Why Millennials Want Shorter Leases

Written by Apartment Management Magazine on . Posted in Blog

millennials lease terms

The supply/demand imbalance and sky-high rents have led to an emerging trend in the apartment industry.

As rent prices continue to rise and a growing number of households are choosing to rent instead of buy, some individuals are looking to alternative options like Airbnb and other short-term living solutions that offer a more flexible lifestyle instead of committing to a year-long lease. Sky-high rents have resulted from demand outpacing supply in most markets, and in 2015, renter households spent $535 billion on rent, up $19 billion from 2014, Zillow reported.

To meet this new demand, some property owners and rental platforms are beginning to list short-term rentals along with long-term rentals. One such company is RadPad, a Los-Angeles based startup founded in January 2013 that caters to younger renters by offering a free mobile app for its listings.

“We’ve seen a lot of changes since we started RadPad three years ago,” Jonathan Eppers, CEO & co-founder of RadPad, told MHN. “About a year and a half ago, we started seeing a lot of people on RadPad looking for short-term leases. We found two-thirds of renters said they were looking for a place for a year or less, which was fascinating to us.”

He added that this demand “isn’t just a couple thousand, we’re talking hundreds of thousands of renters a month telling us they want a place for no more than year.” Renting gives people the opportunity to pick up their bags and move, so “if you’re stuck in a long-term lease, it makes it harder to move. Believe it or not, I think for a certain but growing percent of renters, a one-year lease seems like it could be too long.”

Doug Culkin, CEO & president of the National Apartment Association, echoed this sentiment, adding that millennials today are attracted to short-term renting because it fits with their mobile lifestyle. “While older counterparts have stayed with one company for an extended period of time, the U.S. Bureau of Labor Statistics found that millennials change jobs three times more often than previous generations—staying with the same employer for an average of three years,” Culkin told MHN. “Millennials do not want the burden of home ownership during this transitional stage of life. A shorter-term rental is appealing to many young renters who aren’t sure they’ll even stay in a particular job or city for an entire year.”

This trend of increasing interest in short-term rentals, and the success of platforms like Airbnb, is reshaping the real estate industry, as Stuart Eisenberg, a partner at BDO USA discusses in his guest column for CPE.

But the demand isn’t only on the renter side, Eppers said. As RadPad expanded its supply side in the last year, the company has “started talking to landlords, and we’re finding some of them—and it seems like it’s been picking up steam in the last six months—have been experimenting with listing short-term rentals,” Eppers said. “They’re taking those rentals off the market that would typically go to renters looking for a one-year lease and putting them up on sites like Airbnb to see if they can rent them out more short term.” He added this also allows property owners to see if they can make more money, with the ones he’s talking to saying they can make 30 to 40 percent more per month on a short-term unit.

“Apartment owners and managers recognize the need to cater to this new generation of renters, and many are now offering at least the option of a six-month lease,” Culkin added. “Independent rental owners tend to be even more flexible than some larger management companies, and often have month-to-month leases available.”

RadPad announced in early February that it was opening its platform to short-term rentals, partnering with rental providers such as onefinestay, which offers weekly luxury home rentals, and HomeSuite, which offers months-long furnished condos to rent. Property owners using RadPad can also list their short-term rentals, though RadPad sets a minimum stay of one week.

With property owners taking long-term rentals off the market, the already strong supply/demand imbalance that is driving pricing up is only made worse, Eppers said. He believes that by offering short-term listings on RadPad, it keeps these rentals “in the hands of renters instead of travelers. We keep the listings in the rental market instead of putting them on sites like Airbnb where the [short-term rentals] go to those who have no interest in living in the neighborhood, who oftentimes treat the place like a traveler would and not like someone who lives there,” Eppers said.

Eppers also hopes that by putting more short-term options on the market, it can convert some of the short-term renters into longer-term renters, “which I think is good for the entire marketplace.”

While Eppers said renter feedback about the short-term options has been positive, a common request is for more inventory. He said the company is working to grow by reaching out to property owners already listing on RadPad—which are mostly small- to medium-sized, owning less than 50 units—to let them know they can now list short-term rentals. RadPad also prompts property owners coming to list their long-term rentals to see if they’d be open to a monthly rental option, which Eppers said many signing up are interested in to see if they can get more renter interest.

 

Source: multihousingnews.com

– See more at: http://www.american-apartment-owners-association.org/property-management/latest-news/millennials-want-shorter-leases/#sthash.FNTBAJho.dpuf

You Signed A Lease; It’s A Contract.

Written by Apartment Management Magazine on . Posted in Blog

Lease_Renewal

Every manager and leasing person has experienced the frustration when a new resident challenges a policy or clause in the lease.

I didn’t know:

-The non-smoking policy would apply to my guests.

-I had to have management approval to have a pet.

-There would be a penalty if I moved outt before my lease is over.

Everyone in property management is well aware a lease is a legal binding contract.  Unfortunately, many residents want to overlook this minor detail.

The Importance of the Lease

LeaseThe lack of respect for the lease as a legal document may start with the management team at the property.  The new resident rushes into the office to pick up their keys. The moving truck is right behind them, along with an entourage of families and friends to help move furniture.  “They don’t have time to sit down for a lease appointment, they’ve signed leases before, and they’ve been working with our staff for weeks, surely if it’s in the lease, we’ve probably already explained it to them, right? “. Sign here, initial, initial, sign and witness.  “Send me my copy by email, or I’ll pick it up later,” close out the lease signing appointment.

Even if the leasing staff was able to point out a few key items in the lease, how much of the resident’s attention was focused on the explanation?  The new resident is thinking about where to place the furniture, will the dining room table make the turn in the hallway and how will they make arrangements to feed the folks that are helping?

Lease Appointment

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Scheduling a lease appointment a day or two before the move in creates the opportunity to review the lease and all the supporting documents, without distractions. The resident will be able to focus on the explanation of the lease.

The intent for a move in to be a positive experience may discourage the leasing team from spending too much time explaining policies or rules that may not apply to the resident’s current situation and could be viewed as negative.

-They didn’t have a pet so we didn’t talk about pet rules.

-I’m not going to talk about moving out on the day they move in.

-They didn’t ask about…..

Legal Document

Allowing an individual to sign a lease without a general understanding of the most important aspects of the rules will create problems and frustrations matching the term of the lease.   It is an individuals responsibility to “know” the content of a contract before signing but most leases are multiple pages of the smallest font size. Giving a new resident a copy of the document they’ve signed, with the offer, “Call if you have any questions,” does not provide any type of orientation for the new resident. Since the leasing staff is not qualified to offer legal advice, some questions or concerns may need to be directed to an attorney. However, holding a resident accountable for the content when no effort is made by the management to point out the items most likely to affect occupancy is poor customer service.

Encouraging the early appointment to review the lease, but insisting on a half hour to hour lease review appointment will eliminate many points of confusion. Referring to the lease as a contract, and described the term as binding, will assist in reinforcing the legal status of this document.

Lori_Hammond Lori Hammond | Company Website | LinkedIn Connect |

Lori has 30+ years’ experience in the Property Management Industry, working with both market rate and affordable housing.  Lori has been privileged to work with some tremendous industry leaders during employment tenures with Oxford Management, NHP Management, AIMCO, Alliance Residential, Boston Capital, The Sterling Group, P.K. Housing and currently Management Resources Development.

3 Common Marketing Mistakes Every Property Manager Makes (At Least Once)

Written by Apartment Management Magazine on . Posted in Blog

propertymanager_stressed

People need a place to live as much as they need clothes on their backs. Take a moment to think about your favorite department store. Think about what makes their clothes, brands, or style so attractive to you. More than likely, your tastes are partially manufactured by the way that the brand presents their products. Your favorite pair of pants? You saw those in an eye-catching email advertisement. That coat you’re never seen without? You saw that on a website homepage. Why should your marketing efforts as a property manager be any less enticing? We’ve pinpointed a few marketing mistakes that property managers make every day when advertising their properties, and how you can save time, money, and the environment by NOT making them.

#1 – Immobile

The internet is everywhere, on almost every mobile device. Even if you have a website that looks great on your desktop, are you sure that it looks good on smartphones? Recent trends show that 84% of current or prospective renters actively search using mobile devices. In fact, 4 out of 5 millennials have smartphones and perform almost every research task on them. If your marketing efforts aren’t tailored towards people using mobile devices to find rentals, then you have a great opportunity to increase your search traffic by 30% just by having a mobile-friendly website. If you’re a property manager without a website, or if you’re looking for ways to improve your existing website, AppFolio has a dedicated team of designers that can assist you with optimizing your web layout to attract potential new tenants. For great ideas on how to optimize your website for prospective renters, check out this recent AppFolio article highlighting key strategies.

#2 – Outdated

Along the same lines as mobility, the internet is only going to be your best friend if you stay on top of things. Property managers with the most successful online presence remain vigilant in posting their current vacancies and removing them immediately after they have been filled. Out-of-date postings may detract interested parties from signing a lease with you, particularly if a potential tenant makes an inquiry only to discover their dream home has already been filled. AppFolio marketing features centralize all of your postings (even on third-party listing sites), allowing you to add or remove listings with one-click simplicity.

#3 – Expensive

Marketing can be expensive, and it’s to your benefit to make sure that every dollar you spend on advertising your vacancies counts. When it comes to print advertising in local newspapers or magazines, you’re required to pay an upfront fee for advertising space with no guaranteed return on investment. Online advertising through Search Engine Optimization is a much smarter way to capture your intended audience’s attention and have various methods of charging for advertising space. For example, some SEO services will charge you only if your ads are clicked on, which means that you’re spending only as much as you need to in order to generate business. Not only will you be spending less on ad space, but focusing your marketing efforts online means that you’re using less paper, which can have an increased benefit to your overall costs as well as our planet!

We recently teamed up with the Sprout Marketing team for a webinar on how you can improve your online presence through Search Engines and Social Media.

The next time you stop by that department store you probably love more than you should, ask yourself what strategies they implemented to capture your attention and get you through their doors. More than likely, you can apply those same tactics to drive renters to your properties as well.

You Might Also Enjoy:

How to Stand Out with Your Property Management Website

10 Best Practices for Listing Your Properties

The post 3 Common Marketing Mistakes Every Property Manager Makes (At Least Once) appeared first on The Official AppFolio Blog.

Top 5 reasons to attend the Income Property Management Expo

Written by Apartment Management Magazine on . Posted in Blog

AAOA_banneradJoin AAOA at the Income Property Management Expo! It’s the networking event of the season, held specifically for property owners, managers, and investors like you. You’ll have access to free seminars, new products and services, and face to face interaction with leaders in the rental industry. Visit us at this FREE event held at the Pasadena Convention Center on March 15, 2016.

Here are the top 5 reasons to attend the Income Property Management Expo:

  1. Free seminars and live demonstrations:  Learn new strategies and solutions for managing your properties from experts in the industry. Topics include mixed use property investments, Section 8 housing, tax law, marketing, and tenant screening.
  2. Learn about cutting edge products and services: Meet dozens of vendors that offer solutions that can make your property management more cost effective. Many vendors will have discounts or free trials for their products. It’s an easy way to introduce yourself to new technology and services for the rental industry.
  3. Networking opportunities: Meet face to face with other industry professionals from all across Southern California. You can ask questions at the seminar or strike a casual conversation with like-minded property managers and investors.
  4. It’s Free: There is no reason not to come! Enjoy tons of benefits at no cost to you. Where else can you find an event like this in LA?
  5. Expo giveaways and complimentary food and drink tastings: Take a fun break at the Expo by snacking on complimentary food from local restaurants, breweries, and wineries or participate in free raffle giveaways!

The expo is an ideal combination of education and networking. If you are involved in real estate management, this expo is for you. Reserve your free spot here: http://incomepropertyexpo.com/los-angeles/ . We hope to see you there!

The # 1 Way To Find Apartment Building Deals

Written by Apartment Management Magazine on . Posted in Blog

If you’re a newbie investor interested in investing in apartment buildings, you might be wondering how to go about finding deals.

Some gurus who will teach you to market to probates, send direct mail to apartment owners, or network with attorneys. All of these tactics can work. However, I’ve found that there is one specific tactic that is most helpful for me when looking for deals. So, without further ado…

Watch the video below for the # 1 way to find Apartment Building Deals


Michael Michael Blank | Company Website LinkedIn Connect|

Michael Blank’s passion is being an entrepreneur and helping others become (better) entrepreneurs. His focus in real estate investing is buying apartment buildings by raising money from private individuals. Michael has been investing in residential and multifamily real estate since 2005 and began syndicating deals in 2010. He is the author of the Syndicated Deal Analyzer and the free eBook “The Secret to Raising Money to Buy Your First Apartment Building”.

Should you renovate your investment property?

Written by Apartment Management Magazine on . Posted in Blog

Data from Mortgage Choice shows more than 75 per cent of investors who purchased property within the last two years bought an existing dwelling.

Of those who purchased an existing dwelling, the majority said the property was more than 10 years old and required some form of renovation or maintenance to get it “tenant ready”.

There are many benefits associated with renovating an investment property. In the first instance, simple cosmetic changes to a property can not only help it to appeal to more tenants, but it can also help improve the overall value of the property and the amount of rent an investor can comfortably charge.

But while there are benefits associated with renovating an investment property, renovation – even simple cosmetic changes to a property – doesn’t come cheap.

That said, if you are considering renovating your investment property, there are a few easy steps you can take to help reduce the financial strain associated with property renovation.

Step 1: Create a solid plan beforehand

Knowing exactly what changes you want to make to the property before you get started can reduce the chances of your renovation going off course and off budget. Ask yourself: what changes are necessary, what changes are nice to have and what can be done further down the track? The last thing you want to do is start renovating and then realise half-way through that you actually want something completely different.

Step 2: Get your finances right

Before you start calling builders or drawing up plans, you will need to determine how you are going to afford your renovation. Will you fund it out of your savings, pay for it via credit card, take out a personal loan or potentially refinance your owner-occupied mortgage? Whatever you decide, it is important to know at the beginning how the whole funding process will work.

Step 3: Be wary of over-capitalising

It’s a good idea to get an independent valuation of your property before you get started. You want to avoid spending more on your renovation than it will add in terms of value to your property. Having a valuation done at the start can help you get a realistic idea of what you can and should spend for the maximum return. Also, it is important to see what the average rental price is for similar properties in the area. If the renovations aren’t going to allow you to boost your rent, you may have to ask yourself whether or not it is worth the hassle.

Step 4: Create a budget

A budget is essential for any renovation. Once you know how much you can afford, think about all the costs involved and work out how much you want to spend. Without a budget, costs can quickly spiral out of control, leading to added stress and frustration. Remember to build a contingency into your budget to cover unexpected expenses and delays.

Step 5: Cut your living costs

This last step is pretty self-explanatory. Renovating a property can be a costly experience, so have a think about your current lifestyle and see if there are areas where you can cut back and cut costs. The less you spend each day, the more cash you will have to pay for the renovations.

At the end of the day, renovating can add significant value to your investment property, but it is important to do your due diligence and make sure it is the right financial move for you before getting started.

Source: smartpropertyinvestment.com

– See more at: http://www.american-apartment-owners-association.org/property-management/remodel-and-repair/renovate-investment-property/#sthash.KeYq0ZiX.dpuf

Handle Property Maintenance Calls Stress-Free

Written by Apartment Management Magazine on . Posted in Blog

A sure way to keep your best tenants happy is to respond to their maintenance requests in a timely manner. This involves responding to them right away and selecting your maintenance vendors carefully so that they get the best service possible. Regardless of whether it’s a vital necessity or just a small leak, you should always provide a clear plan for a resolution as quickly as possible. There are a few simple things you can do that will prevent your tenants from becoming disgruntled.

Here are three tips for handling maintenance requests smoothly:

  1. Acknowledge Receipt: Be sure to let residents know that their request has been received, even if you don’t have a solution yet. Just knowing that you will start looking for a solution will help your residents feel at ease. If you are managing several properties, you may want to use a property management software with a built in maintenance monitor, such as ManageZoom. Tenants can create an account on ManageZoom to send you a detailed request with pictures and description. ManageZoom will alert you when you get a request and you can set reminders so that you don’t forget about the request.
  1. Choose Your Vendors Carefully: You want to make sure that the repair team that you hire to maintain your properties are professional and timely. The team you use is a reflection of you as a property manager. We suggest running a background check or using a company that checks their employees, to keep your property and tenants safe. Once you’ve vetted a vendor, be sure to keep their information handy for future fixes. ManageZoom’s property management software makes this much easier by giving you the option to save vendor information in your account. When a tenant sends in a request you can create a ticket and assign a vendor to it. You’ll know what vendor is servicing which property and you can track how much those services will cost.
  1. Provide a Timeline: Nothing is more frustrating for a tenant than ambiguity. Granted, you may not have all the answers and you are probably depending on the repairman to give you an accurate time estimate, but if that’s the case let your tenants know. When you do get a timeline communicate it right away and follow-up with the repairman to make sure the repair will be done on time.

A major cause of tenant dissatisfaction is related to maintenance difficulties. Maintenance will always be necessary, but how you handle it will help you keep good tenants around longer. Organizing multiple maintenance requests at once can be a challenge, but subscribing to ManageZoom’s property management software can keep you on track. Sign up here to try out the ultimate maintenance monitor for free for 30 days.

ManageZoom-logo

Hail All Property Managers: What Today’s Renters Expect, Want & Need

Written by Apartment Management Magazine on . Posted in Blog

RENTERS_1

With spring almost upon us, the real estate market readies for a busy season as leases end and Americans enter back into the rental market. How can property managers ensure they’re competitive, filling vacancies and giving prospects what they want in the apartment search?

AppFolio conducted a survey to uncover what‘s top of mind for today’s renters and what trends modern property managers need to adopt to meet their expectations. As an industry with one of the slowest adoption rates of technology, renters are keen to the tech trend, and online convenience can make or break a signed lease. Property managers need to be thinking about the impact and opportunities of technology to fill vacancies and remain competitive.

All Things Digital, Please

With more and more consumers renting versus buying a home, the rental market has become increasingly crowded. So how can property managers adequately market their available listings? Time to get everything online, folks! Among current renters, nearly one-third (29 percent) say they found the rental listing for their current residence online (via a classified ad or an online service). This trumps traditional methods such as finding a rental listing via word of mouth (23 percent—still a relatively big influence) or through a realtor (nine percent).

This indicates the importance of a digital presence during the listing process and, with traditional word of mouth remaining prominent, the importance of satisfied residents. This is achieved through fast response and maintenance, good upkeep of the property and an overall quality of services so that tenants will refer others to vacant units—all of which today’s modern property manager can boost through technology.

Now let’s take it one step further. Today’s renters are not only finding rental listings online, but they’re also attracted to digital conveniences in deciding which rental to move into next. From paying rent to reporting a maintenance issue, renters want to be able to do apartment tasks from their phone, iPad or computer, whether on-the-go or sitting on the couch. The majority of tenants (46 percent) prefer to pay their rent digitally—through an app, website or automatic withdrawal. Mailing a check or dropping off cash is now old school; after all, this is the digital age. If your property management company can offer these types of digital services, you’ll have a higher chance of attracting more lessees.

Virtual Assets are Key

Nearly a quarter of renters eliminate a property from their search if photos or videos of the property are unavailable. Bad reviews (of the property itself or of the property manager) are also a deterrent, with 27 percent of respondents choosing this as the top reason for eliminating a property from their search.

Bottom line: make sure to highlight your property’s value online. Don’t be shy; be transparent and show off the space.

Millennials Expect—and Are Willing—to Pay More

Surprisingly, millennials are least sensitive to price as this demographic’s expectations have been modified by the current market. Of the total respondents that cite rent being more than they want to pay as the top reason for eliminating a property from the search, only 28 percent are age 18-34. Adults age 55-64 are most sensitive to price, with 45 percent selecting it as the top determining factor. Pay attention to this market property managers—since the rental market is going gray.

Top U.S. cities such as San Francisco, Boston, and NYC are known for making residents “rent poor.” It must be true, as 32 percent of respondents said half or more of their monthly income goes toward rent. This is another reason to satisfy your residents! If they’re going to spend a large portion on rent and have an abundance of apartments to choose from, things like property upkeep and offering digital conveniences will keep current tenants happy, increase the likelihood of re-signed leases and attract new tenants.

The findings highlighted above are critical for property managers everywhere, whether you’re city or small town, 10 units or 100.

AppFolio Rental Market Survey Methodology

Commissioned survey of U.S. consumers conducted in January 2016 via Google Consumer Surveys. The survey collected responses from a representative sample of 1,500 total consumers. AppFolio was the sole investor in the study and the survey population is made up of a mix of U.S.-based consumers aged 18 and older.

AppFolio Rental Market Survey Data Points:

  • How did you find your current residence rental listing?
    • Word of mouth (23.8%)
    • Classified ad (15.3%)
    • Online service (14.3%)
    • Realtor (9.3%)
    • Mobile App (3.4%)
  • Assume that rent is not an issue. Which of the following would cause you to eliminate a property from your search?
    • Property rent is more than I want to pay (31.5%)
    • Lack of photos or videos of the property (24%)
    • Quality of property’s amenities (18%)
    • Property itself has poor reviews online (13.9%)
    • Property manager has poor reviews online (12.6%)
  • Age Breakdown: people who picked property rent is more than I want to pay:
    • 18-24 (27.9%)
    • 25-34 (28%)
    • 35-44 (29.1%)
    • 45-54 (30.2%)
    • 55-64 (45.4%)
    • 65+ (42.8%)
  • Approximately what proportion of your monthly income goes towards rent?
    • Less than 1/4 of monthly income (19.7%)
    • 1/4 of monthly income (21.4%)
    • 1/3 of monthly income (25.7%)
    • 1/2 of monthly income (18.3%)
    • More than 1/2 of monthly income (14.9%)
  • Which of the following methods would you most prefer to use for paying rent each month?
    • Pay through an app or website (28.5%)
    • Deliver a check (21.6%)
    • Mail a check (18.1%)
    • Automatic withdrawal (17%)
    • Cash (14.8%)

The post Hail All Property Managers: What Today’s Renters Expect, Want & Need appeared first on The Official AppFolio Blog.

The Delicate Art of Rent Increases

Written by Apartment Management Magazine on . Posted in Blog

rent increase_1Rents seem to only continue to go up. Nationally, the median asking rent increased 5.74 percent in the third quarter of 2015, compared with the same quarter a year earlier.

But while many landlords raise the rent whenever it seems right, this isn’t the best strategy. You shouldn’t increase the rent because you’ve had an expensive year, or a major roofing job. Instead, your rental rates should be dictated by one very simple factor: the rental market.

Simply put, your rental price will be determined by how much tenants are willing to pay. Use anything other than this criterion to set your rent, and you run the risk of losing them and experiencing higher vacancy rates.

Let’s look at how you can accurately assess the market to determine the sweet spot—the best price that you can get for your property — and how to go about tactfully breaking the news to your tenants.

Ensure Compliance With the Law

First things first: Make sure your proposed rent increase is in compliance with state and regional laws, and of course, in accordance with the terms of your lease.

Rent control areas, which include Washington, D.C., and cities in California, Maryland, New York, and New Jersey, have specific requirements regarding rent increases, including the frequency of the increases and the amount of notice that you must provide. For all other areas though, you’ll still have to provide sufficient notice. In most states, 30 days’ notice is generally required for month-to-month leases. For fixed-lease properties, you’ll want to let tenants know before the lease is up. Commercial properties are usually less regulated, but still require compliance with the original lease agreement.

Give Extra Notice

Sure, you’re required to give enough notice to be in compliance with the law — but why stop there? If you can, give tenants a 60-day notice instead of just 30 days. This will give the tenant more time to prepare for the increase, and allows them a chance to shop around. If your increase is in line with market rates, they’ll see that there’s no better deal to be had. So get those notices ready early. For longer leases, this means at least 60 days before the lease is up. Timing your notices so that the rent increase will take place immediately after the lease renewal date will allow you to start collecting the increased rent as soon as you can.

When informing tenants about rent increases, make sure you put everything in writing. Without a written agreement, a rent increase will be difficult to enforce.

Try to Raise It Every Year, or at Each Lease Renewal Period

If you have a month-to-month lease, you’ll want to increase the rent once per year. If you’re on a longer lease, wait until the lease runs out, unless your rental agreement specifically states that you will evaluate and raise the rent mid-lease. Even if the market only allows for a 1 to 2 percent increase, this is a better choice than waiting years in between rent increases, and then having to raise the rent substantially. This will help tenants to get used to rent going up, and you’ll find them less likely to complain over a $20 per month increase as opposed to a sudden $200 jump.

Calculate the Rent Increase

The amount by which you raise the rent should be competitive with local rental market rates, so do your research. Take a look at what other similar rentals in your area are going for. You could also multiply the consumer price index by your current rental rate. For example, the Bureau of Labor Statistics’ most recent release indicates that the index for shelter increased 3.2 percent in 2015. Suppose your current rent is $1,200 per month. You could multiply $1,200 by 3.2 percent (or 0.032) for an increase of $38.40 per month. While a 3 to 5 percent annual increase is standard, you may want to adjust this to fit your situation and the local rental market.

Determine Why You’re Raising the Rent

Your tenants will want to know, and you’ll need an answer. Be truthful and make a list of reasons that the rent needs to go up, such as increased utility costs (if you pay them), rising insurance costs, higher taxes, and the cost of inflation, if these things have all increased in the last year. Other reasons for a rent increase may include the rising cost of maintenance and repairs or renovations or upgrades planned for the property.

Keep Your Tenants Happy

Also consider your tenants’ situation. If you have an excellent tenant who looks after the property and pays rent on time, you may want to cut them some slack as an incentive to stay. One way to do this is to show them what the rent increase was going to be, but with this number crossed out and with a smaller percentage written in instead. Communication is key to keeping the air clear, so be in touch with your tenant and be willing to talk to them about the increase.

Another option would be to consider offering your tenants a compromise. Propose a rent increase, and be prepared to lower the percentage if they are willing to sign a longer lease.

While rent increases can be stressful, they don’t have to be. Ensuring that you raise the rent in line with market values and communicate all upcoming changes with your tenants will go a long way toward making the process as simple and straightforward as it can be.

Source: realtormag.realtor.org

The 9 Most Important Lessons I Learned About Money When I Became a Landlord

Written by Apartment Management Magazine on . Posted in Blog

Real estate financeWith 30 years under my toolbelt as a landlord, I’ve had my share of lessons learned — so I thought it was about time I put some of those learnings down on paper. Previously, I’ve written about key considerations when shopping for a rental property. Here, I focus on money lessons learned after closing the deal and actually managing the property.

The real estate properties that form the basis of my experiences are a two-family property my wife and I have owned and managed for 30 years, and a rental condo we managed for 20 years then sold. Now on to those lessons…

1. Learn to Be Handy

Owning rental properties is all about building “sweat equity.” The less you pay others to do maintenance and make repairs, the more you keep for yourself. But when you make the repairs, do buy items of higher quality that will last longer. Having to return over and over to make the same repair gets old quickly and winds up costing you more in the end.

2. Be Respectful and Responsible

Remember that both landlord and tenant have responsibilities. I try to put my best foot forward with a new tenant by making sure the unit is in excellent move-in condition, and by responding promptly when they reach out to me. More often than not, they return the favor by taking better care of the property. In other words, “What goes around comes around.”

3. Get a Good Lease (From a Lawyer)

Your lease is a legally binding contract. Make sure you read, understand, and agree to every word. Who is responsible for lawn care? Who shovels the snow? Does it require tenants to be responsible for small repairs (say, under $20) and basic maintenance such as replacement of light bulbs? How much notice do tenants need to give you that they are leaving? (I suggest at least one month.)

Consider the lease a flexible document that can be improved over time to address lessons learned. For example, we’ve found a month-to-month lease works better for us than an annual term, because it provides more flexibility for tenant changes.

4. No Pets! No Exceptions

It took a double-whammy for us to learn this lesson. The downstairs unit of our two-family has very nice Andersen casement windows with stained wooden sills. The upstairs has wall-to-wall carpeting to cushion sounds between the floors. Our very first choice of tenants to occupy the downstairs unit had two cats. Even today, if I close my eyes, I can clearly see images of the deep gouges in those (previously) beautiful sills, and the rips in the Anderson screens.

Upstairs, the culprit was a dog. He used the carpeting as an opportunity to mark his territory — and he did a thorough job, extending into the hardwood flooring underneath. After spending thousands of dollars to repair the windows, replace the carpets, and sand and refinish the wood flooring, it has now become very easy to answer the question we’ve since been asked many times: “Do you allow pets?” Without hesitation, the answer is always the same: “NO!” I take pride in even sticking to my guns when a recent prospect offered to add $300 per month to the rent if we allowed him to keep a pet piglet.

5. Check Tenant References — And Their Car

Banks and other lenders often use the “5 C’s of Credit” to determine whether or not a borrower qualifies for a loan. One of those “C’s” is Character. You want to rent to someone of strong character, who is responsible and honest. So ask for and check both employer and personal references. Do Google, Facebook, and LinkedIn searches while you’re at it. Look for other clues, as well. For example, when meeting a prospective tenant, I always look at their car to see how clean they keep it on the outside, and how cluttered it is on the inside. Unlike a banker, you’re not just lending money; you’re lending someone your house.

6. Check Tenant Finances: Trust but Verify!

Another of the “5 C’s” is “Capacity.” Capacity answers the question, “Do they have enough income to afford the rent?” As a general rule of thumb, your rent plus utilities should be no more than 30% of your gross monthly income. Ask for their most recent pay stub, and call their employer to verify their employment. It’s human nature to want to trust other people, but in this case you need to back it up by verifying.

7. Wait for the Right Tenant

This one falls under the “Pay me now or pay me later” category. I do admit, it’s easy to yield to the taunts of the devil on one shoulder (“Live for the moment and take the money now!”) rather than heeding advice from the angel on the other shoulder (“Wait for a better candidate!”). Trust me, it’s much more costly — not just financially, but also in time and aggravation — to remove a bad tenant than to forego one or two months’ rent in order to find a good one. Do yourself a favor and take the advice of your better angels.

8. Get an Umbrella Insurance Policy

Being a landlord elevates your risk of being sued. It only takes one lawsuit — perhaps involving a tenant falling down stairs or slipping on driveway ice — and you could face hundreds of thousands of dollars in damages. So take out a general liability, or umbrella, insurance policy. Don’t risk getting wiped out. Paying $50 per month for umbrella insurance is a small price in exchange for sleeping soundly at night.

9. Take an Honest Look in the Mirror

Do you have the people skills to deal constructively with tenants? Are you willing to be on call 24/7 to respond to complaints big and small, or to drop everything for the repair of a furnace, toilet, or hot water heater? At times these things are a true test of patience and perseverance.

Self-awareness is key. If you have a spouse or partner, and if the demands of property management begin to weigh more and more heavily on either or both or you over time, it could drive a wedge in your relationship. No amount of rental income is worth that price.

So, taken as a whole, has our experience been worth the effort? Yes. The two-family has worked out better, and we still have it. It generates a regular monthly stream of positive cash flow (over $1,000 per month after all expenses). Granted, it requires time and attention (isn’t everything in life a tradeoff?), but in return we’ve received the equivalent of a modest monthly pension payment since our early 40s. Not many other investments can do that.

Do you own rental property? Any of these lessons sound familiar? And if you rent, how’s it look from the other side?

Source: wisebread.com