E-Renter News

Consider these Dos and Don’ts

Furnished apartments and homes for lease are not common these days, but they certainly exist. And some landlords we know have considered adding basic furnishings to gain an edge in this tough rental market.

Consider these dos and don’ts before you start furnishing your rental properties:

Do consider it a yellow flag if your tenant needs furnishings because they don’t have their own due to lack of good financial habits or “bad luck.” On the other hand, folks who are going through a divorce or moving to your area ahead of their family (for employment, for example) could be viable tenants who need basic furnishings.

Do keep things basic. You don’t have to furnish every knife and fork. Most furnished rentals (aside from vacation and corporate) include a bed, dresser, nightstand and lamp; sofa, chair and bookcase; dining room or kitchen table and chairs.

Do remember that, while investing too much cash in furnishings is not the best idea, if you go for the cheapest furniture, you’ll attract tenants who are okay with cheap furniture.

Do realize that any and all of the furnishings could disappear in the night. Conduct proper tenant background and credit screening before offering a lease.

Don’t hesitate to include the value of the furnishings in the security deposit. You’ll be covered if any items are lost or damaged.

Do get it all in writing. Include a list of furnishings and their condition with the lease. Obtain the tenant’s signature on the list during the move-in inspection, and before they move out, conduct another inspection to determine damages.

Don’t be insulted if potential tenants turn down your lease because they don’t like the furnishings. You can’t please everyone.

Do consider adding furnished rental units to your mix if it will help reduce your vacancies or increase your cash flow!

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.

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.

Join E-Renter USA at the TRENDS Conference & Trade Show, December 8, 2009. This event, the largest rental housing management conference & trade show in the northwest, will be held at the Washington State Convention Center in Seattle, WA from 7:30 a.m. until 4:00 p.m.

The TRENDS show brings together Rental Property Owners, Rental Property Managers, Leasing Professionals, Investors, and Maintenance Professionals for a day of instruction and excitement. Forty workshops, over 200 exhibits, and a $1500 Grand Prize drawing make the TRENDS show a not-to-be missed event.

E-Renter USA is proud to sponsor and exhibit at the TRENDS show. We’re also proud supporters of Search and Rescue Associations. Stop by our display and meet Guy Seeklus and Luke, a trained Search and Rescue dog.

We’ll see you at the TRENDS Conference & Trade Show on December 8 at the Convention Center in Seattle!

5 Advantages of Owner-Occupied Neighborhoods

Specialization is one way to streamline your business practices. So, certain landlords focus on lower-end units; others on apartments, still others prefer duplexes. All have their advantages and disadvantages. For many landlords, buying income properties in mostly owner-occupied areas is one key to their success.

Why?

1. Higher demand. Owner-occupied neighborhoods tend to be nicer and more stable than areas with more rentals. Parents like raising children in stable surroundings, so there is higher demand for rentals in these neighborhoods.
2. Lower crime rates. Fewer people moving in and out means less crime, because neighbors get to know each other better. You’ll have less vandalism, too.
3. Stable tenants. Owner-occupied neighborhoods naturally mean more stability. Your tenants in these neighborhoods are more likely to settle in and stay for longer terms.
4. Steadier rents. Your single-family-home tenants in nicer neighborhoods won’t be comparing their rent with their neighbors—because the neighbors own their house. You’ll face fewer rent reduction requests in these stable areas.
5. Higher quality tenants. Nicer neighborhoods and homes attract higher-income tenants with good credit. And because they really want to live in the neighborhood, these tenants will be less likely to cause trouble, and more likely to take care of the property.

These are just a few reasons to consider investing in owner-occupied neighborhoods—while home prices are still lower than just a year or two ago.

More Renters, More Landlords, More Complaints

Certain areas of the country are reporting increased rental market activity, as a result of the struggling U.S. economy. While it is still true that vacancies are up and rents are lower across the U.S., more foreclosures and a decline in lending are turning more former homeowners into renters—and more inexperienced property owners into landlords.

News reports show that even homeowners with good credit are being foreclosed upon; as a result, landlords could start seeing tenant applicants with otherwise excellent credit reports. They might not be accustomed to renting a home, so landlords are advised to communicate terms and conditions of rental agreements clearly.

Homeowners change paint colors, add or remove landscaping, and change out lights and other fixtures as they wish. Renting after homeownership is a different experience, and reminding your tenants about what you expect will go along way in preventing conflict and property damage.

An increasing number of vacation homes are entering the market as rentals. Owners, who purchased the homes for their own use, or to rent for short-term vacation rentals, are finding the economy has changed their plans. Unable to find enough vacationers to pay the mortgage, they typically try to sell their second homes, and then finally turn to renting them. The number of vacation homes available for long-term rentals is skyrocketing, according to a report—and by people who never considered they’d have to rent out the property.

These new landlords are adding to the changing rental property landscape, as are new investment property owners, taking advantage of foreclosure sales. This increase in newbie landlords is leading to a corresponding increase in complaints about fair housing and discrimination.

This year has been a wild ride for landlords, but just like at the amusement park, all rides eventually come to an end.

New Realities for Landlords

One sign of a tough rental market is that landlords are offering perks to tenants to get them to stay. Some rental property owners are turning to incentives like flat-screen TVs, new carpet, upgrades in kitchens and bathrooms, or cash rebates, while those in oversaturated markets are finding rent cuts necessary.

It’s easier than ever to comparison shop the housing market. Tenants need only go as far as their laptops to see what other property owners are offering—and despite the hassles of moving, many will go where the deals are. Check out your local rental scene, too—you might find out that the reason you’re losing tenants is because you’re one of few property owners who is still charging a pet deposit.

Some landlords are softening credit requirements to deal with the reality of more competition for tenants, as well as tenant credit issues due to job losses. As the number of mortgage foreclosures in the U.S. skyrockets, former homeowners are looking to rent, and are seeing less stigma attached to a foreclosure.  Only you can decide if you will adjust your standards in the short term, but do continue to perform credit checks on tenant applicants—it’s the only way to know if they are credit worthy to your standards.

Should you offer cash or TVs as incentives? Knowing what your local rental market is doing is the best way to decide. Do your research to see what other property owners are offering, and be prepared to incentivize your good tenants to persuade them to renew a lease. Don’t be afraid to ask, “What can I do to keep you?”

High-End Rentals Feeling Pinched

If you’re a typical high-end rental property owner, you’ve been feeling quite a bit of pain in your pocketbook this year.

According to RealFacts, a California company that tracks rental trends, tenants nationwide have been refusing to pay premium rents on high-end rentals in 2009. Rents in every market declined with the exception of a few small increases in Florida, Missouri, and Texas.

California’s high-priced markets, such as San Francisco and San Jose, showed the highest rates of decline, at -2.7% and -3.8% respectively. Other areas of decline in California include Oxnard-Thousand Oaks, Riverside, and Los Angeles. The biggest factor in declining rents is unemployment, which rose to 12.2% in August and remained there in September.

High-end rental property owners aren’t the only ones seeing declines. Nationwide, the 3rd quarter saw average U.S. rents decline by 3.7% from 2008. The silver lining in this cloud is that 7 of 33 markets posted rent increases from the previous quarter—and most of the 33 markets reported occupancy increases, too.

As rent prices drop, more new renters are created, moving out of shared housing situations, and boosting occupancy numbers. Economic recovery is helping, too—but it will be months before jobless numbers improve enough to show significant occupancy increases in the majority of rental markets. And with an oversaturated market, rents are not expected to increase for a very long time.

The U.S. rental market is experiencing the worst rent decline in 20 years, according to RealFacts. Landlords and property managers have a tough job, filling vacancies and staying competitive in a highly competitive market!

Cash, Check, or Charge?

“Show me the money!” is a mantra many landlords employ. But do they really mean “show me the check?” What is the best tender for landlords to require from their tenants?

Accepting cash for security deposits or rent is not a good habit for landlords. Cash can make you a target for crime—especially if you are known for collecting rent yourself. Carrying around large sums of money is just not the way you want to conduct your business. Besides, do you want the type of tenant who must pay their bills in cash?

Still, you may have good tenants who prefer to pay bills out of a cash account, or who are rebuilding their credit. It is reasonable to ask for rent payment in the form of a money order—which takes the risk off of you and puts it on the tenant. Keep in mind, though, that stop payment orders are available for money orders, too—in case they are lost or stolen. Don’t allow a new tenant to move in until the payment for their security deposit and first month’s rent has cleared your account.

Desirable tenants are stable, have regular income, and bank accounts. They are accustomed to paying their bills by check. While accepting personal checks can be risky, smart landlords always conduct tenant credit checks, so they are aware of any bounced check situations. Again, it’s best to wait until a personal check has cleared your account before handing over the keys to your rental property. Or, you can take the check to the bank it’s written on and have it certified. That way, you know the funds are available and are actually held until the check clears.

Online rent payment is becoming more popular. Some of your tech-savvy tenants probably cannot remember the last check they wrote. They pay their bills and do their banking exclusively online. Rent payment service providers allow landlords to set up accounts and receive tenants’ payments online through credit cards or e-checks.  While convenient to both parties, landlords should evaluate the return on the investment—since these services are not free. But if you're trying to fill vacancies in this competitive rental market, then offering online rent payment is one way to differentiate yourself, while attracting the best tenants.