Funding for multifamily properties can be one of the highest barriers to entry in the real estate business. I remember the very first time I walked into a lender’s office (summer of 07). You might think I would be nervous, but NO, not me! I waltzed right into the commercial lenders office at the bank that I had been keeping my (unimpressive) checking account at for the last few years, sat down, and began to explain my big plans for my future in real estate. Note- Something I learned much later in life, is that if the person you are speaking to, is staring off into space or looking fixedly at the Ficus plant in the corner of their poorly decorated, mid-level managers office… they don’t give a damn what you are talking about. The lender was actually polite enough to let me drag on about the 100-unit deal I had brought him to look at. When I was done with my Oscar-winning pitch, including full-color pictures of the property, he gently leaned forward in his seat and looked me in the eye, and said… “Who do you think you are? What money do you think you have to put down on this multimillion-dollar deal? What experience do you have, that you think qualifies you, to buy/borrow on such a large deal? Thank you for your interest in our institution, but we are in no way interested in your loan application. Have a nice day.” That was the end of that conversation. I walked out of that guy’s office feeling about six inches tall. True story. I wish I could say that I shrugged it off and went right out into the real estate world and built a huge portfolio and became successful besides his admonition. Truth be told I went home super pissed off. Yes, I did eventually do all those things, but not before getting set back mentally and emotionally. If you have been in the real estate business for a while, I bet you have a similar story of your own. It’s normal. What followed was the next 17 years in the multifamily business and the building of a large portfolio and management company. I survived the Great Recession by mastering the techniques of creative financing such as seller financing, master lease options, and raising private capital just to name a few. I have seen days like this before. Now we are entering into a similar time in the lending/economic market (like just before 2008). Rates are high and prices are high too. That is a combination what will either result in prices coming down or downpayment going up. The third option is creative financing for multifamily. Using techniques like master lease options or seller financing. Master Lease Option A technique to control the operations and future sale of a property with the use of 2 contracts. The Master Lease- this contract is a rental agreement between you and the seller of a property giving you the right to rent the entire property with the right to sublease the units to the tenants. The Option Memorandum- this contract sets the price that you and the seller have agreed on and the time in which you have the exclusive right to buy the property at the agreed upon price. Use this when a seller has a mortgage on the property. Risk- you have the rights of a renter not an owner.Seller Financing This is as simple as it sounds. The seller will be financing (holding a mortgage on) the property they are selling you. Instead of receiving all cash at closing (usually funded by the bank loan + downpayment) the seller will receive a lien against the property. Just a bank loan the seller will have to foreclose on you if you don’t make the scheduled payments. The deed will transfer to you after a regular closing (title company/lawyer). The seller must have full equity to transfer the title. Loan terms (length, rate, downpayment) are all fully negotiable. Give on price, take on terms! I used these techniques to build by first portfolio. Creative financing for multifamily will be one of the most talked about topics in the near future. Why? Because it works when traditional debt is not an option, but the seller still must sell. If you want more info, check me out the Education (to be hyper-linked) section of our website where I have free courses teaching you how to: How to Get Creative Financing for Real Estate Deals Use Master Lease Options Get Seller Financing Get Brokers to Find You Creative Deals Negotiate Creatively Much More
Category: Apartment Building Management Tip’s
Florida Apartment Building Lending Purchase, Refinance and Cash Out
Jacksonville, Miami, Tampa and Orlando Florida apartment loans with low fixed rates, 80% LTV, 30-yr terms, flexible terms, interest only and non-recourse options
Maximize your Jacksonville, Miami, Tampa and Orlando Florida multifamily investment with an apartment loan or multifamily loan that meets your individual needs and investment objectives.
At Winston Rowe and Associates they provide Florida apartment loans with choice helping you make better decisions. Through their proprietary multifamily lending platform, they can quickly compare their many multifamily loan programs and lending platforms providing you with a Florida apartment loan with the best rates and terms.
Loan amounts from $1MM
Highly competitive interest rates
Interest rate locked at application
Partial and full-term interest only available
Up to 80% LTV
Fixed rates up to 30-years
Yield maintenance or declining prepay options
No replacement reserve requirements
This Year’s Renters Want More Space, Good Deals and the Great Outdoors
Renters are on the hunt for open-air amenities, more space, and a better deal in the city they already live in as 2021 unfolds, according to a recent RENTCafé survey on how renters’ preferences have changed as a result of the pandemic.
An improvement in lifestyle was the main driver for the more than 10,000 people who participated in the survey while searching for an apartment on rentcafe.com. The top features respondents searched for a year into the pandemic included open-air amenities (21%) and more space (20%)—data that stands in stark contrast to RENTCafe’s March 2020 survey, where top drivers were price and safety. In addition, space and open air amenities were more important to renters than WFH amenities like home offices.
The prospect of a better deal motivated 29% of respondents, while the need for a change of scenery prompted a quarter of those surveyed to move. And perhaps most interesting? Contrary to breathless pandemic-era reports of Americans ditching their cities for secondary markets, approximately 90% of renters were looking for long-term rentals with 48% looking to remain in the same city. A mere 4% of renters chose to move because they could now be more flexible by working remotely.
“This shows that improving housing conditions—not drastic change—is the goal,” RENTCafe notes in the survey findings. Of those surveyed, one-third (34%) reported they’d already moved once over the last year, with the majority doing so because of the pandemic.
“After months of staring at the same walls, it’s understandable that some people want to make a move now, if only for a change of scenery,” the survey findings note. “However, many of those who moved back in the spring of 2020 seemed to have done so out of need—not because they wanted to. More precisely, their reasons for moving during those uncertain early days of the pandemic were related to their lease being up or feeling financially insecure.”
The survey also revealed that space and open-air amenities were more important than work-from-home amenities. Only 10% said a good internet connection was crucial, and 5% said they needed a home office.
Despite this data, the multifamily industry is prepping to meet the demands of a growing body of WFH renters. Research last year from Newmark showed that multifamily owners are increasing floor plans to create more flexible spaces (think one-bedroom plus a den) and more outdoor space to accommodate workers who are staying home. The firm advises developers, however, to make more incremental changes to unit mixes and amenities since resident needs are still being hashed out as the pandemic wears on.
New York Apartment Demand Surges As The City Jumps Into Reopening Mode
A full year into the pandemic, New York City landlords are securing new leases at a rapid clip as depressed prices appear to be luring back—or holding on to—tenants willing to sign for the right deal.
New York buildings in Manhattan, Brooklyn and Queens, the number of leases signed during February beat a record set in 2012 during the comeback from the global financial crisis. The median rental price—lease value net of concessions—fell at least 11% across those boroughs last month, according to a new report by Douglas Elliman Real Estate.
The news comes as New York City slowly begins to reopen. Restaurants will soon be able to operate at 50% capacity and movie theaters are once again beginning to show films. It’s been a brutal year for the city; the seasonally adjusted unemployment rate stood at 11.4% in December, a 7.8% increase over December 2019.
Hundreds of thousands of New Yorkers fled the city at the onset of the pandemic, to ritzy enclaves upstate, quiet towns in the Northeast and other pockets of the country. The coming months will help reveal how many intend to return, and whether rental prices will subsequently increase.
In light of the revived demand, some owners are temporarily keeping units off the market in the hopes of a sustained rebound that may help them get higher rates sooner than expected. According to UrbanDigs, a real estate insights firm, in Manhattan landlords took more than 1,800 apartments off the market in February, as the Wall Street Journal reported earlier this week. For their part, renters are enjoying the reprieve from record prices, which peaked just before the pandemic.
Below is a closer look at the current New York City rental market, utilizing data from Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants.
Non-luxury units offer the best deals, with apartments of three or more bedrooms having the biggest year-over-year discounts, possibly a sign that after living through lockdowns, renters are looking to live with fewer roommates. The median rental price dropped 22.7% over the last 12 months on those units. Two-bedroom apartments are down 8.9%, while studios are down 19.3%.
New signings are up dramatically from February 2020, but the overall vacancy rate remains high, at 5%, compared to 2.01% last year. More than 40% of new leases come with some form of landlord concessions, the authors said, often one or more months of free rent during the first year after signing.
Brooklyn saw the “highest number of new lease signings since tracking began during the financial crisis,” Miller Samuel reports, at 1,834 for February, a 133% year-over-year increase. Still, the median effective rent dropped 16.3%, more than any other year in almost a decade. Nearly 40% of new signings last month included landlord concessions.
Studios are commanding the best discounts; median rental prices fell 18.8% compared to last February, while second place goes to apartments with three or more bedrooms, at a 12.5% decline. Still, a glut of inventory remains; there are 3,438 listings in Brooklyn, up from 1,375 a year ago. That figure doesn’t even account for units that have been pulled off the market.
The story is largely the same in Queens, where February also set a nine-year record. Inventory is up 64% compared to last year, and 36% of signings include concessions.
Overall, the median rental price dropped 13% compared to last February, to $2,522, with studios taking the biggest hit at a drop of 28.7%.
9 Reasons to Reject A Tenant Application During the Pandemic
The pandemic led to many property owners finding themselves with tenants that are thousands of dollars behind in rent. Property owners, faced with the recently-extended eviction moratorium, likely want to know how to avoid renting to applicants that may add to their list of tenants not paying rent during the COVID-19 crisis. One way to reduce the risk of having tenants that do not pay rent is to explore the reasons to reject a tenant application during the pandemic.
Understanding the nationwide eviction moratorium likely helps property owners collect as much as possible in rental payments from tenants. The effect of non-payment of rent on property owners, and the rights of landlords during the pandemic, is another area that needs exploration while considering whether current screening methods are effective. The American Apartment Owners Association assists property owners with tenant screening services, tenant credit checks, and information related to landlord rights.
If you are a property owner with tenants that owe back rent, you are not alone. The Los Angeles Times reported that millions of tenants were unable to pay rent at the time of the article publication in February 2021. The article cited the Urban Institute and Moody’s Analytics, who stated that more than nine million tenants owed an average of nearly $10,000 each in back rent. The article included information from a survey conducted by USC and UCLA indicating that households with less than $25,000 income in 2019 were the most likely to default on rent during the COVID pandemic, with households earning less than $50,000 at a close second among those that were most likely to not pay rent.
What does this mean for property owners that want to avoid renting to tenants that cannot pay rent? In addition to the rules that prevent landlords from evicting tenants that comply with the moratorium rules, they are also prohibited from denying housing to applicants based solely on rent that is accrued during the coronavirus pandemic.
Another issue for landlords to be aware of is the fact that several sources indicate that the rate of fraud in tenant rental applications has increased during COVID-19. This typically occurs during recessions, and requires due diligence to fight tenant application fraud.
Consider these nine reasons to reject a tenant application during the pandemic, and to thoroughly screen applicants, using the AAOA rental application as your guide.
1. The rental application is not properly completed
Missing or vague information raises a red flag. Many states have identical or similar guidelines for rental applications and screenings. One example is the Ohio Fair Housing Guide for Landlords. The guide suggests that property owners use current applications that ask detailed questions without violating laws regarding protected classes or other illegal application information.
2. The applicant insists that the property owner uses the credit check printout that the applicant brought along
Credit check printouts provided by applicants are easily created on a home computer. Relying on a professional rental credit check for information helps to protect you.
3. Information on the application does not match information obtained through the tenant screening report
Applicants that transpose digits of their social security number, provide a false or misspelled name, or that provides a fake address are reasons to reject a rental application even during the pandemic.
4. An applicant provides self-supplied references
Self-supplied references from an alleged employer or landlord may be the applicant’s friend or relative. The standard rental application form provides property owners with documentation of the contact information for references. If the references do not check out as valid, or otherwise do not meet rental requirements, there is a record that protects property owners.
5. An applicant provides pay stubs but does not want the employer contacted
Pay stubs and a written statement regarding an applicants’ employment can be faked or forged with little effort. Requiring employer contact information on the basic rental application form provides the company contact information, which allows for a direct check with the company.
6. The prospective tenant is vague about income
Many people work from home since the pandemic started, and there are millions of people that are legitimately self-employed.
USA.gov, the Official Guide to Government Information and Services lists verifying a tenant’s income as one of several ways that property owners can protect themselves from scams that target property owners.
7. The applicant wants to rent the property sight unseen
The FBI lists this as one of the warning signs that is an indicator of fraudulent activity targeting property owners. Agreeing to this likely means that the applicant also wants to send the application fee and rent without meeting in person.
8. There is an unusual sense of urgency to rent the property
What does the tenant have to hide? Why is there an urgent need to rent the property? Applicants may offer to pay more than the deposit or rent to get the property owner to quickly rent them the apartment.
This is another red flag from the list of common rental scams described by the FBI. Sticking to the strict tenant background check procedures means less risk of being scammed while still complying with the extension on the eviction moratorium.
9. There is a history of evictions
Although property owners are not permitted to deny tenancy to an applicant that is based solely on rent accrued during the coronavirus pandemic, a history of prior evictions is still a legitimate reason to reject a rental application.
Can I Evict a Tenant for Reasons Other than Non-Payment of Rent?
This is an area where property owners still have protections and resources during the COVID pandemic. The State of North Carolina provides an answer to this question which is similar to many other states. Property owners can indeed have tenants removed for reasons not related to rental payments.
If a landlord discovers that tenants lied on their application, engaged in criminal conduct, damaged the property or committed other offenses in violation of the landlord tenant laws, an eviction action may proceed if the property manager explains the reason for the proceedings, and the judge or magistrate grants the request. This is true even if the tenant completed the CDC Declaration Form.
Some property owners likely feel that they have no recourse to reject rental applicants or tenants once they move into a property because of the pandemic. Fortunately, courts and government agencies still allow property owners to continue screening for qualified applicants, and to legally remove tenants for just cause.
How to Price Your Rental in a Small, Secondary Market
The time-honored mantra of real estate – “location, location, location” – drives everything from a property’s purchase price to the rental rate. It can even dictate how much or little you should invest in improvements.
Real estate markets are classified by location type. There are primary, secondary, and tertiary markets, sometimes called Tier I, Tier I, and Tier III. The market classification for your rental property will be a crucial consideration as you set its rental rate.
An area’s population and state of real estate market development determine its classification as a primary, secondary, or tertiary market.
Primary, Tier I markets are typically larger cities of 5 million people or more, with well-established rental markets. Examples include Chicago, New York City, Boston, San Francisco, Los Angeles, Washington, D.C., and Dallas-Fort Worth.
These large metro areas are usually more expensive than other metro areas – for both buyers and renters – due to consistent demand for housing.
Growing cities are considered secondary markets; their growth creates demand as new people move into the area, supporting new business development and job creation.
These Tier 2 locations demonstrate more real estate market flux, creating attractive opportunities for real estate investors.
Secondary markets tend to be a population of 2 to 5 million people. They are usually less expensive than primary markets but still in demand. Examples include Philadelphia, San Antonio, Phoenix, San Diego, and San Jose.
Tertiary markets involve a lower population density of fewer than 2 million people. The population is spread out across a bigger geographic area.
There is typically less reliable job growth. In a strong economy, tertiary markets can provide attractive investment opportunities as property prices are typically lower.
These areas may be more expensive to develop as many are rural or outside of secondary market cities.
But can be prime markets for real estate investors as the properties cost less.
Whether you invest in a secondary market, tertiary, or primary market, it is essential to consider market-relevant data to price your rental correctly.
The key to pricing rentals in a primary vs. secondary market
The whole real estate cycle – from the purchase price to rental rate and eventual selling price relies on intelligence gleaned from current, comparable sales data for properties in the same price range.
When you review these comparables, you will get a good sense of amenities and the property improvements for other properties in the price range. As you determine your target rental rate, the purchase price is one factor but not the whole story.
You may be able to invest a small amount in fixing up the property, add or improve its amenities, and charge a higher rental rate than similar unimproved properties sold in the past year.
How you need to look at properties in secondary and primary markets differently.
Demand for rental property is always a local story. You can’t take an apartment in New York City and compare it to a similar apartment in Des Moines. Even if both cities are the largest in their respective states, large is relative –Des Moines has a population of 210,000, and New York City’s population is 8.175 million.
Even within Iowa and New York, you have the full range of markets to consider. So how do you determine the rent?
In real estate, comparing neighborhood properties wins out.
While you need to be aware of overall rates in the city where you plan to buy, your rental rate should be based on going rates in the immediate neighborhood. Each neighborhood will have a range that extends across unimproved and improved properties.
High-demand primary markets are top dogs because they have low turnover and can command higher rents. Secondary markets can present many growth opportunities. You can still improve a property in a secondary market to make it more attractive to tenants.
This will also allow you to raise rents accordingly. Tertiary markets also offer good opportunities, especially when the primary and secondary market values seem overblown.
Comparing apples to apples
In any market, you want to rely on current, accurate information to complete your analysis. Rentometer pulls rental rates from all online sources for current listings to provide you with accurate rental rates for any area. You can search within any state, city, or neighborhood to get the most up-to-date picture of rental rates.
Let’s compare rates for 2-bedroom, 1 1/2 bath rental units in Des Moines. The city’s average rent for this property type is $1,186 per month, but rates range from $943 to as high as $1,429. This range tells you that the right purchase price and a few property improvements could create a nice cash flow.
Comparing similar properties in a secondary market
Going a bit deeper, let’s compare three different neighborhoods in Des Moines: Downtown Des Moines, Bloomfield-Allen, and Merle Hay. Downtown has the highest average rents at $1,482 per month, while Bloomfield-Allen and Merle Hay show average rents of $890 and $891. Looking more closely at each area, you’ll find that Downtown has an entirely different culture and amenities from both the Merle Hay and Bloomfield-Allen neighborhoods. And while the two other neighborhoods are similarly priced, they have different amenities, culture, and crime levels.
It’s Time To Prepare Your Apartments For The Busy Leasing Season
Though every apartment community experiences its own unique seasonality, there are two points of the year that signal changes in leasing activity. There’s the slow season, which usually begins in the fall when the school year starts and the weather turns cold. Then there’s the busy season that begins when school’s out and the weather is nice.
We’re now only a few weeks away from when most communities will begin experiencing their busiest stretch of the year. They’ll have their highest demand—renters want to make their moves when it’s warmer—and their greatest turnover. It really is a make-or-break time for many properties because if they can’t generate enough leases to account for the number of residents moving out now, the task will become much harder when leasing activity slows.
To help, here are our recommendations to prepare your community for success over the next couple of months:
1. Check Your Lease Expirations
Reviewing your lease expirations is your first line of defense when trying to make your busy season more manageable. Why? If you know in advance that there will be a certain week or month ahead when a high concentration of leases will be expiring, you won’t be bombarded by suddenly having multiple units turnover at once. You can get ahead of it.
Plus, taking this step now gives you the opportunity to start thinking through your renewal strategy. Check out our blog post ‘4 Ways to Improve Your Apartment Community’s Retention Rate’—it has great ideas you could apply here to help you keep more leases.
2. Set Your Staffing
Take a look at your work schedule for the upcoming weeks. Will your best manager, or leasing agent, be going on a vacation or be away from the office? If so, get on that now. Being understaffed may affect your closing rates because your team’s ability to conduct in-person tours will be limited. Evaluate whether or not there’s an opportunity or need to add to your staff.
Don’t forget your maintenance team. You need to make sure they’re properly staffed and equipped to be able to handle their increased workload, too. When it’s your busy leasing season, your entire team needs to be hitting on all cylinders.
3. Make Changes to Your Digital Advertising Budget
The purpose of your digital ads is to drive more qualified traffic to your website, which begins the process of converting leads to leases. Think of using them in the same way as you’d use a water faucet. When you need traffic the most, just turn the faucet on.
We talk all the time about dynamic apartment marketing, and a lot of it is tied into how you utilize your digital ads. We believe that pairing a high budget, for times like the busy season when you’ll have more turnover, with a low budget, for when your occupancy is strong, is the best way to maximize your marketing dollars.
So, be ready to turn the faucet on and spend more on your digital ads for the next couple of months compared to other times of year. You will need to have enough ad dollars budgeted to run Defensive ads that defend your community’s identity, Remarketing campaigns on both Google and Facebook that keep your apartments top of mind, and perhaps some Offensive campaigns that allow you to compete against similar properties.
4. Review Your Rental Rates
An odd trend we see is some communities raising their rental rates on January 1st. Right now, at the onset of your busy leasing season, is actually the best time to be taking this measure.
You know you’re going to have more potential residents looking at you over the next few months compared to any other time throughout the year, because whenever you’re experiencing more turnover you’re also going to have more demand. It would make sense to raise your rates at a time when pricing isn’t weighed as much as availability.
We recommend lowering your rental rates about a month or so before the busy period ends. That way you have a better chance of filling up any units remaining in the final few weeks leading up to your slow leasing season, when it will become much harder to do so.
5. Prioritize Your Time
When you’re in the midst of your busy leasing season, you won’t have much time to focus on many parts of your job. For example, why would you be trying to do things like make design decisions when all you’re going to be concerned with in that moment is retaining current residents and attracting new ones?
If you have any pressing managerial decisions, like standard updates, try and complete those now. The goal here is to make sure you’re prioritizing all of your focus and energy for the busy leasing season, when time will be your most important asset.
Multifamily Apartments A Dichotomy Between Fundamentals And Prices
The economic stresses of the Covid-19 pandemic and ongoing shutdowns are taking their toll on renter-by-necessity households. While the prospects of a successful vaccine rollout are encouraging, the many renters who have lost jobs at restaurants, retail establishments, hotels, airlines and other struggling businesses are not going to see an overnight recovery.
The recent collection trends in the multifamily space support this potential for delayed recovery. Trends have been lagging as the Covid-19 pandemic and related CDC eviction moratorium drag on. For example, multifamily industry body NMHC said that 79.2% of U.S. apartment renters had made full or partial payment by February 6, worse than the 81.1% who had paid by February 6, 2020, but better than the 76.6% who had paid through January 6, 2021.
Thus, it seems likely that multifamily apartment fundamentals will remain burdened for much of 2021. This presents an ongoing risk to landlords and multifamily investment firms. My firm lives and breathes the multifamily market every day. Based on my experience in this sector, there’s more to be learned from the current trends as investors and owners look to what’s around the corner.
Multifamily Apartment Pricing
In clear contrast to rent collection trends, multifamily apartment pricing has gone up dramatically over the past year. Typical multifamily apartment property pricing has compressed from a 5.25%–6.25% cap rate one year ago to a 4.00%–5.00% cap rate today, roughly 125 basis points (bps) of cap rate compression.
Similarly, workforce housing apartments that rent for around $800 per month have increased from $60,000–$70,000 per unit one year ago to $85,000–$100,000 per unit today. Clearly, lower interest rates (agency rates have fallen from about 4.25% one year ago to about 2.90% today) have driven at least part of this cap rate compression.
This dichotomy between multifamily apartment pricing and on-the-ground fundamentals is concerning for multifamily apartment professionals and investment firms, particularly those looking to grow their portfolios in the year ahead. Indeed, near-term fundamentals will be stretched significantly to meet higher expenses and greater debt service requirements – even with lower interest rates.
Despite these near-term concerns, intermediate- and long-term prospects for the multifamily sector remain strong for several reasons:
• Incomes are growing, even at lower demographic rungs, leading to higher rent affordability.
• Home prices have increased (paywall) even more than incomes, pricing out much of the U.S. population and making these people renters by necessity.
• Demographic trends are favorable, including aging baby boomers moving into apartments and young people believing in increased mobility and flexibility and less ownership of “stuff,” manifesting in the prevalence of the sharing economy.
• Construction costs have increased significantly in recent years, and especially this year with Covid-19 impacts, making the existing workforce and value-add apartment opportunities that much cheaper in comparison.
• It’s difficult to see interest rates rising more than 50-75 bps anytime soon.
Some longer-term risks exist, and these mainly revolve around:
• “Cancel Rent” and other political movements that can impact landlords’ ability to operate.
• Eviction moratoriums and other legally contestable policies.
• Rent control laws that restrict returns on property investment and weaken property owners’ rights.
• The tremendous growth in expenses, including property tax, insurance and labor expenses.
Several of these risks are found in greater concentrations in places like California, Oregon, Washington and New York, and much less so in Texas, Florida, North Carolina, South Carolina and Georgia. It’s not surprising that investment dollars have been flowing toward the Sunbelt states.
Given the tremendous changes brought about by the Covid-19 pandemic, investors and operators both have the opportunity to assess where things stand in relation to current trends. Do you have enough exposure to real estate and other brick-and-mortar assets, given low yields in the marketplace and the high price of equities today? Are you optimally exposed to locations that are seeing the biggest demographic population and job growth, like those in Texas and Florida? Is your exposure between suburban and urban rightsized? Is your exposure between luxury and workforce assets appropriate?
Despite the challenges seen over the past year, we remain firm believers in the multifamily apartment sector. We’re continuing to buy apartment properties that meet our acquisition criteria and taking a disciplined and long-term approach to strategic acquisitions.
The apartment space is less efficient – and less liquid – than the stock market, but it is highly predictable and repeatable. This means you have more ability to control the results you deliver for yourself and other investors. The multifamily apartment space has shown that it is essential, and this dynamic is not going away anytime soon.
Pet Adoption Skyrockets During the Pandemic It’s Impact on Real Estate Investors
Being a pet person myself, I’ve always allowed pets (within limits) in my rental properties. And with maybe one exception, all my tenants have had pets. It’s one of the reasons people choose my rental over another. I know this because applicants tell me so.
I know the argument against allowing pets: Pets cause damage — or at least additional wear and tear — on property. And that’s true. But running a landlord business warrants evaluating the cost-benefit analysis of allowing pets. If you haven’t considered this issue since the pandemic (or ever) and simply haven’t allowed pets, it’s time to possibly reevaluate your policy — pet ownership since the coronavirus is at an all-time high.
The pet picture overall
Americans love pets. About 85 million families (67% of U.S. households) owned a pet in 2019, according to the American Pet Products Association (APPA) National Pet Owners Survey. Not surprisingly, most people own dogs and cats: 63.4 million and 42.7 million, respectively. This still leaves a sizable number of people who don’t own pets, but you can see how much landlords limit their market by having a no-pet policy.
How COVID-19 increased pet adoption
What didn’t change during the pandemic? As the country went on lockdown, people changed the way they lived their lives: They started exercising at home more (Peloton (NASDAQ: PTON) sales went through the roof — the company more than tripled its first-quarter revenue as of November 2020). And, of course, people started working from home.
Americans, used to more hustle and bustle from the gym and office, became bored and lonely while sheltering in place. Hello, pet adoption. Pets provide companionship, and in the case of dogs, get people exercising outdoors instead of a stuffy gym.
Pets, popular before the pandemic, are in even bigger demand now, as pet adoptions are up across the country. New York millennials in buildings that don’t allow pets are moving. In Ohio, Cuyahoga County’s pet adoption rates have “skyrocketed.”
How to run a cost-benefit analysis
Running a cost-benefit analysis helps business owners make decisions. Regarding pets, the way landlords can determine whether it might be worthwhile to allow tenants to have them is to determine whether you’ll miss opportunities by not allowing pets. (You will.) You should also determine whether those missed opportunities might lead to money left on the table. (They will if your rental stays vacant an extra month or two.)
Every landlord situation is different, but let’s take mine as an example. My business is single-family detached homes. With that said, my market is probably more pet-oriented than a landlord’s with rental units in buildings. So YMMV (your mileage may vary), so to speak.
Whenever I advertise a vacancy, most applicants, at least 80%, have a pet. I probably could still have a successful business if I didn’t allow pets, but there’s no way I want to limit my applicant pool by 80% or more. So I allow them. My cost (losing 80% of applicants) is too high; therefore, the benefit I get regarding the number of applications outweighs the cost of possible pet damage, of which I have a plan.
I charge pet rent, which increases the monthly rental amount for renters with pets, but this policy is actually a win-win for applicants and for me. If I didn’t charge pet rent, petless applicants (all other things being equal) would win the spot every time. But the extra money renters pay in pet rent levels the playing field.
The additional money I collect in pet rent goes to extra costs I typically incur to get the property back in shape. Case in point: Upon a recent move-out inspection, I found the tenant’s dog had chewed the windowsill. I needed to pay to have this fixed, but the extra pet rent I charged covered the repair cost.
The Millionacres bottom line
The surge in pet ownership, particularly among millennials, has led many to seek out pet-friendly rental properties. If you don’t allow pets in your rentals, it might be time to reevaluate that policy.
Suburbs Apartment Rents Close to Their Pre-Pandemic Peak
Though the rental market in major cities has been hard hit by the Coronavirus pandemic—plagued with a mass migration by remote workers seeking larger homes, as well as relocations because of social distancing concerns—it appears that the suburbs have not just survived COVID-19’s wrath, they’re thriving in spite of it.
While rents have declined steadily in the larger, denser, principal cities at the core of each metropolitan region, rents in the outlying suburban areas have, on the whole, rebounded to pre-pandemic levels,” according to a new report from Apartment List.
From June through September, rents dropped in cities but “quickly rebounded” in the suburbs from losses that were seen from March to June across all of the property type’s markets, the report stated. In October, rents were 0.5% higher than they were at the start of the year, and came in just under their pre-pandemic peak in March.
Suburbs are outpacing cities across the country. In 27 of 30 large metropolitan areas tracked by Apartment List, “principal cities are experiencing faster rent drops or slower rent growth than their surrounding suburbs. And in 11, including major economic centers like Atlanta, Dallas, and Philadelphia, apartments in the principal city are getting cheaper while at the same time apartments in the suburbs are getting more expensive.”
The data jibes with other recent research concerning the impact of move-outs from cities, and the resulting strength of the suburbs. A recent report from Redfin showed that in the third quarter 29.2% of Redfin.com users looked to move to another metro area—the highest share since Redfin started tracking migration at the beginning of 2017. The uptick is partly due to the pandemic, Redfin stated, as well as the now pervasive work-from-home culture.
Short-term suburban rentals—which it defines as one-to-two-year lease terms—could be demand drivers for residents seeking work-from-home space and outdoor access. Suburban renters typically seek larger units, such as two-to-three bedroom apartments.
If this work-from-home trend is going to be a little bit longer term, people will feel more comfortable with moving out into the suburbs.
Efforts to socially distance also are fueling shifts away from major cities to the suburbs people just don’t want to be in enclosed, dense areas.
How Technology Is Disrupting The Apartment Rental Experience
Do you remember the last time you left home without your smartphone? Neither do I. We have integrated technology into almost every part of our daily lives. The average U.S. adult spends around three hours on their smartphones every day, from listening to music to scrolling through social media and streaming videos.
Today, technology is changing the way people engage with one of the oldest industries: real estate. It seems like just a few years ago that landlords faxed brokers black-and-white pictures of available apartments and agents would hang them on a bulletin board to display available properties.
Renting an apartment was a lengthy process that required in-person meetings, physically inspecting numerous properties and signing leases in an office space. Although the process might still feel lengthy in many cases, the accelerated rate at which technology has advanced has enabled us to streamline processes and make the apartment rental experience much faster and safer than it was only a few years back.
From Brick-And-Mortar To Smartphones
Residential real estate is reactionary. To remain competitive in a tough market, savvy brokerages have quickly adopted innovative online platforms that allow a faster flow of information and paperless transactions. While real estate agents continue to work from home, brokerages have shifted focus from their offices to their online presence.
Mergers and acquisitions have aided small and medium brokerages by eliminating fixed costs and sharing expenses. Having an online presence is now more critical than ever.
Numerous brokerages in the U.S are adopting video tours to easily share listings with their clients, social media and distinct advertising platforms. Video tours and virtual reality speed up the process by gathering feedback from potential clients. They also make the process safer by avoiding unnecessary physical inspections or gatherings that could lead to exposure to Covid-19.
Improving Potential Matches
The digitalization of the modern brokerage has allowed customers to use complex filters that improve their search for a new place to call home. A few years back, I had to select an apartment for rent from a printed list of properties attached to a wall. Today, a person can filter available properties online and may get as granular as looking for a two-bedroom rental apartment on the Upper East Side with a dishwasher and a walk-in closet that’s located in a pet-friendly building that has no elevator or doorman.
The ability to get very granular with an individual customer’s potential matches translates to a better quality of life and improved satisfaction during the apartment rental experience. It also shortens the time it takes them to find the perfect home.
Social Real Estate
From sharing video tours of available properties to signing legal documents online, technology has streamlined the process of buying and renting a home. People who fail to adopt new technologies will miss big opportunities.
Six Trends to Watch for in Multifamily Property Management in 2021
Pandemic creates opportunities to rethink how best to serve residents.
2020 has presented the multifamily industry with unparalleled challenges due to the pandemic with the secondary and tertiary effects forcing the industry to quickly pivot to meet resident and prospect needs. However, the pandemic has also created opportunities for multifamily owners to creatively rethink resident retention strategies and communication and how to demonstrate value. While some external factors will remain uncertain as we transition into 2021, here are six trends we expect for the future of the multifamily industry:
1. Service Will Be a Secret Weapon
Next year, enhanced customer service will become the most critical component for demonstrating value and increasing resident satisfaction across multifamily communities. While efficiency and timely communication remain two essential strategies for solid customer service, expectations are on the rise as more residents work from home. Although some prospects and residents may continue to request face-to-face (albeit socially distanced) interaction, we foresee most leaning into digital communication via smartphone apps, emails, or text alerts for updates and ongoing communication with on-site teams. For multifamily operators, that means expanding your digital resources and increasing the frequency of communication in 2021.
This also means accelerating response times and prioritizing maintenance requests since many residents are still working from home and spending ample time in their living space. It’s important for on-site teams to prioritize quickly and efficiently, especially as the volume of requests increases and residents expect almost real time responses. What was once a minor maintenance issue can now quickly escalate into an unsatisfied and angry customer as residents are experiencing the maintenance issue for more hours of the day. As we continue into 2021, on-site teams will have to provide an enhanced experience by quickly managing requests, clearly communicating all updates, and going the extra mile to offer the best possible management experience.
2. Prioritize the Retention of Top Qualified Talent
Employing a highly skilled property management and maintenance staff is paramount to resident satisfaction and successful day-to-day operations. However, finding and retaining top talent will remain a challenge in 2021 for several reasons. Multifamily is a highly competitive and growing industry with a surplus of opportunity. We’re now seeing an excessive demand for experienced, trained personnel, but a labor shortage of qualified candidates entering the market. 2021 will continue to expose the need for more highly skilled and passionate staff members. The companies that succeed in attracting top talent do so by offering competitive salary packages; providing training, education, and support; and continually looking for creative ways to “surprise and delight” employees. Example perks could always include an appreciation day for the teams, flexible work hours, or an unexpected day off. Onboarding a professional, qualified, and capable team translates to resident satisfaction and long-term resident retention.
3. Looming Economic Uncertainty Clouds the Industry
Although this year brought economic uncertainty with changes in income and employment status, rent delinquency for multifamily hasn’t been as significant as anticipated. Research conducted by the National Multifamily Housing Council reflects a 1.1% increase in overall delinquency in September 2020 versus the prior year, with a 4.8% decrease in on-time payments. We’ve had a similar experience at Fogelman. Rent collections have outperformed expectations during the early part of the pandemic; however, we recognize that many are still struggling financially, which might impact future collections.
It’s difficult to predict what delinquency will look like in 2021 since it’s dependent on employment recovery and what stimulus is available to help struggling renters pay their rent. Along with the rest of the industry, we’ll be monitoring economic conditions as we head into the new year.
4. Getting Creative with Resident Connection
Striking the balance between resident interaction and safety precautions will continue to be a challenge for multifamily teams in 2021. Residents may want to resume “normal” social connection and activities with the coming winter months, but the ongoing pandemic will challenge property management teams to rethink social events and connectivity. Though we’ve seen a lot of virtual happy hours, drive-by celebrations, and Zoom classes, it’s the teams that leverage creative programming to bring people together online that will have the most success in 2021. For safe, socially distanced resident activities next year, we expect to see more virtual scavenger hunts and trivia, virtual cooking and mixology classes, and community visits from local favorite food trucks.
5. Adapting to the Evolving Needs of Residents
We understand residents are using their living spaces differently in the wake of increased remote working. Apartment units have become a place of work and leisure, and there are no signs of that changing anytime soon. Some major companies, such as Google, Target, Salesforce, and Facebook, are delaying the return to a traditional office environment until summer 2021, and a handful of companies, like Microsoft and Twitter, are transitioning to a permanent remote status.
In 2021, management companies will need to continue adjusting their offerings to meet resident needs in the short and long term. Whether that’s providing better high-speed internet packages, creating socially distant co-working spaces, offering reservation-based conference rooms, or establishing wellness-focused areas like outdoor green spaces and trails. Those that adapt the fastest and implement feedback from their residents will be most successful in strengthening resident retention and satisfaction.
6. Go Digital, Stay Connected
Because of the pandemic, we’ll continue to see less physical interaction with residents, causing a greater demand for information and the frequency at which it’s delivered across online platforms. As mentioned earlier, digital communication tools like apps, emails, and texts are the industry standard and mainstay for properties in 2021. Another must-have for convenience is a web portal that allows residents to make payments, submit maintenance requests, and view discussion boards or upcoming events. For prospects, offering self-guided and virtual property tours will be an important, safer option. Overall success in 2021 requires that digital tools provide both convenience and ease of fast, frequent communication to help us meet our residents and potential residents right where they are—online.
Landlord Inspections: The Do’s and Don’ts of Apartment Inspections
Maybe you’re suspicious one of your tenants is breaking the lease’s pet policy. Maybe you just haven’t checked in with them for a while.
If so, you may ask yourself: can a landlord do random inspections? Well, the answer isn’t an easy yes or no.
As a landlord, you can drive by, walk by, or bicycle by your property anytime. But you cannot walk into the property unannounced. We’re here to walk you through the do’s and don’ts of landlord inspections.
Legal Reasons to Inspect an Apartment
Apartment inspections need to be performed for a variety of reasons. Let’s take a look at those situations in which you can legally enter and inspect an apartment.
Maintenance and Repairs
Your tenant might ask you to service or repair something. Typically, landlords are only permitted to enter the premises during “reasonable hours.” That varies from state-to-state.
Any time between 9 a.m. and 5 p.m. is usually considered reasonable. Those hours are within normal business operating hours.
However, when a repair is specifically requested by the tenant, you can enter and perform the necessary service at any hour that is mutually agreed upon.
In a scenario where the tenant has not requested maintenance or repair, but you still need to perform it, give them 24-48 (dependent on state and local law) hours’ notice of your arrival. Additionally, make sure to come at a time that falls within the scope of “reasonable hours.”
Decorations, Alterations, or Improvements
Can landlords do random inspections to address the aesthetic? As a landlord, you have the right to make aesthetic changes as you see fit. This is different from maintenance or repairs. That’s because it’s not something that you need to do to maintain the unit’s habitability.
For example, you might want to repaint the front porch or install new light fixtures. In these cases, stick to the “reasonable hours” rule. Make sure to give your tenant proper notice.
You have the right to show the unit to prospective tenants. Again, be sure to notify your tenants in advance. This gives them the opportunity to ensure that they’re out of the apartment during showings or give the unit a good once-over, if necessary.
Keep in mind, with millions of Americans working from home due to COVID-19, it may be difficult to schedule a showing during the workday. If that’s the case, you’ll need to work with your tenants to schedule a time that works for them without disturbing their work. You could also “show” prospective tenants your available units via 3D apartment tours.
Though you may have done your due diligence, there’s always the chance that you may have a tenant that is egregiously committing lease violations. Whether you suspect there’s an illegal subletter on the premises or that your tenant has willfully ignored your no-pet policy, you have a right to check it out.
As it goes for all instances in which you may want to enter the unit, give notice. If you find that your tenant is committing lease violations, you may need to serve a notice to quit.
It’s essential for landlords to conduct move-out inspections to assess the damage, if any, that the last tenant is responsible for. Your findings will dictate how much of a tenant’s security deposit you’ll refund back to them.
Upon move-in, inspections enable landlords to confirm the condition of their unit. Then, they can make any necessary repairs before their new tenant officially moves in.
While the previous reasons to perform an apartment inspection were very clear, there are also extenuating circumstances in which an inspection can be legally performed. These include:
Court Orders: If you’ve obtained a legal order granting you permission to inspect one of your units, then you can legally perform the inspection. Typically, the order may stipulate a specific date and time that you can perform the inspection.
Tenant Abandonment: Keep in mind that the requirements to be considered “abandonment of a property” are different state by state. If a unit has been abandoned, you’ll need to remove any remaining possessions. Be sure to document the abandonment.
Tenant Violation of Health/Safety Codes: Not only does this put the tenant and others at risk, but it can also lead to significant damage to your property in the form of a pest infestation.
In Case of an Emergency: For example, a fire, gas leak, water leak, burst pipes, or an extreme weather event that may threaten the safety of your tenant gives you license to make necessary repairs as quickly as possible.
Do’s of Landlord Inspections:
Give Proper Notice of Any and All Inspections (24-48 hours)
Also keep in mind that, even after giving notice, you can only enter a tenant’s unit during “reasonable hours.” Typically, though this varies by state, a time between 9 a.m. and 5 p.m. is considered to be within the scope of “reasonable hours.”
It’s even better to give even earlier notice than the recommended time frame. That’s the case especially in cases of routine inspections that you’ve scheduled in advance.
There are real legal consequences for failing to give notice. Those include arrest, fines, and legal action being taken against you.
Avoid this by giving written notice, leaving a note on the door or in the mailbox, or sending notice via email. Those methods are sufficient and serve as proof that you adhered to the law.
Schedule Property Inspections a Few Times Throughout the Lease Term
There’s no magic number for this. It’ll depend on the length of the lease (we recommend no more than quarterly for a year lease).
What’s the rationale behind scheduled, incremental inspections throughout the duration of a lease? Well, it ensures that maintenance and safety standards are up to date without being excessive.
Remember: Purpose, Professionalism, and Tenant Privacy
If you must enter a tenant’s home to perform an inspection, consider purpose, professionalism, and tenant privacy. State your purpose upon your arrival, give proper notice as a professional courtesy, and respect your tenant’s privacy by ensuring that you don’t overstep.
Document All Routine Inspections in the Lease Agreement
If you have a policy that allows for inspections over a set interval of time, then you need to document that in the lease agreement.
It’s imperative to discuss these provisions when you’re face-to-face with the tenant at signing. This way, everyone knows what to expect ahead of time. It’s much better than having tenants, who haven’t read through the lease, be caught off guard by your routine inspections.
Be Smart and Reasonable
Just because the law is on your side, doesn’t mean you should completely disregard the importance of a good tenant-landlord relationship. If you’re continuously notifying your tenant that you’ll be stopping by, it’s likely to frustrate your tenant over time. If you’d like to increase your rate of renewed leases, limit your inspections.
Don’ts of Landlord Inspections
Breach a Tenant’s Right to Quiet Enjoyment
The right to quiet enjoyment is legally protected. For tenants, this means that they can peacefully enjoy their homes, bar entry from landlords, and that the landlord is responsible for the maintenance and upkeep of the property. Entering the apartment without permission or not giving notice would breach this right.
Show Up Unexpectedly
Outside of an emergency or extenuating circumstance, you need to give tenants proper notice. If your state has a statute that describes a specific notice period that you must give to tenants before entering their homes, then you must always adhere to it.
Remember that a tenant may refuse entry to a landlord that has not given appropriate notification. Additionally, avoid requesting inspections outside of reasonable hours: typically, 9-5.
Ignore State and Local Law
Laws regarding apartment inspections vary in different states, so it’s imperative to be up-to-date with your knowledge of current inspection law. For example, Alabama requires a two-day notice. Connecticut requires reasonable notice. New York has no statue on a state level.
Give a Vague Notice
When you are letting your tenant know you’ll be coming by, stipulate a date and time. Don’t leave the “when” up in the air. Be sure to state your purpose for entering.
Are you coming by for a showing? Are you repairing something? Or is it a regular inspection? Fill your tenant in on the details for your upcoming visit.
As a landlord, you’re ultimately responsible for the upkeep and condition of your property, even when you’re renting it out. Though you’ve gone through the process of thoroughly screening all tenants, there’s always a chance that your tenants may not keep their apartment in top-notch condition. That’s where landlord inspections come in.
Whether your tenants don’t report a leak which ends up causing extensive damage or you simply want to perform a routine check-in, you have a legal right to inspect your property.
However, you must comply with the law when you do. Typically, this means giving proper notice and not entering a unit without permission from your current tenants, except in emergency circumstances.
Can landlords do random inspections? The answer is yes if you follow the above advice and adhere to local laws, your lease, and best practices.
10 Rental Property Red Flags You Should Never Ignore, Winston Rowe and Associates
These are problems are structural in nature. And by that, I’m not talking about the actual foundation of the building, but something that is relatively unalterable about the property. Some of these problems may be at least partially fixable at a reasonable price, such as the point on storage. Others are not, such as the location or floorplan. But these are not items you can simply and easily add to a repair list and make them go away.
With that in mind, let us begin our list:
1. The Proverbial War Zone
I wrote an article about how to analyze the crime risk for a potential deal that I would recommend reading to evaluate which areas are proverbial war zones. Furthermore, I wrote another article on why most investors (and all newbies) should avoid properties in D areas. The gist of it is that properties in such areas will usually cost more to maintain than the rent they bring in. And the risk is much higher, to boot.
Remember, square foot for square foot, a new roof or furnace will cost the same in D neighborhood as it does in an A neighborhood. If the rent is too low, it simply won’t cover the cost of such repairs. And add to this that crime is more common in these areas. It will take a long time at $500/month in rent to cover the cost of an A/C condenser that decides to grow legs and walk off. Tenants in these areas are also more likely to fall behind on their rent or do significant damage to a unit. While there are plenty of good tenants in rough areas, unless you specialize in these types of rentals, really rough areas should be a deal breaker.
2. Terrible Schools
Often, terrible schools go hand in hand with war zones, but not always. Some areas, particularly densely urban areas, have bad schools but some quality areas where most of the people who live there send their kids to private schools. While I personally find this dynamic to be tragic, there’s not much you can do about it as a real estate investor.
Bad schools is definitely more of a red flag than anything that would resemble a deal breaker. But after safety, the most important thing people look for when looking to rent a property (at least a family-sized property) is the quality of the school district. So keep this in mind. http://www.GreatSchools.org is a good place to go to evaluate any given school district.
3. Houses With Only One or Two Bedrooms
I hesitated to even include this because it is absolutely not a deal breaker. But it is worth noting that one and two-bedroom homes are not what any family is looking for, so with these types of houses, you will generally have a more transient clientele. Now, with some such houses, you can add a bedroom, which can be a great value-add. But with others, there simply isn’t the space. Small houses can be risky, and the tiny houses movement is too likely to be a fad to be worth investing in as rental property.
That being said, I have heard of one investor who specifically looks for one-bedroom homes and rents (mostly) to elderly people, and he does very well with it. For our part, we have plenty of two-bedroom houses, and they do just fine. But you definitely need to know what you are getting into with such homes.
4. Huge Units
A 3,000 square foot house does not often make for a great rental. Again, this is not an always proposition, though. But for the most part, the maintenance and turnover will be much higher on such large properties simply because of the sheer size of it. Furthermore, most people looking for such a house will be buyers, not renters.
We find our sweet spot to be around 800 to 1,500 square feet for houses.
5. Huge Lots and Rural Properties
I put these two together since they tend to go together. Now, a big lot is a good thing. But if you are looking at anything too large, especially over an acre, I would start to get nervous. For one thing, that’s a lot of yard maintenance to deal with upon turnover. Furthermore, most people don’t want to take care of such a large yard themselves, so you will turn off a good number of potential tenants. Or you may get a tenant who simply won’t take care of the yard, and then you will start getting letters from the city.
Rural properties are also difficult to manage since they will generally be far away from you. I’m not a fan of rural properties in general (although, for some, I’m sure it’s a very profitable niche). But my advice would be that if you want to invest in rural properties, they make for better flips than holds most of the time.
6. Any Sort of Environmental Problem
OK, another major disclaimer—this could be a goldmine for a savvy investor who will buy what others won’t. But if you have toxic waste dump or an underground leaking oil drum or the unit is going through meth abatement, unless this is your specialty, move on to the next one.
7. Tiny Bedrooms or Kitchen
There are some instances where you can fix a tiny bedroom or kitchen by removing a wall here and adding a wall there. But often, there’s no economically good way to do it. Some old houses are just designed in a way that makes me think the architects were on LSD—even though that drug hadn’t even been invented when those properties were built. I’ve seen massive and useless hallways connecting one tiny bedroom to another in a 1,200 square foot house with no conceivable way to add a third bedroom. It’s endlessly frustrating.
But it’s important to note that potential tenants do not decide on which property they are going to rent by plugging the amenities and specs into a spreadsheet and running a logarithmic, covariate algorithm that takes the least-squares regression of the hypotenuse to determine the best value. They make their decisions based on emotion and livability. Tiny bedrooms are a huge turnoff for anything other than the third bedroom, which is often used as an office, library, or nursery. A master bedroom is a huge plus, but the first and second bedroom need to be of decent size (at least 10 feet by 10 feet or something equivalent).
And they say that kitchens and bathrooms are what really sell houses. I think the kitchen is particularly important, and a tiny kitchen that cannot be expanded or opened up is a huge turnoff. Not necessarily a deal killer (remember, every property has some value), but it’s a big red flag.
8. Awkward Layouts
Can you only get to the bedroom from the kitchen? Is the only bathroom right next to the kitchen? Can you only access the garage from a bedroom? Is the only door to the backyard through a bedroom? Is the second bedroom only accessible from the first (which, I should note, means it’s not a bedroom)? Is the only access to the unit’s only bathroom through one of the bedrooms in a unit that has more than one bedroom?
Maybe you can fix these problems by moving a wall or whatnot. Maybe you can’t. If you can’t, that is a major problem that seriously affects the properties sale and rental value. And tenants, like homeowners, generally don’t like awkward properties.
Obviously, it doesn’t mean the property is worthless, but it is another major red flag.
9. No Storage
Say you have a three-bedroom, two-bathroom house with no garage, basement, or bonus rooms. You need to note that the lack of storage is a big negative to potential tenants. Not a deal killer, of course, but a red flag nonetheless. The best remedy, we have found, is to add a shed in the backyard. Both Home Depot and Lowes sell such sheds at reasonable prices. But this is an imperfect solution at best. So be careful with a house that has no storage.
It’s safer to buy apartments with minimal or no storage, particularly with smaller units, as 1) the tenant doesn’t need a lawnmower or anything like that since they are not responsible for the lawn and 2) it’s less likely to be a family living there, so the person likely has a lot less stuff.
10. Local Governments That Hate You Simply Because You Exist
OK, that may be a bit of hyperbole. But it’s extremely important to know how landlord-friendly any municipality you intend to buy in is. Some cities require landlords to have annual property inspections, which are both expensive and arduous. Are you willing to put up with that? Other cities, particularly on the East Coast, have eviction laws that are so strict, it can take three months or even longer to evict a non-paying tenant. I’ve even heard of it taking as long as a year, especially if the tenant knows how to game the system.
For a rather extreme example, here’s how Global Property Guide describes the eviction process in the Netherlands:
“Landlords can only give notice in strictly defined cases, and it is extremely difficult for owners to evict tenants once they are established. Only the judiciary, and not the landlord, can terminate the contract, and only after the landlord has given notice of from three to six months. Where the contract is for a fixed period of time, he is restrained from giving notice except towards the end of that period.
“Limited arrears in payment of rent are in general insufficient grounds for a rescission of the contract; only an order for payment can be achieved. In the case of arrears of up to three months, rescission will be denied. Nuisances committed by tenants tend not to be a good basis for eviction; they tend to be denied by tenants, and the court procedure is costly.”
If there’s anyone from the Netherlands who would like to correct me on this point, I’m all ears. But for now, I’ll probably pass on investing there.
On the same note, HOAs can be similarly difficult and anti-landlord in some communities. We’ve all heard of the petty tyrants that have rises to power in some HOAs. Such properties are generally to be avoided.
To wrap it up, it’s once again critical to remember that there really is no such thing as a deal killer. After all, I for one would be willing to buy any property in the country if they paid me a billion dollars to do it. But there are major red flags that will kill most deals. When looking for rental properties, the above list are some of the big ones to watch out for.
Cash for Keys – Could it Work for You?
Cash for keys may soon be on the rise. It’s an idea that might appeal to many landlords who want to incentivize tenants to leave their rentals and avoid a drawn out eviction process.
Cash for keys, in concept, is a simple, straightforward process, legal in all 50 states. It’s exactly what it sounds like: an agreement, entered into voluntarily by a landlord and tenant, in which cash or other value is provided to the tenant as an incentive for them to hand over the keys and move out of the rental.
Some landlords are already engaged in cash-for-keys contracts. It’s perfectly legal to do so even while state and federal eviction moratoriums are in place, as long as it is done in a non-threatening, voluntary and non-coercive manner on the part of the landlord. To be safe, consultation with an attorney, or the MassLandlords Helpline, is recommended before initiating or entertaining any cash-for-keys proposals.
A renter may also suggest cash for keys independently, without any prompting from the landlord, which can result in a move-out agreement.
Cash-for-Keys Mortgage Foreclosures vs. Rental Evictions
Cash for keys gained popularity during the housing crisis in 2008. Real estate owners, who represented banks, offered cash to underwater and nonpaying homeowners by the millions in heavy hit communities, in Florida, Southern California and other regions. Offering the strapped homeowners cash to vacate their homes saved banks from going through the costly and time-consuming process of foreclosure.
Over the years, landlords have also begun using cash for keys as a way to entice nonpaying renters, for example, to leave their residences instead of filing eviction notices, spending months in housing courts, sitting on empty rentals and paying court and other costs. Some landlords have also used cash for keys to encourage paying tenants to leave a unit that they want to renovate or sell, or vacate for other reasons.
For the purposes of this article, we refer to cash for keys between landlords and tenants.
Now or Later
It’s important to note: cash for keys, while it may be the answer for some landlords, is not a panacea for those with problem tenants, for example, nor an arrangement to be entered into lightly.
Landlords embarking on cash-for-keys agreements now, while eviction moratoriums are in place and courts are not hearing most housing cases, will have no recourse in the event tenants don’t comply with the agreement. Make certain both parties are entering the contract in good faith, are well-informed of their rights, and of the contract’s stipulations.
In some cases, it might be in the interest of landlords to hire a mediator to work with both parties – landlord and tenant – to negotiate an amenable agreement that all will adhere to throughout the process. If you opt not to hire a mediator, make certain that tenants know their rights in a cash-for-keys agreement, to avoid them from backing out of a deal later when they’ve received advice from others.
Potentially looming at the other end of the state and federal eviction moratoriums now in place is a significant number of evictions. This situation could be avoided if the state government were to take legislative action, such as that proposed by MassLandlords, to guarantee housing for the long term. But short of further legislation, the eviction backlog could become substantial.
Conditions may also be affected by pending bills, such as HD.4878, a bill in the state legislature, sponsored by Reps. Kevin Honan and Mike Connolly, that could effectively lead to rent cancellation for a large percentage of landlords.
Evictions are almost always expensive. The total bill for an eviction in Massachusetts can tally more than $5,000, considering lost rent, attorney, court and constable fees, repairs and cleaning costs. In the next couple years, that amount will likely increase as courts become backlogged and may delay summary hearings for months (i.e., more lost rent).
The math is simple in a lot of situations:
A) Wait months or more than a year for your eviction case to be litigated while a nonpaying tenant occupies your rental (and possibly degrades its condition), then forfeit thousands of dollars in court costs, lost rent and attorney fees?
Or B) Offer your tenant a few thousand dollars to move out peacefully and quickly? The savings between cash for keys and an eviction can range from the low thousands to five figures in some outlying cases, even considering attorney consulting fees.
Meanwhile, you could have your rental reoccupied with a paying tenant within a month or two. Not to mention all the headaches you could avoid.
A Tough Pill to Swallow
For some landlords, paying cash to a nonpaying tenant who owes thousands of dollars in back rent and may have damaged your property is anathema. Like rubbing salt in a wound.
But providing housing is a business, first and foremost. And while it may be emotionally difficult to hand over a pile of cash to a tenant who has given you headaches since the day they moved in, it may be the wisest business decision.
Some landlords also question the ethics of a cash-for-keys agreement. They argue that the practice could have the long-term effect of increasing squatting and rent delinquency by encouraging bad players to force landlords to hand them cash just in order to get them out of their property and avoid legal fees and headaches.
That scenario is possible in a few situations. But in the wake of coronavirus, the overwhelming percentage of delinquent renters will be the result of the pandemic response and economic downturn. There has always existed a fraction of squatters and intentional nonpayers gaming the system. It’s impossible to say how much that fraction could increase because word spread that cash for keys is a way to extort some cash from landlords.
In the wake of the coronavirus pandemic and response, once eviction moratoriums have been lifted, many landlords will be positioned to serve eviction notices as soon as they can to their delinquent tenants. In many cases – especially for tenants who have not suffered a loss of income but instead have taken advantage of the eviction moratorium to get free housing – eviction might be the logical course.
But for many other tenants – such as those who stopped paying rent because they lost jobs and income during coronavirus and response – landlords might consider alternatives to eviction, especially for good tenants who have regained employment and resumed rent payment.
Alternatives might include working with tenants to come to a compromise that will extend the tenancy for the long term while forfeiting some back rent. You could renegotiate back rent payments, for example, or restructure payments with some owed funds added in. Partial rent forgiveness might also be a prudent solution if it saves the arduous process of eviction.
But if you decide as a landlord that the relationship with your tenant is untenable, then cash for keys may be the better alternative.
How to Offer Cash for Keys
The process can be simple, but it depends on a few specifics. At its simplest, cash for keys is a transaction directly between landlord and tenant. No courts, constables or intermediaries needed.
(When court-enforced evictions are possible, however, cash-for-keys agreements may be entered into the court record. This action would give you a back-up plan in case your tenant doesn’t comply with the agreement.)
As stated above, hiring an attorney or mediator, or consulting the MassLandlords Helpline, might be a prudent step, at least to avoid any misunderstandings or surprises, and to provide additional assistance in case the court becomes involved.
As much as possible, try to keep emotion out of your cash-for-keys communications. It’s a business transaction, and in most cases will be a win-win solution (i.e., the least bad outcome) for landlord and tenant. Focus on the benefits.
Step 1: Draft a plan
Jot some parameters on paper, or use the MassLandlords Agreement to End Tenancy form to outline a proposal. Include a proposed amount to offer your tenant to incentivize a quick move-out. Decide on an amount to offer beforehand (see below).
This step offers an opportunity to be creative and flexible within the agreement. For example, you could offer, as part of the payment, to cover moving costs for your renter. Or maybe your cash-for-keys offer doesn’t involve actual payment at all, rather you could offer to forgive all the back rent owed in exchange for a voluntary move-out.
You might consider two or three offers that correspond with faster move-out schedules. If you want your tenant to move out sooner than later, you’ll likely need to offer a higher amount of cash.
This is an abstract that could be shared with an attorney for those who work with one, as recommended.
Step 2: Initiate a conversation with your tenant, either in person or via phone
Present your case and proposal evenly and clearly, as you would with a business proposition. There is no need to mention eviction during this conversation, especially if your intent is just to empty the rental for renovation or sale.
Outline the cash-for-keys concept, emphasizing the benefits to your tenant (i.e., cash in hand, no eviction record to hamper future efforts to find rental housing, etc.).
Your tenant might try to negotiate or counter-offer. Keep negotiation to a minimum. If an extortionist tenant suspects that you are vulnerable or willing to pay more to get rid of them they may take you to the cleaners. Choose a fair amount to open with and try to stick close to that figure.
Assuming your tenant agrees to a cash-for-keys settlement, spell out the agreement with your tenant, or share the MassLandlords Agreement to End Tenancy, a brief and convenient form that provides fields for the essential information and signatures.
Include the amount (or services) you will pay renters to move out. Include the date and time they agree to be vacated from the apartment – meaning all possessions are removed from the unit and any common areas, keys have been delivered to the landlord or agent, and the unit has been left “broom clean.”
Both you and your tenant must sign two copies in duplicate so you each have a signed record of the contract.
Step 2a: Escrow the money
Whether or not you hire an attorney or mediator to assist with your cash-for-keys process, we recommend that you set aside the agreed cash amount for payment upon contract completion. To keep it simple, landlords could place the cash amount in a separate account and pay it out to complete the contract. You could also have your attorney or mediator escrow the cash and oversee the payment at your direction.
This is a step that removes emotion from the payment process, which can be a difficult step for some landlords. It also assures that tenants, who have voluntarily moved out as part of the cash-for-keys agreement, won’t have to wait for payment or chase the landlord to receive the cash owed them.
Step 3: Complete the contract
The cash-for-keys contract is completed when the rental is vacated at or before the agreed upon time and date, satisfactorily cleaned, and keys are in your hand.
Do not hand over any payment or order release of escrowed funds until those conditions are met. If your tenant has not met those conditions by the designated time (i.e., they are still moving out or cleaning beyond the time you both agreed), you have the option of considering the contract void.
Once you have the keys, the unit is in your possession, you have inspected the apartment to your satisfaction and paid your tenant the amount you agreed to, the contract is completed.
How Much to Pay?
First, as a comparative exercise, calculate how much you project an eviction would cost you. You will need to build in more months than usual of lost rent because of the backlog of cases after the eviction moratorium is lifted. For example, if your eviction is delayed six months or more due to the backlog of cases, your costs will increase substantially.
Also think about how much an eviction would cost in normal times, with little or no court backlog. One rule of thumb is to halve that amount as a cash-for-keys offer.
Consider rents and move-in costs for similar apartments in your community. Would $2,700 cover first and last month’s rents plus security deposit? If so, that may be your starting figure, and could present a strong incentive for your renter to leave.
In early conversations, ascertain your renters’ needs. Could they be out in a week, or will they need longer? Would a higher cash offer incentivize an earlier departure?
You could consider a tiered offer with one amount for a 60-day move-out, another offer for a 30-day move-out, or a higher amount to move out in a couple weeks or less. Keep the conversation going over several days or weeks to allow both parties time to consider and address underlying concerns.
On move-out day, once you’ve been handed the keys to the apartment and inspected it, have your tenant sign a final clause saying they have received the cash payment. If the payment was escrowed and distributed by the bank, be sure to get a record of that payment.
Before handing over or releasing the cash payment, be very sure to conduct that final inspection.
As a last step, it is recommended that you immediately change the locks, as usual with an apartment transition. Having the keys handed to you from the tenant doesn’t mean they didn’t at some point have copies made.
Cash for keys isn’t for everyone in every situation. It needs to be approached thoughtfully and thoroughly with all bases covered from a legal standpoint.
If you find yourself lamenting the pile of cash you just handed over to an undeserving tenant in exchange for keys to your property, consider revisiting your calculated eviction costs.
Focus on the potential thousands of dollars you just saved, and your freedom to now locate a better tenant.
6 Tips for Setting Rents, Winston Rowe and Associates
If your rent is set too high, the property can sit on the market and you will miss out on monthly rental income. And if the rent is set lower than the competition, simply put, you will leave money on the table.
Whether you own or manage one rental property or hundreds of rentals across the country, you need to be able to set fair market rents confidently.
As we know, rents vary greatly from market to market, but can even differ from one street to the next within a single neighborhood. Obviously, numerous variables impact the rent you can charge for your rental unit, including location, type of building (duplex, apartment building, etc.), size/square feet, age of unit, number of beds/baths, and amenities (i.e. parking, AC, pool, roof deck, and so on.)
Don’t be fooled that any one rent comp, property manager, or local real estate agent can tell you the perfect fair market rent for your property. We recommend that you tap into a handful of resources to help you set rents confidently.
1. Find some rent comps to give you a starting point
Check local apartment listings using the local newspaper, online apartment guides, or websites like Craigslist and Rentometer to get a feel for the “going rents.” Rentometer can give you historical rent trends for the area and a good starting-point rent. You can further refine the rent from there by using some of the suggestions listed below.
2. Stay up to date on the economic and business activity in the local market
Is it thriving? Are stores closing down? Economic activity is one of the key drivers of rental housing demand and it can affect the rental market in unique ways. For example the current economy in Boston, Mass., is hot! Rental housing is in high demand, leading many renters to forgo amenities and perks in favor of securing a lease. This means that landlords can afford to make fewer concessions when negotiating.
3. Check occupancy rates for your area
Are the occupancy rates trending upward? Good! The stronger the desirability of a rental, or neighborhood, typically the higher the occupancy rate – and higher market rent. It’s a question of supply and demand. Factors that can affect occupancy rates include local millennial population, employment trends, housing supply, and new construction growth, rent prices, and the location and condition of the rental property.
4. Chat with a local real-estate professional
Talk with an industry professional about their take on the market or a specific neighborhood. Local experts (property managers, brokers, agents, appraisers, and lenders) are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, building permits, zoning for a new apartment building, etc.
5. Use “rent per square foot”
Whenever possible use square footage as a benchmark for searching rent comps. This allows you to encapsulate into a single number all the subjective variables of rent, and provides you with a basis for comparison across different units, locations, amenities, and so forth.
6. Check your local apartment or rental-housing association
These are great resources for research. They may provide information about local rent levels – past, present, and future. This is especially important for real-estate investors and developers.
Making sure your property is renting at (or close to) fair market rent is as much of an art as it is a science. However, with the 6 tips for setting rents along with good current and historical rental data and a thorough understanding of the local market and market conditions, you can set rents with confidence!
What is Rent to Income Ratio and How to Calculate It, Winston Rowe and Associates
The Importance of Rent to Income Ratio
A rent to income ratio determines the monthly or annual gross income a tenant must earn to be able to afford rent each month. This ratio is a useful and simple tool that helps tenants as well as landlords enter into a smooth rental agreement.
Using an income to rent calculator, landlords can analyze the ability of tenants to pay rent each month. As a result, it simplifies the process of tenant screening and shortlisting applicants.
Calculating Rent to Income Ratio
Here are two commonly used ways to calculate this ratio:
Calculate net income against a fixed rent percentage
This will help you determine the maximum amount you can afford to pay in rent each month. The industry standard is 30% of your income. In other words, no more than 30% of your annual income should go toward housing costs.
Its mathematical representation looks like this:
(Net earnings per year / 12) X 0.3 = Maximum monthly rental income
For example, suppose an applicant earns $150,000 per year. The income to rent ratio will be:
(150,000/12) X 0.3 = $3,750
Now, if the rental site asks for $4,000 per month, the applicant would fail to meet this condition. This is because their maximum monthly rental income does not reach the required limit. Therefore, the landlord might not find the candidate eligible for renting.
Use a ratio multiplier
Another method to calculate the rent to income ratio is to multiply the monthly rent value with a ratio multiplier. In this method, the standard multiplier is 3. This means that the applicant should make at least three times their gross monthly income to cover rental expenses. The math would look like this:
Monthly Rent X 3 = Minimum monthly rental income
Let’s consider an example to better understand. Suppose you are interested in renting an apartment that asks for $3,000 per month. Three times this rent amount becomes $9,000. This means you must gross a minimum of $9,000 per month in income to be eligible for consideration.
Pros & Cons of Rent to Income Calculations
Each month, a tenant’s paycheck likely goes toward many different bills and obligations. By gaining an understanding on how much monthly income is remaining, you’ll get a better idea of the ability to pay.
When landlords are recruiting good tenants, the rent to income ratio plays a very important role. It is the primary way to determine income requirements to rent properties based on monthly or annual earnings. This helps ensure that the tenant is able to afford rent each month.
As a landlord, you might not want to invest your time on ineligible tenants for your property. Calculating the gross income to rent ratio is an important step toward securing the right people for your rentals. Rather than going through the hassle of the screening process, use the rent-to-income ratio as your simple criteria instead.
However, ideal rent to salary ratio situations are not always as favorable as they sound. We know a lot of people aren’t that consistent in paying rents. Whereas, applicants who may not satisfy the income to rent ratio could be more responsible when it comes to paying rent on time.
Plus, some complexes make their income to rent apartment policies 3:1 . This might look like a lucrative option but in actuality, it prompts to a significant decline. Some tenants demonstrate a consistent ability to pay rent while others, with higher rent to income ratio, fail to provide steady deposits.
On the other hand, the 30% rule is a popular guideline for determining what percentage of income should go to rent. However, there are two big flaws associated with this rule. First, it doesn’t account for inflation and rising rental prices. Although rent prices are climbing more rapidly in some areas than others, average wage growth has been relatively flat since 2007. So, while rental rates are climbing, incomes aren’t necessarily keeping pace.
The second problem with the 30% rule is that it’s not personalized to your situation. It doesn’t take into account, for instance, how much student loan or credit card debt you might be paying off. Moreover, it also does not consider how much money you’re earning, your financial goals, or the condition of the real estate market where you are planning to rent.
Alternative ways to calculate rent to income ratio
As a rule of thumb, your income should be 40 times your rent, which is basically the same as 30% of your total salary. Almost every rent to income ratio calculator you find online uses this alternative way to calculate the ratio.
For example, suppose your income is $100,000 per year, the amount of rent you can afford each month can easily be evaluated as 30% of your total income divided by 12.
The math will look like this:
(0.3 * 100,000) / 12 = $2,500
Alternatively, you can divide the net amount by simply 40.
( 100,000 / 40) = $2,500
How Landlords Can Protect Themselves?
Calculating rent to income ratio might seem quite effortless and manageable, but it might partly hold a deficit for the landlord. Why? Because the landlord is not able to acknowledge the total worth of the tenant because of unspecified sources of income. The potential tenant may seem to have other financial obligations like loan percentage, fixed rate for insurance, and indemnification.
Even after thorough screening, some people may delude and provide false income documentation. In any case mentioned above, the landlord is fully granted the right to access all additional financial information of an applicant. Tenants should likely provide all credit card details with a proper financial report.
Before letting in a tenant, make sure that all the certified funds, cashiers’ checks, money orders, and records of all previous taxes of a year are officially provided. Even if your tenant qualifies as per the 30% rule, they may be overburdened with extra expenditures. In such cases, landlords need to assure ways to protect themselves.
Here’s how landlords can protect themselves:
Set up recurring rent payments
Auto-pay services provide a convenient method of direct deposit with rent deduction on a specified date. It also provides more assurance of getting paid on-time each month if payments are set up to recur.
Request a large deposit as a backup provision from any uncertainty or loss
A larger security deposit offers greater security because it can cover the landlord’s losses in case of damages or missed rent. Also, introduce several methods of rent payment. Get rent default insurance coverage to keep your income stable and regular.
Specify a co-signer on the lease
The co-signer is responsible to pay the dues in case the primary leaseholder cannot. The landlord should vet the co-signer as thoroughly as the tenant.
Run a thorough background check
Check the tenant’s background and inquire about past rental history. Also, check what your tenant presents as evidence. Cross-check all the references provided. Verify and validate all means of income sources. Gather data regarding any individual or collective payments or transactions. Once the property is rented, conduct routine inspections to prevent huge problems.
Rent to income ratio can benefit the landlord and tenant in many ways. It can help with budget planning for tenants looking to comfortably afford their rent. Whereas, it can prevent landlords from having tenants who may have difficulties paying their rent.
However, when it comes to screening and shortlisting a tenant, the rent to income ratio may not reveal enough about the tenant, their level of responsibility, or honesty. Therefore, all landlords should be running tenant credit checks, in addition to, calculating rent to income ratios.
A Comprehensive Guide for Apartment Manager
Apartment Building Lending No Up Front Fees Winston Rowe and Associates
With growing sizes of building complexes, apartment management is becoming one of the most challenging jobs. As an apartment manager, you are not only responsible for maintaining the building but the owner and tenants as well.
The main task of an apartment manager is to improve the client-tenant living experience. They need to reduce costs and increase profit whenever possible.
Many property managers often face many challenges when trying to manage rental property. It’s essential that the management of a property run smoothly just like any other business.
If you are an apartment manager or owner struggling to do your job, these quick tips will guide you through managing an apartment efficiently. So let’s begin then.
Important Points to Consider for Apartment Manager
1. Following the Housing Laws and Policies
2. Securing Your Property
3. Making the Apartment Desirable
4. Selecting the Right Tenant
5. Maintaining and Upkeeping the Society
6. Resolving Resident Complaints Immediately
Important Points to Consider for Apartment Manager
1. Following the Housing Laws and Policies
Some specific laws and regulations govern the professionals responsible for managing properties. Every state has its own set of rules and regulations which needs to be strictly followed.
In recent years, there have been reported cases of property managers where their actions have resulted in the unauthorized practice of law. That’s why apartment managers should work closely with legal counsel. It will ensure that they don’t unintentionally violate the law.
Get in touch with the lawyers who are familiar with the housing field. They will guide you through relevant policies. Let them know about your intentions and what you plan to do with the property.
Furthermore, take advice on tax liabilities and potential credits related to renting properties.
We would suggest that meet two to three lawyers in the beginning. Talk to them about your renting plans and then, decide with whom you can work for a long time.
Hiring a good lawyer will ensure that you always stay on the right side of the law.
2. Securing Your Property
Owning a residential rental property is a wise investment. But at the same time, it can be quite risky especially if you are new to this field. Without the right building insurance, you can face severe financial loss if something goes wrong.
The primary concern for any apartment manager or owner is the protection of the property from catastrophic events. Your apartment complex insurance should protect you against losses, damages, liability claims, and other issues.
Property insurance can seem complicated at first. But you can always take the help of your lawyer and insurance agent to guide you through.
Also, you should know that the insurance coverage and its cost vary. It depends on factors like the building’s location, type of construction, and more.
Some of the risks that apartment building managers/owners have to deal with:
Liability for tenant, employee, and visitor injuries
Theft or vandalism
Fire, storms, and other catastrophic damage
Invading the right to privacy
Loss of rental income
Discrimination lawsuit filed by disgruntled tenants
Any allegations of fraud or misconduct by tenants
You can tailor the insurance policies to one’s need to address the risks as mentioned above.
3. Making the Apartment Desirable
You can’t ignore the fact that for each day your property stays vacant, you lose potential rental income. If you want to attract quality tenants, make your apartment as desirable as possible.
How do you do that? A few simple fixes to help you make your property desirable to prospective tenants.
The first thing any tenant would look at is the exterior paint. If it is not at par, the tenant may not even want to come inside. A few ways how you can fix it:
Add some quality landscaping to increase the property’s curb appeal
Remove chipped paint and get a new coat of exterior paint
Repair broken banisters and replace torn window screens
Keep the compound clean. Remove trash, weeds, and debris
Make sure the lawn and shrubbery are well-manicured
If you want to charge a hefty amount in monthly rent, then, of course, you would have to go the extra mile. Provide luxuries that many tenants would be gladly willing to pay for. For instance, you can consider adding an in-house dryer, energy-efficient appliances and more.
These small tricks will help bring in the quality of applicants.
4. Selecting the Right Tenant
The next step in the apartment management process is selecting the right tenant.
Renting out apartments can be stress-free only if you have the right tenants. For that, you would need to advertise the vacancy to let people know about your rental space.
I. Advertise the Empty Space
Even in places with high housing demands, advertise your space stating all the facts and your requirements. This will help draw the right kind of applicants to your rental house.
The ad should contain information such as your contact number, details about your apartment, and what up are looking for. Some of the places where you can advertise it are:
Post it on newspaper
Display it on Internet classified sites
Connect with a real estate broker
II. Screen Tenants
Of course, you are not allowed to discriminate your tenants based on caste, creed, race, sex, etc.
However, you should screen tenants before renting your apartment to anyone. Make sure that they are financially sound to pay your rent and do not have any criminal background.
Otherwise, unsystematic screening and tenant selection often result in some significant headaches. You might end up with a tenant who pays the rent late or not at all and poorly maintained the place.
Your screening criteria should be the same for all. It should include:
Run a background check on each applicant to ensure that they won’t conduct any illegal activities in your apartment
Obtain a credit report to see if they can afford your rent and will be able to pay your rent on time
Ask for references from previous landlords or other personal references if any
III. Get it in Writing
Once you have chosen your tenant, make sure that you have a lease agreement in place. It should contain all the terms and conditions agreed by both the parties.
Having it in writing will protect both you and your tenants in case of any conflict in the future. The rental agreement helps create good relation by specifying things. It includes clauses like how and when you handle tenant complaints and repair problems, notice period if the tenant decides to leave, and more.
The lease agreement should contain the following information:
The names and signatures of the tenant(s) and landlord
The starting and ending dates that the property will be rented
Rent costs and due dates
Policies on security deposits and lease termination
The tenant’s responsibility to maintain the unit and pay for damage caused by any neglect
Strategy and procedure for dealing with tenant’s complaints and repair request
Mention the restrictions if any on tenant alterations on their apartment without your permission
Information on any environmental hazards present at the property
Other optional policies as required
You can always find lease templates online or even talk to your lawyer about what information to put in one.
Furthermore, a written agreement helps in running the property smoothly and enhance resale value. Make sure that the tenants are aware of all the clauses included before signing the lease.
IV. Ask For Security Deposits
Security deposits are used to cover the expenses in the event of any damages or other faults with the apartments when a tenant moves out. To avoid any dispute over the security deposit when the tenant moves out, it’s better to inspect and document the condition of the unit before they move in.
Specific regulations are governing the policies regarding security deposits. With the help of a lawyer, establish a system of setting, collecting, holding, and returning security deposits.
Also, check with your state’s Landlord Tenant Act to know how long before you can return the deposit and/or a settlement statement.
5. Maintaining and Upkeeping the Society
At times it may become difficult for the apartment manager to choose between areas which need more focus than others. But thanks to the technological advancement, the apartment management software that comes to our rescue.
Using society software, you can streamline all operations and handle it from a single place. Following these five quick tips will help in a better apartment management system:
I. Automate Society Billing & Accounting
Financial issues are always a serious matter. When the apartment size keeps getting bigger, maintaining accounts can get too time-consuming and challenging at times.
The process of accounting and bookkeeping, penalty calculation, and income and expense tracking should be streamlined for smooth functioning. The best way to do that is to employ a society management software that automates your billing and collection efforts.
Some of the essential modules of tenant management include document depository, penalty calculation, maintenance charge payment, payment gateway, request for quotation, and more. It integrates with the current system in place without disrupting the whole operation.
II. Communicate With Your Tenants Effectively
As an apartment manager, it’s essential that you maintain a healthy relationship with all your tenants. For that, you need to find an effective way of communication.
The smart move would be to incorporate an apartment management software that offers communication tools. These tools can post notices and reach out to everyone. Furthermore, it assists in other activities like securely sharing pictures from community events, broadcasting essential messages, and maintaining functions calendar.
You can also create and publish articles on waste management guidelines, festival celebration forums, and more. It will help you create one active community with the ease of the housing software.
III. Manage Apartment Facilities and Staff Smartly
Again, you will often find complaints about how the apartment facilities are not well maintained.
You can save yourself some time by automating all your task such as asset tracking, inventory management, maintenance staff, and more. With the help of society management software, you can save yourself the pain of manually overlooking every activity.
Moreover, the software will also empower your tenants to book an apartment facility online. You can keep records of visitors for security purpose. These are a few of the many benefits a useful apartment management software has to offer.
Provide a superior experience to residents by managing all apartment facilities smartly.
IV. Skillfully Manage Society Data
One of the many benefits of using society maintenance software is that you can easily centralize all your data in one place.
You need to maintain a directory of residents, the number of flats in the apartments and more, to systematically reach out to them. Using maintenance software will save you a lot of time and help effectively manage the condo.
6. Resolving Resident Complaints Immediately
Resident complaints will always be an issue for apartment managers. It is therefore essential to have a system in place that will help resolve their problems immediately.
Having a central tracking of resident complaints or suggestions can be a good idea for efficient management. That’s why the whole process of filing complaints and the manager resolving the issue needs to be automated.
To immediately attend to the tenant’s problem, you can do the following:
Use software that will help you track the complaints at various stages. It should also send alerts in case of unresolved complaints
Give tenants a number where they can reach the management department 24/7, to handle any emergencies
Always have a few handymen on standby who can repair your apartments when need be
It will help you manage the apartment much better and increase resident satisfaction. Thus, it will enhance their faith in the management committee.
Wrapping it up
Apartment management may seem like a daunting task at first. Especially when there are tenants who try to create menace in society.
Sometime you would also need to take legal actions when necessary. Some tenants do not pay rent on time or conduct illegal activities on the premises. Sometimes, they even cause damage to the property or violate the lease agreement. In such cases, talk with your lawyer and proceed in the right way.
Or you can take the help of a mediator to work with you and your tenant to reach out a settlement on the issue. Either way, make sure that other residents in society do not face any inconvenience.
5 Ways to Spot Fake Landlord References
One of the most crucial aspects in tenant screening is that of checking your prospective tenant’s landlord references, so here are 5 ways to spot fake landlord references.
Unfortunately, some tenants have been known to make up references or list friends or family members as previous landlords. There are even companies that hire themselves out to pose as landlords.
As a property manager, you are bound to receive landlord references day in and day out. Some are beautifully written testaments to the incredible nature of these individuals looking to rent, while others are simply fake, with bogus testimonials about the tenant.
5 ways to spot fake landlord references
No. 1 – Call the references yourself
For starters, on most landlord references, they will provide a phone number.
One of the first things you can do to tell if the reference is a fake is to call the number inquiring about a rental. If it is fake, the number either won’t work or will lead to a completely different person or place.
In rare instances, a fake number does lead to an individual, but they may seem to be either untruthful or not detailed in their answers.
No. 2 – Check up on the reference’s name
Go online and Google the reference’s name and look them up on social-media platforms.
Check to see if this person is tied to the potential tenant through tagged pictures and/or posts. If there is a lot of overlap in the people’s profiles, these individuals may have a personal relationship and not a tenant/landlord relationship.
No. 3- Look at tax records
The tax records for all property owners are in the public domain. All you have to do is look up the records for the address where the applicant claims to have lived.
The name on the tax record should match the name you’ve been given. Double-check that the property hasn’t been sold, but otherwise this is a great way to spot a fake.
No. 4 – Analyze a reference’s answers
It’s best to always fall back on your knowledge as a landlord and analyze the answers that the potentially fake landlord reference has given you.
If their answers are vague and don’t have details then it’s likely that they aren’t a real landlord and are instead a friend or family member of the person who is trying to rent from you.
No. 5 – Ask for advice from the reference
Landlords tend to have the same frustrations, interests, and problems.
It wouldn’t be at all unusual for you as a property manager to ask for some advice from another landlord while calling for a reference. Ask for their procedure for getting rid of a tenant who doesn’t pay, for instance.
A real landlord will have an actual answer, even if they’re not interested in spending much time on the phone with you. A fake, on the other hand, will likely have nothing specific to say. This can help you further determine whether the person on the other line is a real landlord, or someone just posing as such.
As a property manager, a significant part of your job involves filling properties with quality, long-term tenants. Including thorough reference verification as part of your tenant screening process, such as the strategies above, can help you avoid costly mistakes and keep you a few steps ahead of the game.
For Multifamily Commercial Real Estate Financing Contact Winston Rowe and Associates No Upfront Fee Commercial Loans
How to Find Tenants for Your Rental Property
How to Find Tenants for Your Rental Property
Methods to find tenants for your rental property vary depending on the sort of rental property you own and its location. For example, I’m in the single-family-home rental business in a so-called “flyover state.” Therefore, my process might not be the same as landlords in New York City or Los Angeles. While there’s really no national one-size-fits-all approach to finding tenants for your rental property, there are best practices, some of which are region specific, for marketing your rental.
Finding tenants on your own
Some people automatically contact a real estate agent to get their property rented. And you might need to do that as well, especially if your rental property is in NYC, where using a broker is the norm. But many times, you no longer need to rely on an agent to put your listing on the MLS: You can list your rental property yourself.
Zillow Rental Manager is top dog in this arena now. They currently charge $9.95 weekly to list your property with them. They also syndicate your listing to Trulia and HotPads. Another option is Cozy.co, where you can list for free.
Cozy syndicates to Realtor.com and Doorsteps.com. And there’s always Craigslist and social media as well. With all that at your disposal, you’ll probably get lots of eyes on your rental property, with no agent being involved.
Set the rent price
You need to know how much you plan to charge for your rental before you can list it. If you set your rent too high, you might have trouble finding a renter; too low and you lose potential income.
To help you determine what to charge, pretend you’re the one looking to rent. Perform an online search to see what rentals similar to yours in your geographic are going for. You can also use online tools, usually for a fee, that will perform a comparative market analysis to help you set the price. Note that a real estate agent can do this for you, so this would be a benefit of using one if you can’t determine what to charge.
How to advertise
Just because you can list on your own doesn’t mean you shouldn’t do your due diligence. If you don’t advertise it correctly, your listing could be one that a prospective tenant would pass by. You not only want people to see your listing, but you also want them to respond to it.
The way to help make that happen is to have professional photos of the property. Yes, you can easily take some pictures of your property yourself and then upload them to the listing site, but professional photos usually look much better, meaning your rental will stand out. Attaching a professionally made video walkthrough is becoming more important to attract consumers as well, especially during the COVID-19 pandemic.
You should also write a description that points out the property’s best features, including its location and what’s nearby. Be careful not to oversell, because you don’t want people disappointed when they view the home in person. Just stick with the facts, pointing out the advantages. Read other descriptions to give you an idea.
Using a real estate agent
If you don’t have the time or inclination to find tenants on your own, set the rental price, market your property, and show your property, hiring a real estate agent could be a good idea.
A real estate agent can help with the following:
An agent could find a potential tenant for you through word of mouth, particularly if they are with a large brokerage. Agents tend to share this information with other agents at their office.
Real estate agents are pros when it comes to listing property for sale or rent. Your listing will probably look great if a real estate agent lists it.
Agents can take over the showing aspect of the process. Again, they are pros at pointing out the features of the rental property and the neighborhood.
As mentioned above, a real estate agent can probably set a reasonable price for your property by performing a comparative market analysis.
Agents who are Realtors have access to official state lease forms through their state chapter of National Association of Realtors. (Note that landlords can draw up their own lease or hire an attorney to draw one up. They don’t have to use the state-approved lease, but the lease needs to reflect the laws of the state.)
The trick to finding good tenants
There are three keys to finding a quality tenant: screening them by conducting a credit and background check, interviewing them in person or through video chat, and checking references.
There’s no shortage of screening services out there. Just search online for “tenant screening.” Most services will give you the following data:
- Credit check
- Credit report and/or credit score
- Percentage of credit used
- Total monthly payments
- Total debt
- Late accounts
- How much time being late
- Background check
- Criminal history
- Sex offender status
- Once you’ve reviewed this information, you should be able to make a decision as to whether an applicant will be considered or not.
If the applicant will be considered, you can then check references, particularly past and current employers and past landlords. If the applicant leaves a phone number for an employer, it’s usually a good idea to search online for the employer and call that number. There’s a chance you could be calling a friend of the applicant instead of the actual employer if you go by the phone number on the rental application.
If that step goes well, you can then ask follow-up questions. This is a good way to make a decision if you have more than one qualified applicant. You might want to know, for example, how long they think they’ll rent. An applicant who knows they’ll stay only for a short term might not be as good as one who plans to rent your place longer. You can ask any questions you like, but you must be mindful of Fair Housing Laws.
Be mindful of Fair Housing laws
When you ask tenants questions, you first must be familiar with the Fair Housing Act, which prohibits discrimination based on these protected classes:
- Familial status.
- National origin.
- Mental or physical disability.
You can ask questions, such as when they would like to move in, whether they can pay all your move-in costs (first month rent and security deposit, for example), whether they have pets, and why they wish to leave their current place.
You cannot ask about where there were born (national origin), whether they have a service animal (disability), how many children they have (familial status), whether they would like directions to the nearest church (religion), or anything else that could be interpreted as possibly being discriminatory against one of the seven protected classes.
Although it’s wise to have criteria to weed out a bad tenant: credit score over 630, income at least three times the rent, limited pets, etc., you might find you wish to waive some criteria based on the overall financial picture of the applicant.
For example, maybe the applicant had a short sale on their record that tanked their credit score, making it difficult for them to buy or rent anywhere. But they might have an excellent and established job that pays more than what you seek. You might disregard the credit score for this good tenant. That’s an advantage “mom-and-pop” landlords have over big, institutional leasing outfits, which tend to not be as flexible.
About using a property manager
A property management company can make your life as a landlord easier. A good property manager handles getting and screening tenants, collecting rent, drawing up a lease, being the point person when an emergency hits, handling move outs and/or evictions, and arranging for repairs and maintenance.
But the wrong property manager might not be worth the cost, especially if you find yourself managing the property manager. Fees vary based on the management company. You can figure spending about 10% of your rental income on property management.
If you live far from your rental property and/or manage many properties, you’ll likely benefit from using a property manager. But if you live close to your properties and you have the time and inclination, you can manage your properties yourself.
How about a property management tool?
If you want to manage your own properties, you might want to consider using a property management tool that would automate certain tasks like listing your property, collecting rent, and scheduling property maintenance. You can perform an online search for “property management tools” to find one that best suits your purposes.
Virtual tours and open houses
COVID-19 changed the showing game a bit. More people are becoming comfortable viewing a house online, but they’re wise to the fisheye lens photos that make the rooms look bigger than they are. If they’ll fill out an application without physically entering the property, applicants usually want to view a virtual walk-through. So make sure you include that with your listing.
Some people still, understandably, want to physically walk through the property, and open houses are an efficient way to accomplish this. But again, with COVID-19, this process has changed somewhat too. It’s wise to either stagger the times people show up in 15-minute increments or have people wait inside their cars until it’s their turn to view the property.
Embracing a Technology-Focused Apartment Building Marketing Strategy
Apartment Building Marketing Strategy
Mobile technology is becoming more in demand in multifamily housing, according to some of the latest survey data. And websites need to get right to the point or prospective renters will move on to the next community.
Property managers should pay attention when creating their apartment marketing strategy, or they’ll miss the boat when it comes to attracting and retaining renters.
Finding apartments online continues to grow
Also, more prospects are searching online to find apartments instead of driving by, and online leasing and renewals are gaining in popularity. Renters are expecting to leverage online community portals, too.
The number of apartment hunters who visit a community website before scheduling an appointment is up to 85 percent, 4 percent higher than last year. Renting online and renewals each earned higher rankings than in 2019.
Engaging apartment website content is a differentiator
Lively, engaging and immersive website content sets apartment companies in competitive markets When prospects visit an apartment website, they want to experience and capture the feel of the community inside and out before deciding on a visit.
Apartment marketing is most successful when it tells a story through photos, video content, 3D imagery and storybooks.
Property management companies need to think about the lifestyle they want to sell. It’s thinking about how to ensure you have good visuals of what the day-to-day life in that community would look like. In addition to that, it’s using the content you create to be able to really drive lead conversions.”
Consider that lifestyle when creating your marketing strategy. Is the community pet-friendly? What amenities are available? Use these areas and more to develop your content.
Web presence is likely leading to more renting without visiting
Effective websites are likely a reason why renting without visiting in person is more common. Eight years ago, only 4 percent of respondents said they signed a lease sight unseen. Today, that’s up to 14.4 percent.
Properties that want to generate more sight-unseen leasing should provide as much information as possible on the website.
It has to have everything they want to know. If you can make it a one-stop shop, you’re going to get people excited about renting.
But don’t overdo it. Online renters want a quick, simple experience. If prospects have to jump through too many hoops, if there are too many steps, screen after screen, they are going to click out. Think about how your websites are laid out. Simple and quick.
A big driver of website engagement is through call-outs when apartments are limited in number. Noting a floor plan is in limited supply is a winning strategy.
That is a huge trigger for people mostly because they are starting to see it more and more in other aspects of purchasing. But she warned be aware of fair housing laws when advertising limited availability.
Apartment leasing software can transform the leasing experience for your staff and prospects. Property management companies can take prospects from search to eSignature with RealPage Online Leasing, which streamlines and simplifies the experience of leasing apartments, saves your staff time processing paperwork, and frees up more time for customer service.
Community portals are extremely important for attracting and retaining renters
Also, residents rated portals as extremely important, a higher ranking than four years ago when they were only considered important. This can be a major attraction for renters, as ninety-eight percent said they would use a portal if it were offered by the community. It’s also a powerful way to engage renters, increasing their likelihood of staying in your properties.
It is extremely important for a community to have a portal. If anyone is thinking about it, you should spend the money. It’s about education and engagement, showing them how easy it is to set up an account, how easy it is to pay rent online.
It also makes it easy for property managers to automate communications, maximize retention and optimize operations.
7 Ways Renters Can Show Proof of Income Beyond the Standard Pay Stub
7 Ways Renters Can Show Proof of Income
Do you make enough money to rent this place? It’s a question any landlord will ask you, and it’s one of the things you must prove before being able to sign a lease on an apartment or house.
Landlords want to be sure that you have the financial means to consistently pay your rent on time and in full. So all applicants need to show proof of income – the amount of money they earn or receive from other sources.
While a standard pay stub is perhaps the most common method used to verify income, it’s not the only way. Here are options for showing proof:
1.For most landlords, an employment verification letter is a viable option to prove how much money you make.
Even if you have pay stubs, an employment verification letter can help verify income that isn’t reflected on those stubs, like tips received by service industry workers.
Signed offer letter
If you’ve been offered a new job, providing documentation of your new employment can also serve as proof of income.
W-2s, 1099s, and tax returns
In lieu of showing your pay stubs, a W-2 Wage and Tax Statement can also be used to verify income. Some people—like freelancers, contract workers, and entrepreneurs—receive a 1099-MISC form. A 1099 is also issued for interest and dividends, and government payments. These documents, with or without your tax returns, can be sufficient to prove income, depending on the landlord.
Official statement/letter from a CPA or trust manager
A lot of people who are freelancers and receive paychecks from many sources If the tenant is self-employed, then a common method is to provide a CPA letter stating their business income last year and projected income this year.”
When renters don’t have pay stubs, if they make consistent deposits over time, we can print off the bank statements to show they are making money to pay for the apartment
College financial aid documents
College students who receive financial aid to pay for their living costs can use this information to confirm their financial history.
It’s also possible to get the help of a guarantor to bolster your annual income. A guarantor essentially promises to pay your lease if, for any reason, you are unable to. A guarantor can be a relative or close friend, but must make a certain amount of money per year.
Landlords will typically require a guarantor to make at least 40 times the monthly rent, although Chadwick says some landlords require 80 times the monthly amount.
10 Things to Include in an Apartment Lease
10 Things to Include in an Apartment Lease
Developing a lease isn’t an easy task. It requires a lot of your time and energy, and even then, it’s possible you’ve forgotten some pivotal information. For that reason, it’s all the more important that you understand what details absolutely need to be outlined in your lease.
When it comes to renters, consider the fact that many are renting for the first time, and every detail truly needs to be spelled out for them. When you look at your lease that way, it’s imperative that you include all vital information. In order to help you get started when it comes to the more important details, here are ten things to include/outline in a lease.
- All Relevant Dates
Any time you draft a lease, it’s important to outline the relevant dates, all of them. This includes the move-in date(s), the move-out date(s), the length of time the lease is for and even the dates when you can resign your lease are (as well as the deadline). Also, though this is typically an item due at signing, you should always mention when the security deposit is due as well as how long it takes to process these payments to avoid any late fees etc.
Essentially, any information as far as dates that are pertinent to your renters go, they should be clearly outlined in a lease to avoid any confusion on their end as well as to have written proof that the renters were notified well in advance regarding all dates pertinent to the lease.
If there are any additional dates of note (i.e. dates when first month and last month of rent are due) make sure you clearly indicate those in your lease as well. Basically, if there’s a date they need to know about, those are items that you need to clearly outline in a lease.
- Subletting Information
Subletting an apartment is stressful for college students, but oftentimes extremely necessary. Most leases run from fall to fall, but students attend school from fall to summer in most circumstances. For this reason, they are left with the options to pay their lease and stay on campus, to pay their lease while returning home for the summer, or to sublet their apartment while they stay home for the summer.
Again, many students are renting for the first time, so it stands to reason they would also be subletting for the first time. Therefore, something essential to outline in a lease is any subletting information relevant to your renters. This includes, but is not limited to, who is liable for what, how those payments work, whether or not subletting is done through the main office or on their own, and if subletting is even an option available to them. (If your office doesn’t allow subletting, you may also want to include relevant information related to summer rent – i.e. what a student is supposed to do if they are returning home for the summer but still paying rent. Is there any upkeep that needs to be done in the apartment? If so, make sure they are aware of this information well in advance, otherwise, their plans may not work out with how your lease is outlined.)
For some, subletting rules are a deterrent from signing a lease; while you may lose out on the rent from that individual, it’s better than taking advantage of them by leaving out pertinent information that could have been outlined in a lease. So, make sure that all rules related to subletting are clearly stated to avoid any confusion and harm to your renters.
- Emergency Details
Nobody likes to think about it, but there are instances of emergencies. This could be, but isn’t limited to, fire, break-in, gas leaks, campus shooters, etc. There are so many variables here, but being prepared for any one of them is a good first step, whether or not an emergency actually presents itself.
If there are any details that a renter would need to know, such as a location to take shelter during a tornado siren or a protocol to follow if there is a break-in, make sure you outline this in your lease. Again, this doesn’t necessarily mean that anything will happen, but, as they say, better safe than sorry when it comes to the safety of you and your renters.
Also important is to include a number to call in case of emergency (i.e. gas leaks) and when it’s important to notify authorities. While it’s always a safe bet to alert the police or fire department, outlining this information can prevent unnecessary calls when there is an easier series of steps for your renters to take. Many renters are unfamiliar with such circumstances so, again, it’s much better to be safe than sorry.
- Maintenance Details
It’s very likely your renters will need to reach out to maintenance at least once during their lease. For others, the outreach to maintenance may be more common. When you develop your lease, maintenance schedules and contact information are very important to outline in a lease. Whether you’re simply including the contact information for your maintenance people, the emergency contact information or a basic timeframe of expected response for maintenance requests, this is all relevant information that your renters should be equipped with from the start.
I recommend speaking with the maintenance department, determining the best course of action for working together and outlining those details in the lease. This provides students with a general idea of what to expect when something breaks or goes wrong in an apartment.
As a side note, you should also outline in your lease what move-in day looks like from a maintenance perspective. Typically, they are provided with a checklist and required to document any aspects of the apartment that aren’t working, so let them know what this looks like and what to document to avoid charges later on. It should also be mentioned that maintenance is typically busy this day, so requests are handled on a first come first serve basis (or in another manner if applicable.)
- Cleaning Specifications
Typically, before an individual move into their new apartment, there is a certain amount of cleaning that needs to be done. For many landlords, this work is outsourced and charged in the last month’s rent of the previous owners. However, in many cases, there are additional costs that aren’t specified in the lease and come as a surprise when they are deducted from the security deposit. Getting ahead of this confusion and clearly letting your renters know what costs for cleaning entail is in your best interest.
Repeat customers are big for business, so negatively impacting your current renters doesn’t make sense. For this reason, let them know what costs to expect when you outline in a lease what these costs would be.
Let them know the charges for paint, for additional cleaning, for damages etc. You don’t need to provide specifics on every item, but essentially give them an outline of what to expect should there be any damage to the apartment.
- Rent Details
Rent details are obviously essential to outline in a lease. This comes down to what your student is going to be paying monthly to live in their apartment. This also includes any additional costs they may not have considered in apartment hunting.
For example, if they plan to pay by credit card, is there an associated fee? Can they pay by check? Do they have to drop the check off at the leasing office every month, or can they mail it in? Can they pay cash? What happens when their rent is late? Is there a late fee? Is there a grace period? Does the fee increase after a certain number of days?
There are countless details to include here, and it’s all information that they will need to know, guaranteed. Think of all the questions you’ve gotten as a landlord and include their answers in your lease, as this is the best way to ensure you’ve included all the information they need.
- Additional Rules
Let’s be honest, there are always rules. Some are unspoken, but additional rules are something to definitely outline in a lease.
For instance, do you allow pets? If not, what happens when a family member visits with a pet? Are there any areas students aren’t allowed in an apartment complex? What are the repercussions? Is there a rule for having guests? Is there a length of time before they need to leave?
These are all rules that may not necessarily be understood without being clearly written out, so I recommend clearly defining them in your lease to avoid any questions when it comes time for reprimanding your renters.
- Additional Fees
Stating additional fees in your lease is imperative. Is there a charge for owning a pet? Is it a per-pet charge? Is there a laundry charge? What about charges for parking?
Any additional fees are imperative to outline in a lease. Basically, if there is an extra charge for something, you definitely need to state that in your lease. Additional costs should never be hidden – always state everything upfront, very clearly to avoid any problems when it comes to payment later on.
The more upfront you can be with your renters, the more likely they are to return or recommend your complex to another student. So, in other words, it’s in your best interest.
- On-Site Resources
Most apartment complexes have a variety of on-site resources that are available to their renters, but many renters aren’t aware of these resources. For this reason, it’s a good idea to mention the available resources to your renters and include them when you outline your lease.
For instance, if you have a fitness or recreation center, that’s something to outline in a lease. You should also include any laundry facilities, parking garages, cafeterias etc. that you have available to your renters.
Many students look for these on-site resources, and they are often large perks to signing a lease, so including these details is a great idea to show all available options to your student so they feel they are getting the most out of their lease.
- Office Availability
Last, but definitely not least, it’s important to provide your renters with your office availability. This might not be the first thing that comes to mind when thinking about drafting a lease, but it’s definitely information you should outline in a lease.
Like it or not, there are going to be a large number of times in which your renters need to get a hold of you. Sometimes, it’s related to quick questions that can be answered on the phone, and other times, they need to come into the office to speak with one of your leasing agents about changes to their lease etc. No matter the circumstances, you should always list your office availability in a lease.
This includes your contact number (both the main office and individual contact information), perhaps a link to the website for an FAQ section, your office hours and any other emergency contact information not previously listed in your lease. It’s important that your renters always have someone they can contact, so the more information you provide in your lease to that end, the better off you are and the more comfortable they (and their parents) will feel.
While this is by no means the entirety of the information required in a lease, this is a good starting point as far as items to outline in a lease go.
Again, there will be plenty of information pertinent to your complex alone, and other information that you may need to leave out, but make sure you develop some form of outline to begin with to ensure you’re not missing any relevant information.
When it comes to including information to outline in a lease, more is always better, as you would much rather provide them with too much information than not enough. So, don’t be afraid of being wordy, it’s not going to do you any harm!
Use these items to outline in a lease in order to develop yours and good luck drafting your lease!
Property Management 101 The One Thing All Landlords Should Do
Management of Apartment Building Investments
Property managers and landlords often go above and beyond, taking care of tenants when unforeseen circumstances occur or needs must be met despite short timelines or budgets. Still, it is important for property managers to take in new ideas within their industry — including the increasing influence of social media and online review sites — as well as continuing the meet the everyday wants and needs of their tenants.
Maintaining and managing properties is often a challenging role. Landlords or managers may sometimes overlook a good practice, or plan to circle back to it later on, but never do so.
Make Regular Checks on Your Rentals
One of the biggest mistakes I see with rentals is not checking on them. We do quarterly checks on the properties. At the same time, we are doing the check, we change furnace filters, check batteries in the smoke detectors and CO alarms, and make sure there are no issues with plumbing leaks.
Screen Your Tenants Carefully
Landlords will spend thousands to repaint, recarpet and remodel — but sometimes they will not take the time to realize who they are renting to. Don’t skip the basics when evaluating a renter: rental application, past references and income/ability to pay, as well as credit and criminal backgrounds checks. Taking the time to screen renters will prove to be the best ROI in real estate investing.
Establish Open and Honest Communication
Property managers must communicate with their tenants to ensure a sense of community, maintain proper operations and keep tenants informed. Also, the building owner deserves to know the good, the bad and the ugly on a real-time basis in order to make business decisions. By expressing candor and providing honest feedback, property managers can ensure that all lines of communication are open
Ask Current Tenants for Referrals
Ask current tenants to help you find new tenants. Current tenants are likely to know potential new tenants. Tenants are likely to only recommend other people they’d like to be neighbors with, and you can build goodwill by offering tenants a referral credit for bringing in a new tenant
Keep Up with Maintenance, Including Cosmetic
Do preventative maintenance. The more a property is allowed to deteriorate, and the longer problems go unaddressed, the more it will cost in the long run to fix. If items are cosmetic and impact first impressions, not correcting can also increase vacancy cost and lower the rent you can get for the property.
Collect Demographic Data
If landlords and managers are not creating tenant profiles, they should be. Being able to tailor your operations and buildings to specific demographics will help with retention and new leases.
Keep in Touch with Your Tenants
Everyone wants attention, and that especially includes your tenants. You need to check in with them to see how everything is going and get any input on the property. Knowing that you care about them will have a huge impact. Surprise them with a lunch event or invite them to a fun event you are hosting (like a sporting event, concert or a few hours at a movie with their family).
Property owners should identify the true competitive set of their building and benchmark their operations to this set. Data is the key, and revenue and expenses must both be tracked. In this way owners can frame the operational performance of their properties as market conditions change and make decisions with hiring, firing or repositioning management teams.
Offer Reliable Service Across Properties
Based on my experience, the landlords that are most successful are the ones that operate the same way across each of their assets, therefore creating little confusion and expeditious service. The buildings are regularly maintained and cleaned, giving their tenants few reasons to have any concerns about where they house their business.
Treat Tenants with Respect
Landlords should always treat their tenants with respect, honesty and integrity. A bit of kindness goes a long way. When a tenant can feel that respect, our experience has been they treat the property with a higher level of ownership, taking better care of it and consistently paying rent on time.
Attract Renters with Quality Photographs
Landlords and property managers need to amp up their marketing efforts by using professional photography, which is more important than ever in the Instagram age, where people quickly judge listings on a purely visual basis. Great quality photographs are more likely to build renter interest quickly than using dark, unattractive and/or outdated photographs.
Solicit Positive Online Reviews
The biggest differentiator in success today is increasingly becoming online reviews. It is vital that everyone, from prospective tenant applicants to exiting renters, receive amazing service. Say what you do, and do what you say. Look for ways to go above and beyond those expectations. Then be extremely proactive about soliciting positive online reviews from every contact.
Stay on Top of Your Online Presence
Our most successful landlords and property managers stay on top of their online presence to manage their vacancy rate to below 1%. They make sure availability and pricing is up to date on their website and on the platforms, they syndicate to, while keeping track of and adjusting to changing rental trends and utilizing social media platforms to deliver their marketing to their target audience.
Top 5 Landlord Tips Winston Rowe and Associates
APPLY ONLINE FOR A COMMERCIAL LOAN
Landlords come from all walks of life, and they can be pros or reluctant landlords who couldn’t sell their home. Whether you’re considering rental property investment, can’t sell and need to rent out your home and move, or you’re already a landlord, these five tips can help you sleep at night and keep a smile on your face on your way to the bank.
#1: The Right Rent
Take the time to study your area’s market rents and property types. Compare apples to apples, not apartments to single family homes. Call and ask about rents and features. Check the rental ads for promotions like free rent. A lot of this type of marketing may signal high vacancy rates. Be objective about your property’s features and location, and set a competitive rent rate. Being just 5% over market rates may still get you a tenant, but if it causes too much turnover you’ll lose that and more in lost rent between tenants.
#2: Be Legal
We don’t live in a simple world anymore, and landlord-tenant laws can be pretty complicated in many states. Even if you must get some legal advice from a real estate attorney, be sure that you’re using legal application and lease forms. They should be legal, but there will be room to draft them to favor your interests and protect your investment.
Misunderstandings cause a great deal of landlord-tenant stress, and using clearly worded and comprehensive leases can go a long way toward eliminating problems. When rent is due, what constitutes poor tenant behavior, and explaining the difference between “wear and tear” and damages are all important for a good relationship. It’s every bit as important for you to abide by the rules as it is for the tenant. If you legally must give notice before entry into the unit, do it the right way and with the right timing. When you don’t follow the lease, tenants don’t feel obligated to do so either.
#3: Screen, Screen … and Interview
Once that lease is signed, if you let the wrong tenant into your property it can be an expensive and painful process to get them out. You want to check their credit history, rental history, job and landlord references, and even do a criminal background check in most cases. Letting a previously convicted drug dealer into your property can create some major problems for you if they lapse into old habits. There are services that pull together these background and reference tasks, and you can find them online with a search, or there may be local companies.
Think back to the previous tip and be legal. Don’t ask for information you aren’t legally allowed to gather, or don’t ask questions that cross the line when it comes to anti-discrimination laws. This is another area where you may want some legal advice and a script for your interviews so you stay on the right side of the law. That said, if your gut is telling you that there’s something not quite right about a prospective tenant, especially in the interview, then you should reject them for any legal reason.
#4: Maintain for Comfort and Safety
The best way to avoid late night “no heat” calls is to have regular maintenance performed on heating and cooling systems. Maintain all of the equipment in your rental and you’ll have a happier tenant and fewer emergency repair visits. For safety, do regular checks of smoke and carbon monoxide detectors, even changing the batteries at your expense. On a side note, this is a great way to get access every three to four months to inspect for damage or problems when you’re doing a courtesy safety battery change.
#5: Make it a Home
Be nice to your tenants. Send them surveys or call them now and then to see if they’re happy or experiencing even minor problems. Be proactive and address their concerns. Whenever you can add a feature or amenity at reasonable cost, do that. When the end of their lease rolls around, you have two possible situations:
1. They give notice and move on to another rental, or
2. They make a rent concession necessary to keep them, or
3. They’re happy, and want to stay, even if you must do a minor rent increase.
The first two cost you money in lost rent and possibly rehab between tenants. The last one takes almost none of your time and keeps the cash flowing.
There are a lot of details involved in these five tips, but keeping them top-of-mind in all of your landlord activities will keep you in a better mood and add to your bank balance.
Tip’s For Dealing With Delinquent Tenants By Winston Rowe & Associates
Tip’s For Dealing With Delinquent Tenants By Winston Rowe & Associates
If it happens to you, time is of the essence, and it’s important to have a well-conceived plan already laid out.
Adopt policies that make it easy to pay rent on time, and difficult to pay late. For example, accepting electronic payments, credit cards, or direct deposit make it easy to pay on time.
Stress the importance of on-time rent payments at leasing.
Send out an invoice with return envelope enclosed.
Make sure the rent due date is realistic (i.e. it coincides with when they receive their paychecks).
Diplomat or Enabler
Evictions are expensive and time-consuming. So is finding a new tenant. From this perspective, it is tempting to try to work something out with your delinquent tenant. Occasionally you’ll have a tenant who has genuinely experienced a temporary financial hardship, one that is resolvable, and it can be in your best interest to help them through their rough patch.
But here’s the hard reality: The majority of late paying tenants will do it again. Not paying rent is a big deal, and it’s in your best interest to make the tenant understand that.
Accepting payments late with no consequences, or accepting partial payments not only encourage late payers, but it can compromise your rights to re-take the property. The longer you allow a late payer to string it out, the more you risk becoming an enabler.
Be Prepared for Battle
Even though it may be in your best interest to help ethical tenants through a rough patch, experience dictates that if your tenant launches a habit of late pays, it will get worse with time. There is always the chance that your tenant is stringing you along intentionally, trying to live rent-free while they save money or search for another place to live. You need to know what your legal options are and be ready to take action.
Collect Your Due
Once a tenant account goes seriously delinquent, your likelihood of successfully collecting the debt drops precipitously. Therefore, it is crucial to aggressively pursue the debt with all means at your disposal. This includes submitting the debt to a collection agency and employing all legal means of collection.
When speed and experience are important and crucial to your apartment balding investing success, a principal at Winston Rowe & Associates is always available to speak with prospective clients. They can be contacted at 248-246-2243 or email them at firstname.lastname@example.org
Whether it’s an initial apartment building purchase or a refinance they have the solution for you. Winston Rowe & Associates offers expert friendly service combined with years of experience and will work with clients to find the best solution that fits your needs.
If you would like to learn more about apartment building financing options from Winston Rowe & Associates you can check them out online at http://www.winstonrowe.com