By happenstance I ran across an article by Andrew Waite, Founder and Publisher of Personal Real Estate Investor Magazine. the article is titled "Don't let a good recession pass you by". Andrew is one of the few people who I've seen who actually "get it".
Mr. Waite argues correctly that there are 3 converging data vectors that can get you to an optimal buy in a residential vacation property: Price, rent-ability/saleability and appreciation in a buy/hold strategy. We are but a handful of individuals who recognize that commercial investment strategies transcend and apply to the residential housing market when it comes to vacation/rental properties.
Mr. Waite goes further when he correctly states that new investors (and homeowners) ignored basic principles and used easy credit to defy economic gravity getting their advice from commission driven real estate agents and mortgage originators.
Mr. Waite's confirmation, as well as my own experiences and ideology, led me to form Quantum Solutions for Real Estate, LLC. I witnessed this huge hole in the marketplace where so called "property management" companies were not doing their clients any favors and in most cases misleading them when it came to their residential investment properties. (You can read more in my blogs titled "Not All Residential Property Management Companies are Alike" and "Proper Valuations for Vacation Rental Properties")
I built my company around helping people succeed in Real Estate Investing. I dig deeper and analyze what a property (and owner) need to do to allow for positive cash flow and meeting the owners objectives. When I'm hired to manage a property I almost always get questions of "what do you need this information for"? I ask for things like mortgage payments, how long have you owned the property, what was the purchase price, capital expenditures planned or exectued, monthly or annual amounts of operating expenses, rental revenue if any etc. I analyze all of the data available and build a financial model and formulate a management plan for each property. It may seem redundent and tedious, but I know it's the right thing to do and I'm helping people succeed.
Not only do I want to know whether the property is worth my time managing, but I want my clients to know every aspect of what it's going to take to make the investment work. There have been more than a few properties I have passed on and recommended the owner sell or reduce his exposure as soon as possible. I know sometimes this information doesn't sit well, but it's honest and the numbers don't lie.
If your management company cannot explain the four principles of real estate investing and model an investment strategy that includes Cash on Cash Return, Net Present Value, Internal Rate of Return, and Value Enhancement to meet your goals, you need to run as fast as you can.
At QS4 I use this modeling as well as market data provided by local real estate agents and derive at an optimum sales/purchase price. So whether I am doing a mid-stream analysis or new purchase inquiry, I am able to create a proper valuation range for the subject property. It takes quite a bit of legwork and research, but in the end it's this analysis that protects my clients from making huge financial mistakes.
I also advise my clients when selecting a vacation home to go into high propensity markets. I tell them to use several criteria to initially narrow the process: Areas in which you frequent or visit/vacation, resort areas that attract large numbers of visitors each year, proximity to local attractions, and something unique about the subject property such as view, pool/spa, upgraded features. Remembering that you want to keep attracting those renters and offer something the competition does not.
It would be all too convenient for me to just take my clients money and be like everyone else in the market, but I plan to be around for a long time and be a leader in effecting change in the marketplace.
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