E-Renter News

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.

First-Time Buyer Incentive Credited

Existing home sales were up 10.1% in October across the United States, according to a report by the National Association of Realtors. Purchases of existing homes drove total housing inventory down by 3.7%.

Inventories are becoming more in line with demand than they have been in two and a half years, according to the study. Buyers becoming more aggressive in some areas, especially in the lower end market.

The Federal first-time buyer tax credit of $8,000 is being credited with the surge in home sales. Buyers who may have been waiting for the economy to turn around before purchasing a home saw the combination of lower prices, low mortgage rates, and a one-time $8,000 tax credit as too good to pass up. The rush to beat a November 30 deadline spurred folks off the couch and into open houses and realtor’s offices.

Mortgage interest rates are the third lowest on record since 1971, according to the National Association of Realtors—another significant contributor to the movement of existing home inventory in October.

The tax credit, which was set to expire at the end of November, has now been extended to April 30, 2010.

Prices continue to be affected by foreclosures and other distressed properties—so this is an extremely favorable affordability climate for real estate investors. The report states that prices continue to flatten and are poised to rise again in 2010.

Check out These Unusual Items and Save

Conducting inspections or scheduled maintenance at a rental property is your chance to check for signs of trouble around the grounds or in common areas. Whether you handle maintenance yourself or hire a handyman for the bigger jobs, you might want to cover the small fixes yourself—it’s a good way to save money.

Landlords are never bored because there is always something to fix, tighten, touch-up, clean up, or patch.  Beyond the basic tools you’ll want to carry with you (channel lock pliers, hammer, measuring tape, wrenches) here are a few unusual items you might want to include in your landlord tool box:

Old English Scratch Cover: Use on natural or stained woodwork to cover minor dings and scratches that tenants inflict on your molding, cabinets, or paneling. It really works—use the light or dark shade to match the woodwork, dab it in and let it dry, then wipe off excess.

Touch Up Paint Applicators: We like the plastic bottles with shoe-polish-type spongy applicators. Just fill them with your rental units’ paint colors, label them and refill as needed. Or, just load up a small, air and water-tight container with paint and throw a clean paintbrush into your toolbox to cover inevitable paint scuffs and chips.

Garbage Bags: You will likely encounter some trash around your rental property every time you go to inspect, so be prepared with a selection of bags--try paper compostable bags for yard waste, and help your business go greener.

Cordless screwdriver: Keep one, along with several different sizes of bits, in your toolbox. There is always something loose in a rental property!

Rhino Glue: Reports we get say this is one of the best bonding adhesives on the market. Temperature changes and moisture don’t affect its durability--landlords find hundreds of uses for this product.

FastCap 2P-10 Adhesive and Cover Caps: another strong adhesive product, and caps that stick to just about any surface, so you can cover holes in walls, cabinets, countertops and floorboards quickly and easily. They come in many colors and wood grains.

Maybe Sooner Than You Think!

No landlord or property manager enjoys evicting tenants. Turnover is bad for your cash flow, and there are usually expenses related to eviction, too. Plus, it can be an unpleasant situation for everyone involved.

However, in the rental property business, evictions are a fact of life. Ask a seasoned landlord when is the right time to evict a tenant who is behind on rent, and you’ll probably hear, “the day after the rent is late.”

There are several good reasons to consider swift action when a tenant breaks the rental agreement:

• If the tenant breaks a condition of their rental agreement once, it is more likely to happen in the future. In other words, the situation is not going to get better, so why not replace them with a responsible tenant?
• You must demonstrate fairness to all tenants. Enforcing your rental agreement (the one that the tenant broke) in the same manner to all tenants is the best way to avoid discrimination claims. And, it can make things easier on you: whenever there is a problem, you simply hold up the rental agreement and stand behind what the tenant and you agreed upon.
• You are running a business, not a hobby or charity. It sounds harsh, but do remind yourself that in any business, rules must be followed and risk must be rewarded. You are the one at risk in your business. If you do not protect your interests, who will? It’s difficult to hear about problems tenants have, and while they may very well be genuine, you must stand firm and defend yourself and your business.

If you’re facing a tenant eviction for the first time, seek a property lawyer’s advice to make sure you don’t make common errors that can hold up your case.

Pros and Cons of Living Next to Your Tenants

When you live in the same building as your tenants, you see and hear everything. And that can be very good, or quite bad. Here are some pros and cons of owner-occupied rental property.

Pros:

You can keep an eye on things. When you live in your rental property, you will hear all the strange noises, see all the potential safety issues, and notice the dripping pipes long before they become major issues.

You’ll have a personal connection with your tenant/neighbor. Along with good communication, a personal connection can pave the way to an excellent landlord/tenant relationship.

Your tenant will behave better. Some tenants can be a bit like your kids—they do things when you’re away that they would never dream of doing in front of you. With their landlord next door or downstairs, most tenants will conduct themselves appropriately.

It’s a short trip to pick up the rent. Let your tenants know you’ll be picking up their rent check on the 1^st of every month. They’ll have fewer excuses, and you’ll have your rent in your hand, not in the mail.

You could gain financially. Check with your lender, but if you’re living in the unit, there could be certain financial advantages regarding down payments and mortgage rates. Plus, your tenants help pay your housing expenses!

Cons:

Your tenants know where you live. When they have a complaint or a problem, they might feel like they have direct access to you, day or night.

You might have to share common areas. If you’re used to your own space, it could be a problem to share a yard, storage area, or a garage with your tenants.

You can only deduct the appropriate percentage of expenses from your taxes. If you put a roof on your entire building, only the portion that covers the rental unit is deductible. Check with your tax advisor, of course.

Staying Organized will Pay Off

Good record keeping can ensure that every visit to your accountant will be a much more pleasant experience. But more importantly, documenting each step in the landlord/tenant relationship can protect you in a claim against a tenant, or verify your position in case of a legal dispute filed by a tenant.

Set up your tenant file system so you can access all information quickly. You will probably have two sets of records: paper and digital. Written records should be kept in fireproof, locking cabinets, and include:

• Tenant’s rental application
• Signed lease or rental agreement
• Verification forms
• Lead-based paint disclosure form
• Credit, Background ,Criminal Records Reports
• Receipt for security deposit and/or rent
• Move-in/move-out checklists
• Photos of unit taken at move-in
• Entry notices
• Addenda to lease or rental agreement
• Maintenance requests
• Tenant Correspondence

Your digital tenant files will include all email correspondence. You can also scan documents and save them on your hard drive or back up disks in case of loss of paper files.

The most important thing to remember is to gather all the information required for each tenant. Don’t fall into the habit of overlooking important details—you never know when you’ll need that proof of notification, or a document signed by your tenant to prove your case!

An Overview for Landlords and Property Managers

As a Landlord or Property Manager, you are subject to a variety of federal, state, and local laws. You must comply with every single one—or risk expensive fines.

One federal law covering rental property is the Fair Housing Act. This law prohibits landlords and property managers from discriminating against any potential or current tenants on the basis of their race, skin color, religion, gender, family status, and national origin. It also prohibits discrimination because of an individual’s disabilities.

This means you must give everyone an equal chance at leasing your property. Certainly, you are entitled to qualify potential tenants based on income, credit and criminal history, job history, and previous rental experience. But beware: you must apply the same qualifying rules to every applicant. Failure to do so could lead a disapproved individual to claim discrimination.

Under the Fair Housing Act, landlords must allow persons with disabilities to make reasonable access-related modifications to private and common use spaces. New multifamily housing with four or more units must be designed and built to allow access for the disabled.

The Fair Housing Act also provides protection to disabled individuals who require service animals. If you have a “no pets” policy, keep in mind that you cannot enforce it on a tenant who has a proven need for a service animal. Whether it is a guide dog for a visually disabled person, or a therapy cat for a mentally disabled individual—you must accommodate the animal. Service animals are not defined as “pets,” so they do not fall under a “no pets” rule.

The Good News: Construction Spending Up in June

According to the Department of Commerce, construction spending increased in June 2009, albeit only by 0.3%. Still, analysts were surprised, having predicted it would fall 0.5%. Despite the increase, construction spending was down 10.2% from June of 2008.

The good news is that gains were seen in both residential and non-residential sectors—which has only happened three times in the past twelve months. And, June’s increase was the second in three months. Some of the increase can be traced to the federal government’s economic stimulus program.

Economists called the numbers an indication that the housing sector may be recovering from its long downward slide.

For the first six months of 2009, construction spending amounting to $455 billion, which is 11.4% below the same period in 2008.

The Bad News: Consumers Not Spending Yet

So while the June construction numbers are helping some economists breathe a little easier, what’s the outlook for the rest of the year? Economic forecasters don’t know what to expect, since the biggest driving force in economic recovery—consumers—are difficult to predict.

Consumers are saving more in response to recession fears—and experts say it will take several years for them to totally dig out from under the weight of job losses. There are still 14.7 million workers without jobs in the U.S., according to the Bureau of Labor Statistics. The more money Americans save, the less they spend—and since consumer spending accounts for 70% of American economic activity, any slowdown in spending is serious.

The big question: are Americans going to remain thrifty, or will they tire of doing without and begin spending again when confidence—and jobs—return? A recent report shows consumers will not return to spending any time soon. Consumer confidence declined in July, based on a sample of 5,000 households, which indicates that consumers are pessimistic about their income and spending expectations.

So while we have a mixed bag of economic news today, at least it wasn’t all bad!

Source: U.S. Dept. of Commerce, The Wall Street Journal

The latest data shows that some areas of the country may have finally hit the bottom of the housing market slump. For the first time since 2007, a composite index of 20 major cities was flat, rather than down. Prices are low enough to attract buyers, which leads to price stabilization and recovery.

Eight cities showed home prices increasing from April to May, including Chicago, Cleveland, Denver, and San Francisco. Charlotte and New York City were still flat. In the same study from April 2009, only four cities increased; in March, it was just one.

Another study reports that areas showing signs of stabilizing include parts of California and the Washington, DC suburbs of Northern Virginia. The hardest-hit areas, including Florida, Detroit and Las Vegas, are still quite depressed.

Earlier reports revealed that sales of existing homes rose last month for the third consecutive month, and sales of new homes increased in June by 11%--the largest percentage gain in eight years.

A research firm showed the number of buyers in the second quarter who actually moved into their newly-purchased home declined by 2.6 percent. This could be a significant predictor in future months. If speculators and investors are purchasing inventory, a large number could be back on the market soon.

While these numbers do not represent the country as a whole, they are certainly indicative of movement in the real estate market. Investors will want to keep a sharp eye on prices in their targeted markets—they could be going up soon.

Sources: The Wall Street Journal, The New York Times