I haven't updated the blog in so long because I've been working on another project--- Rental Restoration LLC!
Rental Restoration LLC is a general contracting firm that focuses solely on rental properties in the Seattle area. To fully introduce you to the company, I've prepared a little Q&A- which I'll publish in shorter chunks for your blog-reading pleasure:
Wait, I thought you were a property manager!
Yes, I worked with Seattle Management Group Real Estate for a little under a year. The brokerage is owned by some old friends who needed help with marketing and business development. Prior to working with them, I was involved with residential and capital construction, an active landlord, and real estate investor. While working with them, I realized how much time PMs spend managing vendors instead of managing properties! I started Rental Restoration while still working at SMGRE and continued to learn more about what property managers need in a reliable contractor. In the spring, I left SMGRE to focus full-time on Rental Restoration. I no longer manage properties (except my own!) or hang my real estate license with any brokerage.
What exactly does Rental Restoration do?
Rental Restoration is the only general contracting firm in the area that focuses strictly on rentals. We understand the need for speed, affordability, excellent communication and quality. I created this company with a crystal clear vision of providing services that would make the lives of property managers easier! Rental Restoration offers affordable maintenance, repair and renovation of rental properties. We do everything from simple handyman service calls to major updates to rental properties.
Do you do the work in-house or do you subcontract?
Right now, we have 8 employees with varying specialties. We're able to handle most services in-house. However, we also have negotiated special rates with journey-level plumbers and electricians to offer our clients an affordable solution when the nature of the service exceeds our on-staff crew. My business partner and I have been in the construction and real estate field in Seattle for many years and we have an extensive network of specialty subcontractors such as roofers and appliance repair.
Do you have a website?
Of course! You can find Rental Restoration at www.rental-restoration.com. We're adding some new functionalities to the site such as client log-in, so you can place work orders, check the status of work and look at the billing.
MORE Q&A TO COME!
Are you excited about having your very own reliable contractor or what?!!?!?!?
All best,
Eleanor
With April wrapping up, there is some good news on the rental scene, and in the real estate market as a whole. It seems to me that like the weather, things are heating up a bit.
Here in Seattle, the real estate professionals I know are getting busier by the day. Anecdotally, home inspectors are reporting an increase in business, as are friends in other related professions such as title, escrow and lending.
I got to feeling so confident that I put one of my own homes out on the market and got a great response. We had a ton of quality showings and really great feedback. Of course, the house is a great deal-- I've got a contract for about $80k less than it would have sold for last year... but that was last year! It was funny to see how many people came around multiple times to "kick the tires" and how many agents wanted to be "kept in the loop". It seemed like nobody wanted to make a move until someone else made a move- which was exactly what happened and we ended up with three offers. But either way, it goes to show that buyers are not white unicorns of our imagination. Of course, inventory is low in Area 705 (Ballard-Green Lake), it's a truly fantastic house, and the price was low enough to make it pretty hard to pass up.
I'm seeing the same thing in the rental market... a ton of tire kickers and people taking their sweet time to make a decision. Whereas it would normally take only a few showings to rent out a place, it's taking a lot more showings. This makes sense because the rental inventory is so high- there's a lot for a renter to see! Prices are definitely low and needing to stay low- and I've finally settled into the idea that we're not going to see those prices creeping up for the "summer rush" like we normally would. Homes that are priced too high are definitely going to sit empty.
So, with great effort and lower prices... what's the good news? The good news- er, the GREAT news- is that places that are marketable and reasonably priced are ACTUALLY RENTING! Nothing was more frustrating than Feb & March where we had lots of great properties at a steal of a price and nobody wanting to sign a contract.
Kinda like everyone everywhere, you have to feel grateful for what IS going right. We're ALL working twice as hard for less financial reward, but hopefully, those who are working are grateful to have a job!
My two pieces of advice for those who have a rental property this month are:
- Be prepared to show your property a TON.
- If your place hasn't rented in a month or if you go a whole week without a single serious call on your property, this is a clear indication that you're priced too high. (Obviously, this is not ALWAYS the case, there are certain properties that are unusual and take a longer time to attract the right tenant... but those cases are rare.)
My firm has a great reputation and enjoys a very steady stream of referrals. We serve Seattle, the Eastiside, some Snohomish County, and Bainbridge/Kitsap. However, we get multiple calls per month from agents and potential clients looking for property management for Pierce County and Kent, Sumner, Auburn, etc. We have taken a few clients in Kent, but found that the distance from our Issaquah satellite is just a bit too much to deliver the level of service our clients have come to expect. I really prefer to pass along resources rather than saying, "Sorry, I just don't have any contacts in those areas!"
Is there anyone in this group that covers those areas? If so, can you email me and perhaps we can get together for coffee or lunch? I want to be able to have a good understanding of who you are and what your firm's philosophy is so that I can refer people on with confidence.
Best wishes for prosperity to all!
Eleanor Trainor
Seattle Mangement Group Real Estate
Most people know that "days on market" is real estate-ese for how long a home has been on a market. Lately, with all the homes on the rental market, I've coined a new term... "DAYS ON LAWN".
Days on Lawn is how long a home sits for rent by owner. I'm seeing a lot of homes coming on the market -- and sitting on the market-- from "Accidental Landlords" and new landlords whose rental rates are a bit unrealistic. These well-meaning folks don't have the resources to analyze the current rental market to set an appropriate rent, market the property beyond Craigslist, or properly show the property and therefore they accumulate far more Days on Lawn than necessary.
I genuinely feel compassion for people who are trying to rent out a home right now without professional advice. As I've said so many times in my blog posts, I think it shows a great deal of savvy to see homeowners trying to ride out the market by renting rather than selling and new investors taking advantage of the opportunities to build a rental portfolio. However, I wonder how often this savvy goes unrewarded because the house never actually sees a tenant... or the house has so many Days on Lawn that the owner grows evermore exhausted and market-weary.
The Days on Lawn phenomenon has an impact on all of us in the rental market. Many of the property owners I speak with on a daily basis have been doing their homework in preparation for renting their property by running their own comparative market analysis on Craigslist. They look at CL to find similar properties in their area to get an idea of what rent might be appropriate for their property. Unfortunately, CL doesn't tell you how long a given property has been vacant or how much comparable homes ACTUALLY rented for. So, while the house down the street might be advertised for $2800... you don't know that this is week 31 on Craigslist. In my latest post on luxury rentals, I show how the math pretty clearly favors dropping the rent a few hundred dollars to attract a tenant immediately rather than playing a waiting game at a higher price.
I'm not saying Craigslist isn't incredibly useful! Of course, Craigslist is part of my arsenal of tools to help clients set a rent range. Like any tool, however, it's only useful if you know how to use it well.
A well-respected member of the real estate community here in Seattle recently said that the most important words in real estate have gone from "Location, location, location" to "Drop your price".* For the moment, this is as true for the rental market as it is for the sales market.
*(Alright people, before you jump in on that one, I think we all know location will always be king! It is simply an illustration of the times.)
Sometimes I feel like counseling my clients with higher-end homes is like counseling my single girlfriends in their late 30s.
Her: I have a great job (Viking stove).
Me: Yes, I know you have a great job (Viking stove).
Her: Do you have any idea how much I spent on my new new blonde highlights (radiant heat floors)?
Me: Your highlights (radiant heat floors) are very warm and inviting... and I know how much you love them, but suddenly every single gal (new property on the rental market) has gorgeous blonde highlights (radiant heat floors).
Her: I'm the total package! (My house would go for $1.3m on the sales market!)
Me: Oh sweetie, I know you are-- let's go to Ray's for Happy Hour to watch the sunset and have a cocktail. (Yes, it really is a gorgeous home. Let's sit down and pencil out cash flows.)
It's no wonder there are so many luxury rentals on the market. Last summer I put my Ballard Cape Cod on the rental market because the thought of losing $60k in cold, hard cash was unbearable to me. I can't imagine the thought of losing several hundred thousand!
Pulling your property off the sales market in favor of the rental market shows a great deal of moxy and resolve. Your sensibilities tell you that you can ride out "today's market challenges" (my go-to euphemism) if you make some adjustments to your plans and don't lose your head. You'd rather see some cash flow on the property than not. Excellent-- all makes great sense.
And now for the math...
I wish the math looked like this: House A has an approx sale value of $500k and House B has an approx sale value of three times that amount. House A's rental value is $1800 and therefore House B's rental value is also three times that amount. If only! Recently, we've been finding that House B's rental value is more around $2800 (NOT always- it greatly depends on a lot of factors, which is why you should always consult a professional)... and about the same as House C's rental value, although House C would fetch around $1.0m on the sales market.
Rental values just don't take the same exponential trajectory, which is very difficult to reconcile for owners of higher-end homes.
Here's some more math:
House A lists Jan 1, 2009 on the rental market for $4000/mo. House B, with somewhat similar features down the street lists for $2800/mo. Feb 1, House B is rented at $2800/month. After two months, House A lowers the asking price to $3500 and then two months later on May 1 rents for $3300. By Feb 1, 2010 House A has generated $33,600 and House B has generated $29,700. Not to mention the fact that House A's owner didn't have the headache and heartache of having a house sit empty for a few months. Now, if you were a landlord with the long-term in mind, then maybe waiting for $3300/mo makes sense. But MOST OWNERS WITH LUXURY HOMES ON THE RENTAL MARKET DON'T INTEND TO BE LONG-TERM LUXURY LANDLORDS! It just doesn't pencil out to be a long-term luxury landlord.
I came to my own painful realization in this market. I'm going to lose money. I had to ask myself whether I wanted to hemorrhage or bleed slowly. And then I figured out a timeline... and within that timeline formulated a plan to mitigate those losses.
There still is a luxury rental market and a good deal of people who want and need to live in larger homes with more features. However, the supply has far out-paced the demand recently and those consumers have a great deal of choices. Make sure consumers will be "into you" by setting the price appropriately.
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