RentalsGuy

I’ve flat out ignored this blog for the past month (okay, month PLUS). Since my last post, I left Rentals.com and have started my own venture as a property management and leasing company here in the Twin Cities. I’m working with 2 other people - Barbara Wickstrand and Matt Jerome…both very capable leasing agents. It’s been my job to set up our web presence - including a Joomla-based web site that we just converted to Wordpress as well as a couple of different blogs about the industry.

Now that the bulk of getting those sites online and optimized has started to roll to completion, I should be able to find more time to write at this blog.

I originally got my Minnesota real estate license back in 1993. I was, in fact, in the very first graduating class at ProSource who learned about a new thing called “Agency” in which we were specifically taught how to represent buyers and sellers as different entities. With my background in contract law (I loved it in college) and the teaching I received at ProSource, I was poised to become one of the few agents who really understand how to “represent” their client. Up until that point in the early 1990’s, agents represented only the seller…but few buyer’s understood this because most agents FAILED MISERABLY at representing their sellers by promising the buyer to work hard for them. In fact, most agents were only representing their OWN interest — namely their commission check.

It’s amazing to me now, as a broker, how few agents STILL understand agency and how to represent their clients. Many agents claim to understand it…or have plenty of excuses for why they “bend the rules a bit” to make a deal happen. The sad fact is, that most many buyers and sellers have poor representation because the people who are supposed to be representing their interests are more interested in “putting together a deal” than actually doing what is right for the customer/client.

I’ve lost many deals…had them disintegrate before my very eyes…because I said or did something that informed one party or another of potential issues with the way a contract was written or the reality of what the other party was demanding and how it could negatively affect my client in the future. Many agents try to minimize problems or issues as “that’s just the way it works…” but that’s not upholding the fiduciary responsibility that is inherent in the contracts we sign with our clients. Put another way - many agents keep their mouths shut so they can get paid. And that’s plain wrong.

I’d like to think that Barbara, Matt and myself take a very ethical approach to doing business. We see a lot of really BAD situations. Deals that were just WRONG to begin with yet no one told the real estate investor just how ridiculous their purchase would be. This is especially when working with novice investors today…so many of them bought with zero or very little down, paid premium prices, and then got left out to dry in downturn of the real estate market here in Minnesota. So when we meet with these investors we frequently have to tell them some very bad news. I often have to say YOU ARE NOT GOING TO CASH FLOW - PERIOD. While the rental market is strong - so is competition. And just like any other product or service in the world, rental houses, townhomes and condos all have a fair market price that a consumer is willing to pay. Just because an investor’s (poorly thought out) mortgage is costing them $1500 a month does NOT mean the property can or will rent for $1500 or more. The market rate may only be $1100.

The same is true for rent to own property. It’s become the fashionable thing today to convince people that rent to own is THE solution their problems. The idea goes that the property you have today that you owe $200,000 on may only be worth $180,000. But if you do a rent to own you can get some down payment money today as collateral for a future sale date and sale price that is at or above what you owe because you schedule the purchase at a future date and assume market appreciate over the term of the rent to own (the option period).

This approach can and does work - for some. But it’s definitely NOT the answer for everyone. Many real estate investors don’t want to hear that they screwed up. That they bought high and now are in a position to sell or rent low. The truth hurts some times. A good agent is going to be honest with an investor - not try to sugar coat it or provide fanciful solutions that may or may not work. Rent to own is a case in point — whereby the agent needs to be telling an investor that it may or may not be the right solution depending on the financial circumstances. But anyone who says it will “definitely” or “most likely” solve an investors problems is probably blowing a lot of smoke. It’s something I don’t understand because I don’t think it’s beneficial to waste the seller’s time and money marketing a property that really isn’t marketable as the agent presented it.

There are a lot of great property management companies in the Twin Cities. I personally know many of the principles of these companies from my days at Rentals.com and Rentalhouses.com. They are good folks who sincerely want to help investors and landlord rent out their property. But there are just as many (if not more) property managers and management companies who literally run outside the law. The operate illegally and, often times, they are so uneducated about the industry that they don’t even realize they are running their businesses illegally. Other do, and figure the fines and penalties are worth the risk.

I’m excited to bring my new company, Minnesota Rental Houses, into the market. I hope that, along with the many other great property management companies out there, we will be able to elevate the standards and the expectations of residential property management and leasing companies. We’ve already joined the Minnesota Multi-Housing Association…and our plan is to eventually become part of the National Association of Residential Property Managers. Hopefully we’ll be able to join together with other NARPM members in the future and start a local chapter.