E-Renter News

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.

More Cities Across U.S. Cracking Down

Several cities around the U.S. are instituting inspection programs for rental housing. Cracking down on code violations is driving the passage of a new ordinance in Eureka, CA. The task force set up to create the ordinance says it’s needed to deter crime and blight caused by substandard housing conditions. But landlords are fighting the new law, concerned that it punishes law-abiding property owners along with those who don’t follow all the rules.

Gresham, OR has had a mandatory rental housing inspection program for two years; its intent is to crack down on code violations and livability issues. Pasco, WA charges property owners $30 per year per apartment building and $3 per unit for a rental housing license. The license is not issued unless the units are certified up to code every two years. Because property owners may hire an architect, engineer, or housing inspector on their own, the law has stood up against legal battles over privacy.

The city of Seattle, WA is considering modifying a current complaint-based program or adopting a system of mandatory rental inspections. A spokesperson for the Rental Housing Association of Puget Sound says neither landlords nor tenants are in favor of inspections, on the basis of privacy.

As city councils from Maine to Hawaii struggle with keeping renters safe, properties occupied, and property values from declining, the possibility increases that mandatory property inspections will become more prevalent.