Real Estate Coaching – Case Study #1

Let me tell you about my coaching client Al.

Al owns two investment properties – a duplex and a single-family house in Oregon. He is working out of the country so he is managing the properties long-distance.

Here are the issues as Al described them to me:

• The house is currently on the market. It’s been listed for several months and the Realtor keeps telling him to drop the price (drastically) and he has.
• The house is still not selling even though he has dropped the price by $50,000.
• The rental income on this house is $700/mo and his mortgage payment is $1,000/mo so he’s ponying up $300 a month to keep this rental.
• The feedback from the showings is that the house is filthy and needs work – paint, new carpet, etc basically all cosmetic.
• The renters are three men who are on a month to month lease

Some Interesting Info Came Out During the Coaching Call:

Market rents for this area are $1,200 a month. I told Al to raise the rent immediately to solve the cash flow problem and he said, “I tried that and the renters refused to pay more than $700 a month.”

Al is afraid to raise the rent for fear the tenants will move and he will lose $700 a month income.

Al hasn’t performed any cosmetic improvements based on the feedback from potential buyers because “the renters said if someone wants the house they will buy it even if it’s ‘dirty’.”

Al thinks he should pull it off the market and relist it when the economy improves. According to him, “It should sell with no problem then.”

OK, Al, here we go.

You have a rental that is filthy with tenants refusing to pay more than $700 a month and trying to justify the fact that they have wrecked your house AND are causing you to potentially lose $50,000 in profit?

Here is EXACTLY What You Do:

• Present the tenants with a new lease for $1,200 a month. If they refuse to sign and pay the increase – GOOD!
• If they pay the increase – GOOD! You are now positive $200 a month.
• Begin eviction proceedings if they refuse the new lease. I provided a referral to a landlord’s attorney in Portland to do the job for cheap.
• Once the house is vacant, hire a handyman to perform ALL the cosmetic improvements required – new paint, carpet and clean up.
• Have your Realtor stage the house and bump the price up to 10-15% below the comps in the neighborhood.
• Your house will sell and the $700 a month you “lose” will be more than made up for with the increase in the listing price.

Lessons

• NEVER be bullied or intimidated by tenants. EVER. You own the property, not them.
• Correct problems with the house based on the feedback BEFORE just dropping your price arbitrarily.
• If a filthy house isn’t selling in a down market, it sure as heck won’t sell in a good market so in the words of that financial analyst on Saturday Night Live’s Weekend Update – FIX IT!

Need Real Estate Coaching?

I have a few spots left.  Call the office at 303-534-7078 and let Deanna know. I’ll give you a call to discuss. Spots are filling up fast, so call ASAP if you are interested in affordable, real estate investing in the real world coaching.