HAVING VISION

Can you see potential?  When you walk into a space, do you focus on what is or do you see what it might become?

Seeing potential is about being optimistic.  It is about visualizing the best case use of a space, rather than focusing on what the drawbacks are.  Seeing potential is easy in some situations, especially when someone has done the work for you.  It gets a little harder when you have to look beyond neglect, misuse, down right filth, and more. When you are willing to dive into things that normally frighten other people, that is when you know you can see potential.

For consideration, a house I just toured today.  My realtor's opening statement to me was that the house was filled with mouse poop.  Not the most appealing thing I have seen in a house.

Mouse poop is always exciting in your cooking areas, right? Who wouldn't love that?  Turns out, mouse poop was only the start.  The house needs a new roof, evidenced by moisture damage on most walls, crumbling ceilings, and rotting insulation.  The gutters are full (and growing their own small forest), it has cracks, weirdness, and more.  I was afraid to pull down the attic stairs; I just did not know what creatures might greet me. 

There were a few cracks in the foundation, the floors are not quite level, and on and on we go.  

HOWEVER...

Me being me, I did not really mind all that.  I saw a darling front porch (which I forgot to photograph but will!), wonderfully old solid wood floors, a large welcoming living room, gracious dining area, ceramic tile in the kitchen, a nice (although dirty!) tub surround, a large master closet, vinyl siding, new windows, thick window moldings, wood cabinets, walk out kitchen, laundry area, large attic and lots of charm.  The street is nice, and the location is lovely.  

So, while you don't want to underestimate the drama and cost of repairs (which could be a lot in this situation with water, creatures, and more), you don't want to limit yourself because things look scary.  Neglect does not mean unfixable.  There are houses out there just begging for someone to care for them and restore them to their glory.  This house was a sweet little house, calling out to become a charming home for someone.  

Don't be afraid. 

“Vision is the ability to see potential in what others overlook.”

— Rick Warren

So, did we make an offer on this water logged, poop filled house?  Sure did. Why? Because we see it as a charming home, just waiting to be loved. 

What do you see?

- Casey

Organizing Your Lease

Found a client to rent your home!  Check that box.

Yikes.  Now you need a lease. 

Creating a lease and organizing your paperwork is not as hard as you might think.  There are plenty of services out there that will let you customize your lease according to your state and needs.  We use EZ Landlord Forms for our homes as they have an array of forms and state specific topics. We don't rely on their free forms, however.  We find them too general and not state specific.  When it comes to getting things in writing, you want to be sure that you are up to date and complete with your state requirements.  Rather than becoming an expert in the ever changing regulations and laws, we have found it much more effective to allow them to stay up to date and us utilize their service.

When it comes to what pieces to include in the lease, it makes sense to review everything that is included by you and everything that you expect from the client.  Some often overlooked things might include:

• Pet Requirements - deposits, fees
• Clean Out Expectations
• Homeowner Contact Hours
• HVAC Filter Replacement
• Utilities
• Emergency Contact Information
• Parking Instructions
• Key Responsibility
• Surface Care (ie, Granite, Tile, Grout, Wood Floors)

The more your outline expectations, the easier it is for you and your client.  We like the simplicity of the online services.  Most clients are in the middle of a move and have a transitional address.  It wastes a lot of time sending a lease through the mail to your client.  With online forms, you can use digital signatures that allow you to create, send, and receive the signed lease all within a few hours.  Additionally, you then have a saved copy already to go on your computer.

Even though the services do help automate your lease creation, that does not relieve your your burden of being familiar with your state requirements.  Things such as security deposits, late fees, termination notice, and more all vary by state.  There are cues in place with automated forms to help you understand what you need to be familiar with.  We will cover that in greater detail in another post.

“You are far too smart to be the only thing standing in your way.”

— Jennifer J Freeman

Don't be nervous.  This is a lot easier than you might think.  In a matter of an hour, you can have a solid lease that is ready for your client.  You just need to do it!

- Casey

RENTAL HOME YARDCARE - INCLUDING LANDSCAPING IN THE RENT

Including yard care in the rent? You must be kidding?  Rental homes are already expensive enough!

Well, I am not kidding.   I do feel like I have a valid argument for why including yard care is an important service for your potential clients. 

We include routine yard care for all our homes.  This includes mowing, trimming, edging, blowing, and such.  Including yard care in the rent has several benefits for both the client and for the homeowner.

Primarily, by including yard care, you ensure your property's landscaping is well taken care of.  You ensure that the neighborhood says attractive and help your property values continue to rise.  You prevent drawing attention to the fact that the home is a rental property because it is continually manicured as if a homeowner was invested in the home.  All of these things help improve the neighborhood, deter crime, and hopefully will add to your property value over time.

Additionally, your clients are renting a home from you.  Clients that rent homes are more likely to be moving more frequently, have recently changed jobs, and are in a state of transition.  Many of them do not own yard equipment.  Often, potential clients will turn away from a single family home because they do not want the hassle of yard work.  You do not want to lose potential clients to an apartment or condo simply because they cannot or do not want to perform yard care.

Yard care is more reasonably priced than you might think.  We have several homes and our yard care professionals discount their work because we give them several homes to care for.  Additionally, depending on your climate and location, it might not be something that has to be done year round.  We service our southern NC homes twice a week from about March through October.  We usually include a leaf blowing, gutter cleaning, and hedge trimming in there as well.

Finally, if you have someone staying on top of your landscaping, you will avoid the negative connotations of having to bother your clients to keep up with the yard.  Negative interactions as a whole are bad for your relationship with your clients.  You will also ensure that there are minimal costly "whole yard" landscaping renovations once your client moves on.  This can often add up to more than the landscaping over the course of the season would have amounted too.  Even if it means an adjustment in your asking price, landscaping will be a huge benefit to the client and to you.

Clients love it when landscaping is included in the rent.  Often, they cannot believe it when I let them know.  I think it is important to think about what makes life a little nicer for your client.  Landscaping care not only improves their quality of life, but it will improve your stress and neighborhood appeal as well.

- Casey

SETTING A RENTAL RATE

650? 1000? 1500?

Utilities? Yard Care? Pet Rent?

Yikes! Where do you begin? 

Spinning from the last post about the 1% rule, we already know that the house needs to rent for approximately 1% of the total purchase price of the home.  So, using our last example, if the home was $100,000 to purchase, then the home needs to rent for $1000/month.

You have to understand your rental market to know if your home can command this price.  This is where you must become a student in your market.  You need to invest time researching your market.  There are plenty of rental sites to choose from.  One of my personal favorites, is zillow.com, but there are plenty of them to choose from.  Look around the area you are considering purchasing your home.  What are the going rates?

You'll quickly find that it is hard to compare.  Some homes will have the same number of bedrooms and bathrooms as yours, but yours might have additional rooms that offer more square footage.  Some homes have better or worse finishes than yours, such as granite verses laminate counters in the kitchen, or a master en suite bath verses a shared bathroom.  The list of comparisons can be daunting.

Comparing homes can be difficult, here are some fairly tried and true rules that I have learned that allow me to size up the market and the competition.

• Number of Bedrooms
• Number of Bathrooms
• Quality of the Kitchen and Bathrooms
• Overall Square Footage
• Yard
• Storage

Let me preface this by stating that we rent mostly historic homes.  These homes are in an area that particular streets are more desirable (less traffic) and yard size is often small (thus, more private, larger lots, matter).  Additionally, historic homes traditionally offer storage challenges, so when a historic home offers storage, this is a big advantage.

That stated, people overall care about having a nice space/street to live on, some place to store their holiday decorations, and enough space for their family.  They also care about the amount of bedrooms and bathrooms.  The price of the home is usually most dependent on the number of bedrooms, more than bathrooms, but no one will complain about having additional bathrooms!

People care about kitchens and bathrooms and the quality of the finishes.  Depending on your market, the level of quality can change.  However, across the board, attractive surfaces, cared for appliances, and nice flooring go a long way.

When you put this all together, you can start to compare homes on a more equal basis.  Perhaps you have a very nicely appointed two bedroom home that has 2 bathrooms, a fully remodeled and upgraded kitchen, and a private, fenced yard.  This might rent for the same price as a three bedroom, one bathroom house that has a standard grade kitchen and one less bathroom, on a busier street with a smaller yard.

It is not simply the size of the home that determines the rent, but as importantly, the quality of the home.  Some people will sacrifice more space for better finishes; others will want that extra bathroom. When pricing your home, consider the competition in your size range and determine if you were looking to rent, where would home fall amid the available competition on the market?  Would your home be as nice as the others? Nicer? Less nice?  If you were looking to rent, consider what price would make your home a "no brainer" or "I need to call quick before this house is gone?"  That is the price you want to consider.  Something that makes a potential client act so they don't lose out.

We'll cover more on this in the future, but hopefully this helps guide you in determining a rental price for your home. Once you know your market, you can better compare what your home has to offer a potential client, and you can more accurately determine the best price.

- Casey

HOW DO I KNOW A RENTAL HOME WILL BE PROFITABLE? EXPLAINING THE 1% RULE.

The 1% Rule.

Ever heard of it?

The 1% rule is a quick and easy way to determine if your rental home is going to make you money.  This rule helps you know if your property will cash flow (ie, will you make money after your mortgage, repairs, taxes, insurance, and other bills are paid?).  Will there be money left for profit?

Here is how the 1% rule works.  If you can rent the home out for 1% of the price of the home, then it will likely produce income.  When you consider the total price of the home, you need to consider your "all in" price.  If the home is ready to go, then the total price is the home price and any associated loan or closing costs.  If the home will require any renovations, then the price is the purchase price (including any loan/closing fees) + renovations = total home price.

Once you have determined your total home price (let's say for ease of math that the all in home price is $100,000), then you need to be able to rent that home for 1% of that price, or for this example, $1000/month.

If you can achieve that ratio, then you most likely will end up with a profitable rental home. 

Some people are more strict, and opt for a 2% rule to ensure a greater margin for profit.  Some rental markets are not as lucrative and 2% is harder to achieve.

What if your home doesn't meet the 1% rule?

Well, then you probably need to keep looking.  There are lots of reasons why, but let me give you the most obvious example that makes me strive to meet the 1% rule. 

Historically, a mutual fund in the stock market achieves about 7-8% returns annually.  When you invest in a mutual fund, you literally spend a few minutes making the transaction and then you move on.  You might spend a little time checking your investment, but essentially, it becomes a passive investment and does not cost you any additional time.

Therefore, if you are going to spend your time renovating, renting and managing a rental home, you should expect something more for your time than what you could otherwise achieve passively in the mutual fund.  You need to get paid for your extra effort and time.  If you can meet the 1% rule, you will likely see better returns on your money than what you'd see in good to average mutual fund.  You are rewarded for your additional work with additional returns.

This is just a brief overview into how the 1% rule comes into play.  There is a lot of additional math that does need to be considered, but usually the 1% rule is a fast and easy way to size up a property and see if it will work for you.  Many people are confused by the 1% rule because they don't understand why it matters; I hope that this helps break it down a little bit.

Have you purchased a home that meets the 1% rule?  Do you consider the rule when you are looking for rental homes?

- Casey

INVEST IN YOUR COMMUNITY

One of the best ways we have found out how to make our homes more appealing and better suited to the market is through investing in our community.

Investing does not always equate money.  There are a lot of forms of investment that bring great returns.  Investing our time, talent, and treasure in our community has expanded our knowledge on what our clients are looking for, and how we can better meet the needs of those we serve.

For example, we are active in several community organizations, community parks and recreation activities, religious organizations, and the local arts community.  We attend local events and socialize with neighbors.  We do our best to lend a hand in organizing neighborhood socials, events, and groups. 

Participation in these activities not only allows us to grow as a family and as individuals, but we engage in discussion that educates us on the frustrations and limitations of our community.  We also learn about plans that are being developed to improve the community for expansion and growth.  We hear the needs of the area, the highlights of the neighborhood, and see the direction things are moving.

While this may seem lofty and unimportant, it is anything but.  If you understand where your community is headed, you can be wise in your financial decisions about how to invest your money.  For example, if you know your city is about to embark on a downtown restoration project where they plan to highlight historic projects and preservation, then you have an idea that land and homes in that area will likely appreciate with the investment by the city.  Now might be a time to look at the adjacent properties that might be currently undervalued so that you can invest early. Likewise, if you learn the city plans to expand a major operation and relocate it to another area of town, this could move jobs out of your area and relocate them.  Property values can be affected as the demand for your location might decrease.

Concurrently, you can also learn about what people like and dislike about their current homes and neighborhood.  Are they craving more space? Better quality appliances? A nicer layout? Improved maintenance? The list goes on.  Whether they rent or own homes, they have something to share and you get a sense for what is trending in your area now.

Understanding your community is imperative to understanding how to optimize your rental.  knowing the needs and plans of those around you will help you better serve your clients and ultimately result in a better place to live for you and them.  Even small, local investments of your energy, talents, and money can offer great returns both socially, mentally, and physically. 

What have you learned about your community this week? Does it spark an idea that you might be able to act on? What might the result of your action bring? I'd love to know!

- Casey

Quick evaluation of a potential rental property investment

One common question: What am I looking for when I tour a potential investment home? 

Good question.  There are lots of things to look at when you consider a purchase of a rental home, but let me give you my quick list that I have created for a fast evaluation of a property for purchase.

I tend to focus on the "big guns" first. I look at high dollar items that will quickly add a lot of cost to the transaction.  Here are the things I typically inspect:

ROOF

• How old does it appear? Most roofs last 15-30 years depending on the shingles
• What type of shingles are there? 15 year flat shingles? 20 year? 30 year architectural shingles?  The more expensive the shingle, the longer it usually lasts.
• Do the shingles appear well intact? Any dents? Any ruffles? How is the flashing?
• Roof angles and pitch - the simpler it is, the cheaper it is to redo.

WINDOWS

• Have they been replaced with vinyl?  On historic homes, old windows can be beautiful if in good condition. Equally, they can be a disaster if they are spent.  Drafty, high in cost to maintain, dysfunctional and difficult to use.  They are also fairly expensive to replace.
• How many windows? This can add up quick if there are a lot
• How big are the windows? You guessed it, the bigger they are, the more they cost to replace.

HVAC SYSTEM

• How old is it? Look for a date on the machine.  That date is usually the date it was made, not installed, but it gives you an idea.
• Older homes often have additions. Are they ducted for central heating and air, or are there window and electric heating units?  It costs money to re-duct systems, and often, there are difficulties with tight spaces to do so.
• Does it work? Check the thermostat and see what the response is.

FOUNDATION

• Do a quick round about look.  Do you see crumbling?  Shifting in the brick or blocks? Do you see "step cracks"?  These are cracks that follow the bring stacking line and zig zag up the brick.  These can be signs of serious issues.  Though anything can be repaired, the question becomes what the cost will be?

KITCHEN & BATH(S)

• Surfaces - what countertops are there and what are their condition?
• Appliances - condition, age, functionality, style?
• Shower and Toilet - condition, style, and function (make sure the water is on at the house before testing that)
• These are things that quickly add up to high spending if they are dated.

FLOORS

• Are there hardwoods?  Big bonus if there are. Hardwoods are expensive, but their condition matters too.
• Ceramic tile?  If well done, this material can outlast a lot of other floorings, but can also become dated fast.
• Are they level?  In older homes, you can expect some settling of the floors and this is forgiven.  However, some settling does not equate floors that are all over the map.  Usually, if you see very uneven floors in a home, there is a chance that the foundation is compromised or there has been a water incident in the home and there could be rotted joists beneath the floor. Both are very costly to deal with.

I hope that helps give you some insight in how to quickly sum up a property in terms of financial risk to invest.  Clearly, this is a minor overview, but it is my "go to" list to quickly tally what a house might take to make it a home for someone special.

Seize the day and we'll talk soon!

-Casey

The Birth of Haymount Homes

Welcome!  Today is the first day of our website.  We are proud to be moving into the online space and we hope you'll become our fast friends.  A little about ourselves, we are a family of six (well, seven if you include our dog) and we are a proud military family in Fayetteville, NC.  Fayetteville has been home to us for nearly 14 years and we have embraced the southern charm of our historic neighborhood, Haymount.  We don't believe there is a better place to call home and we're excited to welcome you to it!