Archive for July, 2008

Because I continue to be so bullish on real estate in metro Detroit, I’m constantly talking to people about buying rental properties here. Day in and day out, all kinds of people in all walks of life with all different backgrounds.

I have to say that the most common reaction that I hear is this:

“Ooooh Nooooo – I DON’T want to be a landlord. Then you have to talk to tenants all the time, and have them calling you at hours of the day and night.”  

I usually just chuckle to myself and move on, as I’ve found it impossible to ever make a dent in that type of mindset.

But I got to thinking yesterday after another such conversation just how the heck that impression got started? I know I don’t feel that way, and I know that just about all of the rental property owners that I commiserate with don’t feel that way either. So I emailed a couple of them and asked about their experiences and their interactions with other owners.

And the results were interesting and mirrored what I had come to believe.

Before I started buying, or really as I was looking for my first property, I did some informal research on what were the most frequent problems that rental property owners faced by talking to a bunch of them. Not surprisingly, once I sifted through all the whiners and bad owners and ferreted out the successful ones, the responses came in two relatively narrow categories:

1.      Plumbing clogs and other minor maintenance items

2.      Major items in the house not working – furnace, a/c, water heater, roof leaks, and plumbing leaks.

The first category – minor maintenance items – was easily addressed in the lease agreement that I created, such that I have received exactly one call on these types of things in a little over four years in this business. And a gentle but firm reminder was all that it took to ensure that there wasn’t a second one from that tenant.

I also easily addressed the second category as well – in my purchase criteria.

Because of category #2 issues, from the beginning I have pursued a “strategy” of making sure that all of my rentals had bullet-proof mechanicals by the time that they were ready to rent. Since that was the cause of most tenant calls, I figured that the best defense was a good offense. And this has actually been pretty easy do accomplish up front when I buy a property because of the huge number of rent-ready homes that are listed for sale right now.

So nine times out of ten I don’t even consider a property that needs any of these systems updated.

And the result? One water heater failure in a little over four years. And that one was a fluke – it was only three years old.

So back to my original question – where do people get the impression that owning rentals is all about “tenants and toilets” ? (that phrase cracks me up by the way)

Maybe those folks all know someone that “tried it” without knowing anything first?

Who knows. All I know is that it’s the same old story almost every time.

What if I could show you a way to easily find, meet, and network with a few dozen out of state real estate buyers and investors?

What if I could show you a way to network with national business reporters and get exposure and possibly get slotted for interviews?

What if I could show you a way to network that is nearly effortless, but still completely effective?

Would any of that get your interest?

Of course it would.

One of the problems that I have is time (yeah I know – who doesn’t). Hyper demanding job consulting to one of the automotive manufacturers here in the metro area, four kids under 12, a stay at home wife, an ill mother living with us, boards, committees, volunteer work, kids sports, and all the rest.

And my steadily growing real estate business.

I simply don’t have any extra time. So for me, what falls through the cracks?

Networking.

I know that it’s a critical task. I know that it pays big dividends down the road. And I know that it’s an essential tool to help build and grow my business.

But I just don’t make time for it.

Part of it is that I have, as I call it, somewhat “underdeveloped” people skills. I find breaking the ice to be difficult, so when I think of attending a Real Estate Investor Association meeting, or some event that’s similarly large, I pass because I see it as a daunting task to break into a group that large and start to get to know people. Heck, I’ve been part of a 200 member mastermind group now for about two years and I still don’t know everyone.

Do you find yourself in a similar predicament?

Well I have found the solution. It’s called Social Networking using Social Media tools. And it’s absolutely changed the way that I look at and pursue networking.

Why?

Because it’s made the hardest part of networking (for me), the meet and greet, easy because it happens online. At my own speed and without any stress or drama.

At a basic level, think about how much easier it is to attend a group event – of any size – when you have a personal relationship built with some of the people that will be there.

At a more advanced level, think about how much more effective networking would be in large organizations (like REIAs for example)  if more people know more about each other. Think about what it would do for membership and attendance, and think what it would do for retention!

And now, thanks to Web 2.0 and the resulting FREE tools like forums, weblogs, wikis, podcasts, and others, we can build relationships online with people far and wide as we go through our regular daily routines.

This has certainly changed the way that I look at networking. And it’s already had a favorable impact on my business.

Real estate investors in Southeastern Michigan are severely underrepresented in Social Networking right now. Let’s change that. It’ll be good for all of us.

More about that particular tools that I use later.

Unbelievable. AGAIN.

I kept hearing how this commercial property stuff was different. But it seems like every time I turn around it’s gets more and more bizarre.

As you have read in some of my prior posts, I’ve been pursuing my first apartment building since the beginning of April. The seller has been a compete flake every step of the way.

He dragged his feet so much that I drew a line in the sand to either decide or I would cancel the deal. He couldn’t make up his mind so I canceled it two weeks ago. He came back a couple of days later and tried to renegotiate – for more money if you can believe it – even though he hasn’t had any other interest in the building since we started to dance.

I said no and have moved on to look at other buildings.

That was over a week ago. And guess what? The seller has decided that he’s not going to sign a release so that I can get my earnest money deposit back from the title company.

And here I thought that the commercial area was where the big boys played.

Instead I picked a third-grader to deal with on my first one. Brilliant.

So now I get to engage my attorney and go to court – just to get my EMD back.

So as Bugs Bunny says – of course you realize, this means war!

What a maroon.

I was out in Southern California visiting my “little” sister for her 40^th birthday two weekends ago, and as usual after a few cocktails out on the patio, the conversation amongst us siblings devolved into quoting lines from our favorite movies. (This is a source of constant bemusement bordering on irritation for our spouses, who for some reason aren’t into it)

Our favorite quotables include Ghostbusters (You’re right, Ray, no – human – would stack books this way), Weird Science (just let me know if you’re going to float an air biscuit), and of course, Pee Wee’s Big Adventure, which as EVERYONE knows is the source of the Alamo quote that I used as my title.

We had a lot of fun as always. I was telling the story to my kids when I got home and my youngest, who’s 7, chimed in and told me emphatically – “if it doesn’t have a basement Daddy, then you can’t buy it!”

I was a little surprised and I had no idea what she was talking about. Then she reminded me that “we don’t buy houses without basements!”

And she was right!

One of my primary criteria for selecting a property to buy and hold as a rental here in the metro area is a basement. And it happens to be only one of four criteria that is a non-negotiable deal breaker when it comes to my analysis.

Why?

Because families need basements to store all of their stuff. Because kids need a place to play indoors during the winter and also during the rainy spring days. And because sometimes we just need our space during long cold winters when we’re cooped up inside.

So a basement is critical.

Basements attract families. Families with kids. And in my experience families with kids are the most stable tenants that you can find. And if these folks have a basement to fill up with junk, then they’re that much more unlikely to move, because they’d have to move all of their junk to another basement somewhere else.

So to me a basement is a lure – a lure to catch what I call a “permanent renter”. And once they’re in, a basement serves as an anchor to keep them there.

After my wife and I got out of grad school with our newly minted MBAs from the University of Southern California, we high-tailed it out of Los Angeles to the Northern California town of Burlingame. This was in May of 1992.

At that time, Burlingame was a quiet little town with a slow and somewhat decaying downtown area – you know the type – three consecutive blocks of shops, restaurants, and offices not much different than you’d find in Northville Michigan or Monrovia California.

The only difference was that Burlingame had a commuter train station at one end of the downtown area that I used to commute north to my investment banking job in downtown San Francisco and my wife used to commute south to her Finance Manager job at Hewlett Packard in Palo Alto. And we walked to the train station together every morning.

The town had reached a sort of lazy equilibrium – no real action, 10-15% of the store fronts vacant, and you could find a parking spot on the street any time of the day or evening, even on weekends.

Then Starbucks opened.

Talk about a renewal program on steroids. In less than a year, every store front was full, and some of the old-time shops had closed and been replaced by new trendy ones, Some of the old buildings were even torn down, including the Mexican Cantina on the corner that my wife and I used to visit every Friday on our way home from the train for a margarita and basket of chips. That was replaced by a high-priced cosmetics store.

And by then you couldn’t EVER find a parking spot on the street, every restaurant had a line, and you could never find a seat in any of the coffee shops. Good for the town I guess, but in the process of transforming itself it lost every bit of the character that made it special.

A couple of years later we needed more space so we moved south a couple of cities to San Carlos. You know the story – a quiet little town with a slow and somewhat decaying downtown area . . . . .

And then Starbucks moved in there too.

And in less than a year the town turned into Burlingame – and lost all of IT’S character in the process.

It wrecked our little downtown. And so from that point we started calling it the Starbucks Curse.

What a shame.

I looked at the list of Starbucks closings and didn’t see either of these on the list. In fact when I was back in Burlingame last fall they told me that their store was in the top five busiest in the whole chain, and that it had been since the day it opened. So these two will likely remain open.

But otherwise this urban renewal program called Starbucks looks like it’s done.

And truthfully I don’t know if that’s good or bad – my heart tells me one thing and my head tells me the other.