Real Estate Question

[MDZ]

Okay, it has been a while since we had a real estate discussion on here. Since one never knows who has joined our ranks since then, I thought I would post up a question of mine.

I don't know if any other parts of the country are having this problem, but in Grand Rapids and the surrounding areas, there are a lot of "spec homes" sitting empty. A "spec home" is short for speculation home, and basically it is a home that a contractor builds without having a buyer lined up. They will usually build them when they are slow on work, with the hopes of someone coming along and buying it when they are done. For the builder it helps make their work steady.

The problem that has developed, and that is too many spec homes not selling. There are many nice, new homes just sitting around, and I imagine that some of the builder are getting short on cash. It seems like there has to be some solution for this problem?

One idea that I have came up with is creating some sort of property management program that the builder could put the home into. Someone could manage the the business completely, and the builder could at least make some money. The rent could be lowered for the tenant with the understanding that they would have to keep the house ready to be looked at if they get a 24 hour notice of a potential buyer walking though. The builder might loose the "brand new" aspect, but I think that sooner or later, some of these builders are going to run out of options.

Not looking to solve the problem necessarily, but more looking for discussion and ideas.

[MDZ]

I like the idea, but I don't feel that there are enough people who would be interested in taking a lease option on a house. I guess you could make it an interest only option, with one balloon payment at the end.

[Cassandra]

In my area, I've witnessed the buy market and the rent market are very closely aligned. I mean, either there are people looking for a place to live in the area or not. While I agree it's possible that there will be somewhat more people who want to rent than want to buy, the main issue seems to be an over abundance of housing. This can't be good for the market, just considering the law of supply and demand.

Cassandra
(a property manager)

[MDZ]

You are a property manager Cassandra? Where are you based out of? How many units do you manage?

In my area, there is the trend of building new houses, and the trend of restoring properties. Also, Michigan has been hit by the problems of GM, Ford, and Chrysler. So I agree with the over abundance of housing. Sooner or later, something is going to have to happen with these abundant properties.

I will be out of town until the 13th, so don't feel bad if I don't reply right away.

[Cassandra]

Yes, I manage about 40 units (houses and apartments) in Mississippi. When something comes vacant (which is more likely than not through eviction, not because the tenant just wants to move) I end up with probably 10 applications for one vacant unit. Probably only half of those can I take seriously, though. The other half aren't completed correctly, the income is way too low or there's no references for me to call. So, five good apps to check for each property.

I was living in Baton Rouge, LA for a while (wasn't managing property there.) But apparently there was an overabundance of housing there at the time, because I saw big billboards and ads up all over the place from the big apartment complexes talking about "2nd months rent free with 1st month plus deposit" or other incentives like that. You can bet that doesn't happen when there's a housing shortage.

Cassandra

[efex77]

Hi Cassandra,

You are right about your appreciations on the house market.
In my country seems that we are begining with the house market boom so that means opportunities for services like yours (property management)
As I don't know anything about this area, could you please tell me how does a property manager charges for his work? Also, what are the things he has to manage? tenants, rents.......?
Can u recommend a good reading about this?

Thanks in advance

[MDZ]

Cassandra,

That is really interesting, is that something that you do on the side, or is it full time? Also, how did you get involved in an operation like that?

[Cassandra]

efex77, I can tell you a little about how things work in the US, but I'm afraid that may be considerably different in Ecuador.

I am employed by the property owners (father & son), so I make an hourly wage. (I enjoy it a lot, though & I'd do it for less. but don't tell them, that!) But, from what I have read, property management companies usually charge anywhere from 3% - 15% of the amount of rent collected. With the most common amount being 10%. So, if you managed enough units to collect $50,000 per month in rent, your cut would be $5,000.

I'll list the things that I do as a property manager. If you open a property management business, you will have to design a contract with your clients (the property owners) that details all of the duties you will perform, such as:

Advertise vacant properties
Collect applications
Screen applicants
Fill vacancies
Collect rent money
Field maintenance calls
Dispatch contractors (plumbers, electricians, carpenters, etc...)
Monitor billing and pay invoices for all of the above
Take all nature of complaint calls
Contact tenants when a complaint has been lodged against them
See to the upkeep and appearance of the exteriors (nice looking exteriors attract better quality tenants.)
Make sure everything is insured
File insurance claims
Pay insurance premiums, mortgages, and property taxes
Send late rent letters and eviction letters
Take tenants to court, if necessary, to collect past due rent and reclaim the property

All of this is fantastic and exciting to me. I do all of the above for 40 properties and I feel I could easily do it for twice that many all by myself. That's why I'm going to buy my own properties. Not necessarily because I think real estate is a great investment (though I believe it is), but because property management is like my own private disney land.

I googled around and printed out the actual legal code regarding residential property management for my state. I keep it at my desk and read it when I need to know something. You should do the same for the laws that apply to your country. Or get them from a library, or talk to a real estate lawyer in your area.

I know that people in the US (and around the world) will buy property in other countries. So if an American investor bought a lot of rental property in Ecuador, you can imagine how important it would be for him or her to have a good property manager that is familiar with all the regulations in Ecuador. More than likely, he isn't going to want to spend a great deal of time in Ecuador and isn't going to want to learn real estate law in Ecuador.

That's where you could come in. Become the expert! Read, read, read as much as you can find and take classes, if you can, about anything relevant. And everything from being organized to dealing with difficult people is relevant, believe me!

I will search around to see if I can find any reading material that would help you. I will post back here if I do.

Cassandra