It's a Brand New World for Many

I recently met some very nice people from Minnesota; they are like most of the new breed of real estate speculators, novices not seasoned investors. Yes they have bought and sold a few homes in their day, but property management from 1000 miles away is part of the new experience.

The "pat" answer from the speculators to the current market conditions seems to be "no problem we will just rent it out," (they must teach this in all the real estate get rich courses).

Just for the record I do not work in property management, with thirty years in the real estate business and enough experience with my own rentals I have found it to be an area I would rather avoid, it is a specialized business.

Back to the people from Minnesota, they came in very frustrated. The house they bought last year has been rented, (they wanted to save the management fees, so they found their own tenant) now the tenant seems to be having some financial difficulty. At this point they are about two months behind, but they won't move out. Upon inspection of the property the owner found it to have dirty carpet and walls and generally not well cared for. It was brand new just a few months ago.

Anyway they wanted to know "how do we get them out of the house?" They flew in just to try to deal with this and they can only stay a day or so. (Of course just like they teach in those classes, the travel expense can be deductible, it adds to the already serious negative cash flow but it may be deductible!) I introduced them to our property manager and she told them, "under Nevada law they can go to the justice court and file a five day eviction, at the end of five business days they can pay the constable to evict them. As far as damages and rent, they have two avenues, the deposit and court. Good Luck!

Once they have possession of the property back they will just have to deal with it and either re-rent it or sell it.

Units listed "For Rent" in the news paper and on the internet have increased dramatically in Mesquite. There appears to be 100's available, not including condo conversions or apartment buildings. There are many brand new, never lived in units available for rent. The competitive rental market is leading to incentives like "first months rent free."

Not a healthy environment for speculators who are faced with negative cash flow even in a strong rental market.

In the last week I have spoken to at least five people with property for sale that for now refuse to reduce the price but instead plan to rent it out. They bought it to sell, they want to sell, but plan to wait for the market. The devil is in the details, things are seldom as simple as they appear and investment fundamentals do matter.

My thoughts, waiting could cost more than pricing it right.