I was digging through our archives today, and came across this pretty nifty training on how to setup property specific Twitter pages for your real estate social marketing. This is just one of many options that you can add to your arsenal of tools whenever promoting a local listing for your business.

In fact, this whole process can easily be followed and implemented in a matter of minutes. So let’s dive in right away to discover how you can quickly create each page and start driving a little extra traffic to your main lead capture elements.

Creating Your Twitter Listings Step by Step:

1. Setup unlimited accounts with this tactic: Did you know that you can actually setup separate Twitter accounts for your real estate social marketing efforts by using the same Gmail address? Since Twitter will require this entry to be unique, just type the first portion of your address (the portion before the “@”) symbol, followed by the “+” sign and the address of your property (i.e. 77 Privet St), and then finished with “@gmail.com.” Please see the tutorial below for better clarification.
2. Invite your friends: This part is optional, but it may be worthwhile to upload any buyer contacts you may have in your address book to follow the details of each listing you have.
3. Change up your settings: By clicking on the “settings” link once signed in, you can customize your profile picture, page background, add website links, choose a description and even change hyperlink colors. When implementing this Twitter real estate marketing strategy, we recommend that you write a quick call to action (such as “Click the link above for even more pics, video content, etc.”) in the description box that will encourage visitors to jump from your Twitter listing and onto your main lead capture page.
4. Create short tweets: Now we get to the fun part. Once you have your page looking the way you want, next it’s time to start posting a small handful of updates to your Twitter homepage. Simply begin uploading tiny snippets of info about the property straight to the twitter feed. As you are doing this, be sure to also sprinkle some lead capture elements into the body of each Twitter real estate marketing listing as well. For example, you could include the message “To see 1,000’s of other listings just like this, go here,” or “Access the full property details for this listing right here.”
5. Drive more traffic: Although Ryan doesn’t cover this part in the training below, he does refer to the idea of setting up an automatic traffic engine. One option that we highly recommend to build up your list of followers is known as “Tweet Spinner.” By using this powerful tool, you will be able to search and follow those who are posting keyword phrases relevant to your niche.

Even though creating Twitter specific listing pages may not produce the highest amounts of traffic or leads for your real estate social marketing efforts, every little bit certainly helps. Plus, sellers will love to see that you are taking advantage of every possible avenue.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How to Create Property Specific Twitter Listing Pages

No.  No thank you.  No can do.  No means no.  No go. No way Jose.

As adults we’ll do almost anything to avoid having someone tell us no.  But children, they have absolutely no fear of rejection.  That is, until their parents, grandparents, aunts, uncles, teachers and babysitters unmercifully beat them down with a never ending chorus of no, no, no, no, no.

According to a UCLA study, the average toddler hears NO up to 400 times a day.  It should come as no surprise that by the time a child becomes a teenager they’ve built up a healthy aversion to the word.

Just imagine what you could do if no wasn’t so difficult to hear.  What if you and I were a little more like my 8 year-old daughter Allyson?

Last month, with an order form in one hand and pen in the other, she eagerly left our home with one goal in mind – to sell as many Girl Scout cookies as possible.  Allyson knocked on every door in our neighborhood.  She was confident in her delivery and prepared for any objection, the most common being “I don’t have any money right now.”  She politely informed the prospect that they didn’t have to pay until the cookies were delivered.

The end result was an 88% conversion rate.  Of the 25 people who answered their door that day, only three said no.  All 22 buyers purchased at least two boxes of cookies, or more, and one sugar-deprived woman proudly ordered 20 boxes for herself.

Of course, it helped that Allyson had a desirable treat to sell.  And her passion for the product was clearly evident to the customer.  Mix these things together with her no fear of rejection attitude and it’s surprising her conversion rate wasn’t higher.

So, do you have the following?

1. A desirable real estate related product or service to offer your customer?
2. A passion for that product or service?
3. The ability to shake off a steady diet of no, no, no, no, no?

My hunch is that if your real estate investment business is struggling it’s because you answered no to at least one of these questions.  A lousy product, lack of passion and fear of rejection is a recipe for failure. It’s much easier to sell something you believe in.  The word no doesn’t sting as bad either.

Now, Allyson would like to know – who out there would like to buy some Girl Scout cookies?

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Motivated Door Knocker has 88% Conversion Rate

Any investor or homebuyer that has worked through a short sale in the last year knows what a lengthy process this can be. I actually bought a new personal residence in 2011 and it took 8 months for the bank to finally approve our offer. Of course, this was after multiple denials and re-offers, appraisals, inspections, etc.  Because the process took all of 8 months, we eventually resolved that the bank wasn’t going to approve the offer and had mentally resigned ourselves to this fact. As far as we were concerned, if the short sale eventually did get approved, it was going to be a pleasant surprise. While 8 months isn’t the norm with most short sales, waiting multiple months to get an approval (or denial) is not uncommon.

For many investors or wholesalers, it’s very difficult to build a business model around an acquisition strategy that can take months just to get a “yes” or “no” decision. I have found that many of the short sales we are involved with as investment properties take upwards of 3 months to get approved. At first, I was hesitant to use short sales as an acquisition strategy because I didn’t want to get muddled down for months at a time waiting for a bank approval that may or may not come.  However, as a turn-key provider always looking for rock bottom bargains, I couldn’t overlook the opportunity that the short sale market presented.

Once we committed ourselves to the short sale market, it became a matter of building a pipeline of short sale contracts. The idea being that after a few months of filling up the pipeline, we would get to the point where we are consistently closing on approved short sales.  Of course, this requires that we are continually adding short sales to the pipeline as well. Keep in mind that for every 2 or 3 contracts that get put into the pipeline, we may end up closing on only one of those.  Thus, if I want to consistently close on 3 short sales a month, I probably need to have 6 to 9 submitted every month as well.

As an aside, 3 months can be a very long time in a real estate submarket. Some of our short sales don’t go through because we choose not to move forward, not necessarily because of a bank denial. If a neighborhood experiences decline over a 3 month period as a result of foreclosures and there aren’t any newer comparables to work with we may choose to walk away from a property. It’s very important to keep a close eye on the submarkets and neighborhood you are buying in. In this volatile market, it’s not uncommon to have a detrimental shift in values in a short period of time that can kill your numbers.

Whether you are new to investing or a seasoned professional, working in the short sale market is a very viable strategy right now. While the thought of getting entangled with a bank for a one to three month period of time may not sound like fun (especially for a single deal), the principle of building a pipeline of short sales can make the time investment worthwhile.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Building a Pipeline of Short Sales

The questions I get most frequently via email from the BiggerPockets audience are:

- Can you tell me more about your model?
- Why do you think it works?
- Can I copy your model in my market?
- How can I participate in it?

Instead of responding to emails weekly around these topics, I thought I would take the time to write up a detailed review of our model.  I will take you through a specific deal we have just locked up and hopefully answer the majority of the questions we receive.

Step 0: Learn your market and establish relationships

Our model starts with doing the homework required to understand what a good deal means in your market and establish relationships with multiple agents.

By putting in the leg work up front you can quickly understand what a good deal means and you can put yourself in the path of success by establishing relationships with agents who control the inventory.

When you spend quality time with agents that control the inventory, you can share with them specifics on what you looking for.  When they trust you and they know you will close on deals, they will bring you into the deal flow. They will show you what is available, what is coming and what might be a shaky escrow.  Investors who can get in the deal flow with the most agents will find the best deals!

Step 1: Purchase a Property at a significant discount for Cash

As an example we just locked up a tremendous deal because we were in the “Deal Flow” with a particular agent.  We were presented with the opportunity to purchase a Tri Plex for only 65K.  The Tri Plex is a single building with three units, one of which is two bedroom, one bath unit and two of which are one bedroom, one bath units.

We agreed to pay 65k cash and close quickly.

Step 2: Repair Acquired Unit

The units are in relatively decent shape given they have been vacant for a year.  Two of the units just need a good cleaning, new carpet and paint and they are ready.  The third unit needs some attention in the bathroom as the subfloor needs work.  But all in all, we are looking at under 12K for all the make ready costs.

Once complete we will receive between $1,600 and $1,750 in rent.

We may have a surprise or two arise during the make ready process, however, given our initial price point we have plenty of security and cushion.  Regardless of any surprises we will make sure the Tri-Plex is a safe and secure building for our tenants and a great long term investment.

Step 3: Lease Unit

We will stick a for rent sign in the ground and start marketing the property on CraigsList as soon as we clean up the yard and paint the outside of the building.  I want to get as many people interested in the units as I can while we spend 2-3 weeks repairing the units.

If the trend holds, we will actually have at least one and probably two of the units rented before we have completed the remodeling.

If we have any vacancies post make-ready, we will run ads in the newspaper, and we might offer a move-in special or other promotions to fill up the building.

Step 4: Secure Passive Investment

The most important step in our model is to recycle our capital by offering a secure long term return to a passive investor.  Some past investors have chosen to invest cash while others have used their IRA.

Either way the investor gets a secure 1st Trust Deed and 10% Interest Only Note that pays them every month for the next 10 years.

Each investment is different, but on a deal like this Tri Plex a Passive Investor will lend between 48K and 60K.  The payment on said loan would be between $400 and $500.

We could certainly afford a higher payment given our low end rent expectation is $1,600 but we never want to over leverage our properties.  We believe this type of margin of safety gives our passive investors the security they need and deserve.

Our Passive Investors’ downside risk is they get a building already repaired for about 80% of our invested capital which is a tremendous deal if you ask me (Given I already bought the deal at a tremendous discount).

Step 5:  Recycle Capital

Repeat!  We never spend our real estate capital on anything but more real estate! We work with agents and get in the path of deal flow and find the next tremendous deal.

Our 5-step model takes work but once you have done the upfront homework of learning your market and establishing relationships, it can become a lot of fun. The real key is securing passive investors to recycle your initial capital.

I offer double digit returns on purpose because I want them to work with me.  I have had several emails asking why I pay 10% when I could offer 6-8%.

While it may be true that I can offer less, I won’t because I want the passive investors to profit from this relationship.  Plus, does saving 2% on a relatively small balance really save you that much?  If your deals are that skinny then you need to do different deals.

Everyone should win if you follow my model.

Hope this additional detail provides better insight into our model.

Good Investing!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Our Real Estate Investing Model in Detail

As the result of a massive settlement negotiated between states and lenders that is almost complete, major changes are in the offing that will significantly change the way lenders, especially the largest banks, service defaults and foreclosures.  For investors, especially those who invest in major foreclosure markets in states in participating, the settlement will have a significant impact on foreclosure prices and inventories.

More than 40 states will sign onto the settlement, which may be finalized this week.  At this is being written (Tuesday, February 7), several major states have yet to agree to the deal.  California is the largest hold out, along with New York and Nevada.  A major sticking point is the amount the $25 billion settlement for not going far enough to punish lenders but the odds are good that an agreement will be reached. With or without California, the deal is likely to move forward and become the largest industry settlement since a multi-state deal with tobacco companies in 1998.

In return for immunity from prosecution by the states signing the agreement (but not immunity from suits brought by individual borrowers), lenders will pay $25 billion to finance loan modification and homeowner relief efforts and they will overhaul their mortgage and foreclosure servicing procedures.

Roughly $17 billion of the total settlement would be spent on various types of loan modifications for homeowners. Rather than paying that amount in cash, lenders would receive a series of credit toward that amount based on a complex formula that would assign different levels of credit to different types of modifications. Decisions about which loans to modify would be left to bankers. But the overall impact of $17 billion in reduced loan balances would be far too small to help revive the housing market. There are currently some 11 million borrowers with an average shortfall of roughly $65,000 — or a total of $700 billion — in “negative equity,” according to the latest data from CoreLogic.

Another $5 billion would be set aside to help support state foreclosure relief programs. Another $3 billion would be applied to a program to refinance mortgages at lower rates. Borrowers would have to be at least 60 days late on their mortgages as of a date that’s yet to be determined. They would also have to be underwater, meaning they owe more on their home than it’s worth.

The program would apply largely to the relatively small universe of home loans owned outright by the five lenders, including Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC). Loans held by government-controlled Fannie Mae or Freddie Mac — some 60 percent of the 31 million home loans outstanding — would not be covered in the deal.

However, the settlement’s impact on the foreclosure processing will transcend these five banks.  In addition to the financial penalties, the draft settlement includes 40 pages of standards governing future loan servicing and foreclosures. The standards are expected to be tougher than past ones and should improve consumer experiences.  Servicers will adopt them industry-side, in hopes their liability will be reduce.  The new standards will break the post Robo-signing scandal logjam for all servicers by clearing the way for them to move forward with standardized foreclosure processing procedures that will be faster and easier to implement.

The impact on pending foreclosures would also be very small.  As many as 100,000 borrowers could be helped by the settlement, a fraction of the 2.3 million homes in the foreclosure pipeline.

“Based on the numbers alone, this is pretty modest,” said Christopher Mayer, a professor at Columbia Business School told the Washington Post. But he added that the numbers don’t account for the broader impact that the settlement could have on the housing market. Mayer said a deal probably would lead to more industry-wide loan modifications and would help jump-start foreclosures that have languished since reports of flawed and fraudulent legal filings came to light in 2010, causing banks to halt many legitimate foreclosures. “There are no silver bullets,” Mayer said, but the current deal “is an important step forward.”

In light of the size of the backlog in the foreclosure inventory, especially in judicial states (see Foreclosure Update: Happier Days on the Way for Judicial States), expect to see processing speed up.  A wave of foreclosures will he going to auction, then back to the bank and into REO status in the coming weeks, just in time for spring home buying season.

In REO-heavy markets, the wave could cause a temporary dip in prices as they expand inventory, creating special opportunities for alert investors.   The wave will last through the spring as properties now in default and pre-foreclosure work their way through the pipelines and onto the market.  Again, expect the biggest impact to be in judicial states:  New York, Illinois, Florida, New Jersey, and Ohio.   Banks will want to control the marketing of these properties to avoid disrupting prices, but in light of the fact that many of these homes have been in the pipeline for over a year, they may opt to sell them at a loss rather than suffer further damage and decay.

Perhaps the greatest impact of all is the promise of a smoother, faster-moving, more logical, less paralyzing foreclosure process that will no longer hold hostage entire local real estate markets with logjams of foreclosures stuck in the purgatory of processing.

Photo: Logan Ingalls

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How the Robo-signing Settlement will Affect You

Over the last 35+ years I’ve spoken with literally hundreds of people convinced they were seriously preparing for retirement. The problem for many is one of scale. For a couple in their 40s who make $80,000 yearly between them, $250,000 is one heckuva lotta money. Yet, if they’re 45, retiring at 65, turning that  amount into $1 million would require 20 consecutive years of just under 7.2% annual yield. No losing years allowed. ‘Course, they’re gonna have a down year or two, right? That means a few months to a few years on the ol’ treadmill catchin’ up to where they were when Murphy showed up. At that point, more likely than not, double digit returns would be needed to arrive at the coveted million dollar mark.

A million bucks at retirement probably ain’t gonna cut it for most retirees.

Think about it. For those getting their income from 401s and IRAs, two things sober ‘em up big time, and quickly.

1.  Every single dollar coming out of their plan is taxed.

2.  If they were 65 today, the 10 year treasury bond would yield them exactly $19,000 a year plus two $5 foot-longs at Subway — before taxes.

The same million bucks in debt free real estate?

Well located real estate, assuming no increase ever, as in never-ever, in net operating income (NOI), the income would be roughly $60-80,000/yr give or take. $1,000/mo into an EIUL from 28 years old ’til 58, with inflation adjustments of about 2% annually on the premiums, will get my own daughter and her newish hubby around $100,000 annually — tax free — ’til they die.

The combination of those two investment vehicles, wisely used, with careful and Purposeful Planning, will slaughter, literally, the anemic performance of a million bucks in the average couple’s 401k or IRA.

Thing is, Purposeful long term real estate investing is relatively rare. This is especially true when compared to those with the ‘qualified retirement plans’ at work. Seems most everybody has one, but they’ll quickly tell us how the performance has been mediocre at best, and dismal at worst. What TV does with real estate is Barnum and Bailey. There’s the required flipper. Then they find a property. Then there’s some false drama created to keep us coming back after the commercials. Then they make a profit. Then it’s time for the new Netflix movie that came in the mail today.

The Takeaway

Your 401k or IRA ain’t gonna get ya there, regardless of what you’ve been told. The next person who tells me about the six figure retirement income they’re enjoying, courtesy of their 401 or IRA — will be the first. They gotta be out there, but I’ve yet to meet one.

Are you gonna be the exception proving the rule? Not freakin’ likely.

Marshal your capital, and commit to learning about how to invest in real estate, long term. Don’t travel the road most are on, it’s a dead end. There are thousands of Americans thinkin’ they’ve succeeded with their retirement plans, solely due to the fact they’re nest egg requires two commas. They were woefully misled, but after the last guest at the retirement party leaves, it’s a bit late.

Now, it might not be too late, IF, that million bucks can be extracted tax free. Alas, a pipe dream for most.

What’s that I see comin’ round the corner? Another birthday?

Time . . . is . . . not . . . your . . . friend.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Purposefully Planning Your Retirement – What Is Time To You?

Cash is King

If you’ve been paying attention recently to the drivers of the real estate market, you may have noticed that there is a decided uptick in the number of ‘Cash Purchases’ taking place throughout the country.  Some estimates put the actual number of cash transactions at over 100,000 monthly across the U.S.  This development though has raised some interesting questions among industry experts as to whether or not this is a good thing.  Some actually want to place blame on cash buyers, who are overwhelmingly investors, for driving the values of real estate down.  Others see cash buyers as providing needed capital and resolve to purchase, but are not happy with the discounts given to these buyers.  In the end, I believe, there are too many different ‘problems’ in the real estate market for any one solution to fix and placing blame on cash buyers for contributing to the lingering crisis is silly.  The long-term solution to the housing crisis encompasses fixing two main problems:

1. Eliminating excess inventory
2. Allowing for prices to stabilize and increase under normal market conditions

Institutional Buyers

The federal government has been slowly and very calculatedly releasing plans to sell large tranches of REO properties.  These transactions are going to be sold to large buyers who are closing within 96 hours of accepted price point and the deals will be valued between .43 cents on the dollar and .47 cents on the dollar.  (Which dollar they are using for calculation is a whole different topic!)  Suffice it to say, the dollar value that will be attached to these properties before discounts will not be top value and will most likely reflect present day value.

If that is in fact the way the government chooses to dispose of the REO inventory they currently have, which amounts to near 50% of the total number of U.S. homes in REO status, then those homes will be sold to cash buyers at significant discounts compared to today’s pricing which is already depressed after years of stagnation.  Do not expect this to increase any home values anytime soon.  That is the main argument that many industry experts are using when they argue against such a plan.

They would rather see these homes sold very slowly and the highest price possible and would like the government to offer some sort of financing option for new buyers.  This slow approach, while possibly slowing down the slide in real estate values, will actually prolong the recovery and keep prices depressed for years to come.

What is the real ‘Fix’?

Today, investors are accounting for 1 out of every 3 transactions occurring.  Out of that 30%, nearly 3 out of every 4 are transacted with cash.  The simple fact remains that investors are ready to enter the real estate market in a big way and the cash to do so is simply sitting on the sidelines waiting to be put to work.  There is no possible way to eliminate cash buyers without prolonging the housing crisis into 2017-2020 or beyond.  There is not enough demand for securitized mortgages for private mortgage holders to get back in the market in a large scale way and the government clearly does not have the appetite to continue to underwrite U.S. housing.  Without underwriting in place – and discouraging cash buyers either directly or indirectly by not discounting – the housing crisis will absolutely drag on and easily could extend into and beyond 2017-2020.

On the other hand, discounting pricing – even at the .42-.47 cents level – attracts more cash buyers and even the institutional buyers who can purchase thousands of properties at a time.  Being pro-active on reducing the inventory and clearing up the back-log of vacant REO properties will lead to an eventual stabilization of pricing.  While it will be bad for current home values, when the REO sales are gone, they will no longer be calculating into the values of homes and pricing will be able to naturally increase as demand increases.

When I read that real estate industry experts are bemoaning the number of cash buyers and the downward pressure they put on pricing, it makes me wonder whether they really grasp the enormity of the REO problem and exactly how damaging the slowdown in processing and selling excess REO’s has been.  The faster we clear excess inventory, the quicker banks can re-establish a lending standard and the real, long-term solutions to the housing crisis can begin.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Are Housing Solutions Really Part of the Real Estate Problem?

Do you track the response you get from your direct mail campaigns each time you send one out? I hope that everyone said yes, because you should be. Tracking your response from each mailing is the only way you can figure out if it’s working like it should. It’s imperative that we spend those precious marketing dollars wisely in our business.

The two main groups of people I mail to regularly are probates and absentee owners.  I have never sent a direct mail campaign out to probates in the month of December for obvious reasons. Previous mailings have also taught me that absentee owners are less likely to respond to your mailing the closer it gets to the holidays. A lot of these folks don’t want to fool with selling a house even if they NEED to sell it.  It has been my policy not to mail to absentee owners past the first week of December, and not to mail probates at all in December for as long as I have been in this business.

What about January?

Probates

I have always resumed my mailings for probates at the very end of January, typically around the last week of the month. The last thing someone wants to get in the mail at the first of January is a reminder that their loved one wasn’t here to share in the joy and celebration of the holidays.  So like previous years, I held my big mailing until last week. One half went out the last week in January, and the other half will go out this week.  I have already gotten a couple of calls that look promising.

Absentee Owners

Absentee owner mailings were always started up again around the middle of January. Until last year this schedule always seemed to work for me.  What I noticed both last year and this year in January was that I got a terrible response rate from that mailing. I would even go so far as to say it was a dismal failure, not to mention a waste of money. I got very few calls on a pretty big mailing.

I am really at a loss to explain this. When it happened last year, truthfully I thought it was a fluke. Now that I had the same experience last month, I’m not really sure what the answer is. Is it that folks just aren’t ready to deal with those “extra, unwanted” houses at that particular time of the year? Or is there another reason? I really don’t know.

If anyone has had a similar experience I would love to hear about it.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Response Rates for Direct Mail at Different Times of Year

When I was first invited to write for BiggerPockets, I was told that I had editorial freedom—but I should keep to my all-time favorite subject, short sales. Between the BiggerPockets Blog and my other gigs, I think that I have probably written about 2000 articles about short sales. I also calculate that sometime in 2012, I will reach 1000 short sale closings in five years. That’s right, my team and I will have processed and negotiated 1000 short sales before this year ends—maybe even before we hit summer.

What I am pondering today and what people always ask me is this: How have short sales changed in the last five years? Are they easier to process? Are the short sale lenders easier to deal with?

Of course, hindsight is always 20/20. But, by today’s standards, my first short sales in 2007 were nearly impossible. Even the largest servicers were not equipped to process and negotiate a short sale. By mid-2007, I had about 15 short sales with Bank of America, so they were kind enough to assign one employee to all of my transactions. The transactions still took months and months to close, but I had a phone number and a name (no emails were given out back then) and having that contact information was invaluable to my success.

Little by little over time, most of the servicers have become more efficient and more accommodating. However, we have run into more trouble with the postponing of foreclosure sales. Both Fannie Mae and Freddie Mac began to practice tough love in late 2010, and they have not stopped since—despite the huge irony there.

For those individuals buying short sales, things are tough. Lending guidelines are tough, and many buyers find that despite the fact that the short sale has been approved, they still may not be able to close.

For our market to change, we need equity buyers to pick up distressed properties and rent them to folks who have lost their homes to foreclosure or sold them in a short sale. However, for the equity buyer to be interested, the banks need to lower their prices a little bit in order to incentivize the buyer. Banks don’t need to give away the homes, but perhaps they should not insist on top dollar for homes that need love and attention.

Sometimes when I look at my dog, Charlie, I find myself thinking “he’s sad” or “he’s lonely.” I then need to remind myself that I am anthropomorphizing (say that three times fast). Charlie does not have human traits. Well, the same applies to short sale lenders. While I have come across many, many bank employees who have been lovely, freethinking individuals, I must remember that I cannot give human traits to the lending institutions. To be successful in short sales, I need to work within their box—whatever that might be.

Photo: flickr creative commons by Umberto Fistarol

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

The Evolution of Short Sales

America’s great spectator sport is front and center with the Super Bowl taking place this past Sunday.  In professional football, serious resources go into the process of putting a good team on the field.  Each team has three smaller teams; offense, defense and special teams. Every good property manager needs the same structure.   Is your property management pro-active?  Are responsibility centers clear?  Who is responsible for marketing,  for emergency maintenance, for answering the phone?  Are you fielding a good team?

An arrow is a precision weapon built to pierce its target.   Armour is blunt, big and bulky.  Armour does little except deflect.  Arrows are light and nimble, armor is heavy, hard to move around. These two instruments are seldom used by the same individual. 

What does this have to do with property management?   

Let’s segregate tasks into arrow and armor categories as writers tend to do (Men are from Mars, etc.), but let’s start with a broad premise; arrows are built for distance and amour is for close encounters. 

ARROWS – A GOOD OFFENCE IS YOUR BEST DEFENSE

Arrows represent a good offense, a proactive stance on leasing, maintenance and systems.   Arrows represent marketing, customer service and tactical strategies for interaction with the public.  Note, arrows that miss the target are wasted, delivering zero benefits and costing money.  They are meant for precision strikes and can be moved to selected targets rapidly.  With a good offense you keep the other team off the field (chasing you around the field of play versus concentrating on their business).

ARMOR – PROTECTING HOME BASE

Armor represents having a good defense, being able to protect the asset with appropriate insurance, good policies and procedures, keeping the asset safe from attack.  That means having safety lighting where needed and a 24 hour number for residents to call for emergency maintenance (so a one ounce leak has no chance of turning into a 500 gallon leak). Like “real armor” you cannot move your asset, really.  Armor assist you in making a stand where you are- protecting home base.

SPECIAL TEAMS ARE IMPORTANT

In football the kicking game is fully one third of the plays in a typical game.  Ignoring the kicking game will have your offense and defense reeling for lack of field position.  Our “special teams” are our people with multiple skill sets- they are crossed trained to do more than one role when called upon.      

Certain areas of property management absolutely require cross-training.  Customer service, for example.  A uniform method of addressing our customers, with respect, with listening and attention.  Simple enough yet sometimes difficult to implement.  For example, every member on staff should be able to pick up the phone and greet a customer or potential customer.

Like in football, a missing or weak element in any of these aspects (offence, defense, special teams) of your property managment team weakens the entire team.  When budgets are tight “training” gets kicked down the list of priorities.  There are no shortcuts to building a quality portfolio or property management team.  There is just no replacement for good people — well trained good people.

Photo: Stephen Luke

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Property Management: Offense, Defense and Special Teams

I once read a real estate book that said, “If you’re a real estate investor, it’s not a matter if you’re going to be sued, it’s when you’re going to be sued.” Well, I’ve been in the business about 10 years and I’ve dealt with dozens upon dozens of tenants and sellers and I am now being sued for the first time ever.

Here’s why: A few months ago I had a tenant who signed a lease on one of my rental properties. The day the tenant was supposed to move into the property she said the property was uninhabitable and she refused to move in. She wanted her security deposit back, and obviously I did not give it back to her because she was breaching the contract which she had signed.

Now she is suing me for the security deposit along with other “damages” from not being able to move in. After I found out about this I called the woman to try and be reasonable and figure out what’s going on because the last thing I wanted to do was end up in court.

I asked this woman why in the world she would walk through a house and sign a lease on a house which she now deems uninhabitable. Of course, as soon as I asked her this question she quickly changed the subject and could not answer the question.

All she kept saying was that it was uninhabitable.

In case you’re wondering, the property is in fine condition. She took pictures of the property and her definition of uninhabitable means like a speck of dirt on the carpet and walls that have a scuff on them.

I tried to calmly talk to this woman and explain to her that when you sign a lease you are expected to honor it and that obviously she wouldn’t have signed the lease in the first place if the house was so horrible it couldn’t be lived in.

However, it was pointless trying to talk to her and she hung up on me.

Now, I have a court date several weeks away where I have to go show a judge the lease the woman signed after she had done a walk through in the property. By the way, to make this even better, on my lease I have a part where it says “please note any problems or anything you would like fixed” and she left that part blank.

What I believe happened is that the woman decided she no longer wanted to live in the area (since her mailing address is now out of state) and she realized the only way to get out of the lease was to be dishonest and make something up.

It’s a shame that there are such dishonest people in the world, but the majority of folks are good people, and as I mentioned earlier, in 10 years of business this is the first time I’ve ever been sued.

The pain in the butt thing is, I have to waste my time and the courts time driving all the way to the courthouse because of this woman, but that’s the way our legal system works where anyone can sue you for anything.

Also, if you’re worried about getting sued you shouldn’t be. If you always treat people honest and fairly then you should never, ever be worried about having to stand before a judge explaining why something happened. Yes, you may get sued in life, but if you’ve done the right thing you should hopefully be fine.

As for me, I’ll let you know in several weeks what happens after my day in court.

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Why I’m Getting Sued by a Tenant

Several days ago I read a great post by Michigan landlord, Dennis Fassett, in the Biggerpockets blog section (article). It would have been hysterical if only it wasn’t so true. He discussed what he called The Boyfriend Disorder. He wrote about what happens when a prospective tenant shows up to view a property and has her boyfriend tagging along. In between the laughs, I cringed.

Having spent two decades as a real estate investor, half of that time as a landlord of properties in a blue-collar mining town, I thought about some of the trouble I’ve experienced along the way. Mind you, I had a plan and procedure to minimize bad tenants – it didn’t matter. Problem tenants seem to have an innate resourcefulness, if only they used it for good instead of evil.

What to Believe?

The first line of defense against bad tenants is your screening process. It starts with a rental application. The information on there is used to do a background and credit check, verify employment, previous rental history, and personal references. With all of that information, what could possibly go wrong? Believe it or not, everything.

A clean criminal background check could just mean that the prospective tenant hasn’t been caught doing anything illegal yet. Credit reports are rarely perfect and tenants usually have a good excuse for whatever is on there. Confirming employment seems straightforward enough, but what if your applicant has arranged with a buddy to lie about his job? Previous landlords may be reluctant to bash a past tenant but they will usually drop hints if you listen carefully. (If you do get a bad report you should immediately be reaching for the giant rubber stamp that says “REJECT.”) Personal references are just about useless; what applicant would put down someone who wouldn’t give a glowing report? All of the above has happened to me at some point.       

Trust Your Gut

I’m not suggesting that you don’t carefully evaluate rental applications, just understand that they aren’t enough. Every one of us has an internal screening device to send us warning signals – ignore them at your own peril. Call it intuition or gut instinct. The feeling in your stomach develops from past experience and you should listen to it. Have you ever been tempted to accept an application from a marginal prospect because a property has been vacant for too long and you absolutely need to get it rented? I have, trust me on this one – don’t do it. Ever get the feeling that the sweet looking couple is lying to you? They usually are, your gut probably picked up subtle signals that your conscious mind has missed. This is a time you should listen to that voice in your head.  

Anyone even remotely thinking about becoming a landlord should rent a copy of the movie Pacific Heights. If you still want to proceed after watching that then you may have what it takes. Don’t get me wrong, being a landlord has been very good for me. I’ve learned to handle the ups and downs and can avoid the pitfalls most of the time. If given the opportunity for a “do over” I absolutely would do it again. Now it’s time to meet with a young lady about a rental – I hope she brings her boyfriend!

 I sold my house this week. I got a pretty good price for it, but it made my landlord mad as hell. – Gary Shandling  

Photo Credit: http://www.flickr.com/photos/ishane/3509419604/sizes/m/in/photostream/

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

So You Want to be a Landlord? Really?