Monday, December 9, 2019

Talk The Good Side of A Bad Property Deal

One of the most important things an agent needs to do is to be ready to turn a negative in to a positive. This is whether it is a new agent or one which has 30 years of experience. I bring this up whether in one of my workshops for agents or consulting with agents who are marketing or coaching clients.

There are times when things do not go as hoped or as planned, especially in real estate. The news article below describes one such time, in which a multi-million dollar property sold for more than $400,000 less than the asking price and below a sales price from 2013. (This sale occurred in the Fall of 2019.)

The article about this property sale appeared in the Chicago Tribune, which remains one of the largest newspaper publications in the country. It so happens that the reason for this story is that the 'featured' home was once owned by a former Head Coach of the Chicago Bears. 

However, this sale of the house had nothing to do with the former coach, who did rather well with buying and selling the property earlier in the decade.

The "negative" in this story is the report that the home sold for $400,000 under the asking price and for less than it did in 2013. 

Within the story it is noted that the agent, Paige Dooley, "declined to comment". This is exactly where an agent needs to turn that negative into a positive. Trained journalists know to report the specific results of attempts to contact an individual for a story.

Consequently, that Paige "declined to comment" is much different than the story saying "She could not be reached". Declining comment infers that Paige had nothing to say about this story. 

It is as though she is admitting that she did not do well for the sellers and wanted this story to go away. There are likely to be potential home sellers reading this story that would be less likely to consider her for selling their home because she had no explanation for a deal that was not what it should have been for her client.

I always advise my clients (and workshop attendees) about the benefit of outside publicity. Dooley had the opportunity to be quoted in the Tribune, at no cost, and could have turned that in her favor. Chances are she spends marketing dollars on social media and advertising of her services. Positive publicity in this newspaper and its web site would normally cost a large amount.

What she should have done is commented about how "This home is one of many great opportunities for buyers in Winnetka to secure a great deal!". Had she done so, she would have pointed out how this buyer got a home in 2019 for less than it cost in 2013. Such a quote would have made readers of the story think that if they contacted her, she could help them find a good deal.

Instead, by declining to comment, she put out only a negative impression. And probably killed her chances of being contacted in the future for a newspaper story.

Do not decline comment and lose out on publicity. Be ready with the positive.

Thursday, November 14, 2019

Doing Your Investing Homework

Over the past few years I have been working more with real estate investors while continuing to serve licensed agents and offices with branding and marketing. Investors often shed a different light on marketing themselves and their properties, especially when it comes to seeking their "next" property investment.

Quite often, the properties with the most investment potential over the subsequent 10+ years are ones in which there is also an increased risk. Even the most reputable experts have no guarantees that the market will go as they expect or predict.

Recently an investor client told me, "The greater the risk, the greater the reward!" as one of his reasons for seriously considering purchasing an investment property. He and his group saw the potential for some serious rental income upon completion of major renovation which could take close to one year to complete to their liking.

However, this investor was surprised at my response to his comment, which was to ask him to show me the market trend numbers instead. When he replied that he "already looked" and concluded that "Other investors are not willing to take this risk", I gave him my standard example in response.

If you are in your first floor office and jump out of the window, chances are you only drop a couple of feet and would land safely and ready to continue on. However, jumping out of your fifth floor office is a bigger risk. Yet, the consequences of such a jump would be far worse than jumping out from ground level.

Consequently, the "reward" is far worse than the greater risk in the fifth floor scenario. Or is it?

As is usually the case in real estate, more information is needed. Suppose the fifth floor office fed into a rooftop garden. In that instance, jumping out would likely produce the same result as doing so from the first floor. 

The point of the discussion is that the need is there to more thoroughly compare the risk to the reward. 

Although my marketing client "saw" the reward and realized there is a risk, he was closer to a form of gambling than he was to making an important business decision.

One of the questions I asked him was about the amount of time this property had been on the market. To me it was clear that if this property had been available for months it would mean there would be more problems than needing a lot of renovation. Very few real estate opportunities go unexplored once they hit the market.

There were more questions, including researching of local rental comps over the past couple of years with an eye toward showing growth trends.

The whole idea was to get my marketing client to make this property he was so interested in become his "fifth floor" in considering his risk.

Next, I suggested that he ask the broker he works with to come up with other investment possibilities on the market which are available and fit his group's criteria. If his broker could find one or more opportunities which are as or more likely to become profitable in less than one year, it would be more financially feasible to go that route. 

He told me that he had already looked at other opportunities before targeting this "risky" one. That meant I had to put it a different way.

"Suppose you find something that could bring you $50,000 six months from now. This opportunity could bring you $90,000 a year from now. Which opportunity would really be your best investment?

The idea is that it is important to compare the risk to the reward with every possible real estate decision. 

What happened? My client is still looking for his next investment deal. His group wants something more rewarding.


Tuesday, November 12, 2019

Post For A Real Estate Solution, Not The Problem

With thousands of dollars at stake, it is not a good idea to post about a problem situation. You could be tipping your hand.

The situation described in the (below) link is another example. If I saw the post and my office is more than 2,000 miles away, there is no telling how many local people saw this and now have information which could benefit them and not the party which posted.

This post deals with an unfortunate situation where a home buyer moved in to a community only to then find out that a developer is buying up homes in quantity nearby to rebuild for their benefit. Now these new owners are asking for suggestions on a public real estate forum.

They want to be able to have local developers bid for their property. There are not any visible comments (as of press time) following this post. No surprise here. As generous and helpful as some people are, it is highly unlikely that anyone would comment publicly on strategy.

Instead, it would not be surprising to have had a couple of area developers contact this party with offers lower than what they would normally pay. The person behind this post could very well have lost out on thousands of dollars because they posted their motivation online where "anybody" could see it.

Furthermore, there are several real estate investor sites which also have forums such as this for people to post specific questions and problems. This example from Seattle is far from the only time we see this sort of thing happen. There are lessons to take from this.

A home owner should always have a network of contacts and know how to use them. This is whether you have owned your home for two weeks or thirty years. Instead of putting out in public, the person behind this post should have known who they could ask privately. Not on a public forum.

If this home owner had, or utilized, his/her contact list instead, all he/she needed to do was ask around for an agent that works with local developers. That agent would then want to get the highest price (and commission) and would have the skills to attract the right developers and coordinate the process.

On the other hand, if this person did not have a network of contacts to help with this situation, they could have posted like in the above paragraph. A simple, "Looking for an agent to work with developers in (neighborhood)" post could have brought a similar result.

With this post and forum, it is not likely that we will know how this specific situation does or does not play out.

However, the lesson of not posting the problem, instead posting for the desired solution in a non-revealing way, goes for all of us.

Thursday, November 7, 2019

One Home Leads To Another

Another day, another "news" article showing real estate research which doesn't help the situation. It is no surprise, and didn't take a 'study' to show that baby boomers are staying in their homes much longer than they used to.

Instead of using this research to complain that their doing so limits inventory, the time would be better spent with giving boomers (and other demographics) one or more reasons to relocate.

Instead of complaining about "limited" inventory, the time would be better spent on getting the "weeks" worth of currently available inventory sold or rented. 

When too many homes in a given area are on the market, it sends a message to consumers that something might be wrong for this many residents to be looking to get out. The fewer homes on the market, the better it should be for sellers.

There is also nothing preventing potential buyers from making offers on properties not currently on the market. 

We all have our price. If someone were to offer way more than you think your property is worth, it would, at the very least, get your attention.

Due to economic conditions of the past few years, real estate is currently not the investment it used to be. Home owners are no longer able to do the maintenance and watch as their property increases in value over the next five years. THIS is why the market "slows down", according to this study.

Many boomers might prefer to downsize and/or to relocate upon retirement or becoming empty nest couples. However, it is not worth losing money on the sale of their current residence in order to do so. If local property values continue to be stagnant, this situation will not change.

Putting out statistics such as this only discourage home owners in most areas. Taking action toward making them consider selling for a profit is a much better solution.

Monday, November 4, 2019

Why AirBNB Owners Need To Deal With This Problem

Many of you may have already seen the extensive article written by a guy describing how he and others appear to have been scammed by one or more AirBNB operators in large cities. The author describes in great deal about what happened to him, as well as to other renters.

However, a larger part of this problem is how little is being and will be done in response. 

One of the most important tips I provide to my real estate marketing clients based on 30 years of experience is that there are times when a reaction is necessary to maintaining business. Not just an option.

If I were a betting man, I would bet that at least 95% of AirBNB (or its competitors) owners will totally ignore this story. They will either chalk it up to "I'm not that kind of person/owner and people already know that", or "It's the company's (AirBNB) problem and not mine".

As the article explains, AirBNB appears to not be getting heavily involved in this, although they certainly should be.

Reading the story, which I saw posted on several different social media sites, gives AirBNB, and consequently its operators, a bad rap. If even one person gets scared off of booking via this company, it means that its business is negatively impacted by this story and incident.

Chances are that way more than one person is scared away because of this story detailing how this scam took place in multiple cities and locations.

As a landlord, the next course of action should be to enhance your current and upcoming marketing. Let potential tenants know that you have a guarantee. Show them a current video, offer to do a Face Time or Skype if a high end unit. Do everything you can to leave zero doubt in their minds about exactly what they are renting.

Look at this from the potential renter's point of view. If you are willing to go to that extent to verify the quality of their rental, while other landlords are not, you are going to get their business. 

This is not to say that AirBNB is the only company that intentionally makes it difficult to publish bad reviews or follow up on complaints while relate to its service. Doing so makes it more challenging for the "good guys" to do business under this platform, and that is the problem.

No matter what role you have within the real estate industry, you need to always monitor for problems and be prepared to react. It might be to gain a competitive edge. Or, it could be a situation like this where standing still could negatively impact your bottom line even though you had no part in the problem.

Be one of those few that does not ignore this story, and that is whether you have anything to do with AirBNB or not. Don't let anyone associate you with a scam.

Friday, October 25, 2019

A Higher Ceiling For Drones In Real Estate

The contribution of drones to the real estate industry continues to grow even though not enough people within the industry have embraced it as of now. You might say there is no ceiling on how much of a difference maker they are becoming.

What the University of Michigan has just unveiled is nothing short of amazing. Using what it terms “autonomous drone software”, they have demonstrated a drone add-on which appears capable of finding where to nail shingles on a roof (or comparable surface) with or without a human presence.

This does not mean that drones will be replacing humans on construction sites within a matter of months, if at all. Based on the progress to this point, these drones only operate for short period of time. While the skill or skills demonstrated are incredible, there are operational and time restrictions which may or may not be able to reach higher limits as the technology grows.

Consequently, the role of drones in real estate is more likely to be helping with short term projects and solutions. Examples might be using in situations where it is a higher level of challenge for a human to reach or access a corner or higher point due to wind, weather, or slope conditions.

Additional challenges include drones needing to comply with FAA guidelines above a specified height and on larger construction projects. These considerations are in addition to technical challenges.

I’m already seeing drones being used in conjunction with “Virtual Reality For Real Estate”. Residential and commercial builders working on high rises or projects where a view of the waterfront, skyline, or other consideratios important to the price and the sales process. For example, a drone is sent to the exact point of where a 30th floor ocean front condo will be built to photograph the specific view which will be available upon completion of construction.

By doing so, a potential buyer has the ability to see exactly what the view will be from the living room looking out toward the ocean before the building has reached the 30th floor. This provides the builder with an advantage toward getting the property sold well before the ready date.

Like with the nailing on the roof, it involves utilizing a drone for a short period of time for a purpose which greatly benefits execution of a real estate project.

There is a long way to with developing this technology. Yet, it is a huge positive that we have these uses available within our industry.

Check out the video: 

Friday, October 18, 2019

The Rise of Renters

The article in the WSJ earlier this week is just one of several recent ones talking about renters in a totally separate forum than the Rent Control concerns.There is more to the rental preferences that need to be addressed by real estate professionals, especially those who do not deal with helping renters for commission.

Some cities are showing a decrease in the cost of rentals, while some age groups are showing a stronger preference to rent rather than buy. What these separate trends show is that more than just the monthly cost is factoring in to the decisions people are making when it comes to renting.

To put it less diplomatically, the real estate professionals that say "You are crazy to pay rent instead of owning" are going to have to come up with a stronger argument to support that claim.

In many areas of the country, home prices have still not returned to the levels they were at prior to 2008. Those long time home owners don't care that, for example, home sale prices in their neighborhood "increased 3% per year for each of the past five years". Those owners will tell you that the 15% "increase" still leaves their home value below the 30% decrease suffered from the crash of 2008. 

Consequently, many long time home owners still do not see enough appreciation in the value of their home over the years to justify selling. Let me put that a different way. If they were to sell, it's really about justification of buying again. 

With the real estate market staggering in many cities, even the most recent to become home owners are not "assured" of appreciation and an increase in the value of their home even by doing only the most basic of maintenance. You could say it's not your parents' home ownership anymore.

While some real estate professionals remain in denial about this, the point is that they need to come up with more solid reasons why renters should be buyers.

More and more home owners are not seeing enough of an increase in the value of their home to consider a mortgage as an "investment" that will pay off for them some day. 

Consequently, they see renting as having more advantages. They do not have a commitment to a property from five to thirty years (length of mortgage) to worry about. There are not thousands of dollars in property taxes, dealing with home owner association decisions and fees, and in some cases, a lot less time and money spent on routine maintenance.

Having the ability to move within a matter of weeks or months due to family, school, or career issues also comes with renting. 

Renters, whether apartment or single family homes, can have the location and amenities they desire, and without having to come up with thousands of dollars for a down payment and the commitment of a mortgage which follows.

They feel like they are working for themselves and not the bank or mortgage banker. If life happens and they can't afford where they are at, they can end their lease within a few months and relocate to what they can still afford.

This is much different from 25 years ago when they could purchase a home, stay for five to seven years, sell for a profit, and then rinse and repeat.

Given the rising number of people in their 20's and 30's who still live or who have returned to live with their parents, adding them to the mix shows that there is a much stronger need to "sell" the overall benefits of home ownership.

The next time a real estate professional tells you "It's crazy to rent instead of own", you need to ask them why they say that. He or she needs to "own" a much stronger response.

Wednesday, October 16, 2019

Impact of Rent Control - Part 4

All things considered, Rent Control has its purpose, which should be to prevent outlandish rent increases. However, as discussed in this series, the current format enables some landlords and tenants to take advantage of the situation.

Not being able to increase the rent for “current” tenants often leads to lesser living conditions for tenants and savings and tax advantages for landlords. The larger scale impact is often the prevention or limitation of neighborhood growth and/or improved property values.

One solution for Rent Control is to allow for small percentage increases on an annual or bi-annual basis, with specified standards being met in order to do so.

For example, a 10 or more unit apartment building could increase 5% every two years (for continuing tenants) upon proof that landscape upgrades were installed. This concept would help to assure that upgrades and improvements are part of rental facilities. Perhaps meeting specified safety requirements could impact a landlord’s ability to raise the rent.

To take this a step further, a reduction in or maintaining low levels of crime or vandalism statistics could be a reason for a rent increase to existing tenants. Many tenants would be willing to pay extra with the knowledge that their overall safety is a consideration.

As it stands now, this is not always about creating or maintaining affordable housing. This all feeds in to the “renting vs. buying” debate in many communities. Some people look at having a Fixed Rate mortgage as a form of Rent Control, keeping the resident at the same rate for up to 30 years. One important difference is that the home owner chose the monthly payment based on the price of the property and their financial status at or after the time of purchase. Apartment living, however, could be due to geographic, financial, or logistical concerns.

Our hope is that more states or municipalities considering implementation will look at ways to modify existing regulations and learn from other parts of the country. The system needs to be changed before it should be expanded.