How To Get The Real Scoop On Rents OR They Call It INCOME Property
Posted @ 9:54 pm - Filed under Real Estate Investing, Builders, Buying Income Property, Investment Lessons, Dallas, Kansas City
As written recently on these pages the internet isn’t the end all be all for data collection — especially income property stats. One of the most egregious errors a real estate investor can make is the purchase of a property based upon erroneous rent assumptions. Since it’s called ‘income’ property one would assume it’s potential to garner that income would be important. One might even take it a step further and insist on empirical evidence. 
Way back in the days of pen and paper, the only acceptable way to acquire concretely reliable rent info was to hit the pavement — literally. Grab yer clipboard and yer basic comfortable shoes and start walkin’ and knockin’. I’ve been doing exactly that since the late ’70’s. It’s not sexy work, trust me. Though most people are more than happy to help, some folks can get downright rude.
BawldGuy Axiom: Nothing beats first hand research done at street level, in person — nothing. The gold standard for research is always first hand — their lips to your ears — in person. Hearsay just doesn’t cut it.
Still, when a client asks us what makes us so confident in our rental figures as stated on our after tax cash flow analysis, we grin and pull out ours, or sometimes our team’s rental survey. (Note: The minute I find out a team member hasn’t done a required rent survey, they’re fired.) This isn’t done by phone, fax, email, or channeling the local apartment tenants in an area. You do what needs to be done — you knock on doors yourself. 
Management firms will tell you, “You’ll easily command $XXXX a month in rent for that unit — no problem.” When it ain’t their butts on the line, it’s never ‘a problem’. Most management firms make their rental decisions based upon their own relative convenience. I ran my own management division for a decade and know what it takes — and it ain’t hangin’ ’round the office when you’re not sure of what the rents should be.
Agents/brokers will be smother. “Our experience in the area says you should get this amount.” Whereupon they give up a number. Rely on that number the same Mom relied on me having all my homework done before bedtime.
Builders are the comedians of potential rents. It’s long been my theory they size you up and decide in the middle of their answer what rent figure to give you. If they discern I’m from California, it goes up at least 10%. Exceptions: I’ve met two builders in the last 18 months who gave me rents backed up with empirical evidence — one in the Kansas City area, and one in the Dallas/Fort Worth Metroplex area.
Short diversion.
The first thing a California real estate investment broker/advisor learns when leaving the state is the strange thing that happens to their forehead — In bold lettering a message appears. CALIFORNIA FRUIT LOOP — I’LL BELIEVE ANYTHING.
Tomorrow I’ll give specifics on how I’ve conducted rent surveys over the last 30 years. I’ve learned a ton, and it’s all come in handy. Meanwhile, keep this in mind: Buying investment property without slam dunk, sun-settin’-in-the-west reliability is foolhardy at best and a quick way to lose a bunch of your hard earned money at worst.
Remember: It’s called income property for a reason.
This entry was posted on Thursday, March 13th, 2008 at 9:54 pm and is filed under Real Estate Investing, Builders, Buying Income Property, Investment Lessons, Dallas, Kansas City. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.