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Category Archives: Strategies

What’s the Difference Between Distress and Motivation?

This whole village is for sale in New Zealand!

If you have almost $2-million available, have friends in New Zealand, and love the views as much as I do, this village may be the right investment for you. Check out the listing on OneAgency. They have lots more exciting pix.

You know we’re always looking for our next redevelopment opportunity. We’ve talked about distressed properties and the opportunities they present if you can look past their challenges. I’ve also talked about how the numbers have to make sense and we buy only a small percentage of the distressed properties we look at.

Why is that?

A distressed property is only one indication of what may be a motivated seller. The level of seller motivation rather than the level of property distress is the real driver of what makes a property we can buy.

Some of the things that may motivate an owner to sell include:

  • Physical distress arising from deferred maintenance or the inability to pay for needed repairs
  • Lack of interest in an inherited property or a second home the seller just doesn’t want to deal with
  • Landlord fatigue that comes from not understanding how to manage rental properties and tenants or when the landlord moves away
  • Financial distress arising form health problems, job loss, or financial mismanagement

In any of those cases we can help the seller overcome a (hopefully) temporary problem by buying their property and taking on the headaches they can’t or don’t want to deal with.

One of the challenges in our business is understanding the difference between distress and motivation. This article is one of the best example examples of how to tell the difference between distress and motivation. Here are a few salient facts if you don’t want to read the original article: Continue reading →

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More Trend-Savvy Ideas

Yesterday I wrote about some of the ideas and concepts we’re keeping in mind as we work on current projects and select new ones. It’s helpful to take the pulse of the world outside our own little bubble every so often. Sometimes the trends confirm our observations, and some surprise us.

Here’s a blank slate that a new buyer could do a lot with (our currently rented Villa Park main house).

What Do Buyers Want?

So, once we have the money and the people, and have a house ready to renovate, we need to think about what buyers are looking for, right? Well, a recent report from the Urban Land Institute gave us some intriguing information (the link takes you straight to the report). One of the trends it notes is that perhaps our drive to make houses perfect and “move in ready” may not always get us the sales we want. Like those of us who renovate for a living, many home buyers today would prefer to buy a house that needs some work and fix it up to their own tastes. (It’s shocking but true: not every buyer wants a blinding white kitchen and some even like carpet.)

Apparently, many are choosing to engage in very long-term renovations, which sound good, but may be hard on both homeowners and contractors.

What does that tell us? Champion Title says:

For realtors, advertising and emphasizing a property’s potential can prove to be a lucrative strategy. Buyers are increasingly showing that they pay attention to what a home may offer, instead of what it currently does. For developers and contractors, the shift towards larger-scale renovations means that price quotes should always include overage considerations in addition to any project-based flat fee — especially for time-consuming jobs like historic restorations or high-price residential remodels.

It might be worth considering making a house clean and livable, but not making any high-end upgrades that may or may not be to the liking of buyers. They feel much more comfortable taking down basic components and upgrading them. I know it hurts ME to get rid of a bathroom renovation I know cost a lot of money but I just can’t live with.

Continue reading →

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To Rent Your House, or Not? Part 1

It’s no fun to discover you inherited a house that’s upside-down (on the mortgage).

I read this really interesting article a few days ago that can be found here. We didn’t write it, but we have heard it before: the housing market crash in and around 2009 left many people with very few options.

The truth is that we never really know how the housing and job markets are going to go. With that knowledge we should all have a backup plan that is attainable before we sign that dotted line!

So many things can happen that make a mortgage unmanageable. This leaves homeowners with very few options, one being to rent their house out and find another dwelling that more meets their needs. Putting the house on the market to try and get out from under the mortgage is, I think, the first choice when you realize you just can’t do it anymore. Sometimes that is not a viable option depending on how much you owe, repairs needed, and the time it will take to sell it.

Considerations

There are some things to consider before you, too, become a landlord by accident.

Look at what your mortgage payment is, and figure out if you can charge any dollars over that for rent? You will need those extra dollars for repairs, taxes, and insurance. Anything that you charge over your mortgage payment cannot really be considered profit either. You will have additional expenses. Because of this, renting your house out will not immediately earn a very good living for you 99% of the time.

A Scenario

Let’s look at some fictitious numbers (because I can’t remember the real ones honestly, but I will get close) to help explain why renting may seem like a great idea, but may not be worth it in the end.

I’m going to use a scenario where someone was left a house that had a mortgage on it. Before they got the best advice, they went ahead and signed to assume the mortgage and take on the additional house payment. They had the credit to do it, and the mortgage company was happy to oblige rather than foreclose and put it on the market themselves. This is a typical situation that can make someone an unintentional landlord.

Continue reading →

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Some Thoughts about the Changing Real Estate Industry

Beware of 3D printers building houses! From a cool article in Business Insider.

We’ve been discussing lately the possible impact of the encroachment of technology in the real estate industry, especially artificial intelligence.  What are investors supposed to do when the process of locating deals (querying all the various lists out there for potentially distressed houses and homeowners) is taken over by AI or automated to the point where someone else always finds them first?  Is it going to render the humans obsolete?  Then I remembered a book I read once called What Every Manager Needs to Know about Economics.  One of the chapter take-aways was this – a robot can build a car, but a robot can’t drive a car.  (I know, I know – self-driving cars.  But the logic still holds.)

There may come a time when a bot or some software can identify potential properties faster than we can, but it’s still going to require a human to meet the humans involved and negotiate the deal.  At least for now, it will still be humans who do the repairs.  And houses will still be bought and rented by humans, who will live in them.

I think changes in how people make their decisions about housing is a more important (if less interesting) conversation.  As more and more people opt for other arrangements than the traditional single-family residence or duplex (think mobile homes, tiny homes, modular, manufactured, apartments), the same sort of dynamic is going play out in those areas.  The investors who don’t adjust their approach to this industry and expect to keep doing the same thing they (we) have always done, are the ones who are at risk of becoming obsolete.  But that will be because of failure to adapt to the changing behavior of humans, not because of technology.

As I was writing this, I heard this TED Talk.  Not exactly on point, but interesting –

 

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Fixing My Burnout. And a Surprise at the End of this Blog!

I couldn’t bear to look at my keyboard a couple of months ago. And it loves me.

Oh the lovely burnout we often experience with work and other activities that keep us on the move at a constant. I’m no life expert, but I have hit burnout many times. This last time was different, and I want to share why. I hope this will reach someone who finds my own experiences helpful. I will go over the last two. One that didn’t work out, and one that did.

Burnout #1. I had been a non-stop volunteer for several years at a nonprofit. I was constantly on the run. Very little sleep, wasn’t seeing my doctor, wasn’t eating right (I gained about 100lbs thanks to fast food), and generally was running on caffeine and fumes every day. No amount of sleep helped, because my soul was tired. I was also a full-time college student, with four kids, four dogs, and a household to manage. I was hitting 100 hours a week most weeks, and not seeing my kids or dogs. That was hard. I ended up crashing and burning HARD when the burnout hit, I couldn’t stand the thought of doing one more hour. I trudged on until the dread in my chest absolutely collapsed my whole schedule and world I had built all around me. I was powerless to stop it. I quit. I slept for almost two weeks, and I don’t remember a thing about those weeks. After some R&R, I felt better. I became myself again, started eating better, spending more time at home, and my soul was recharged! I have not gone back yet. I plan to, but now is just not the time.

How does this fit in with my work now?

Well, I will tell you! In May-June-ish, I started feeling that same overwhelming feeling. I felt the weight of the whole world I had built resting on me. My soul was tired once again. I thought, “Man, I need to take a vacation!” So I planned one for July. It fell through. Now what? Well instead of letting everything crash around me and quitting again, I took a long, hard look at why I felt this way. After I established that time was once again the culprit, I sat down with a pen and paper and mapped out a schedule. I also looked very hard at why I do this job every day. I looked at what all has gone on in my life the last couple of years that has led me to this place of burnout.

Continue reading →

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