Austin Real Estate Investing Not Always Profitable

investing in real estate

Sylvia and I just sold a couple of acreage lots that we purchased in Oak Hill back in Feb 2007. For those who remember, Austin’s real estate market was still running full tilt in early 2007. I bought three lots in a new subdivision, we built a new custom home on one of them and moved in, and held the other two for investment.

The Original Plan – what was suppose to happen 
We bought the lots directly from the developer for around $85K and $90K each. I figured they would be worth $150K or more within the following year or two. The house we built, which we really didn’t need but which I though would be a good investment, cost about $475K to build turnkey, including lot purchase. It appraised for $610K when we closed the loan, which I thought was a bit high, but nevertheless I figured the value would appreciate to over $700K within two 2 years. We’d sell it, take the tax free capital gains, and buy again in Westlake near the high school.

I think of this strategy as “laddering up”, whereby each successive home purchase/build and move-up results in tax free income and an increase in net worth. Others I know have done this with “slow flips”, buying fixers and staying the required 2 years while renovating, then capturing the tax free capital gain and reinvesting into the next home. Over time, this is a powerful formula.

On paper, this all made sense. The home we’d lived in prior and sold to build this one was built in 2003 on another lot we’d owned since 1999, and it had appreciated nicely. Because of our convoluted tax system, there was a sizeable capital gain profit to be taken tax free on the sale of that one. Those proceeds were dumped into the new one to start a new two-year clock ticking. Any home you sell that you’ve owner-occupied for at least 2 of the past 5 years is not subject to capital gains tax upon sale, so in an appreciating Austin real estate market, moving often can actually be a wealth building strategy and a way to earn tax free capital gains.

What Actually Happened
The plan didn’t work out as expected.

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Staying in Touch with Past Clients without being a Pest

One of the toughest things to balance as an Austin Realtor is finding the right frequency and methods for staying in touch with our past clients. On the one hand, we have the National Association of Realtor (NAR) surveys of buyers and sellers showing that over 90% of real estate consumers never hear from their Realtor again after closing.

Wow! This, in an industry where repeat business and referrals are extremely important to succeeding, is amazing. Clearly most Realtors drop the ball on “after the sale” follow up.

At the other extreme are those Realtors who follow up too much. Consider the quote from this Inman article titled “Is your real estate client a friend?“:

“There are salespeople out there who have inserted themselves into my life with constant contact, and I don’t seem to be able to get rid of them. They put themselves into my online conversations and follow me everywhere. Once we get onto their mailing list we can never get off”.

As my teenage daughters would say, “Eww, creepy”. I know what the author means. I’ve met mortgage and insurance people at industry events such as “lunch and learns”, we exchange cards, and next thing you know I’m receiving regular automated email newsletters and junk mail, getting followed on Twitter and Friend Requested on Facebook and LinkedIn.

None of those “connections” makes me more likely to become a customer or referral source. And in these instances, I’m not even a client or past client.  That said, I do receive follow-ups and “just touching base” calls and annual birthday and/or holiday communications from various vendors, and I do value those follow-ups. But the weekly email newsletters from the mortgage gal I met just once at a Realtor lunch? Not valuable or useful in an way.

Sylvia and I don’t generally seek out clients online and try to “Friend” them or otherwise get connected. Many “Social Networking for Realtors” workshop classes encourage this as a lead building strategy and as a way to stay in touch and “connected”. No thanks. Feels too creepy. They should title those classes “how to be super annoying and bother people”.

The exception is for the clients who actually do become real off-line friends as a result of the real estate transaction, or for those who initiate the connection with us themselves.

So, for an Austin Realtor, what is the right mix and balance of staying in touch with past clients without bugging them or becoming a creepy Social Networking Stalker?

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Austin Property Tours: Beneficial to Sellers and Listing Agents?

Austin 15 Passenger Van

Today I attended a property tour for my listing in Great Hills. There were 11 homes on the tour, including our listing. The other agents on the tour were the listing agents for the other 10 houses. This gives us a chance to see each other’s listings and to offer feedback on pricing, staging, etc.

This particular tour was a van tour. There are two types of Realtor tours – caravan or van.

Caravan Tour
On a caravan tour, agents travel in a caravan either alone or carpooling. This limits interaction and always results in the caravan getting stretched out with the faster ones getting way ahead and the slower ones getting way behind. So, the last few listings end up having the agents straggle in at staggered times and then that listing agent has to lock up and in turn becomes the final straggler on the next home. This is a bummer, but that’s how it goes. It’s also a huge waste of gas to have 11 agents travelling in 7 cars.

Van Tour
On the van tour, we all ride together, talking on the drive in between homes, and there is more interaction and discussion about the houses and the market. This is better in every way except one. When riding in the van I lose track of where I am because I’m not driving or paying attention to where we’re going. This affects my ability to offer an accurate pricing opinion on the feedback sheet. It’s not easy to say how much I think a house is worth if I’m disoriented and fuzzy about the neighborhood I’m in.

Imagine being blindfolded, driven to a property and let out in the front driveway. You walk inside, look around and then have to write down a price opinion. That’s what it’s like. Yes, I know I’m in Millwood, but which side of 183? Which schools does this one attend? Wait, are we down the street from that park? Can you hear the railroad tracks from here?

This disorientation doesn’t happen when I drive myself into a neighborhood and up to a house with buyers. When I’m driving, I have a clear sense of where I am. I’m taking notice of the street and the other homes as I approach the subject property. Now I see why buyers sometimes get turned around and confused about where certain homes were that we saw, because they are riding instead of driving.

So, are property tours even worth the time and effort and is the opinion I wrote down on the 10 feedback sheets today worth anything to the listing agent and the seller? Are the 10 feedback sheets I received for my listing helpful? Yes, here’s why.

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Navigating the Yelp Review Jungle for Real Estate Agents

Yelp Reviews

Earlier this week someone I’ve never met, Paul B from Round Rock, blessed Crossland Real Estate with a disparaging 1-Star review on Yelp. It reads:

Unprofessional and unpleasant demeanor.  General lack of realistic market knowledge and trends.  Probably better suited as a property manager, but lacks the proper people skills to be effective as either a listing or selling agent.  Argumentative and combative.

Definitely would NOT recommend, especially as a listing or selling agent

It’s hard to describe how jarring this was to read at first. Hit me smack in the face. I haven’t felt a jolt like that since the final scene in Boogie Nights. Crossland Real Estate has escaped all such “bad reviews” online until now, though I knew the day would come. After the initial shock and dismay, it settled in that Crossland Real Estate now had a 1-star rating on Yelp, which in turn displays next to certain search results. Not good. Not the sort of visual indicator that motivates a prospective new client to click through to our website from a search results page. For a moment I leaned back in my chair and stared at the ceiling and thought, “it was so much less complicated in 1993”.

To add insult to injury, Yelp has “filtered” the two legitimate 5-star reviews and the 4-star review written by actual past clients of ours because the reviews are deemed “suspicious”. Yelp considers those reviews “suspicious” because they are the only Yelp reviews written by those reviewers. I actually talked to a Yelp rep about this last year and he said that the automatic “filtering” system hides solo 4 and 5-star reviews to prevent abuse. That makes sense, but these are actual client reviews, not bogus made up reviews. Yet, since Paul B from Round Rock has written 12 reviews, he’s considered a valid Yelp reviewer, even though, as I reported to Yelp, he’s never been a client of ours and we know not who he is or why he wrote what he wrote.

So, determined not to let a 1-star review from Paul B of Round Rock stand as the only visible Crossland Real Estate review on Yelp, I decided I needed to somehow dilute Paul B’s opinion with some rebuttal reviews more reflective of the truth. But this needed to be done without running afoul of Yelp’s rules. Here’s what I did.

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Austin House Hunting Gets Boost from Daylight Savings

Austin House Hunting Gets Boost from Daylight Savings

If you’re currently searching for a home in Austin – not online but physically touring homes with an Austin Realtor – you know that one of your biggest limitations is available daylight time. That’s about to change over Spring Break as we move to daylight saving.

Starting in Early November each year, sunset happens before 6PM. That makes looking at homes on weekdays after work nearly impossible. Buyers don’t like looking at homes in the dark. Tonight, sunset will be around 6:30PM but, starting tomorrow, you’ll have an extra hour of daylight to view homes with sunset after 7:30PM. By mid April, sunset moves to around 8PM and by mid-summer you have until 8:30PM.

We all know the real estate market in Austin is better in the Spring and Summer. The accepted reason is that Spring/Summer is a more convenient time for making moves, especially for families with children in school. But I also think there are secondary factors.

One of the main secondary factors is the notion of “daylight shopping hours”. It’s just easier to buy a house when you have more daylight to work with. Also, I think buyers actually feel more like buying in warmer weather with longer days.

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Austin Craigslist – A Real Estate Advertising Sewer

Real estate ads on Craigslist

We don’t post ads on Craigslist. I’m not sure why any informed buyer, renter or seller would use Craigslist in Austin anymore, as it’s become a sewer of real estate scams and spammy garbage ads. If that’s not bad enough, Craigslist real estate ads in Austin represent the #1 subject of Ethics Complaints at the Austin Board of Realtors, as agents ignorant of advertising rules and the code of ethics try to market other agents’ listings. In short, the real estate section of Austin Craigslist has become a scourge and a menace to the Austin community.

Before anyone emails me or posts a comment about how great Craigslist is in your community, don’t bother. I know it works well in some communities. And I’m sure there are anecdotal instances of good outcomes and success stories in Austin. But it’s worthless as far as I’m concerned.

A scammer today posted our listing for 6010 Long Champ on Craigslist For Rent at $700/mo. This is a $2,400/mo. home in Westlake, for which the $700 price should have been red flag, yet at least 1 person we know of believed the ad. Later they forwarded the correspondence to us after concluding it was a scam.

Tenant Prospect Responding to Scam Ad (personal info altered/removed as indicated:

Good morning,

My husband and I are interested in seeing this home. The price & location are perfect for us –

Please contact us anytime at {contact info}

The scammer replied with the following (unaltered except is was all blue bold text):

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