Today for your Real Estate Graduate Call we had discussions regarding many areas that relate to real estate investing.
Rehabilitation Costs:
We talked about the typical areas to adjust for and itemize when it comes to planning what expenses could be factored in when analyzing a new property of interest. Beyond the normal areas that relate to the exterior and the interior of the property it was brought up in our discussion that one always needs to look for lead paint in older homes. David from Capital Region, New York mentioned that he has had a lot of experience with this in rental homes he has purchased in the past. He mentioned that one can look for rental homes that have any kind of flaking paint and to be very mindful that it could be a sign that lead paint could be several layers below. It takes a good scraping and repainting of the area. The intent is not to expose the old lead paint but to seal a new coat on top of it. Especially labor intensive is peeling paint on wood or other types of windows frames. One must also realize that different states and counties have different rules if the lead paint and be painted over or completely removed.
We also read an article that talks about a new trend. Many investors have paid a fee to stage a home for sale so the home doesn’t look as barren when a potential buyer inspects the home. But, a new trend is to pay temporary home managers to live in the home. This can give the buyer a real sense of a home feeling warm and inviting since it is clean but lived in with all of the amenities. This new trend can also spark a feeling that all areas of repair have been addressed knowing that the home managers are using all parts of the home and would have found any stray issues with the home.
More options to sell homes quicker:
NEW YORK (CNNMoney)
The Starres aren’t movie stars, but they live like it — for a fraction of the cost.
As home managers, Calvenn and Crystena Starre rent a $1.3 million home in Carlsbad, Calif., for just $2,500 a month — about a third of what it would cost normally.
They’re “hired” by Showhomes, a Nashville company that helps sell high-end homes. It preps the homes to look “lived in”… by finding people to actually live in them, at a very discounted rate.
Currently, there are 200 home managers, who reside in the home until it’s sold (it usually takes about three to six months). They watch for any maintenance issues and make the home look desirable (food in the fridge, clothes in the closet) for prospective buyers.
But not everyone can get the gig — Showhomes’ acceptance rate is about 40%. Residents must undergo online background checks, including criminal and rental histories. They’re typically white-collar professionals who are in a city temporarily, newly divorced or, in the Starre’s case, a family of five looking for a quick and easy rental.
With Showhomes, the Starres didn’t need to make a long-term commitment — they could leave their furniture in storage until they figured out where they wanted to live long term.
But what was a temporary move became a way of life. Over the past two years, they’ve lived in five different Showhomes — ranging from $900,000 to $1.3 million in value — all in the San Diego area. The amenities have included everything from tennis courts to pools.
“It’s a way to livein a really inexpensive way,” said Matt Kelton, chief operating officer of Showhomes, which has 58 franchises in 18 states.
But it’s not all a walk in the park. Showhomes has a number of restrictions for home managers.
“You can’t be a smoker, you can’t have a bunch of pets, no religious items — things that can deter [a buyer] one way or another,” added Kelton.
Personal items like family photos, sports teams and political paraphernalia are also prohibited. And then there’s the prospective buyers who could be surveying their home at a moment’s notice.
“We give up certain parts of our lives [for] the reduced rent,” said Calvenn.
They also have to move every time a place sells, with just about a month’s notice, and maintain a spotless home in the meantime.
“You have to keep it clean and model home-ish,” said Crystena Starre, a stay-at-home mom to her three kids. “We got to teach the kids, ‘We need to put things away.'”
For homeowners, Showhomes is piece of mind that costs just .5% to 1.25% of the list price (this can vary and decreases the longer a home stays on the market).
Radiologist Bernie Schupbach first worked with Showhomes in Fox Valley, Ill., when he put his home on the market six years ago.
“I was living probably 20 miles away, and it was hard to get down to check on it,” explained Schupbach. “There was always ongoing concern of a water pipe breaking or animal infestation or vandalism in the interim between visits.”
Schupbach didn’t have to worry about finding and vetting renters — or about the state of his home before it sold.
“We only communicated with [the home managers] if there was a problem,” said Schupbach.
Schupbach’s home was on the market for several years during the recession. It ultimately sold for around $500,000, and he had such a good experience that he employed Showhomes to stage his new home for buyers (which is the other half of the company’s business).
And while Kelton says one man was a home manager for 15 years, moving from home to home, the majority do it for a much shorter period of time because of the “nomadic lifestyle” it requires.
As for the Starres, the wealth of knowledge they’ve acquired from living in different San Diego neighborhoods has helped them narrow down where they want to put down roots. They soon plan to purchase their own home.
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