article. Luxury Apartment Boom Looks Set to Fizzle in 2017 – WSJ Certainly, every market segment from first-time renters to move-up renters to empty-nesters has an ebb and flow to it. It’s capitalism and the forces Adam Smith described centuries ago. What you do with this information is the critical point and take away. Depending on your current interests, this could also be a buying opportunity for some savvy investors to pick up units from distressed landlords. As always, here’s to your pursuit of Financial Freedom!
Why do sooooo many investors lose money on real estate? ….Because They Buy: The Wrong Real Estate At the Wrong Time For the Wrong Reasons In the Wrong Way From the Wrong People In the Wrong Location Using the Wrong money/financing The investors who have epic failures typically combine more than one of these reasons. Don’t be an epic failure. Be an Epic Success by getting educated and being disciplined.
Last week, we started discussing the early work to position yourself strongly for a tenant renewal scenario. (http://danbaldini.com/2016/10/24/treats-instead-of-tricks/) This week, let’s conclude the article. 1. The Approach Let’s assume you have one of two options for the renewal scenario: You plan on keeping the rent the same as in prior years or you plan on asking for a rental rate increase. Same rent scenario: This one is easier, but be prepared for the tenant to ask for a possible rent reduction or other concessions. Their argument could be as basic as,”Hey–you don’t have to search for a new tenant, so how about knocking $25 off our rent for the next year?” or “Hey–can you replace the carpet and we’ll agree to renew?” Whatever their request is….be prepared to know your numbers (i.e. profit margin) in order to know if you can do it or not. In addition, if the request […]
Landlords and Investors make money the same way airlines, hotels, and entertainment shows do–they keep butts in seats for as long as possible. For real estate, this means maximizing Days of Occupancy and correspondingly minimizing Vacancy Days. So this Fall let’s review some of the Best Practices to give your Tenants Treats instead of Tricks for their lease situation. 1. Advance Communication The saying, “Misery is the mismatch of expectations between two people”, holds true in rentals. If you are communicating with the tenants at the time of their initial lease signing that you’ll be recontacting them to begin discussing the possibility of renewing their lease 60-90 days before the lease ends, you’ve planted the seed early on that your not the kind of landlord who waits until the last minute for these conversations. Good for you. 2. Review of the Market Conditions Before you pick up that phone or begin […]