HMW #143: 3 Wrong Questions Real Estate Investors Ask at an Open House

Read Time: 8.25 minutes

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I (Alan) recently held an open house of a duplex in Atlanta with Section-8 (government assisted) tenants that was a perfect investment for a real estate investor.

The price point was reasonable at under $300,000. Rents were $1500 on each side, for a total of $3,000 per month. The property is located in a fast growing neighborhood on the west side of Atlanta with tremendous upside.

I spent the day talking to investors checking out the property and we eventually got multiple offers. But this blog entry is about three investors whose questions signaled they were evaluating real estate in an incorrect fashion. I share these prompts to educate you like I did these curious questioners at the open house so we can all be more successful in real estate collectively. Does this sound fair?

It's really not a debate, but I'll always bend a ear to someone who thinks I'm wrong. There are no sides, just my take on innocent questions for educational purposes.

Question 1: Can I add a driveway?

This can be a great question, but in this instance it was the wrong question to ask. There are better questions I would have asked first:

• What if this duplex going to a house-hack and I want a driveway for my unit?
• Can I charge more for rent if there's a driveway?
• Is it difficult to find street parking at the moment?
• Do other homes (comparables) on street have driveways?
• Do the current tenants have cars?

In this case, everything was a no to these better questions. So, there is no need to spend money to add a driveway then.

The investor said she would want a driveway if she lived there, but guess what, she's not going to live there! And the tenants who did live there (and were paying market rent to live there) were well aware there was no driveway when they signed the lease and are not asking for a driveway (presumably because they don't have cars).

The takeaway: don't have your personal preferences or bias into an evaluation of an investment. Instead, understand what your tenant really wants (or needs) by understanding what they are willing to pay more in rent for before making any big changes.

Do you understand what makes this a wrong question to ask?

Easy now! That was not the point of my story at all. She was very sweet lady.  

Question 2: What's the cost to covert range from electric to gas?

All the utilities were electric in the property. This investor was a cook and appreciates a gas stove over an electric stove.

However, through my 20+ years working with Section-8 tenants I've learned one thing: the majority of them prefer an electric range over gas.

Any reason you can think of? Here are a few:

• Many do not have the luxury of time to cook at home
• Most prefer having one bill to worry about, instead of multiple bills
• Most prefer not having to put out 2 deposits on 2 different utility accounts

Also, as a landlord, electric stoves provide you with a slightly less of a fire hazard and are typically easier to clean and repair.

The takeaway: This question illustrates this may be a new tenant class for the investor, which is fine. You learn by doing. But again, adding your own preferences into a property "to improve it" can actually make it take longer to rent and possibly even rent for less after making this change.

As an agent, how would you have answered this question?

Ok, now I'm glad you are on "my side" but I'm not sure being an agent is your calling.

Question 3: Can I add a fence?

This seems like an innocent question for sure. The investor wanted to enclose the yard for a pet and/or privacy for the tenant. We agreed that a fence would probably run $3,500-$5,000 to install.

But what makes this a wrong question is that Section-8 tenant leases typically do not allow for pets. And with a fenced yard and pets being allowed, you get to deal with barking dog noise complaints quite often or gate repairs when the latch doesn't work.

And fences often serve as an exterior storage unit for tenants, aka junk collection. I've found fences rarely help me get more in rent and are more likely to cost me more in expenses in the long run getting rid of old tenant's trash (in)conveniently collected along the fence line.

So, it's not the most wrong (grammar check?) question in the world to ask, but a better question would be to ask if a fence would add a return on investment in both money and time. These are better questions that only come from experience, not something a new investor would ever know to ask, and now I am sharing it with you as well.

So when someone asks you a questions like this, how are you going to respond?

Let's tone it down a bit, we aren't looking for a fight here! Questions are how you get better educated. The investor again is looking at personal preferences or possibly can't see the problems yet that an unnecessary fence may bring in.

I hesitate to ask but are you in a better place now after this quick blog breakdown on how to evaluate property with better questions?

Congrats! We all can get behind that. 

Summary

• Tenants needs are often not your needs in a home
• If you can rent it in it's current shape, then do so
• Only do improvements that impact rent
• Medicate yourself as needed (lol)