Help!! Can't sell or rent my own house!! - Posted by Barbara

Real Estate Investing Vacation Rentals
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Posted by Barbara on April 30, 2005 at 15:38:46:

Frank;

The idea of converting the family room back to a garage is a good one but the building department says that I’d need archtect’s plans in order to get a permit and it could take months. I didn’t think I’d need a permit since it was a garage to begin with but I do. As far as a master suite is concerned, I agree that it would be good to have but I don’t have the money (or time since the current tenants are moving at the end of the month and I need to do something with it soon).

You’re absolutely right that in this price range people want to keep their nice cars warm and dry but the agents I’ve spoken with seem to think that $899 to buy (or $4400 to rent) are very different prices from the one million dollar homes that have everything and are perfect. I’m not sure I agree with them…what you’re saying makes more sense to me…if they can afford 900, they can afford a million and if they can afford 4400, they can afford a thousand more. Thankfully there are no other rentals on the market in this price range so I will probably be able to rent it but my fear is that the market will drop in the coming year and I’ll still have all the same problems but the house will be worth 100,000 less.
An appraiser I know said that many of the older homes (before the 1920’s) have no garages and there should only be a 25,000 price differential. Maybe so but in reality I think it will be much more and the house will be harder to sell.

Sorry for all this rambling. Thank you for your time and your good advice.

Barbara

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Help!! Can’t sell or rent my own house!! - Posted by Barbara

Posted by Barbara on April 27, 2005 at 20:38:14:

I’ve had the good fortune to see the house where I raised my kids appreciate a lot. It’s been rented out for the last few years (I live in a much smaller place) and the current tenants are moving out 5/31.

It’s a nice, big house but there’s no garage (a big drawback here). I gave it to an agent to either sell ($900,000) or rent ($4,500)…in this part of the world agents run the show. It’s been on for a couple of months and not one offer to either buy or rent. I can’t come down too much in price because I’m highly leveraged. I feel like the “motivated seller” we’re all trying to find.

My question is…can I do a “rent-to-own” in a high-end market? Does anyone have any other ideas? I’m starting to panic.

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Re: Help!! Can’t sell or rent my own house!! - Posted by JA

Posted by JA on May 01, 2005 at 02:23:53:

My suggestion is to look into corporate leases or corporate rentals. Just use your favorite search engine (google or metacrawler.com).

If your house has certain amenities and is near some sort of business activity this is a good prospect.

Is your property near the shore or golf course? - you get the idea. Vacation rentals can be very lucrative.
Sell an option to have the property for rental to a travel agent. Or rent it out yourself. take some prebookings with fee to cover months before the busy season. I was told of an investor that was buying 500K homes(mansions in those parts) along the North Carolina shore. He was making a lot of money renting the props during the summer season alone. Enough to carry the props vacant for the remainder of the year.

I agree with Mr. Chin - No one really wants to come out of pocket with $4500 because they had to get to the property thru a real estate agent. Advertise the property yourself and even state, “No fee”.

To sell it you could hold a second mortgage (after paying off underlying mortgage) for someone with excellent credit. Put the deed in escrow for added protection if possible.

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Re: Help!! Can’t sell or rent my own house!! - Posted by Pookie Wookie

Posted by Pookie Wookie on April 28, 2005 at 17:09:12:

I’ve been looking for a house that’s selling for around $1,000,000 which doesn’t have a garage…

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Re: Help!! . . . . - Posted by Mary in CA

Posted by Mary in CA on April 28, 2005 at 13:15:27:

Just out of curiosity. Have you considered adding a garage?

Mary

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More info on the house…and thanks to all - Posted by Barbara

Posted by Barbara on April 28, 2005 at 08:10:29:

Thank you all for your responses to my situation. Kristine asked for more info so here goes…

I’ve been renting the house out for three years…1st year at $4500, 2nd year $4500, 3rd year $4600 (2nd and 3rd to same tenant.) We put it on a month ago at $4700 and then lowered it this week to $4400. Looking on realtor.com and at the local agents’ websites(Chappaqua, NY) the rent seems right and there’s almost no competition. The agent tells me that with interest rates so low, people in this market are buying rather than renting. But…I don’t think they’re advertising it as a rental and after reading your posts I realize that I need to insist that they do. It was also a very good idea to offer first month free. Frank…as you know in the Westchester rental market, owner pays agent’s fee so they’d be coming in with first and security (9,000). That’s why I started thinking about finding a tenant-buyer but wasn’t sure whether people in this price range did rent-to-own.

David says 60-90 days so I think I’m letting the agent pressure me. It’s only been on for sale for three weeks at $949 and I lowered it to $899 the other day. How did we arrive at those prices? Six agents came in last months and did comps and they recommended prices ranging from $870 to $970…we chose to go with the higher. (950) Appraisers in our area are not as good as agents in determining market value because their comps often go back six months and might not accurately reflect current pricing.

The problem seems to be that this isn’t your typical center hall colonial with basement and two car garage. It has neither basement nor garage. It’s a charming house in excellent conditions on an acre in a lovely neighborhood. (new bathrooms, new kitchen, technically a 3 bedroom but really 4, three baths, walnut library, family room, formal dining room). There are several pics on the agent’s site…www.pruholmesre.com…mls # 2506860. The rooms are very large but the layout is a little strange…you either walk into it, as I did, and say what a terrific house or look at it and say “There’s no way I’d live here.” So the pool of potential buyers is relatively small.

You’re right, David, when you say that the market dictates the price, not my expenses. But the thing that’s making me nervous is that no one even made an offer at $949. The agent says that dropping it to 899 will attract a different set of buyers.

One of you mentioned not to miss the spring/summer market and I agree. The current tenants are there till 5/31 and might extend for another month. I can afford to carry it for a while with no tenants but not for very long.

People in my area might rent directly from the owner but it’s not likely. They almost never buy from the owner…I think they’re suspicious of FSBO’s and the agents will kill the deal anyway since virtuaally all buyers are working with an agent. Three years ago I tried to rent it myself…about 30 people came through and no offers. A few weeks after I gave it to an agent, she rented it.

My agent says she’s “getting nervous” because there’s been no action and that’s getting me nervous. There was an open house (maybe two?) and I think around 20 buyers have been through it. But at the lower price, maybe they’ll be some action. The agent says that the “perfect, white bread houses” are “flying off the shelf” but the others are sitting. How long should I give it at 899 before lowering it again? I don’t want to miss the sprin/summer markets.

I’m thinking of refinancing with an interest only arm to lower my payments and move back into it myself and try to catch another year or two appreciation (assuming the “bubble doesn’t burst”) but the house is really much to big for one person.

I might try rent-to-own but I wouldn’t know how to structure it in this price range…rent? rent credit? sales price? option fee? I have no idea.
I’m truly sorry for this very long posting. Thanks to Kristine (looked for you at the convention), Frank Chin, Frank, David and the others who repsonded.

Barbara

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I’ve only been renting houses for 4 decades… - Posted by David Krulac

Posted by David Krulac on April 28, 2005 at 06:46:07:

I agree with previous posters. Even not knowing the area, “Any property that has not sold in 60-90 days is overpriced.”

  1. the amount of your debt on the property is not a relavent factor in determining either the price or the rental amount. The market will tell you the price and the rent. And they have told you “loud and clear and in one voice” your price and your rent are too high.

  2. You can easily determine market rent by calling ads in the newspaper and calling on signs on properties for rent. Here the prime selling and rental market is April to September. Do let that prime time slip away becasue you have your property priced too high both as a sale and as a rental.

  3. To determine the price I would hire a competent PAID real estate appraiser. around here that’s $300 or so. IMHO that’s money well spent. You may not like the value the appraiser comes up with, but it will probably be less than $900,000 and closer to what an actual buyer will pay.

  4. $4,500 rent is on the high side in most markets, perhaps not in yours. From an investmentment point of view $4,500 rent on a $900,000 property is inadequate IMHO. I look from property where the rent is 1% of value per month or BETTER. A $900,000 property in my world should rent for $9,000 a month or I’d be selling not renting.

  5. On average Americans pay about 30% of their income in housing. So at $4,500 a month you’re looking for a person/family that makes about $180,000 to $200,000 per year. Target your rental/sales marketing to that market segment. Contact large employers in your area that employ people that make $200,000.

  6. If you require first, last and security, a prospective tenant would need almost $15,000 just to rent from you. That could also be a roadblock to renting. some prospects won’t have $15,000 CASH and other who do have it won’t want to give it to you. Since you rental/sales market is obviously soft at your prices, that will give the tenant/buyer an additional advantage in any negotiations, putting you at a disadvantage. By the lack of response its obviously a buyer’s market for you property.

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Re: Help!! Can’t sell or rent my own house!! - Posted by Frank Chin

Posted by Frank Chin on April 28, 2005 at 04:57:51:

Barbara:

I got a SFH in Long Island NY that’s been a rental for over 20 years. While I rented apartments using RE agents, I had not been succesful using agents for this rental.

In fact, the way I do it, I give the agents a 3 to 4 week head start on it, by letting them show the place 2 weeks before the prior tenant vacates to thru the painting and repair period, about another two weeks. I tell them that after the place is painted, fixed, I’ll market and show it myself as well.

Most agents agree to this because none will think or admit that it’ll take more than 4 weeks to rent the place.

I find thru the years in my area that there are two types of renters. One type would only approach owners directly because agents charge ONE MONTH’S rent to the prospective “tenant”. Is that the case in your area?? I’m in NY, but in MA where I also own rentals, the LANDLORD pays the agent’s fee.

Another type of tenant only goes thru agents. This is a smaller group but these include people relocating from out of state, business owners, people with limited English, and some cases people too shy to do it themselves, often older retired people.

I find people looking on their own currently outnumber those using agents 10 to one. The BIG reason cited is the ONE MONTH fee charged by the agent. Rent for my SFH is $2,200/month, and renters find it hefty in addition to the 1-1/2 month security I charge.

Barbara, are you asking for security too?? And if the tenant pays the fee, PLUS the first months rent, how much out of pocket moving into your house??

I recall a good example.

I placed an ad to rent the house on a father’s day weekend. I had over 20 people coming over, and about 12 applications. I had a fight among the top 3 applicants. My wife was afraid it’ll be slow because it’s “father’s day”.

The local agent also had an ad in. They’re not spending any more or less to market my house because their ad normally says:

Rentals available 1,2,3 BR apartments. Houses for rent.

While the agent bought one or two applicants per week the weeks prior, she said no one called about houses on that father’s day weekend.

Barbara, there might be several reasons for your problem, and I suggest you get the local papers to see how much competitve units go for, and visit some of them if you can. ALso, either you, or ask a freind to call local agents to find out how much they rent they ask for.

When we did this some years back, and ask them about renting out my house, agents will tell me, “I can get $2,200 rent for your house”. But if I had a freind or my wife call the very same agent later and ask how much houses go for in the area, the answer would be “you can get a nice place for $1,750”.

My wife was a RE agent doing rentals once. She tells me that while its true the agency has a range of rentals available, they’ll bring people to see a high price rental to first as an example of a high price rental. Then they’ll bring people to see the cheaper one and exclaim “this place is about the same as the other, and is so much cheaper”.

When I asked why some places are overpriced, she tells me owners tell the agency they want at least so much because they have to cover the mortgage.

Barbara, a lower rent, NO agent’s fee, free first month’s rent etc. would get you the tenant you need.

Frank Chin

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Re: Help!! Can’t sell or rent my own house!! - Posted by dealmaker

Posted by dealmaker on April 27, 2005 at 21:30:24:

I agree 99% with Christine. If there’s been NO activity in 60 days, the price is wrong. It may be wrong for the lack of garage, may be wrong for time of year, may be wrong for side of the street. But if you offered it for ONE DOLLAR, you would have takers. Somewhre between one dollar and 900K is your number.

More likely the agent isn’t doing their job. Ask them to show your their marketing plan, and what they’ve done so far. If not happy, cancel the listing agreement and get an agent that’s on the ball.

BTW, in my book a 900K house that only rents for 4500/month isn’t a good rental.

dealmaker

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Re: Help!! Can’t sell or rent my own house!! - Posted by Kristine-CA

Posted by Kristine-CA on April 27, 2005 at 21:24:22:

Barbara: I live in a similar market (I’m in Santa Barbara). In fact, I
thought maybe you were my landlord but then I remembered that we
have a garage. Actually I shamed the property mgmt company/
landlord into using a garage door to prop up the shed in the back
alley–we started calling it the garage.

I’m curious about your rent figure. Is $4500 market?? Even here that
is one hefty number for a house w/o garage (unless the property has
luxury amenities or acreage). Also, if you haven’t gotten one
offer…something’s not quite right. You are either: overpriced. Or
the house really isn’t listed. :slight_smile: Is your agent experienced? What are
they doing to generate interest?

Agents DO NOT run the entire show–anywhere. The majority of the
show, you bet. Remember agents are in the business and spend
mondo bucks to make you believe that they run the show and that you
can’t live without them. So, what does that agent that you can’t live
without say about no offers and no takers on the rent? Is the agent
giving you advice you are not listening to?

Tell us a little bit more. What’s the market like? What the real FMV of
the house (as in what it would appraise for).

Of course you can rent to own in a high end market. I’d take your
house in a second if the terms were right.

Please share more and I’m sure we can brainstorm ways to help sell the
house. But if it’s just that it’s overpriced…well, nobody likes to hear
that as a reason…Kristine

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Pookie you’re in luck… - Posted by Cletus

Posted by Cletus on May 01, 2005 at 15:02:16:

I found a house in Compton, Ca. that you can pick up for your $1MM that will meet your needs, (no garage, exploding frogs, etc.) I’ll email the details…

:o)

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Re: Help!! Can’t sell or rent my own house!! - Posted by Barbara

Posted by Barbara on April 28, 2005 at 18:11:44:

Thank you…a very helpful posting.

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Re: Help!! . . . . - Posted by Barbara

Posted by Barbara on April 28, 2005 at 16:18:52:

Mary,
Because of the bedriock around the house, putting up a garage would be possible but difficult. Agent has advised that it would be better to come down in price rather than spend a lot (not sure how much “a lot” is) on a garage. The other option would be to take the family room and turn it back into the garage that it once was…which would make the living space smaller but it might be worth the expense. Maybe a carport would be almost as good as a garage.
Thanks,
Barbara

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Re: More info on the house…and thanks to all - Posted by SKI

Posted by SKI on April 28, 2005 at 19:55:56:

Ever consider a round robin or an auction. These seem to generate a lot of activity here in sunny SWFLA.

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This should be an article! - Posted by Clint

Posted by Clint on April 28, 2005 at 05:55:41:

Great advice Frank!

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Re: Help!! Can’t sell or rent my own house!! - Posted by Nate Andree

Posted by Nate Andree on April 28, 2005 at 05:39:24:

Hey folks,

Great discussion here. I wanted to throw my two cents in on how to sell the home instead of renting. Did you ever think about owner financing the home? By offering owner financing you will attract more buyers or heck even more l/o candidates cause they might not qualify through traditional financing or they don’t want to deal with the bank or lender. There are many options with owner financing and its dependent upon what your goals are. You can take back the first position note and carry it for a nice cash flow for the set term that you have agreed to with the buyer. Or you can also sell that “note or carried back paper” to a note investor 6 months, a year, or however long down the road. Orrrrrr, you could do an owner financed deal where you get 5-10% down, carry back a first position mortgage, and then sell that note at closing to a note buyer for a small discount and walk away free and clear. There is more that goes into this type of transaction which is called a simultaneous closing but that is it in a nutshell. Again this is not for everyone but its a creative way to do it on your own. No banks, no lenders, no realtors. Just you and the buyer. Some people like the support factor with a realtor and the comfort of having someone else doing the work. You can save alot of realtor fees and still sell your home quickly by offering owner financing. Hope I didn’t step on anyones toes here. Just thought I would expand the discussion. Thanks,

Nate Andree
Investment Solutions
920-428-9858
natejen@new.rr.com

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Re: Help!! . . . . - Posted by bob

Posted by bob on April 28, 2005 at 17:01:39:

When you received the comps, did those properties closely match yours, as in no garage or basement? Those two factors alone would be enough for me not to consider your house. (If everything else was relative) I think you should do either one or both of these: Lower the price to reflect no garage/basement or return the family room back to the garage as you stated earlier. Just my .02 cents and much luck to you in the sale.

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Re: More info on the house…and thanks to all - Posted by Barbara

Posted by Barbara on April 28, 2005 at 20:08:05:

Interesting idea but I don’t think house auctions are legal in NY…at least I’ve never heard of them except in the case of foreclosures. But even if we did have an auction, I don’t think people would be bidding very high since we haven’t gotten any offers at all.

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But how much are a garage and basement worth?? - Posted by Barbara

Posted by Barbara on April 28, 2005 at 18:49:08:

Bob;

You’re right…in this price range I wouldn’t buy a house without a basement or garage either. The agents figure (and I agree) that if it had a basement and garage we could ask $940-950 and get maybe $920-930, give or take a bit. Taxes are about $14,000.

The question is…how much are a garage and a basement worth, or…how much less should I be asking without them??

It’s so important to price a house correctly or it will sit and get stale but the agents don’t seem to have a clue how to answer this question.
Do you have any ideas?

Thanks,
Barbara

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Re: But how much are a garage and basement… - Posted by Frank Chin

Posted by Frank Chin on April 29, 2005 at 07:47:57:

Barbara:

The SFH I mentioned earlier had a den with fireplace which was originally a garage, and no basement. Being a corner property, it also has a small back yard. So I am well aware of the downside issues involved.

I agree that not having a garage or basement would be an issue for someone paying over $4,500/month in rent, has nearly $9,000 on hand just for move in, and earn in the range of $200,000/year in order to afford the place.

Someone who can afford $4,500/month can just as easily afford $5,500 or even $6,000/month. So, it might as well be a $1.1 million dollar place just right, instead of a 850K place with so many things wrong with it. If I pay this amount of money, the place better be JUST RIGHT.

Fortuntately, for me in Long Island, where SFH rent for at lease $2,000 and up, I rented my place out this time around for $1,775.00. Pricewise, I positioned it as something immediately above a 3BR apartment, renting in the $1,600 and up range.

This is because a 3BR house usually does not come with a basement, in most cases no garage, no yard, and usually one parking space. My SFH, even though has a small yard, at least has a yard, has a driveway widened to accomodate four cars, plus 8 more street parking spaces. I provide a storage shed, plus attic space to store stuff to make up for the basement. Three BR apartments don’t come with sheds and attics either.

One advantage of doing FSBO, or showing the place for rental yourself is to be able to get the reaction of your customers. You said you did it yourself once, with 30 lookers. It would be nice it you can find out what other places these people are looking for.

As to lowering the price to accomodate the lack of a garage or basement, if these are essential items in this price range, then you’ll have a lower it a great deal. On the other hand, if you can revert the family room back to a garage, retrofit the place to provide plenty of storage, you might have a chance.

Another feature that I find appeals to people is a large master bedroom unit away from the other bedrooms. This feature appeals to people needing a unit for their parents, be futher away from teenage children, or even a home office, and if done right, an office separate from the house that one can receive visitors.

In other words, make an appealing feature that diiferentiates your property from the others.

Frank Chin