Recently, I was introduced to an out-of-state real estate investor who had bought and rehabbed a large single family house in Fishtown. On our first conversation they told me that they were a seasoned real estate investor and agent from another state who bought in Philly because they were told there were good deals here. They also told me that they spent more than they had intended to on the rehab and the property was sitting vacant for a while which had combined to put them in a cash flow crunch. They told me that I had come highly recommended and asked for my help.
Mistake #1 – Spending Time and Resources on Improving the Wrong Things
When I started asking questions about the property, some things didn’t make sense. There were hard wood floors and a full bathroom downstairs, but no central air conditioning, stainless steel appliances and a brand new kitchen, but no washer or dryer. While hardwood floors and stainless steel appliances are great, renters in trendy neighborhood expect to get washers and dryers when they’re paying top dollar rents.
Mistake #2 – Price the Property Right
When she told me that she wanted to charge $2,200 for the house, it sounded high, but I didn’t react right away. While we were on the phone, I checked my usualt sources. There were some comps asking around that price, but they were all new construction and had central air and washers & dryers or on much better blocks. The similar rehabs were all asking much less. I asked her how many showings she had since she put the property on the market several months ago and she said none.
Mistake #3 – Don’t Show the Property Before It’s Ready
After convincing her to bring the price to other properties within the market, I quickly got an inquiry for my first showing. When I arrived at the property, I noticed that the tenant was already there. They questioned whether this was the correct house, because there was a number missing on the address sign. Let’s say the address was 1482. There was a 1, 4, 8, but no 2. After entering the property, we noticed the 8 on top of a pile of construction trash. This lead to outlets with missing covers, dangling light fixtures and a shed roof that looked like it was about to collapse.
I turned on the charm, agreed to get the items addressed and with a good amount of salesmanship, convinced the tenants to agree to move forward with leasing the property. I also explained to the everything to the owner and they agreed to consult with me in the future and not make these costly real estate investor mistakes again.
Ari Miller at Real Estate Management Advisors, LLC has over 20 years experience in commercial and investment rea estate. Contact them for all of your property management needs at 215.914.0700 x 275 or AriMiller(at)reinfo411(dotted)com.