Brett Furniss

"There are no facts, just interpretations." Friedrich Nietzsche

On a whole, I like honesty. I like it when people tell me what they really think (within reason). And if they don't have anything interesting or worthwhile to say, omission works well for me too. I like things clear and easily understood.

So it came to my chagrin when I was reading a headline of an article this week that blared, "N.C. foreclosure sales drop 42%." Wow!! 42%? That's almost half! Is the job market trending up in our southern paradise? 2011 must be when the US economy really rebounds led by the Tarheels of North Carolina! Charlotte is ready to do its part! This must mean that home price stabilization is around the corner and real estate will start picking up and lead our country to another streak of prosperity!

But wait... I really hadn't heard anything about the local real estate market getting noticeably better; rather I've continued to hear the opposite. Homes sales in Charlotte have continued to dwindle (I read another headline saying that Charlotte home closings were down 23% in 10/10 when compared to 10/09!). Well, I guess that has nothing to do with people actually staying in their homes. So less foreclosed homes equals better capitalized consumers, which equals more consumers with jobs, which equals a better economy, which equals a more robust (and rising!) real estate market? Cool!

And then I actually read the article. The 42% foreclosure decrease was due to the halting of foreclosures due to questionable bank procedures. That explains it! So, this statistic is artificial and misleading. We'll soon see a headline in the coming months saying that foreclosures are up 42%+ to make up for the halted foreclosures now.

And now that I think about it, our firm did have some closings that were held up because of this foreclosure freeze. So what does that mean about the 23% decline in home sale closings statistic compiled from 10/10 (when compared to 10/09)? Does that make that statistic artificial and misleading as well?

The clearest answer is "yeah, probably." Who can figure out what's going on? Maybe this is what Wall Street legend, Peter Lynch, was talking about when he said, "The man who studies macroeconomics for 15 minutes a year wastes 10 minutes." There are too many moving parts to get a true picture of reality!

It's like the rock band that labors through the reading of their 2,000 word concert review in Rolling Stone magazine and only wants to know one thing: "Do they think we rock?" I just want the same type of clarity from the headlines I read.

Are things getting better or worse?

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent's Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

As a Charlotte property manager specializing in lease options (rent-to-own and rent-to-sell), we get many calls from home sellers "exploring their options" about their vacant properties (unlike Obama, my puns are typically not intended). So, as a public service, I'll run through the available options:

1. Strategic default (I think this is what it is being called): Stop paying the mortgage and taking the credit score beating like a man
2. Put the property on the market for sale: If the home is special and priced well, it will sell in some period of time. If not, eat the mortgage every month until the banks start lending again.
3. Rent the property out: Get most of the mortgage paid every month by the tenant. Keep a tenant in the property until the market comes back and then place the home up for sale.
4. Rent-to-sell the property: Put a rent-to-own tenant into the property who will pay the mortgage and potentially buy the home during their lease period.
5. Rent out the property and then put it on the market: In my experience, this leads to disappointed sellers and upset tenants.
6. Arson: Not recommended. And, no, this is not a service we offer!

All of these approaches obviously have pros and cons (like jail time). Depending on each respective person's needs and tolerance for risk, each approach could be the appropriate one.

And to conclude the public service announcement, please contact your local property manager for further details.

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent's Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

I was talking to a prospective Charlotte property management client the other day and he had only one criteria he really cared about. He wanted to make sure that we placed a rental tenant into his home that had 700+ credit scores. That was it.

I told him I didn't think that was a good idea; it would reject a lot of better suited applicants. He told me I was crazy (in so many words).

Well, let's do the whole Benjamin Franklin pro's and con's thing. Then we can make an educated decision.

First, the overall goal must be established. As a Charlotte property manager, we want to make sure that we maximize our client's investments. Generally speaking, we define this as providing the most net cash flow to our owner clients. Most clients agree that we should be measured by how much money we put into their pockets.

Now for the pros of a 700+ credit score client. They will almost always:

1. Pay their rent in full and on-time
2. Leave the home in great shape when they move out

These are the two biggest concerns of our clients, so these are very good attributes.

Let's now look at the cons. I could nitpick, but tenants with 700+ credit scores are pretty good to have. So, I just want to focus on one con:

1. They typically vacate after their initial lease expires

This one con crushes a client's overall cash flow and ROI.

Most people who have 700+ credit scores buy homes immediately. The ones that don't usually have a reason like they:

1. Are a mobile professional who will move with their company in 1-2 years
2. Are waiting for the right deal on the house they want (Guess what? The deals are here now!)
3. Just moved to town and will buy once they get to know the area

So a full year's rent is secure, but then there will usually be a few months of vacancy and holding costs that have to be factored in after the 700+ tenant vacates.

The ROI might be better with a tenant with sub-620 scores (who can't buy) and a solid landlord history? I'm thinking there is certainly a case to be made.

Tenants who stay for years are almost always a better investment than those that are one year and done. In conclusion, it may be time to rethink the "700+ credit tenant or no deal" strategy.

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com.

Writing a blog every week is hard! My hats are off to the people who write multiple times a week, and especially to those that do it every day- kudos!

My thoughts haven't changed in the past year on the near future of short-term residential real estate (next 1-2 years). Rent-to-own and rent-to-sell (as well as short sales and working with serious investors) seem to be what the main growth areas will be.

As foreclosures continue to rise, banks will not even pretend to relax lending guidelines.

As the US economy sputters, FHA loans will not become more affordable or easier to get. It will actually be the opposite. Fannie and Freddie have lost and continue to lose a lot of money!

People, in general, have less money. For people disbursing it (banks, government, property managersJ), the pressure of delivering it is on much more than usual.

More real estate offices will close as technology and business realities (aka less revenue and customers) continue to hit. Office virtualization will continue to grow.

I don't like the thought of owning a business in a downtrend industry. There, I said it. Being involved in high growth industries is much more exciting (and profitable). Property management is a good growth industry with steady income, but the margins are not close to those of brokerage. You live off of property management and vacation from the brokerage business.

The biggest market for rent-to-own and rent-to-sell prospects will continue to be $250K+ homes. These owners (especially those over the FHA maximum loan amount) need solutions for their homes!

Rental (and especially rent-to-own) tenants are plentiful in this market!

Other people are still the best source of blog material!

Is social media going to continue to trumpet it's ROI in anecdotal format? Has anyone made any money on Twitter on a consistent basis? Let's see the numbers, not hear stories!

On that token, one of my favorite quotes on social media is, "Conversation is king. Content is just something to talk about." Twitter is a bit one-sided (aka no conversation), no?

Here's to another 52 weeks...

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com.

Wow! Only one?

As a Charlotte property manager, we have potential customers contacting us everyday about managing their rental homes. Their questions typically boil down to two:

1. How much can my house rent for?
2. How fast will it take to fill with a tenant?

These two questions are not mutually exclusive.

This leads the property manager to ask the true follow-up question:

How fast do you want the property to be filled?

Duh, today or tomorrow would work! What type of question is that?

It's the only question.

Here's the logic: if you put the average Charlotte house up for rent for $100, we could have someone locked up today to rent it. Conversely, if you put your house up for rent for $10K today, it would take us years to fill with a tenant (if ever).

The equation is:

$100 Rent = Tenant move-in today

$10K Rent = Tenant move-in in 5 years

Today ($100) < How Fast you Want a Tenant to Move-in ($X.XX rent) < 5 Years ($10K)

If you want a tenant to move-in within 3 months, a good property manager should be able to tell you what price you should list your home for rent for ($X.XX). Chances are, you won't be willing to accept the monthly rental price that would have your home filled within two weeks (nor would it be wise). But at least you would have the information to make the choice you want based on your needs.

With all other things being close to equal (marketing of the property, etc.) in an efficient rental market, rental price should determine how fast a tenant moves into your property. Speed is a function of price.

The only real question is, "How long do you want to wait for a tenant?"

Brett Furniss is the President & Owner of BDF Realty ("Charlotte's Most Innovative Property Management & Investment Company"), and Rent-To-Sell Realty ("When You Need a New Solution to Sell Your Home") which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com.