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The Value of a Real Estate Agent – Seller Side

You’ve made your decision. You’re going to sell your home. Now what?

Well, you can list it yourself as a For Sale By Owner (FSBO). You can “get an offer on your home with the press of a button” –OpenDoor. There are discount brokerages out there such as RedFin. Or, you can go the traditional route of listing your home with a real estate agent and pay the going rate of around 6% (3% to listing and 3% to buyer’s agent). There are benefits and reasons to choose each. Here, I will discuss the value of using a traditional real estate agent.

happy couple in front of their new home

Local Expert

Location, location, location. Ultimately, the person you use to sell your house should have an intimate knowledge of the locality.  What streets are good to live on and not. What is an up and coming area vs deteriorating. It is relatively easy to give an individual an immediate price estimate of their home. What is difficult is to know the local political landscape. Example: Someone may want to buy a small 1-bedroom condo and turn it into a Short-term rental. In Fort Collins, it better be in commercial zoning, otherwise, STR’s in residential areas are illegal. Investors need to work with individuals who know these things.

It is important to work with a real estate agent who can direct you to developing areas and areas of growth or stability.  Also if you’re looking for family friendly neighborhoods vs. college rental areas. It will be up to you if you want to live next to a perpetual rental with 5 college boys living there, but hopefully you’re working with someone who could inform you of the likelihood.

There is a subdivision in Fort Collins that is the most affordable subdivision. Would I ever buy there? NO! Because there is manufactured homes, next to homes on a slab, next to tree houses, next to space ships. Not really, but kind of. Looking online you wouldn’t know that. You need someone with a focused local knowledge.

Marketing Expert

The Multiple Listing Service or MLS. You must be a realtor to be on it, however sites such as Zillow and Trulia are pretty good too. They just don’t provide you with ALL the information. That is step “zero”. Placing your property on the MLS should be a given.

In addition to the MLS, your real estate agent should present to you how they will get your home in front of as many people as possible and sell your home for the best price possible. Will that include open houses? Mailers? Social Media? Maybe it will include all of them or just a couple of them. Be open to listen to new and creative marketing techniques as well. Each home and different price points will all need a marketing plan specialized for it.

Financial Fiduciary

Although a home should not be considered an investment. It is a place where people are able to invest in their future by providing themselves secure housing. The biggest financial decision most of us will ever make is buying a home. It is important that you use an expert to help you make a decision on the purchase as well as an expert to help you when you decide to sell.

Just because you think your home is worth 2X doesn’t mean the market is willing to pay that. When a property hits the MLS it hits the hot sheets. Realtors send new listings to their buyers. Firms may have property tour days, where they go and visit new listings. When your property hits the market for the first time, it is your BEST opportunity to sell. It better be priced right.

Don’t overestimate your homes value and cost yourself thousands. If there are things your agent is missing such as a water softener or smart home features that could increase the value if marketed correctly, show them. Otherwise, feel free to get aggressive, sure, but if your property begins to sit on the market, your net figure may begin to suffer.

Your real estate agent is your financial fiduciary. They are in it for your best interest.

Emotional Crutch

The home selling process can and is very emotional for home owners. You’ve spent 5, 10 or 20 years in this home. Your children grew up in this home. You need someone who can understand that and empathize with that while also maintaining their professional mission.

It is important that you are able to call/text your agent with questions or concerns and they help you through them. Your agent should be in constant communication with you. They will let you know how showings went, what the feedback was, how many people came through the open house and present offers and provide guidance.

Selling a home can be scary. Having someone who can empathize, understand that and stay focused on the mission can be priceless.

Your Ally in War

All deals that are win-win are the best deals. But lets not be stupid and suggest that each person isn’t fighting for the best financial outcome.  As mentioned in the buyer’s side post, there are three areas of negotiation. The price, the inspection objection and the appraisal are these three areas. These areas each need to be discussed and responded to with strategy. You are the general of the army and your real estate agent is your sergeant. Give him/her the orders, but be willing to listen to their advisement as well.

The landscape of buying and selling a home are changing quickly. Discount brokerages, Zillow, OpenDoor and others are all keying in on the process. The variability of each deal is the X-factor. The above mentioned values of a traditional real estate agent can be a huge benefit to you and your bottom dollar when selling.

Determine your situation, understand your financial needs and make the decision that is best for you.

The Value of a Real Estate Agent – Buyer Side

Besides becoming friends and spending a significant amount of time together, what is the value of your real estate agent?

There is a significant amount of money he/she is going to be taking home after helping you find your new home, so let’s break down what value they bring to the table.

You’ve already began searching for a new home on Zillow and may already be pre-qualified. Now you just have to decide whom to choose out of your 20 friends who are real estate agents. Here are some things to consider when deciding on a real estate agent:

Understand Your Goals

Let’s start with the basics. Make sure she/he knows what type of home you desire. This is the time to be very specific about what you want as well as what you’re willing to sacrifice if the right home comes up. For example: location, school district, size, number of bedrooms and bathrooms, privacy fence etc.  Set expectations up front with your agent so that they know what type of home to send you and locations you are okay with.  Trust their knowledge of the market and if they send you a red herring every now and again based off your wants, who knows, that may become your new home.

In addition to the specifications of the home, what is your financial position and budget for purchasing a home? Just because you’re approved for a loan amount of $400,000 doesn’t mean that you should buy at that amount. You should expect ancillary expenses on top of debt services while owning a home. These expenses are lawn and sprinkler service, HVAC servicing, exterior painting, appliance replacement, plumbing, electric and many other expenses.

Owning a home is an amazing opportunity, but it can be extremely financially burdensome. Have a real talk and be vulnerable in your discussion about your comfort levels. If you are house rich and unable to afford general upkeep and maintenance of your home, it’s resale value will suffer.  It is important that your agent discusses with you these expenses and together come to a purchase price that makes sense.

Network

There have been more times than not, that the realtor on the other side of the table knew who I was, knew that when I said something they could take it to the bank. It helped get us the deal. The more connected your realtor is, the better chance you have to have a successful purchasing experience.  Your realtor to realtor connections can assist you in possibly getting first eyes on a property that hasn’t yet hit the market or a “pocket listing”.

From providing legitimate inspector options to coming in the 11th hour to help you find better financing, the real estate agent’s network will be an asset for you.

Creativity

I talked with a gentleman today who was just starting the home search process. He is at a price point where there are many hungry buyers and not very many sellers. It is time to have a sit down with your agent and get creative.

It may be time to look at withdrawn or expired listings, send out mailers, knock on doors or hang door hangers. As a buyer this creative route requires time and effort; therefore it would be fair if you’re asked to sign an exclusive buyers agreement. The work and effort to get aggressive and go for the house you want can be well worth it. Don’t sit back and wait for the house to come on the market…go get it.

Negotiation Ability

In our present market, it is not practical to expect a significant discount on the listing price. Currently, homes are fetching 99.7% of list price, so a .3% discount is about as good as they’re coming right now. Although, there are opportunities to get aggressive with properties that have sat on the market for longer than 30 days. Those are GREAT houses to go after with wiggle room on price.

There are typically 3 main negotiation parts of buying a home and your real estate agent is your ally:

The purchase price

As stated above, this isn’t any wiggle room for negotiations in today’s market unless you are willing to look at homes that have been on the market for a while.

Inspection Objection

If you’re buying an existing build, it is important to have an inspection done on the property. Homeowners at times, neglect their home but can “make er’ look all nice and purdy” before putting it onto the market, essentially hiding all of the damage. That being said, it’s the mechanical, electrical, plumbing, exterior, and foundation that are major aspects and all should be inspected.

If there are major items of concern or that need to be addressed, this is where your agent will have to come in and negotiate a resolution on your behalf. This could be worth 1,000’s of dollars. Otherwise, you may be buying a home that upon move in will be a drain on your wallet.

The Appraisal

Crazy offers come in and crazy offers get accepted. That doesn’t mean that the home will appraise to that amount. If the home doesn’t appraise, there are typically two options. Are you going to bring more cash to closing or is the seller going to decrease the purchase price? This should be negotiated.

Experience

Why hasn’t Zillow automated the home buying process? Basically, the variability of each sale is the reason. Zillow will figure this out sooner than later. What does this mean to you? Although there is no way an agent has seen it all, hopefully she/he has seen enough to use critical thinking and deductive reasoning to help resolve any problem/situation that may arise throughout the process.  Your real estate agent should have a good reputation within the industry and leverage that to your benefit.

Buying and selling homes is most people’s biggest financial decision. You should use an individual who understands the magnitude of the financial decision being made. These are the values an agent should bring to the table if you are to work with her or him.

My $4,000 Mistake

Owner operators of investment properties at times get emotional about their tenants and properties. Recently, I may have made a $4,000 mistake because I like a tenant.

We recently bought a duplex where the rents were about 40% under market. The prior landlord did an amazing job operating the property, but fell in love with his tenants and kept rents at the same level for many years. The first of the two leases is up for renewal and I too got a little emotional about the tenant. Here’s what I did:

The Offer

Dear Tenant, I really appreciate you and how well you maintain the unit. Thank you for all of your years renting. You are currently about $500 under market rent and I would like to give you the opportunity to renew the lease at a rate that is still significantly lower than market. The offer is to move from $800/Month to $1,000/Month. If you choose not to, I completely understand, as it is a significant financial leap. If you choose not to renew, we will be renovating the interior and marketing the property at $1,300/Month.

The Renewal

If this tenant chooses to renew, I know what I am getting.  A good tenant, who pays on time and takes care of the unit. I won’t have any out of pocket expenses and will have no vacancy.

Increased rent: $2,400/Year or a 25% increase – Not Bad!
Zero Vacancy: $0 Cost
No Turnover Expense: $0 Cost

This option is appealing to me because I get to provide good housing to a good tenant. No headache (which is worth significant $$), no turnover cost and no vacancy. The financials look good.

The Vacate – Update – Re-Rent

If the tenant chooses to vacate, I will drop about $10,000 to $12,500 on the updating of this unit. It will take about 2-4 weeks and then another 2-4 weeks to show, lease and have a tenant move in.

Increased Rent: $6,000/Year or a 62.5% increase
Vacancy: 2 Months: $1,600
Renovation: $12,500
Total Cost of Vacate and Update: $14,100

The Mistake

Here is where I messed up. I got emotional about the unit. “Hey! I can get a 25% increase and keep the same tenant?! Heck ya!” The opportunity cost though of NOT updating and re-renting is significant! Where can you invest $14,100 and get a 25% return? ($6,000 Updated Increase minus $2,400 Renewal Increase over the $14,100 cost). The answer is damn near nowhere. A 25% return on $14,100?! How could I even thought a minor renewal was the right move. It wasn’t.

I may have gotten lucky though, as the current tenant has until October 25th to let me know if they plan on renewing at the offered amount, and have not signed yet. I don’t feel it fair or appropriate to rescind the offer at this point because why put salt on a open wound? THAT could be cause for a direct to Google/Facebook reputation slaughter and THAT could be worth thousands as well.

So currently, I am waiting and hoping that my mistake doesn’t come back to haunt me. That shows the importance of keeping your goals in your immediate vision and your business operating as a business and not as a emotional investment.

3 Reasons to Post Walk Units

Post walking units prior to tenant move in can save you thousands. Walking the unit after contractors have been in but before the new tenants move in, is essential. You must verify the work that was scheduled was done and completed.

Just this past week I had a unit that turned over, a single family, and post walking the unit saved me at least $2,000. On top of financial savings, I also saved myself the stress of a pissed off new tenant. When I walked into the unit, I immediately knew it wasn’t ready. It had been worked on for the entire week with new paint, flooring, maintenance, yard work and cleaning. The oven range I had ordered had not been installed, the floor seams were extremely visible and the yard work was in progress. The tenant was moving in in 3 hours.

I called the flooring company, after sending them pictures, who in turn took it upon themselves to contact the new tenants to schedule a new floor install.  The appliance company had an internal miscommunication and would again, call the new tenants to schedule a range install the following Monday. At this point I had to call the new tenants and apologize for the work that would still occur upon move-in. Fortunately, both were exciting things to the new tenant (a new oven range and new flooring), so they didn’t put up too big of a fuss.

The flooring has been replaced and the range installed. The tenants are happy and all work will last.

Here are 3 reasons to post walk the unit before a tenant moves in:

Verify Contractor Work

There are a few main categories of contractor work when turning a unit: flooring (steam clean or new flooring), painting, general maintenance, cleaning and landscaping. Some turns require just a couple contractors, and some require them all. Each need to be checked after the work was “complete” to verify the work was done and up to your standard. Typically, so long as you are working with trusted vendors, there is no problem. Every once in a while though, the contractor has subs working under them and they mess up.  Or the contractor begins to get lazy if they feel you aren’t checking their work. However it happens, it sometimes happens. The work needs to be verified. When the owner pays for the work, you can, with a clean conscience verify the standard of the work. Post walking units will do this for you.

Tenant Communication

As with this turn, the work was not complete and not to my standard. Without post walking units prior to moving in, I would not have known this. A result is I would have received a very upset phone call/text. “Why is the stove broke and in shambles?!” “The carpet is falling apart and we have only been here a week!” I can confidently say that these phone calls (at least for these two items) will not happen. Hopefully I have built some goodwill with the tenant. They should know I care about the property and there quite enjoyment of the home.

Post Turn/Pre Move In Pictures

You’ve painted the place, you replaced the flooring and you paid $600 for a clean. Document, document, document. Of course you will have invoices that the flooring was replaced, but we live in the 21st century and owners like pictures. Take pictures of your work. Before and after pictures are great. I just paid $5,000 in make ready expenses and know the flooring was replaced, but why? There was a stain 3 feet wide and holes in the wall and dust thicker than a book, show me.

Post walking units is not just good business practice, it is good mental health practice. Eliminate the unkowns. Without post walking units, you just don’t know what the tenants are moving into and what headaches are soon to pop up. As stated above, post walking units will help verify contractors work, tenant communications and provide you evidence and support of work done. Post walking is as important if not more important than pre walking units.

How NOT to End a Professional Relationship

All I can say right now, is thank goodness it is fall and almost winter. Why? Well because a couple of weeks ago I had our “professional” landscaping company come into my office and tell me they have shut doors and are not doing any more work, for anyone.

“What do you mean, ‘no work’? You’ve stopped marketing and taking on new business?”

“No, we are no longer providing service to anyone. No mowing, no sprinkler repairs, nothing.”

This was a conversation had after they just promised that all of our sprinkler issues were going to be resolved.  That our bush trimming was going to be happening that week and all was on the up and up. I guess not.

There are never any fun ways to end a professional relationship. Here are a few ideas on how to possibly get through that difficult time.

Exit Strategy words under a magnifying glass with terms separation, ending, dissolution, truce, escape, moving on, withdrawal, leaving and termination

Don’t Let Rumors Start

Whether you are planning on selling a business, shutting down a business or bringing on a new partner/account, keep it private until it happens.  Speculations from the masses only leads to misinformation and anxiety. Throughout the entire summer we knew the company was on rough waters. Honestly, I should have explored alternative options at that point (point remembered). I wanted to give the trust and respect I would want, in return for completion of the contract. Oops.

Even if this company did not shut doors this year, we already made a decision to move on next year. We didn’t want to be a part of drama. So keep your dirty secrets private until they are final and a decision has been solidified.

Give Ample Notice

Unless you are planning on leaving the state, you MUST end professional relationships well. Although you may be done with one business venture, you still have to work don’t you? Well, reputation in business is key. Don’t burn bridges by quitting on a partner/contract/relationship without providing the client with the opportunity to get their ducks in a row. You don’t have to promise the world, your business is closing after all, I’m guessing there is limited abilities to perform anyways.

Problem solve the best you can. Even suggesting “we are closing up shop in a week, here are 2 companies we have contacted that would be willing to pick up our contract and finish the job. We will be here to help the transition, but cannot commit more than 2 weeks to help that as we’ve accepted jobs elsewhere.” I don’t think that is too much to ask for and in reality you will garner so much respect and trust going forward. You already created a problem, now help try and solve it.

Leave the Emotion at the Door – Be Professional

I wanted to to start name calling, telling him how unprofessional he was being and rattle on. I didn’t. Ultimately all I was being told was how sorry he was, how this isn’t easy on anyone ‘blah, blah, blah’.  I don’t want to hear a sob story or how sorry you are. Words mean nothing to me at this point. All I want to see is your actions. All anyone wants to see is action. As stated above, tell me how sorry you are by helping me transition to someone else. I am not going to all of a sudden give a crying shoulder because this was hard on him. You need to take the responsibility of finishing this relationship as professional as you started it, by following through with your promises.

Be Transparent

If there is money still owed or work that is half finished, be upfront and honest. Don’t send an invoice to a now, former client, two weeks after telling the company to “f” off.  Is your company in the middle of a project that was time sensitive? Inform the client where you were, how far along and what yet needs to be done. Considering the atmosphere in the room, it may be best to have a letter drawn up outlining these and any other important details for the client to have the best chance of succeeding moving forward.

Closing a business or ending a relationship is never the intent when starting. It happens. Business revenue dries up, relationships crumble, life desires change.  It is of utmost importance, if you care about your professional reputation and image to end these situations the best way possible.

Rental Fraud in Real Estate

1 in 3 people who have been impacted by fraud in renting has resulted in more than $1,000 in losses.

I read an article in the Wall Street Journal that suggested that “More than two-thirds of teens say they would rather communicate with their friends online than in person”.  Watching girls at a baseball game, this is obvious, yikes.  Property management and real estate are going through technology transformations. Online applications, performing primary searches online, paying rent through Venmo and team communication through Slack are just a few of the major technology uses. It makes life so easy signing documents without having to meet in person. Wouldn’t you rather see your account balance go to “$0.00” immediately than hope your check doesn’t get lost in the mail?

All of this technology stuff is hard for me to see as anything other than the second coming of Jesus.  So just as I tell you how much I love technology, I need to tell you to STOP!!! For at least 5 minutes and read this blog post.

Online Fraud

Online fraud grows with the growth of online usage. Over 5 million renters effected by fraud in some way:

 

  • In a new study, Apartment List found that an estimated 5.2 million U.S. renters have lost money due to a rental scam. In addition, 43.1 percent of surveyed renters, have encountered scam listings or contacted fraudulent properties while apartment hunting.

 

  • The issue is especially prominent among millennials, who although generally tend to be more tech-savvy than their older counterparts, often lack the necessary skills to recognize fraudulent postings.

 

  • Renters aged 18 to 29 years, are 42 percent are more likely to fall victim to fraud, probably due to a lack of renting experience or moving quite far from home and not being able to visit their new places before the move-in date.

 

This results in an estimated 88.3 percent of renters with negative renting experiences, changing how they search for their future home.

1 in 3 impacted lost more than $1,000 due to fraud:

What Can You Do?

Awareness

Understand that not everyone out there is good. You need to know that just because someone promises you a “deal of a century”, it might be false. If you and the listing representative e-mail back and forth, follow-up with a phone call.  If it is a private property owner/manager, verify information on the county records or google the person/manager in question.  The ability to research online has never been easier. Use it.

Request Seeing The Property

Site unseen is not a good practice. Unless you are using FaceTime for a showing, never sign a lease site unseen. Routing you through an application process and online payment schemes won’t be easy if the property in question doesn’t actually exist.

Use the Triangle

“This is an A to B conversation, C your way out.” Actually C, make your way back and see if I am being an idiot. When you are conducting business with just one other person, it is easy to get scammed. Using Google is a great start to verify, but asking an expert is never a bad idea either. Call a local property manager and check to see if what you’re doing sounds legitimate.

The Don’ts

  • Don’t give your credit card over the phone
  • Don’t take anyone at their word
  • Don’t give any personal information through e-mail or texts
  • Don’t open any e-mail attachments without knowing exactly what they are

Rental fraud will continue to increase as online usage increases. The fraudsters are getting more and more creative. It always seems like we are on the responsive side of the defense and not proactive. We have Lifelock to help stop identity theft before it gets too bad. We have information that we share to help inform the public. It is ultimately up to you to make sure you do everything you can to make sure your financials and identity are safe. Online fraud is scary, but if you go into it with your eyes wide open, you can possibly prevent it.

Property Management and The Power of Technology

If you’ve had a sewer back up or any type of flooding in a house, you absolutely know how crucial time is. Seconds can save you thousands.  Water is fast moving and extremely damaging. Technology and my software system recently saved me thousands and weeks worth of remediation.

The other week I was at home watching my 3 month old daughter as my wife had a meeting she needed to attend. I was a little late getting home at 4:30 and my wife left ten minutes later at 4:40. My daughter and I started as we usually do, dancing, singing, me trying my best to make her smile and laugh. It was 5:15PM and I got the call.

The Call

“I have water coming up out of my utility closet.” -Tenant Unit #1

Now when you have water coming up the toilet, or shower, it could just mean those specific lines are clogged. Utility closet drains should not have water coming out of them. That is a main line clog. You don’t mess with main line clogs, ESPECIALLY in multifamily. In a single family, you have a single family that would be using the main line for all of your used water to get out and into the city main. In a multifamily, you’ve got multiple families using that same line. That means you could have multiple people showering, pooping, washing their dishes or washing their clothes. All of that water has to have a place to drain and if the main drain has a clog, it will make its way backwards.

Immediately I called the neighboring tenant to see if they had any water issue, but no answer. I signed into my property management software system and was able to “text property”, meaning I was sending 8 texts to all tenants.

The Text

“Everyone stop using water. There may be a main line clog. Call XXX-XXX-XXX if you have water coming out of your drain.”

Looking at my daughter, I yelled “Lets go! It is due time you get introduced into the world of Property Management.”

I packed her diaper bag, got some milk and bottles ready, as this could be a long night, strapped her in her car seat and we were off to the races to the property. I had called my wife, who ON THE BALL, knew I wouldn’t call her if it wasn’t an emergency, called me right back.

“We’ve got an emergency and I’ve got little girl. Can you meet me at the property?”

My wife actually beat me to the property, where we handed off our daughter and I began investigating the situation.

When I viewed the situation, a puddle the size of a large pizza was in both utility closets. Everyone received the text and had stopped using their water. Thank goodness!!!

The Situation Resolved

The night was long, because with a main line clog, you want to ensure the line gets cleared. Eventually, the rooter cleared the line (tree roots) and was able to get all water flowing in the right direction.

Water back ups usually result in water extraction, dehumidifiers and possible removal of drywall and carpet. It will require the current residents to find alternative living arrangements.  After all of the removal, you then begin making all of the necessary repairs and remediation. Water back ups become expensive FAST.

The Technology

It was amazing to hear from all four units that they had received my text and immediately stopped using their water. That quick text to the four units and 8 tenants saved me thousands of dollars in repairs.

The day immediately following, I took the opportunity to thank my tenants through the same software technology. I thanked them for their patience to build tenant relations, and I also reminded them about the importance of renters insurance.

My insurance representative Seth Gilbert, through Country Financial stated that “The cost (of renters insurance) is roughly $10-$20 per month depending on the coverage.  For that minimal monthly cost you are potentially saving thousands in losses.” I had a tenant respond that, yes indeed they were seeking more coverage.

Technologies ROI

My property management software costs me around $4,000 a year, in one night, in my mind, had a 100% ROI.

If you can garner the power of technology to its fullest, it can absolutely be a lifesaver financially and emotionally. Technology is property management is just scratching the surface. It will be fun to see what and where it goes from here.

The Greeley Flip

The MLS doesn’t supply many deals, but sometimes you get lucky. We closed on the Greeley flip on June 13, 2018 for a purchase price of $260,000. Below, is the time frame and costs assocaiated with this flip.  I don’t do very many flips, but when I come across something that make sense I pull the trigger. I felt the “after repair value” (ARV) was $330,000 and expected to put about $15,000 into the deal. It was actually a pretty “clean” property, in that it did not have a major layout flaw or structural/major mechanical issues. New carpet, new paint, a major clean and throw her back on the market. Here is the actual numbers and timelines for those who have not yet done a flip, or are so in love with HGTV’s glamorization of house flipping.

Timeline

5/25/2018 Original Offer$245,000.00
5/27 Fully Executed Contract $260,000.00
5/30 Inspector and Floor Measurements
6/13 Close on Property $260,599.54
6/14 -6/17 Maintenance in Property
6/15 -6/18 Painting
6/20 – 6/21 Carpet/Flooring
6/22 – 6/26 New Sod/Landscape
6/27 HEAVY Clean
6/28 Professional Photography
6/29-7/4 Final Details Prior to List
7/5 Live on MLS
7/9 Under Contract
7/24 Inspection Objection – 14 Items
7/25 Inspection Resolution
8/10 Closed on Sale $335,000.00

 

Total days from going under contract on the buy, to closing on the sell: 76 days

 

Repair Items and Cost

Item Cost
Purchase Price $260,599.54
Maintenance $6,417.20
Flooring $7,369.90
Painting $3,950.00
Cleaning $720
Landscape $2,745
Utilities $579.93
Holding Cost $4,119.45
Marketing Cost $250
Total ALL IN COSTS $286,751.02
Sales Price $335,098.63
Less Closing Costs of $24,247.28 $310,851.35
Net Proceeds = $310,851.35 – $286,751.02 $24,100.33
% Return 8.4%
Annualized Return 46.86%

 

Before

After

We didn’t have as much foot traffic as we would have liked when we put the property onto the market, but we did have the right traffic. Ultimately 12 people came through the property in the 5 days. We received one offer, which we accepted.

Our budget going in was $15,000 which quickly moved to $20,000 with an idea of it possibly hitting $25,000.

Although we made $24,100.33 on the deal, we had to risk $286,751.02 to get it. You have to ask yourself if it is worth the risk to sit. Every day we sat on the market was $54.20 in interest. Without the right buyer coming through the door and receiving that offer, the property may have sat. At which point, it begins to start accumulating interest. At that point you would have to ask yourself if you need to upgrade anything else, which costs more money and time.

What made this flip extra appetizing was that we were going to be able to take the commissions on the buy side and the sell side. At 3% that was $7,800 on the buy side and $10,050 on the sell. Without the extra commission dollars, this deal may have not been a deal. It is easy to look back now and see that at any time there could have been an unforeseen item pop up. The property could have sat for 30-60 days on the market. Although the money we made was good, we had some good luck on our side as well.

Flips are fun and the before and after are always great to see. If you’re not flips on a regular basis maybe think of another way to make a “quick buck”. Having the right vendors and processes is essential. Stress is a part of the process and also part of the fun. Be prepared to be flexible.

 

 

The Excitement of Hell Week

Hell Week

You wake up Monday morning July 30th and you know for the next 120 hours, you are going to be going nonstop. That’s what it felt like this morning and I am pumped about it. Hell Week is my favorite week. This is my 8th year of Hell Week and we probably have one of the easiest weeks ahead of us, yet the excitement is the same. This week is about all the work prior to this week.

Vendor Relations and Preparation

You need to have a team of vendors who know your system. Floor installers, painters, cleaners, steam cleaners and maintenance techs are the vendors who make the magic happen. Without these vendors, your turns won’t turn and your tenants won’t be happy. Do your vendors know they are going to be working in the unit with other vendors? Have you provided them a rough estimate of about how many turns they are going to have? Do they know the locations of their turns and the layout of the property? If you’ve done all of this, at least your vendors are gonna rock it.

Tenant communications

Although the lease terminates on the 31st at noon, the 31st is a Tuesday and no one likes moving on a Tuesday. Most folks work, or only can move on the weekends which means early move outs. It is imperative that you’ve called all of the tenants moving out weeks in advance to inquire if they are planning on moving out early. If so, hopefully you can get into the unit to begin work. On the flip side, know if your future tenants plan on moving in the 1st or 5th or if they’re going to be a late move in. If so, one less property you have to turn with the others, set it aside.

Employee Job Tasks

Although your accountant, secretary, maintenance supervisor, property managers all have daily tasks. Turn day is a day where no one job is more important than the next and everyone needs to be working together towards a common goal. Secretaries may still be answering phones, but then relaying the needed vendors to the maintenance supervisor. Property managers may be driving the properties to inspect work/units/employees. Accountants may be doing checkouts.  It has never been truer on turn days “One for all and All for one.”

Temporary Help

Friends, family and random college kids may all get involved on these days.  Extra helpers may do all of the following: Deliver work orders, do checkouts, weed whack back yards, pick up dog poop, collect rent payments, deliver lunch to techs or any number of other random tasks that the company/the system needs help with on these days.

Positive Attitude

I can’t emphasis this one enough. If you’ve been around a stressful situation and others are in a frenzy, it never helps the situation. These days are going to be crazy nuts and the only thing you can do to help both your sanity and the company is keep a completely positive attitude, no matter what. If a unit was missed and there is going to be a late move in, it’s okay, what do you do now? Is there a tenant that is refusing to move out, it is going to be okay, follow protocol and begin the process of getting them out. There are SO many unknowns on these two days and being ready for the unknown is all you can do to be successful. In the meantime, stay happy and positive and think creatively to find solutions.

Systems Systems Systems

Over the 8 years I’ve been here we have fine tuned the process while I am leading the charge. Each individual team member must know their roll but also be willing to help where needed. The process of turnovers start months before the 31st, but the 31st is where it all comes together. Step 1, check out units; Step 2, call in vendors; Step 3, turn over units; Step 4, unit checks prior to move-in; Step 5, collect rent, provide new keys. Essentially the 24 hours of turns consist of these 5 steps, but you need to know who is doing what, where and when.

I created a video for our maintenance techs a year ago to help them visually see how it goes. I don’t want calls from new vendors not knowing what is going or when to expect calls. This video has helped. A video like this could be applied to leasing agents checking out units, accountant taking in new rents and providing keys, but everyone needs to know what they need to do without any hesitation. A phone call of “what am I supposed to do?” is never a good phone call on these days. Know the system and fine tune it annually.

Step 6 – celebrate the end of turns!

Hell Week and turn days are my favorite part of the year. The excitement of working as a team and getting SO much accomplished in such a short time never ceases to amaze me. Whether you are turning 1 unit or 200 units, you too probably have those turn day jitters. As long as you’ve got all of these ideas lined up, you should be golden. Good luck to all that are doing unit turnovers!!

Stacking Showings

When I entered into Property Management, my first title was that of leasing agent. With over 400 residential units to keep rented over the years, I’ve learned a few tricks to get properties leased and in the shortest amount of time. One of those tricks is stacking showings. Stacking showings is about creating urgency, saving time and being efficient with your time. Turning those prospects into buyers or renters.  Stacking showings is essentially setting a time where there are either showings back to back, or all at once. There are three reasons I like stacking showings.

Create Urgency

Have you ever been to an auction and see that someone else is interested in the same item you are and bidding on? It’s time to make moves, are you going to get it or not. It is the same when you stack showings. These people who are attending this showing, see others at the same property, given the same information as you need to decide and decide quick, if they want to make moves to lease the property. Buyers will delay if they feel they can. Provide them with a reason to make a decision.

Save Your Own Time

Stacking showings will not only create urgency on the buyers side, it will also save you substantial time. If you have a showing set for 4, 4:30 and 5PM for 3 different groups, you’ve committed 2 hours of your time. Drive time, prep the property, and drive time home included. If, rather, you set all three groups up for 4:30PM, it should only take you about 1 hour. 1 hour at $50/hour = $50 saved. Take this over multiple properties and you’ve saved yourself hundreds of dollars. Save yourself time by stacking showings.

Never Miss an Appointment or be Stood Up

You may have a Google calendar where you put all of your appointments. But what if you have 10 showings over 2 days? If you time block and stack, you can decrease the likelihood of missing an appointment. Not saying that missing appointments should happen, but when you have a high demand property, you’re going to have a lot of traffic and tons of phone calls, mistakes happen. You should be confirming all of your appointments day of, but there will always be those renters or buyers who skip appointments even after confirming. If you stack the showings, at least one of the three groups you show, hopefully shows up.

Ultimately, you will have to consider whether stacking appointments are best for you and the property.  You may like the personal touch, to sell the renter as to why they should rent here. Personally, I’ve never had to be sold on a property. I know what I want and what I can afford. I don’t need to be sold. Tenants and buyers know what they are looking for, know their price point and will make the decision as to whether or not they are going to take the property themselves. That is why I choose to stack showings.

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