Monday, May 11, 2009
With news of my impending departure from the Garden State came the news that I am now taking on a new venture, that of the landlord. I guess it is time to put my proverbial money where my mouth is. I have long been a proponent of real estate both as a homeowner and an investor. Having faced high rental rates when I moved to New Jersey, it was a no brainer for me to buy a condo. Even though conventional wisdom always says not to buy if you aren't planning on living in the property for at least 5 years, I cringed at the thought of throwing so much money away on rent when I could spend a few hundred dollars more and own.
My timing wasn't the greatest and although I didn't buy at the peak I bought far from the bottom (if we have reached a bottom). But as I have said on BadskiBlog before, losses (and gains) are only realized when you sell. I don't want to realize a loss so I am not going to sell. It's that simple for me. Will I break even or better yet make money renting my place? I am not sure. It depends on the rent I can command and my refinancing analysis. Hopefully I will have time to update the status of this recently acquired venture and thoughtfully justify my decisions as I go along. Regardless I am willing to take a few hundred dollar a month loss while building equity and avoiding a much larger loss by selling. No one likes to lose money, especially me. However I am looking at it like this: I am paying $200 a month to have someone else pay the majority of my mortgage and continue to build equity in my place. Once the market recovers I can sell and realize a gain, or I may just hold onto a cash flowing property forever. Only time will tell.
My first concern with my new venture wasn't leases, tenant laws, or pet policies; it was marketing. I started thinking back to my mindset when I purchased the condo and to how I feel when I enter open houses or other people's homes. I don't think about square footage and room sizes, I think about the way home makes me feel, the story it tells. I am convinced that most people purchase homes based on the impression they get from the first five minutes they are in the home. If you think I am crazy you are wrong. There is no other way to put it, you are plain wrong. Over the last three years Heidi and I have continued to go to open houses throughout the neighborhood to see what is on the market, how much they are going for, and to steal a few decorating ideas. This practice has validated my first five minute emotional decision theory. I have probably gone through 50 condos with the same exact layout over the last three years. Over those three years I have seen all those condos with the same layout command sale prices with ranges upwards of $40,000. How can this be? They are the same condo! The answer is the story that condo portrays. People want to envision themselves in a home not a condo. They want to envision their lives in their new home. The easier you make it for them to envision their life in your property the higher the premium they are willing to pay. When I look back I could have bought a horrifically decorated condo with terrible furniture and ugly carpet for thousands and thousands of dollars cheaper than I paid for mine. But I didn't. I bought a condo from a young couple with similar tastes to mine, who probably lived a similar life to mine, whose home told a story that I wanted to live. I am trying to figure out how to paint that picture for a lucky renter who will enjoy my condo as much as I have.
My first step seems simple and easy but I am convinced it will make a difference. I am trying to set my marketing apart. One way I have found (thanks to Jessica for the help) is using Postlets.com. Postlets.com is a service that spices up your posts on Craigslist and other sites that allow html posting. I am also having my friend who owns his own photography business (check out his awesome site here) come by to take some professional pictures to provide every detail the prospective renter needs to choose my property as their next home. All things being equal, which post would you rather pursue? The standard Craiglist notepad-esque format or the professional organized information packed Postlets template? The answer is simple. I am also considering setting up a blog just to promote my rental property. People want information and I am willing to put in the extra time and effort to prove to them that my lovely home can become their lovely home. I will continue to update as I progress along in my new venture and hopefully I find a tenant soon who is as excited to live my story as I was when I bought it.