E-Renter News

Protect Your Investment and Your Tenants

Here are two good reasons for setting up a regular rental property inspection schedule:

1. Your rental property is likely one of your most valuable assets. It’s important to protect its value by maintaining and repairing its structures and systems throughout the time of your ownership.

2. Safety and livability are important to your tenants. They want to live in well-maintained property—and it’s a landlord’s obligation to supply the tenant with safe and well-functioning housing. Poorly maintained properties expose owners to liability issues and even litigation. You don’t want to be responsible for injuries on your property.

So it only makes sense to create a quarterly or semi-annual schedule for regular property inspections. This way, you’ll know what repairs are needed right away, and what you can put off until later.

Present the schedule to your tenants on lease signing day, so they can be prepared for your visit. Contact them at least a week ahead to confirm the day and time. Be as flexible as possible. Most of your tenants have busy work and personal lives, so be patient if finding a mutually-convenient time is difficult.

The inspection should cover structural overviews: electrical, heating and plumbing, plus the exterior safety of stairways, porches, railings, and sidewalks. Inside, look at smoke detectors, CO2 detectors, water heater, and all door and window locks.

Check overgrown shrubs near windows, and overhanging branches that could injure a tenant. Look for damages to the roof, gutters, and exterior paint or siding.

Ask your tenants if anything is causing problems or if they’ve seen any leaks or smelled any unusual odors. It’s far better to keep communication open and learn of any gripes or potential problems before they become major issues. Document damages with photos; you and the tenant should sign and date the inspection report.

Keep your rental property value as high as possible—and keep your good tenants—with regularly-scheduled property inspections, repairs, and maintenance.

Flexible Options for a Tough Rental Market

More and more landlords and property management companies are offering tenants month-to-month leases. In a rental market as tough as this one, landlords are willing to try nearly anything to fill vacancies.

Besides, more tenants have poor credit, evictions, and foreclosures in their histories. Bending the rules and becoming more creative may become more necessary these days.

Month-to-month leases offer both sides the option to break the rental agreement with 30 days notice. If no such notice occurs, the lease renews itself for another 30 days.

How can month-to-month leases help strapped landlords?

• You can choose from a larger pool of applicants;
• You can take advantage of your location if it’s a college town or popular vacation spot;
• You can rid yourself of a problem tenant after only one month;
• You might be able to charge a premium for the risk associated with lower-quality tenants;
• You’re not locked into a long-term rent payment and can raise the rent when the market adjusts back up;
• It’s easier to evict.

Of course, the tenant can leave at the end of any month, with the loss of rent, associated expenses to fill the vacancy, and other turnover headaches. Still, month-to-month leases offer flexibility that may help many a landlord survive this challenging rental market.

Did They Plummet or Stabilize?

Depending on which analysis of which report you read, U.S. home prices either plummeted or stabilized in 2009. Market reports stated that U.S. homes lost $489 billion in market value during the first 11 months of 2009.

Some would read that as “plummeting.” Others would compare the figure to 2008, when homes lost $3.6 trillion in value, and consider the loss a great success—or at least a “stabilization” of the market.

Some markets (Boston, Denver, Providence, RI) even posted gains in home values in 2009. This upward trend appears to be nationwide for the second half of the year. In other words, had the downward trend of the first six months continued, the overall loss would have been much greater. In reality, many areas have seen slight increases in home values since June. This has significantly helped reduce the number of homes that are “underwater,” or where the mortgage balance exceeds the value of the home.

Should home values continue to stabilize—or rise—more homeowners should be able to apply for refinancing. Lower interest rates, more secure mortgage terms, and lower payments could help slow down foreclosures.

Increasing mortgage rates could create a lower demand for home sales. And, studies show that 25% of folks who will move in the next three years are looking to rent or buy.

Is a healthier rental property picture on the horizon for 2010? Nobody knows for sure, but we can all hope that continued stability in home values will lead to less rental inventory, lower vacancy rates, and more stable rents for income property owners.

Which Records to Keep and For How Long

Investment property owners must keep meticulous records. If you’re a landlord with less than stellar skills in this area, consider hiring a property management company to help.

Of course, hiring outsiders cuts into your profit and cash flow. Whether you choose to keep paper files or a specialized property management software system, it’s not difficult to set up and maintain adequate records retention.

Visit an office supply store and you’ll find a wide variety of new tools for records keeping and file organization. pick up plenty of file folders and plan on keeping them in locking, fireproof file cabinets.

You’ll want to keep records of each property purchase. The original contract, closing documents, tax records, inspections, appraisals, insurance and loan documents are all required. Store them separately from rental paperwork for each property you own, for as long as you own the property.

Tenant paperwork includes applications; background screening documents, including credit checks; legal notices; maintenance records and correspondence. Even the most insignificant-seeming records can be very handy in case of litigation or dispute. Store tenant records for three to five years after the tenant moves out, but keep all legal paperwork indefinitely. This includes everything related to injury reports, evictions, and litigation.

Rental income and associated expenses are the final set of landlord paperwork. These can be easily tracked, either with business accounting software, property management software, or on spreadsheets. Software packages are less pricey these days, and their reports and templates make them indispensible to many landlords.

New Home Sales Drop to Lowest Level in Seven Months

While hopes were that new single-family home sales would have continued October’s upward trend, instead they plunged 11.3 percent, according to today’s U.S. Commerce Department report.

The seasonally adjusted rate for November was 355,000 new home sales—the lowest level since April, 2009. Forecasts had indicated a possible rise of 1.7%.

Strategists pointed at the expiration of the new homebuyer tax credit, which affects new home sales differently from existing home sales. Existing homes take longer to close; those sales are reported weeks or months after a contract is signed. Many economists consider new home sales, reported when the contract is signed, to be a more timely housing market indicator.

Still, existing home sales were higher than expected in November. The 7.4% increase led to the highest level since February, 2007. The rise is attributed to the homebuyer tax credit, along with lower prices and interest rates.

An estimated two million people have taken advantage of the tax credit, which helped lower existing home inventories during one of the worst economic environments since the Great Depression. 7.2 million jobs have been cut in the past two years.

Zillow.com has established itself as a one-stop website for home values, recent sales, and general real estate information on every house in a requested area. The site’s (company-provided) statistics are impressive:

• 8.9 million unique monthly users (as of August 2009)

• Year-over-year growth of 64%

• Median household income of users of $90,518

• Median user age of 47

House hunters have become familiar with Zillow.com as a place to search for homes to buy, relying on the site’s huge database—90 million homes in the U.S. Now, the site is offering information on homes for rent, too. The addition is timely: a recent poll reports that 25% of people who plan to move in the next three years will search for both homes for rent and homes for sale.

The posting fee is $9.95 for a 180-day Featured Listing, with “extra exposure”—not too bad, considering the number of users they claim.

Landlords who post a for rent listing will enjoy editable content, including open house dates, unlimited photo availability, contact information, and trackable reports on traffic and page views.

Users can search by monthly rental payment, narrowing choices to those they can afford. Homes for rent appear on Zillow’s maps with purple icons. Red icons are for homes for sale; yellow means recently sold, and blue indicates for sale by owner.

Is the Landlord/Tenant Relationship a Friendly One--or Strictly Business?

Every landlord has a unique way of interacting with his or her tenants. Some see the relationship as strictly business. Others, particularly those who live near their tenants, have a more friendly relationship. And some are more like family.

An informal poll of landlords and property managers revealed quite a range of ways to celebrate the holidays with their tenants—or not. From complex-wide holiday parties to simple greeting cards, just about anything goes.

A number of landlords replied that they give tenants gift cards for pizza, local restaurants, or grocery stores. “It doesn’t have to be a large amount; I only have four tenants, and we have a good relationship, a $25 gift card for each one doesn’t break the bank—and they really appreciate it,” said a Michigan landlord.

Other landlords demonstrate appreciation to their tenants with gifts of food. Homemade cookies, tins of popcorn or candy, or fruit baskets are almost always welcomed. An idea we like is the five-pound box of small oranges that most groceries carry. You can’t beat them for a healthy and inexpensive gift. You can’t always know if your recipient has dietary limitations, but most folks will pass along anything they cannot eat.

For multi-unit landlords and property managers, a holiday card is easier to manage. Just as cards are sent to plumbers, handyman services, and landscaping companies, they are mailed to their tenants too. These days, you can’t be too careful in considering tenants’ individual beliefs and religions. Not everyone shares in the same celebrations, so don’t offend a tenant with the wrong message.

Keeping the landlord/tenant relationship strictly a business one is a good way to avoid problems in this area. Your duties to your tenant are spelled out in the lease—and as long as you abide by your agreement, you don’t need to feel obligated to provide gifts at all!

It’s an entirely personal decision whether a landlord decides to manage his or her own properties or hires a property management company to do it.

Property management firms exist because there is a demand for their services. And they charge for them. Only each landlord can decide if the service is worth the fees and possibly lower profit margin.

If you have found that managing your own income property is not one of your stronger skills, there’s no harm in researching property management firms. Check out several, ask your friends in the rental business for their recommendations, and have a list of questions ready. Here are a few to help you narrow down your choices:

1. What are your fees? What do they include?
2. What would trigger an extra charge?
3. How will you advertise my properties?
4. How do you handle maintenance? Do you mark up materials and supplies?
5. What is your procedure for showing a unit that is for rent?
6. What options do you offer my tenants for rent payment?
7. How do you collect delinquent rent?
8. What about maintenance emergencies?
9. How will you prepare a unit for leasing after a tenant moves out?
10. How do you prescreen tenants?
11. How will you enforce my rules?
12. Why should I hire your company?
13. How does your insurance cover me? What about bonding?

Be sure to ask for references—and follow up on talking to as many as you can. You might hear three glowing reports and be tempted to stop—but number four could have information you really must hear. Consider finding a few clients that are not on the company’s reference list, since they’re not likely to provide you with a bad reference. Ask around.

Visit the offices of the management company and observe how they answer the phone, interact with tenants and property owners, and meet the person who will be handling your account. Establishing a rapport will smooth your interactions with him or her.

Before you sign any contract, know what you’re getting into. The way a property management company answers your questions will reveal a lot about how they will work with you.  Choose a property management company that will look out for your best interests.

While it’s true that 90% of tenant problems can be avoided by ensuring, though tenant screening, that you are renting to qualified individuals, it’s also a fact that bad tenants happen to good landlords. And bad tenants are better evicted than tolerated.

Evicting tenants is not easy or fun. Unfortunately, it is a fact of the rental business. If you’re lucky, evicting tenants is not something you have to do often, but every landlord and property manager faces this issue eventually.

Landlords often blame themselves for being careless or missing a telltale sign that an applicant is going to be a so-called “deadbeat.” However, there are professional cons everywhere—in your town, answering your For Rent ads, submitting applications to live in your properties.

The guy who appears to have a great job, high FICO score and cash in the bank might not be who he claims he is—check his identification carefully, and run an ID and Social Security Number check.

The woman who works in management at the large retailer at the mall could be applying for an apartment that she never intends to live in. Rent to her, and you’ll find her credit-risky daughter living there in a month. Rental agreements and leases should clearly indicate the consequences of such a bait-and-switch tactic. Does yours?

The nice-looking family who moved in two months ago could be doing so well because Mommy and Daddy are dealing drugs out of their apartment. While it is not necessary to run your business within a framework of paranoia, it pays to be observant and to keep communication open with your tenants so you know what’s going on in your rental properties.

If you have problem tenants who have broken the contract they entered into with you, an eviction could be an unpleasant part of your future. Most landlords would advise you to start the process sooner, rather than later.

Keeping Excellent Records is Key

Some of our landlord friends might look twice at this title. “Why would you reject a tenant in this market?” And that’s true in many places. Not only are good tenants hard to find—any tenants are hard to find. Even in this economy, every landlord should have a minimum set of qualifications, and a way to deal with applicants who fall below them.

The Fair Housing Act (FHA) prohibits discriminating against tenant applicants on the basis of race, religion, gender, disability, family status, or national origin. Your state may have additional protected groups—and landlords must be familiar with their state and local laws. But there are several legitimate grounds for rejecting an application:

1. If a rental property applicant does not meet your minimum income standard, you may reject them.

2. A poor credit history means you can legally reject a tenant’s rental application.

3. If your rental property cannot accommodate the number of people applying to live there, you may reject them. For example, if a family of five applies to live in your one-bedroom apartment.

4. Foreclosure: while more Americans than ever are defaulting on their mortgages, you may reject an applicant who has a foreclosure in their credit history.

5. Eviction: prior evictions or poor rental history are grounds for rejection.

6. Criminal record: If an applicant has been convicted of a crime (not just arrested), you probably can reject them.

Two important tips when rejecting an applicant are consistent procedures and good recordkeeping. Screen all tenants to avoid claims of discriminating against any single person. Credit checks and tenant background checks will help you decide whether to approve or reject each application—and save you money, too!

Notify the applicant in writing, stating the reason for rejecting the application. Be ready to back up your reasons with proof. Keep all paperwork on file and provide the applicant with a copy of the credit report.

Until the market improves, you might be tempted to waive standard procedures in favor of anyone who will pay rent. But nobody knows if a tenant applicant will actually do so. Be safe, check credit history and criminal backgrounds, and wait for the best possible tenant.