Rehabbing is all the rage right now. The opportunity to snap up distressed properties, pretty them up and sell them for a quick profit has probably never been better, and lots of newbies and Mom & Pop investors have jumped on the bandwagon. Heck, the opportunity is so good in single family homes that even big Wall Street private equity firms are gobbling up inventory in some of the markets most devastated by the financial crisis.
Now rapid fire rehabbing is hardly “passive investing”. There’s certainly nothing “passive” about it – and one could argue that true “investing” is making the money do the work, not you. So we contend that rehabbing is more of a business than an investment strategy. But that’s beside the point.
If you decide to be in the business of forcing value into your properties, whatever property type you’re in to, then you’ll like this session because we have a couple of very experienced “turnaround” specialists on the microphones.
In the house for this episode of The Real Estate Guys™ radio show:
- Possibly the finest host, Robert Helms
- Your impossible co-host, Russell Gray
- Hotel Impossible star and hotel turnaround expert, Anthony Melchiorri
- General manager of the 21c Museum Hotels, Craig Greenberg
No matter what kind of income property you own, success is all about occupancy. But if you think it’s hard work to turn over a tenancy every six months, try doing it every night! That’s the challenge every hotel operator faces.
Now even if you aren’t in the hotel business and never plan to be, there are great lessons to be learned from those who are. Because at the end of the day, when you pretty up a property, you do it to please another person: the home buyer or the tenant. No one knows more about the importance of pleasing the customer than people in hospitality.
So lesson #1 is to be sure you prep the property properly to optimize it’s appeal to your target customer. Of course, this pre-supposes that you are clear on who your target customer is, what they want and what they’re willing to pay for it.
If you’ve ever watched an episode of Hotel Impossible, you know that Anthony Melchiorri helps owners see their properties through the eyes of the customers. What a powerful, but sadly overlooked concept! Property owners often create a property that pleases them. Oops. They aren’t the customer!
You’ve probably also noticed that Anthony often discovers what the customer wants by talking to the staff. Why? Because when the customer expresses their need or dissatisfaction, the staff are the first ones to know. So a wise owner listens carefully to the feedback from the staff to respond quickly and accurately to the needs and wants of the customer.
Do these concepts apply to other kinds of real estate investing? Of course they do.
If you’re a fix and flipper, your real estate broker is a great source of information about what the market wants and what they’re willing to pay. Doesn’t it make sense to listen to your broker? Say yes because that’s the answer. Yet, so many flippers go to the market with their own need, instead of focusing on the needs of the market.
News flash: the market couldn’t care less about your need. If you want to make money, you need to give the market what it wants.
Whether you rent our single family homes, apartments or office space, your property manager and leasing agents will tell you what the market wants. Once again, it pays to listen.
“Well, that’s just common sense,” you might say. Yes it is. But have you ever known someone to buy a property in an area they don’t know and then go find a property manager to manage it? It happens all the time. Wouldn’t it be smarter to have the property manager tell you what kind of property, location, amenities, etc. is most in demand, and then go buy that?
You get the idea. There’s a lot of real estate wisdom to be gleaned from the hospitality business.
And while our second guest isn’t as famous as Anthony, his story is every bit as enlightening. Craig Greenberg takes old, dilapidated “historic” properties and adds a unique attraction to bring people and their money into the property. It’s a fascinating study in creativity and one you can learn from.
So listen in as we talk to Anthony Melchiorri and Craig Greenberg and glean valuable lessons from their experiences in finding ways to extract more profit from problem properties.
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