Technology is finally eliminating geography as a barrier to real estate investing

Written by Apartment Management Magazine on . Posted in Blog

world flags globeSource: techcrunch.com

Real estate investing has long elicited a variety of emotions, running the gamut from excitement to anxiety. When dealing with significant sums of capital, feelings of apprehension tend to creep in, especially regarding neighborhood quality, tenant and property management issues and liquidity.

But those feelings of apprehension should be balanced by the knowledge that real estate as an asset class offers high returns in low-interest-rate environments, provides diversification from traditional stock portfolios and has the potential for long-term appreciation.

Plus, there’s another, more recent benefit to consider for investing in real estate. Technology has enabled radical changes in how and where people invest in real estate. The old adage that real estate investing is a local business no longer holds true.

Millennials, skilled professionals, overseas investors and retirees now have the ability to acquire properties, commercial developments and even homes like they acquire stocks or bonds. Remote investing makes single-family rental (SFR) investing a viable alternative investment option, and with returns that outperformed S&P 500 returns in 2015, it has emerged as a powerful wealth-building tool.

An initial wave of remote real estate investing happened via crowdfunding, which enables investors of all ages, risk profiles and wealth levels to acquire real estate. With as little as $5,000 down, investors across the world can buy a stake in a single-family home, or with a larger investment, they can opt to purchase shares of a 300,000-square foot office tower. Realty Mogul,RealtyShares, Fundrise and more than 200 other firms valued at a combined $2.6 billion worldwide support this type of crowdsourced investing.

While crowdfunding may be a great way for novice investors to get their feet wet, there are some downfalls. Investors can only purchase a portion of a real estate project, which means they own the property along with several other investors — similar to timeshares. In some cases, hundreds of investors might own a stake in a single asset through a limited liability company. Instead of having full ownership of the real estate, the investor possesses limited control over their capital, how it’s distributed and where it’s distributed.

There is no real way of knowing whether the interests of the majority owner are even aligned with the interests of the portion that is crowdfunded. Furthermore, there are potential tax liabilities based upon income charged to the investor without receipt of any cash flow, lack of a secondary market for liquidity and dealing with the requirement of new capital if a cash shortfall should occur. Investor fortunes could be lost, and they could be lost quickly.

As crowdfunding models have become more complicated, a new generation of real estate technology disrupters has addressed some of the shortcomings of crowdfunding with a more holistic funding model, providing protection for investors and helping them build wealth through a combination of cash flow and appreciation.

Firms such as HomeUnion, in which we’ve invested, and OwnAmerica offer investors the ability to buy an entire single-family home or create a portfolio of homes, fully customized to meet their personal investment needs. For instance, my portfolio of homes would focus on cities such as Cleveland and Indianapolis where cash flow is high, whereas another investor may prefer locations like San Antonio and Houston where there is more of a balance between appreciation and cash flow.

The fundamental difference in this next wave of funding platforms is that they support true ownership of real estate. Land is the underlying asset, not a piece of paper endorsing fractional ownership. Additional benefits include receiving significant tax breaks associated with home ownership and investment guidance throughout the entire holding period. In short, investors have complete authority over the decision-making process.

Venture capitalists and individual investors have given this new wave of companies a strong vote of confidence over the past few years. According to Venture Scanner’s portfolio management category, the median funding value of real estate startups globally is $3 million. One of the leading anti-crowdfunding companies, HomeUnion, has raised nearly $23 million in funding from VCs and has closed on the sale of more than $50 million in single-family rental assets since its inception. Similarly, OwnAmerica has traded more than $27 million during the beta phase of its new platform.

As the crowdfunding segment plateaus and the next generation of real estate startups continue to grow rapidly, these companies face a different set of challenges. They will need to manage concerns that investors have about lack of diversification by offering inventory in multiple geographies and across multiple micro-economies, ensure excellent customer service and fail-safe processes for the inevitable eviction of tenants or to prepare for a catastrophic event, such as a fire.

In essence, the experience of buying homes remotely must be entirely hassle-free, as should the ongoing property management and eventual sale of the asset.

As real estate technology continues to improve the benefit for consumers, one thing is crystal clear: The notion of real estate as a hyper-local business has turned upside down since the arrival of these new platforms.

In the U.S., single-family rentals currently comprise 40 percent of the country’s entire rental stock, up from 34 percent in 2005. Individuals own the majority of all single-family rentals — 83 percent — with REITs and other institutions holding the remaining small portion.

Hands-off investing, uninhibited by geography and free of the headaches associated with property management, has completely disrupted real estate investing forever.

Large Apartment Markets Drive Moderation Trend: Secondary Markets are the Hottest

Written by Apartment Management Magazine on . Posted in Blog

Contributed by Dave Sorter, Axiometrics

The expected moderation that occurred in the national apartment market during the past two quarters was the result of many factors – a wealth of supply entering the market, regional Apartment_Market_Moderation.jpgeconomic conditions and unsustainably high rent growth among them.

When annual effective rent growth and occupancy rates decline, it can be difficult to remember that just a few months earlier, the sector was in the midst of its strongest period since at least the start of the Great Recession.

Just as a presidential election is, with the Electoral College, the aggregation of 51 state/federal-district elections, national apartment performance is a compendium of hundreds of metro markets throughout the country. Obviously, larger cities have more apartments and have greater weight in the national averages.

The recent moderation has been largely the result of sharp decline in many of the largest metros in the nation. Some of them, such as Houston, have suffered from economic woes combined with a glut of new supply. Others, such as San Francisco and Denver, also experienced lower job growth near the end of 2015, but had such high effective rent growth that it had to decrease eventually.

And the largest market, New York, has also sustained significant rent-growth decline in the past half-year. Other very large metros, such as Atlanta, Dallas and Los Angeles, have neither increased nor decreased significantly. In fact, no really primary market is in the fast lane of growth.

As rent growth in these metros declined or maintained, however, the metrics started surging in smaller markets. Sacramento has seen an exceptional increase in annual effective rent growth in the past six months, and Salt Lake City has made its way into the top 10 among metros with the highest rent growth. Long Island and Newark are no longer playing second fiddle to the Big Apple.

A look at year-to-date effective rent growth in some of these markets tells the story of how some larger markets have moderated while some smaller markets have strengthened.

San Francisco, for example, combined with Bay Area neighbors Oakland and San Jose to comprise three of the five highest rent-growth metros for much of the first half of 2015. But the chart below shows that, come September, 2015 YTD rent growth for San Francisco apartments dropped from the second-highest figure since the recession to the lowest. As of March, 2016 YTD rent growth also is at a post-recession low.

San_Francisco_Apartments_YTD.jpg

Denver had a similar end to 2015, finishing with its lowest YTD rent growth of the recovery – though 5.6% was fairly robust. Things were looking the same through the first two months of 2016, with negative YTD rent growth in January, though a strong March rebound moved Denver apartments out of the post-recession basement.

 Denver_Apartments_YTD.jpg

Houston apartments, still sustaining minimum job growth as a result of a weakened oil industry, had negative YTD rent growth in March for the first time since the recession ended. This following a 2015 that beat out only 2010 among the post-downturn years.

Houston_Apartments_YTD.jpg

Sacramento is on the other end of the spectrum. After experiencing some lean years during the early part of this decade, this metro’s 2014 and 2015 were the strongest of this cycle. This year is on the same track, with March’s YTD effective rent growth for Sacramento apartments some 80 bps above the next-highest March, in 2012.

Sacramento_Apartments_YTD.jpg

And while Salt Lake City’s March 2016 YTD rent growth is the third-highest of the post-recession period, it was the highest since 2013 and continued the trend started in the second half of 2015, when the metro avoided the common fourth-quarter dip and climbed to tie for the highest year-end rate of the decade for Salt Lake City apartments.

Salt_Lake_City_Apartments_YTD.jpg

With annual effective rent growth either declining or relatively stable in most major markets over the past half-year, it follows that the national market would mimic that trend. The smaller markets are somewhat offsetting the moderation of their bigger brothers and are on pace to continue to do so, as national rent growth is forecast to average 3.5-4% this year.

Dave Sorter

Dave Sorter is an award-winning journalist who spent 30 years as a newspaper reporter and editor before joining Axiometrics. He oversees all Axio blogs and newsletters and serves as senior editor of all Axio publications.

“Nobody gave me a copy of…”

Written by Apartment Management Magazine on . Posted in Blog

please sign this contact“Nobody gave me a copy of…
By John Cottrell

the lease during escrow!”…“The lease you had was with the previous owner”… “I didn’t sign any lease”… “All contracts were canceled when I purchased the property.” These are some of the statements heard by laundry service companies from new owners of apartment buildings.

Purchasing a multi-family property can be an exciting, yet challenging endeavor. There is the loan process, the seller, the residents, due diligence, escrow, paperwork galore, etc. Keeping informed about everything involved in the process is a daunting task at best for a prospective buyer.

It can also create difficult times for a laundry service vendor who gets to explain to a new owner that they have the right to continue to provide their services at the property for several years.

There appears to be a myth about the following two things “automatically” canceling laundry contracts: 1) when a property is sold, and 2) when a property is purchased through a foreclosure. Neither of those offers such assurance. I am hopeful that this article will assist prospective owners in finding out about the possibility and validity of an existing lease BEFORE escrow closes.

There are 3 basic types of notice indicating that there may be an existing lease for the laundry space. Actual notice—the prospective buyer knows of the existence of the lease. This is the case in most purchases. The buyer may receive information about, or a copy of the lease, from the seller, their agent, the escrow or title company, etc. Constructive notice—The lease may have been recorded in a County Recorder’s Office. The recorded information should come up in a title search. Note: Although the title search should show the existence of a lease, it may not give the entire terms of the lease. The laundry vendor should be contacted to have a copy of the entire lease put in the escrow. Inquiry notice—Most laundry vendors have signs in the laundry rooms and/or on the machines with their name, phone numbers, etc. California law is straightforward in saying that this clear and apparent possession gives the prospective buyer an affirmative duty to inquire as to the basis under which the vendor is in possession of the laundry space. When doing due diligence and walking the property, the laundry facilities should not be ignored.

Let’s briefly discuss foreclosures. Not all leases are extinguished by a foreclosure process! Generally speaking, a lease is extinguished if that lease is subordinate to the foreclosed deed of trust. In a case where the lease is dated prior to the note that was foreclosed upon, the lease is generally considered senior, not subordinate to the foreclosed deed of trust. The lease would still be valid and in full force and effect. Again, not every case is clear-cut, and there may be other circumstances to be considered, but this a dependable “rule-of-thumb” tool.
Generally speaking, laundry space leases “carry with the land”. If a new owner comes in, they are bound by the terms of the laundry lease currently in place. They are similar to the rental leases with the residents. A purchaser cannot arbitrarily go in and cancel all of the leases the residents had entered into with the previous owner.

There are cases where a purchaser of a property thinks the lease is not binding, and the vendor contends that it is. In this case, the property owner should not remove the vendor’s equipment. (Just like the fact that you cannot go into an apartment unit and throw all of the resident’s belongings out). THE LAW MANDATES PROPER LEGAL PROCESS BE FOLLOWED, I.E., AN UNLAWFUL DETAINER ACTION.

“Self-help” remedies, such as denying residents and the laundry service company access to the facilities, or removing the equipment are not recommended, nor legal. These actions could force the vendor to file a Forcible Detainer action, which could include recovering possession of the premises, actual damages, additional damages allowed by statute, attorney’s fees under the lease, and other relief allowed by law. Laundry service vendors would normally be more interested in discussing an amicable solution than proceed with litigation; however, they have the lawful right to enforce the terms of their lease.

Bottom Line—If you cannot work something out with the vendor, get dependable legal advice to help you proceed accordingly. Contacting an attorney with experience in “contract law” is recommended and may save you time, energy and money in the long run.

The information in this article is intended to help prospective buyers with one phase of the sale that does not always get attention when looking at the “big picture”. It can also help provide a smooth transition between the laundry service vendor and new owner.

Should you have any questions about your current lease, please feel free to contact me for general assistance.

Bio: John Cottrell is the General Manager for All Valley Washer Service, a leading coin and card-operated laundry service company servicing multi-family properties throughout ALL of California for over 57 years. Mr. Cottrell has been with the company for 26 years. If you have any questions regarding this article, please contact him at john@allvalleywasher.com.

4 Ways Property Managers Can Save Money (and Water)

Written by Apartment Management Magazine on . Posted in Blog

save money and water

No property manager wants to pay too much for water. However, if those costs aren’t kept in check through good practices, the results can be much worse than a costly bill.

Just ask the residents of a condo in DeKalb County, Georgia. In February, the condo’s property management company threatened to condemn the building and evict the residents if they didn’t pay — wait for it — a $130,000 water bill. The building’s owners paid $220 a month to the property management company, but the dues simply weren’t enough to cover the absurd water costs.

What kind of water situation leads to such a high bill? While it’s possible the association in DeKalb misused funds, sometimes the answer is simply that the charges really are that high.

Water usage skyrockets when tenants of a complex or association use too much water, don’t report leaks properly, or simply are unaware of a leak. As costs rise, the property manager often doesn’t have the funds to cover the unexpected bill.

That debt gets passed along to residents, which opens the door to a situation like the one in DeKalb County.

Keeping Costs Down

Every property owner wants to avoid unexpected bills and angry tenants, while those same residents would rather not pay higher fees that go straight to the water company. This is precisely why property managers looking to maintain costs must make managing water usage a top priority.

In 2015, water prices rose at a higher rate than almost any other household expenditure. Some cities combat this rise with different pricing tiers, but simply charging people more for higher water usage doesn’t address the real issue. The solution isn’t to cause affordability issues; it’s to control water waste.

Property managers usually employ several strategies to manage water waste. But when the problem has so many potential causes, it’s hard to know which fixes are worth the money and which just cost more. Below are four potential strategies to curtail water usage, as well as an analysis of whether they’re worth the investment:

1. Ensure regular preventive maintenance.

Over time, the working parts and seals on toilets and other water-based devices deteriorate, especially toilet flappers. If the valve doesn’t let enough water through, residents will often flush multiple times and consume double the water. And if it lets too much water through, water is wasted with every flush. (Leaking flappers can also cause water to run constantly.)

To provide maintenance, property managers must include a clause in every lease that calls for regular inspections in every unit. After moving out, every faucet, appliance, and pipe requires a thorough check to ensure each works properly.

If you think you have a toilet leak, drop some food coloring in the tank. If the dye trickles into the bowl, replace the flapper. Also, keep a close eye on your shower diverters to make sure the water isn’t running to the tub while the shower is on.

Remember: The best way to solve a problem is to stop it from happening in the first place.

Verdict: Always worth the investment

2. Convert to more efficient equipment.

Many older toilets use 3.5 gallons of water per flush. However, the Energy Policy Act of 1992 lowered new toilets’ flush volume to 1.6 gallons.

This change didn’t just help the environment; it dramatically reduced water costs on newer toilets. However, much of the water that flows into a toilet tank during the fill cycle goes directly into the bowl, resulting in up to 1.5 gallons wasted for every flush.

Installing diverters can help this problem, but they’re not the best option for every toilet. Replacing toilets en masse can be expensive but saves more money in the long run.

To get the most bang for your buck, have a water savings expert examine water usage throughout the entire building. Wide-scale upgrades present high upfront costs, so it’s ultimately more cost-effective to hire someone who can analyze the property as a whole and suggest the most appropriate course of action.

Verdict: Worth the investment after an expert analysis

3. Submeter every unit.

Even for property owners who don’t bill tenants for water, submeters are beneficial for monitoring usage. They let you see who uses the most water and when, and they identify potential new leaks or illegal devices.

The use of submeters to gauge volume and time of water usage also helps determine hot water usage, which affects an energy bill. With the cost of water and other forms of energy continuing to rise, attacking both fronts can help property managers save.

Unfortunately, putting submeters on older building can be a major hassle. Installation usually involves going under the floors and behind the walls, which makes the cost prohibitive to the potential savings.

This strategy is effective for newer buildings, but it can be challenging in those that older.

Verdict: Only worth the investment in new buildings

4. Find and fix every leak and drip.

Without a water monitoring service, you won’t be able to detect problems as they happen. Inspecting your units is the best way to find the leaks immediately and fix the problem.

Doing unit inspections more than once a year are impractical and costly. A water monitoring service alerts you to leaks and other waste problems. This, along with an inspection service, helps you prevent, detect, and repair leaks and waste.

Along with a full-on leak repair initiative, educate residents on the importance of reporting leaks and defects. Hang fliers and show residents how quickly you respond to the problem once they bring it up.

Verdict: An inspector is worth the investment when combined with a water monitoring service. Educational campaigns cost next to nothing and should be part of any strategy you decide on.

Property managers don’t have to fix the world’s drought problems, but they do suffer from inefficient water usage more than others. Rather than make tenants uncomfortable or penalize water usage, simplify water conservation and invest in a sound infrastructure to lower present and future cost

Source: Four Walls

– See more at: http://www.american-apartment-owners-association.org/property-management/landlord-quick-tips/4-ways-property-managers-can-save-money-water/#sthash.5dS8IPLZ.dpuf

Dear Maintenance Men – Maintenance Tools & City Inspections

Written by Apartment Management Magazine on . Posted in Blog

DearMaintenanceMen

Dear Maintenance Men:

I am going to university and want to use my DYI skills to supplement my income.  Being that I live in a college town, there are a lot of rentals aimed at students.  Since students are sometimes hard on their living quarters and move a lot, I figured there might be a maintenance market for repairs and making rooms and rental units rent ready.  I don’t have a lot of money to invest in tools and want your recommendation for the minimum I might need tool wise to get started?

Bryan

Dear Bryan:

Good thinking Bryan, you might just be on to something; students can be a bit hard on rental units! Keeping in mind that as a college student yourself, you have limited funds, so other than a cordless drill, we will leave power tools out of the picture. The majority of the repairs will involve drywall, plumbing and cleaning. Other than light bulbs, leave the electrical to the pros.

Basic Tools

  • Retractable utility knife
  • 5 in 1 paint scraper
  • Drywall saw
  • Drywall mud and tape
  • Bucket
  • Hacksaw
  • Claw hammer
  • Tape measure 25’
  • Caulking gun
  • 6 way screwdriver
  • Adjustable wrench
  • Channelock tongue & groove pliers
  • Small hand snake for bathroom sinks.
  • Toilet plunger
  • Broom and dust pan
  • Gloves
  • Flashlight
  • Safety glasses
  • Step stool
  • Cordless drill/screwdriver

This is a limited tool set used for light duty work. Try to buy quality tool. Many can be found at garage sales for a fraction of the retail price. With these tools, you will be able to change a faucet, repair drywall holes, unclog bath sink drains, caulk bathtubs, haul trash etc.

Dear Maintenance Men,

I am planning major remodel work to my 4plex and need some advice. My contractor has told me not to worry and he will have everything under control but I know that city inspections can cause serious delays if we are not ready for them or do something wrong. I am not an expert or experienced in construction, what should I watch for as far as the actual inspections are concerned?

Bob-

Bob,

It is not often we are able to share our experience on the actual General Contracting and building side of our business so, thank you for your question.

We have listed the top reasons why professionals do not pass inspections taken from a 2015 JLC (Journal of Light Construction) survey.

Foundation: Improper reinforcement or support of rebar

Wall Framing: missing fire-blocks, hold down straps etc.

Floor framing: missing anchor bolts, sheeting nails missing joist.

Trusses: bracing not installed, improperly connected to wall plate

Roofing: over driving of nails in shingles, missing nails, incorrect felt

Window and Door: improper flashing, inadequate fire rating, improper weather stripping

Handrail: Improper height or spacing

Plumbing: missing nail plates, improper pipe support

Electrical: missing grounds, GFCI protection, labeling of circuits

Decks: deck not built according to the plans, improper handrail installation

Dear Maintenance Men:

I have been contemplating the purchase of a high pressure sprayer for my employees to use in maintaining and cleaning around my apartment buildings.  Because these pressure washers produce a powerful stream of water, I am worried about my employees hurting themselves or damaging the building.  What size machine do you recommend and how safe are they to use? Should I rent one first?

Julia

Dear Julia:

As with any large ticket items it is always prudent to “try before you buy”. Fortunately there are a variety of rental places to choose from which carry all sizes, makes and models.

A rental yard will often use the best and longest lasting machines. Most times these companies can provide you with the best information on the products in regards to maintenance, wear & tear, life expectancy and performance.

In regards to workers safety, look at the operators manual for the best advice on personnel safety wear and use. These machines can produce a very powerful jet of water capable of ripping through clothing, skin and even break small bones.  You should always wear goggles, leather gloves, and steel toe leather work boots with nonskid soles.

Stucco & wood siding is especially susceptible to damage when using a power washer. Use the lowest setting and wide spray nozzle to avoid damage.  Lightly mist stucco surfaces if cleaning is your objective. Keep nozzle adjusted to spray not stream and approx. 2’ to 3’ away from the surface.

As with most things, proper training will help insure safe usage of power tools.

Bio:

Please call: Buffalo Maintenance, Inc for maintenance work or consultation.  JLE Property Management, Inc for management service or consultation

Frankie Alvarez at 714 956-8371   Jerry L’Ecuyer at 714 778-0480  

CA contractor lic: #797645, EPA   Real Estate lic. #: 01460075 Certified Renovation Company   

www.BuffaloMaintenance.com    www.ContactJLE.com   www.Facebook.com/BuffaloMaintenance

New Rental Housing Legislation Proposed in California

Written by Apartment Management Magazine on . Posted in Blog

CA Legislature

New legislation has been proposed that (if passed) will greatly impact the multifamily housing industry in California. Keep up to date with new legislation that might affect you in the next few years, and determine which bills gain your support.

Involuntary Enrollment into the Section 8 Program

This proposed bill requires all residential rental property owners to participate in the federal and local government’s Section 8 housing program by prohibiting property owners from denying an applicant on the basis that they will pay with a voucher. Additionally, this bill will make all owners accept government-mandated lease terms and regulations. Learn More About SB 1053.

New Housing No Longer Exempt from Price Controls

This bill allows local governments to adopt inclusionary housing laws; price control mandates on new rental housing developments. With inclusionary housing laws, private developers will be required to set aside a percentage of new rental housing units for low-income housing for 30-55 years. Owners will not be allowed to set initial or subsequent rates of their units and developers will not be provided any cost-offsets from local governments. This will overturn the Costa Hawkins Act, which currently exempts new construction from price controls. Learn More About AB 2502.

Good Faith Rent Deposits

Requires represented residents asserting a warranty of habitability defense in an unlawful detainer (or eviction) action to continue to deposit rent that becomes due during the pendency of an eviction proceeding. This does not include the rent that is in dispute. With this bill, the rental amount will be due on the first day of the new month following the filling of an eviction action. Learn More About AB 2312.

Evictions Hidden from Public Records unless Owner Wins

If this bill passes, eviction proceedings will remain masked or “hidden” from public view indefinitely (unless the rental property owner prevails) on a default judgement, summary judgement, trial, or stipulation by all of the parties. This bill also imposes a new 60-day “masking” period (starting from the date a default or default judgement is set aside) after the expiration of the first 60 days. Learn More About AB 2819.

Series of Rights Changed in an Eviction Case

This would enact a series of changes that will affect rental housing:

  1. The bill will prohibit a warranty of habitability defense in an eviction action (unless the owner had knowledge about the habitability condition before the filling of the eviction action).
  2. It will require tenants to assert on an answer form if they made a habitability complaint to the property owner or the city.
  3. The eviction court closest to the property will be required to hear the case
  4. Property owners and managers will be able to enter a dwelling unit with proper notice (in compliance with Civil Code 1941.1). Learn More About AB 2003.
Becky 201509 Becky Bower | Company Website |

Becky Bower is a writer for ResidentScreeningBlog.com and the Communications Executive at Contemporary Information Corporation (C.I.C), a nationwide tenant & employment screening company.  She has also spent several years in compliance and auditing.  Becky holds a degree in English with a focus in creative writing from CSU Channel Islands and is a published writer.

A Sort of Fairy Tale – Don’t Get Scammed by Dishonest Renters

Written by Apartment Management Magazine on . Posted in Blog

tenant fraud

Getting renters into your vacant properties and keeping those vacancies to a minimum is the goal of all property management companies. Unfortunately, some companies get so focused on filling vacancies that they end up falling victim to dishonest tenants. It’s tempting to rent to the first applicant that shows interest. But when companies don’t take the time to do a thorough background check of the applicant before handing them the keys, you can end up with less than a fairy tale renter.

Run a Credit Check

One of the first things any property manager should do is run a credit check on applicants who want to rent a property. Make sure you let your applicants know, in writing, that you will be checking their credit. Have them sign the paper that gives them that information, along with any other checks you will run, or have the right to run, as part of making an application decision. You can legally charge a fee for this, and some management companies charge more than others. If you decide that a fee is necessary, make it strong but reasonable. Running credit can be an excellent indicator of whether someone will be a good tenant, so be sure to look for any judgments or evictions on their report.

Verify Employment History

There’s nothing at all wrong with checking the employment status of someone who is applying to rent from you. You want to make sure they really do work, and that they are employed with the company they state they work for. If they’ve recently lost their job or just changed jobs, they may not want to say that, but lying on their rental application is never a good thing. Make sure you verify employment and dates, along with salary if possible, so you can feel more comfortable with the applicant and screen out more bad or potentially bad tenants who may be dishonest about their ability to pay.

Remember References Matter

While your property management company is checking a potential tenant’s credit and employment, don’t forget that references matter, as well. The landlord your renter had before can be a great source of information about whether renting to that person will be a good idea. Keep in mind, though, that some landlords will give a good reference for a tenant who wants to move, just to get rid of them. Don’t believe everything you hear, and check more than one reference if possible, so you can feel good about the honesty and quality of the renters you sign a lease with.

What if They Haven’t Rented Before?

You can’t get landlord references if someone hasn’t rented before, but you can find out about their previous housing situation. If they owned their home, sold it, moved to your area, and want to rent, you can check their credit report for foreclosures or short sales. If they’re very young and have never lived away from home, you can require a co-signer. There are many ways to determine whether a tenant will likely be honest, so you don’t get scammed by an applicant you trusted when you really shouldn’t have. Lack of a rental history isn’t bad, as long as other areas check out without a problem.

Your Lease Should Be Clear and Direct – and Signed

Having an air tight lease that was written (or at least reviewed and approved) by an attorney is a great way to make sure you don’t get scammed by dishonest tenants, too. You want to make sure you can evict a tenant that’s causing a problem, or that you can take other action against a tenant who may be slow to pay rent or who may be creating other issues. Without a clear lease that doesn’t have loopholes, you could end up with a problem tenant for a lot longer than you would hope for. Good leases mean dishonest tenants are reluctant to sign, and that you have the upper hand if you do need to enforce something in the lease.

You might also enjoy:

3 Resident Screening Tips for Getting High-Quality Renters

The post A Sort of Fairy Tale – Don’t Get Scammed by Dishonest Renters appeared first on The Official AppFolio Blog.

Use FHA Duplex Financing to Become a Real Estate Investor

Written by Apartment Management Magazine on . Posted in Blog

fhaqualify

Real estate investors in most cases need at least 25% of the purchase price as a down payment and possibly 35%. But investors willing to occupy one unit of a duplex or similar small multifamily property can get Federal Housing Administration insured loans for as little as 3.5% down. FHA loans are also suitable for borrowers with lower credit scores, and people just getting started in real estate investing.

In November 2014, Scott Trench, a recent college graduate and operations manager for real estate investing social network BiggerPockets, bought a Denver duplex. He put 5% down, moved into one unit and rented out the other. Rental income covered $1,150 of the $1,500 mortgage. A roommate contributed $550 more.

Trench wasn’t just living rent- and mortgage-free. He was also getting started as a real estate investor. In March of this year, he moved out and rented the other side as well. “I’ve got a new set of tenants in there and collect roughly $2,500 per month, on a mortgage of $1,500 per month,” says Trench, who is now renting a place to live while contemplating his next move.

In addition to $1,000 a month income on an investment, he pegs at $20,000 including down payment, he gets tax write-offs, is paying off the mortgage and benefits from any price appreciation. “This is a stepping stone in my real estate portfolio,” Trench says. “It was my home, but it was really an investment property I worked on and lived in.”

What made Trench’s foray into real estate investing work is the Federal Housing Administration’s government-backed mortgage program. FHA will make multifamily loans to borrowers with far lower down payments than almost all other loan programs.

“If you’re buying for investment, it’s going to be minimum 25% down payment,” Bill Brown, president-elect of the National Association or Realtors, says of conventional and most other multifamily mortgage. “If you get 25% down, you’re actually getting a decent deal.”

In addition to accepting lower down payments, FHA will lend to borrowers with less- perfect credit. “FHA only requires a down payment of 3.5% for owner-occupied properties with credit scores down to 580,” says Erin Lantz, vice president of mortgage with Seattle-based Zillow. “With 10% down, FHA will insure loans for borrowers with credit scores as low as 500.” Conventional lenders typically require, along with much larger down payments, a minimum score of 620, Lantz says.

Another important factor is that FHA lets borrowers include projected rental income on mortgage applications. “This means the future income from the rental can help you qualify for the property,” Lantz says. “For conventional financing, rental income from a primary residence may not be used in qualifying.”

Of course, FHA has some gotchas.

First, it is only for owner-occupants. Borrowers must move into the property within 60 days and live there at least one year. That can be an issue for buyers of properties in undesirable areas.

Another drawback is that FHA requires mortgage insurance when lending more than 80% of property value. The costly insurance includes an upfront payment equal to 1.75% of the loan plus monthly premiums of $200 or so on average, for the life of the loan. These added costs can significantly affect economics of a real estate investment.

Brown advises any borrower to check out all available mortgages before settling on one. For buyers who have the money for a large down payment and don’t want a lot of leverage, a conventional mortgage can be better, he says. Veterans Administration-backed loans can be better yet, allowing zero down payment for qualified veterans.

Still, FHA duplex financing makes sense for those new to real estate investing, according to Lantz. “It provides a great opportunity for those beginners who may not have a large amount of money saved up to start investing,” she says. “It gives them the investment experience with less risk, as they have less of their own money invested.”

Trench is making plans to refinance with a conventional lender to eliminate mortgage insurance, and hopes to buy another property soon. “If I can get another $1,000 a month in cash flow,” he says, “I’m pretty far along in my search for financial freedom.”

Source: thestreet.com

Spring Landscaping Ideas for Property Managers

Written by Apartment Management Magazine on . Posted in Blog

drought landscaping

A little bit of curb appeal benefits property managers by showing off rental units in the best possible light. Time and money invested in landscaping can reduce unit vacancy, shorten time spent on marketing and advertising rentals, and shorten the amount of time spent showing prospective renters available apartments. As weather warms, plan and implement spring landscaping with our roundup of fun, affordable landscaping ideas.

Spring Landscaping Ideas

Streamline spring landscaping with spring bulbs. Spring bulbs, such as tulips or daffodils, are not only cheery, they are a gardener’s best friend. Why? One round of planting and you will be rewarded every spring with fresh flowers as bulbs return. Bulbs are a natural addition around walkways or paths and also look sweet when planted around the base of trees. Spring bulbs can also be grown in pots, which is a nice solution for condos that have a lot of hardscaping.

Use succulents in arid climates. Not only will trendy succulents help you appeal to Millennial renters, but they are a smart choice for arid climates. Succulents need little in the way of care and are a great way to reduce your water usage while maintaining an attractive landscape. Small, creeping succulents work well in border beds while larger varieties can make an unusual and elegant property screen. Choose succulents that are suitable for year-round growth in your area to keep your maintenance low.

Fill planters to create a welcome entrance. If prospective renters come to a central office on their property tour, spruce it up by using large planters to create a welcoming entryway. Select colorful spring annual flowers and foliage, then fill the planters with these flowers. You will be rewarded with cheerful color all spring long, and visitors will get the impression that apartments for rent are well kept.

Add flowering shrubs to break up the landscape. Many large, sprawling apartment complexes could benefit from a little infusion of color. Spring flowering shrubs offer you an easy way to add color, and will only get larger (and more eye-catching) as the years go on. Popular spring flowering shrubs include forsythia, lilac, dogwood, witch hazel, mountain laurel, viburnum, and camellia.

Perk up border beds with floral ground covers. It’s a common problem for spring garden beds: Big shrubs that add visual interest in the summer offer little visual appeal coming out of winter and into spring. Garden beds can look bare and unattractive. One simple way to perk up large beds is to add low, creeping spring ground covers to the front of beds, infusing the garden with color while trees and shrubs are still bare. Options here include creeping phlox, wood anemone, bellflower, snowcap, pink, chamomile, dianthus, and gentian.

Think high-impact for common areas. Modern renters want a sense of community from living spaces. If your apartment complex has a swimming pool, barbecue area, tennis court, or other type of outdoor gathering space, consider adding unusual landscaping to complement the community space. Fun ideas to try include a water garden complete with fountain and lovely water lilies, an edible garden featuring fresh grown vegetables and herbs, or a Zen garden with mixed grasses and exotic hardscaping. While an edible garden requires maintenance, it could be run as a community garden, freeing up your time to manage the property. The other ideas are not only low maintenance, but pay off by making a powerful impression on potential renters.

**One final tip: Make sure that none of the flowers or plants you select are on the invasive species list for your state. Accidentally selecting a plant on this list will quadruple your landscaping time as you will need to invest hard work, sweat, and man hours in weeding invasives that have sprawled where they do not belong. The USDA maintains an invasive species plant lookup that can help you avoid a costly mistake.

What other landscaping ideas have you tried successfully at your rental properties? Share your floral inspirations with other property managers.

The post Spring Landscaping Ideas for Property Managers appeared first on The Official AppFolio Blog.

3 Steps to Get More of Your Residents Paying Rent Online

Written by Apartment Management Magazine on . Posted in Blog

Female Holding Credit Card Over Keyboard

So you’ve made the step to offer your residents online rent payment options. You’re ahead of the competition down the street still trying to organize their spreadsheets and deposit checks on-time! But convincing your residents to use online rent payments can be a trickier feat.

Millennial renters will get it instantly; many have never even seen a checkbook before. But some renters are averse to using their debit cards online, afraid to submit personal information through the Internet. When people discover the ease and flexibility of paying their rent online, everyone (property managers and residents) will be much happier.

How do you get your renters to sign up for online rent payments? First, explain to them the benefits of online rent payments—you can securely pay rent from anywhere with your mobile device; no late fees when checks go missing; you always know the status of your payments.

Still not convinced? Try an incentive to kickstart the process. Here are some tips for running a raffle to get more of your residents using an online rent payment platform:

Step #1 – Decide What to Offer

The benefits should speak for themselves, but sometimes renters need a little motivation. This is where you should think long and hard about what you want to offer in your online rent payment raffle. It should be useful. Here are some ideas:

  • Monthly gift certificate drawings for all residents who pay rent online (think local restaurants, coffee shops, etc.)
  • $50 off next month’s rent
  • Free one-time carpet cleaning
  • Upgrade an amenity like a shower head or add a ceiling fan
  • Depending on your budget and if it would be of interest to your residents, you could give away something fun like an iPod shuffle ($49) or a Google Chromecast ($35).

If you run one raffle and don’t see a lot of success, try a different prize the next time around until you find the winning incentive.

Step #2 – Market the Raffle to Your Residents

Use any method you can think of to get the word out about your raffle. Make it sound fun and exciting and more people will be engaged. A couple ways to reach renters:

  • Send an email or text message
  • Add a message on your website
  • Leave a flyer on a door or post in a common area
  • Tell your renters in person!

You might want to consider marketing heavily a week before rent is due. This adds urgency and with the first of the month coming fast, it’ll be fresh in their minds.

Step #3 – Announce the Winners!

Often, people hold a contest and only let the winner know when they’ve won. In this case, you’ll probably receive a number of phone calls and emails asking “who won?” So don’t forget to announce the winner publicly so everyone knows.

Congratulate the winner in your newsletter, and try to get a quote on how much they love using the online rent payment option. You can use this in your next contest. The social proof will help drive new residents to begin participating and keep the excitement level high.

With these tips hopefully you can motivate most of your residents to pay rent online and start enjoying all the extra time you will have during rent week.

You might also enjoy:

5 Benefits of Managing Rent Collection Online

The post 3 Steps to Get More of Your Residents Paying Rent Online appeared first on The Official AppFolio Blog.