Jeff Thomas

Covid Summer, 2020. Since the stay at home order was lifted at the end of April the houses have been flying off the shelf!! Go to setup showings for 10 houses and 5 are under contract. Even the houses you thought would never sell are selling…and close to listing price! What is going on….

My theory has some factual basis and the rest is simply my opinion based on conversations with clients looking to buy and clients who have bought. Here is what I think is happening: rates are low….great start, people are scared of the stock market after the covid drop so they are looking for more stable investments and the real reason…everyone was locked up with their family in their house/apartment/condo and they saw their neighbors with lake houses headed to the lake to play! I just know that has to be it…I can almost hear the conversations now. Husband to wife or wife to husband…”and why don’t we have somewhere to go when the world locks down?” We love our families but you know that was said….by a lot of people.

So now everyone is at the lake looking for lake properties. Those of us that sell property are like…awesome!!!…have 10 new clients but the problem is we don’t have anything to sell. The reality is there are about 3 houses in the 300-400k range worth showing (and they need fixing up). The numbers double as you move into the next $100k range but they are still not perfect. Once you get to the 700s you start to see the inventory get better…because this is where the spec homes are starting these days.

So…if you are looking for property on Smith, be patient, get educated and ready to pounce when something new hits the market. Call me and I will get you ready. OK rant over. JT

“I would like to purchase a lakehouse for my family to use but also want to maximize the income I can generate from it via vacation rentals. What is the best house for this?” I get this question a lot! The short answer is…buy a house that allows the most sleeping possible for the price. Think of things like: is there a BR I can put multiple sets of bunks or beds in? Can I put beds in the basement? Is there a bonus room for beds. Bottom line, the number of people the house can handle is USUALLY the primary driver of the price per night. One thing is for certain…THE BIGGER THE BETTER. Big houses make the best rentals because multiple families can go together and when they do they typically stay longer (5-7 nights vs 3-4 nights).

Couple of examples:

1. Three BR home. Setup for 2 families (sleeps 8-10) to rent….2 adult BRs (Queen or King beds), 1 kids BR (lots of beds). Add lots of amenities: kayaks, paddle-boards, pedal-boats, lillypads, etc.
2. Four BR home. Try to buy one that 3 families (sleeps 12-14) can use….3 adult BRs, 1 kids BR and maybe additional sleeping in a basement/bonus room/hallway/etc.
3. Five or more BR home. These homes will probably have a lot of room and each will be a little different. Usually these can be setup to easily handle 3-4 families (sleep 16-20). Just make sure the living areas (hopefully 2) can handle the numbers. You want to ensure everyone has a place to sit down to eat and to lounge during the day and after dinner.

I have put in previous post but there are a few rules of thumb in determining rate per night: $100/nt/BR or $100/nt/$100k of home value, $150/nt/family you can sleep. Examples: 3 BR house averages $300/nt, $400k house averages $400/nt, house that sleeps 3 families (12 people) averages $450/nt.

As always, call me to discuss specific properties. I am glad to go out and evaluate a property pre or post purchase.

Jeff Thomas…205.492.3211 or Jeff@SmithLakeRentals.com

Why? couple of quick stats: 183 residential homes (condos, houses, mobile homes) currently on the market…most of which were added in 2019. 253 homes SOLD over the last 12 months…most of which were added the previous year. If you remember anything from economics class it is supply and demand….if supply is low and demand is high the price is….you guessed it…high! This is how I came to my conclusion.

So what does that mean for property buyers/sellers. If you are BUYING you better be prepared to jump on a property you like as soon as it hits the market. This almost means drop what you are doing and go see it (or if you have a good realtor, get them to go video for you). If you are thinking about SELLING, now is the time. Prices are higher than ever and the supply of quality homes is very low.

If you have questions about either side of this discussion, feel free to reach out to me at 205.492.3211 or jeff@smithlakerentals.com.

Why you ask…they know the most about the property, right? Probably so but that does not mean they will tell you and more importantly, they represent the SELLER. The listing agent will rarely recommend you offer a low price or negotiate hard as they will have to explain that to the SELLER. Buyer’s agents are not trying to get the best deal for the SELLER or trying to walk the fine line between BUYER and SELLER where both MIGHT be happy.

Quick story….I am part of a group that gets together once a week to play ping pong and socialize. We have been doing this for years and rarely discuss business but we do know what each other does for a living. The other night one of the guys said he just purchased 2 lots next door to him and, of course, I ask who he bought it from. He responded that he called the name on the sign and worked with that agent to buy the lots. I asked him why he did not call me and he responded “could you have helped me?” At that point, I realized that I am not doing a very good job of explaining the value of using a Buyer’s Agent when BUYING property.

With very few exceptions, the real estate commissions paid (e.g., let’s use 6% in our example) in a real estate transaction is paid by the SELLER. The commission was negotiated up front between the SELLER and the listing agent. The commission is split between the realtor representing the SELLER and the realtor representing the buyer, or 3% each. The BUYER does not pay any commissions. When an agent represents both the SELLER and the BUYER then the agent receives all (or 6%) of the commissions.

First, what is a Buyer’s Agent? In every real estate purchase there is a listing agent and a buyer’s agent. The listing agent is the name on the sign and represents the SELLER of the property. A listing agent can represent you but they have to disclose to you that the represent the seller (typically done on a document you sign that you don’t ask about). In this case, they now have a fiduciary responsibility to both parties which can create a conflict of interest. The biggest areas for this potential are in negotiating the price and inspection results. I really cannot see how a listing agent can represent both BUYER and SELLER in these two parts of the transaction.

My recommendation to BUYERS….do your homework online and when ready to actually start looking for a property, call a Buyers’ Agent who will help you with questions (answering without worrying about offending the seller), negotiating the deal (again, not worried about offending the seller, and inspections (helping you understand your options and making recommendations).

Feel free to contact me at Jeff@SmithLakeRentals.com or 205.492.3211 to answer any questions about this. Thanks for reading.

I get this question a lot!! The price range that has the largest prospective buyers is the below the $500k range. The lower you go the more people interested. Once we have looked at the properties in this range everyone always asks the question of why are builders/developers not building in the price range that has so many buyers. Below I try to explain…

When you start looking at houses newly built on the lake you will find that the price is typically over and in most cases well over $600,000. Why is this? Why are developers not building houses in the price range that is so hot (less than $500,000)? Lets break it down. A lot in one of the areas that developers are building is going to run $150,000-200,000. Building costs are $120-150 per sq ft. Most houses are 3000+ sq ft. At 3000sf and using the lowest price per sq ft the house will cost $360,000, add the lot at $150,000, add a dock (at least $30k and can go over $100k), and you are at $540,000. Now we need to add in a developers profit (approx. 20% or $108,000) and real estate commissions (6%) and we are at $686,880. Keep in mind that we used the lowest price per sq ft at $120/sf which means limited to no stone, limited hardscaping, builder grade finishings, sheetrock vs wood interior, limited outdoor spaces, etc. Price per square foot can go well over even the $150sf if you start upgrading….which most desire.

As you can see from the above, a house has to be $650,000+ to make it profitable for a developer to build a house on the lake. In addition, the houses in this range are selling so why would they not build houses that provide the largest possible profit margin!!

Your options for acquiring a lake house for less than the above are: 1) build your own (hopefully) saving the profit of the developer, 2) buy an existing home and renovate, or 3) buy a lake house as is and enjoy it as is until you can afford to renovate it.

I built my last home using a different philosophy. We decided to build a house that only has the space we need and will use. The house is 1800 sf. We did use high quality building techniques and finishes. The difference here is that we were building for ourselves, not for others and we did not have to include a profit margin. This approach is not practical for many and building a house can test an individual and many relationships. That being said, building your own home IS a way to save a lot of money.

Feel free to call me about any of this and I will be glad to share what knowledge I have gained through my experiences helping buyers, managing rentals, owning multiple lake homes and building on the lake.