By Megan Eales Monroe

We live in an age where nearly everything is available on-demand.

Uber and Lyft are gradually replacing traditional taxi services. AirBnb has taken a chunk of the hotel industry’s revenue. Amazon is investing heavily in infrastructure to support one-day shipping. Babysitters, dog walkers, virtual assistants, and even doctors are now available to many consumers with the tap of a button, thanks to the prevalence of mobile technology and artificial intelligence.

This new reality is known as the ‘On-Demand Economy,” and no industry is immune to the disruption it will cause — including real estate. As a property manager, “business as usual” will no longer meet the high expectations of today’s renters. According to Microsoft’s’ 2018 State of Global Customer Service report, 56% of consumers have higher expectations for customer service now than they had only one year prior.

In the on-demand economy, renters are looking for personalization, convenience, and speed during their search for housing. In short, they expect a great experience. This creates an exciting opportunity for service-focused property managers to thrive.

Providing a great experience is what will set your business apart in the on-demand economy. Here are five concrete strategies for improving the resident experience from beginning to end.

Automate Your Vacancy Postings

Renters today, especially millennials, prefer to find information about rental units on their own time, rather than making a call during business hours just to find out what’s available. Listing sites such as Zillow, HotPads, Rentler, Zumper, RentLingo, and many more are where renters often begin their search for housing. Your company’s website also plays a large role. Without accurate, up-to-date information available on a professional website, as well as the most popular third-party rental listing sites, you will struggle to fill units quickly.

But manually posting rental vacancy information to a property management website plus third-party listing sites can be time-consuming for your staff, and it can also lead to poor experiences for potential residents if leasing staff fails to remove occupied units or posts incorrect information.

The best solution, which ensures consistent posting to all third-party listing sites and your website while saving hours of time for staff, is one-click vacancy posting. You can easily manage vacancies and create better experiences for prospective residents, right from the very first time they engage with your brand.

Make Info and Showings Available On-Demand

A Zillow Group Report on Consumer Housing Trends found that 71% of renters said they expect a response to their initial rental inquiry in 24 hours. 31% said they expect a response within just a few hours. This is a high bar for leasing staff to meet, and even the most skilled leasing agents may struggle to respond to all inquiries on such a tight timeframe.

To solve this problem, make the most of new innovations in AI technology to improve your lead-to-lease conversion process by automatically engaging each lead, answering their questions with conversational AI, and allowing qualified leads to book showings at their own convenience.

You can even allow tenants to book a self-guided showing by using lockbox technology. Leads can receive a unique code to gain access to the unit shortly before their showing. With on-demand showings, you can impress prospective residents by catering to their preferences, delivering instant service, and gathering qualified applicants more quickly and efficiently.

Bring Applications and Screening Online

Create a better experience for new residents by bringing all application, screening, and leasing steps online. Mobile technology can empower your team to obtain a signed lease faster, even during the renter’s first visit to the property.

Online applications mean that a renter may apply and pay the application before they arrive for their showing, or even during the showing itself. With instant tenant screening that provides credit, eviction, and criminal reports, prospective renters who meet the screening criteria can be given an “approved” rental decision on-the-spot.

This will make it possible for your property to win more new residents, since prospects will be less likely to apply at similar properties while they wait for a decision. Instead, an approved applicant can sign the lease right away. Or, if they need time to decide, they may submit a signed lease later on from anywhere, without the inconvenience of scanning, faxing, or returning a signed paper lease.

Let Residents Pay Their Way

Today’s renters expect to be able to do everything online, and that includes paying rent. By allowing your renters to pay online, you’ll save them a trip to the drop box, front office, or even the post office. They’ll appreciate the convenience of being able to pay from anywhere using their computer or a smartphone,

Online rent payments also save time and costs associated with paper checks, money orders, or even cash payments — many companies have been able to cut the time spent on rent week activities in half, since online payments drastically simplify reconciliation and reporting. And finally, online payment options reduce the instance of human error in data entry, ensuring 100% accuracy.

Collect Maintenance Requests Online

Yet another experience that can be improved for your residents (and staff) is maintenance requests.

According to research by Microsoft, 70% of consumers globally have a more favorable view of brands that keep in contact with proactive customer service notifications, and 52% of consumers in the U.S. have a more favorable view of brands that offer a mobile-responsive customer service support portal.  

This strategy can easily be applied to maintenance for rental properties. Instead of having to call to report or follow up on a maintenance issue, let your residents submit requests via an online portal using their computer or a smartphone. Then, they’ll receive regular updates on the status of their request via their preferred communication method, whether SMS or email. This vastly improves the experience for residents when something goes amiss.

Few things matter to your residents today more than experience. With so many options available at their fingertips, the experience that you provide can differentiate your company from the rest — so focus on making it a good one with these five strategies.

AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money.  Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.

By Joseph DeCarlo, MBA, CPM, CCIM

Even though Proposition 10 (Rent Control) was defeated in the November 2018 election, cities are allowed to enact rent control and moratoriums.  The County of Los Angeles recently instituted a rental cap that remains in effect until the end of 2019, which will likely be extended.

MITIGATING EFFECTS OF RENT CONTOL OR MORATORIUMS

Many rent control ordinances are capped at CPI or 3% annually.  Cities such as Santa Monica or Los Angeles have unique rules and regulations with no standardized or uniform code.  While rents are capped operating expenses like trash, electricity, water, gas fees can increase freely.  When operating expenses increase faster than rent, the owners operating income and cash flow decreases and could even be negative.  New apartments in California, starting in 2020 will require separate meters or sub meters.  Large apartment complexes usually bill back these utility costs to their tenants using an independent billing company.  These outside billing companies will likely not service smaller apartment complexes due to economics of scale.

RUBS FOR SMALLER UNITS

Most smaller unit managers do not use RUBS (Ratio Utility Billing System) to bill back utilities to their tenants.  If you have RUBS in place, before rent control is enacted, you may continue to use RUBS however, cannot institute RUBS unless for vacancy re-rents in City of Los Angeles.  In other words, if RUBS is in place you can continue to use it.  We try to promote the environmental benefits of using less utilities fees to our tenants.  Installing submeters is usually very costly and not feasible.

REASONS property owners DO not usE RUBS?

1. Usually we institute RUBS in lieu of a rent increase and some owners want the higher rent today
2. It’s difficult to find a billing company that will handle less than a 100 unit property.
3. Property Managers and onsite managers are not receptive as it is hard to explain to existing and new tenants and onsite managers need to be trained.
4. Some owners and property management companies are afraid of change and the added work
5. Small property owners need to find a property management firm that will do the RUBS billing and conduct the necessary training to implement.

IMPLEMENTING RUBS

Each tenant gets a monthly rental bill with the base rent and RUBS charges in an itemized list.  We provide the tenants the actual utility bills if they question the amount, as we do not mark up any of these bills.  A 2 bedroom pays a higher percentage than a 1 bedroom apartment since they generate more utilities.

RUBS Factors

Looking at the real estate tax bill, you may want to use Sewer & Water Bonds, City Services (Paramedics) etc., as part of the calculations for the RUBS charges.  As these costs increase, the tenants will pay the increases vs. a rent control cap.  This is similar to a commercial property net lease, except for maintenance costs.  In California, Civil Code 1941.1 states “Landlord must provide a habitable unit” (no roof leaks, working plumbing & electrical, etc.).  We, as the property management firm, do all of the billing and collection and charge the tenants a $4.00 p/month fee and there is no cost to the apartment owner for RUBS.

By using RUBS, which usually returns over 5% per/mo. of your gross income, you can more than likely expect to cover your property management cost for the month.  That means free management for your apartment.

In summary, rent control is on the horizon and apartment owners should now do everything possible now to have secure future income practices in place that a rent control cap allows.  Using RUBS, allows the owner to pass higher utility and other costs, dollar for dollar, to the tenant.  RUBS is environmentally friendly as tenants will use less utilities knowing they will pay more if they are wasteful.

Joseph W. DeCarlo

JD Property Management, Inc.

joe@jdproperty.com  I  www.jdproperty.com

Author personally owns over 100 units, previous Adjunct Real Estate Professor at Coastline Community College for over 30 years and his property management firm manages over 2,000 units.

by David Crown

Move-ins and move-outs can be delicate things. If mishandled by a property manager, they can lead to upset tenants or far worse. Disputes over damages take a toll on both sides, and a late refund of deposit money could land you in legal trouble. Whether you’re managing single family homes or urban high-rises, it’s your responsibility to make sure that every unit is clean and fully functional before the next tenant moves in. Through strict organization and clear communication, you can streamline this process and avoid costly mistakes. Here are my keys to smooth and painless move-outs

1. Get It In Writing

It’s important that you know your rights as a landlord before the move-out process begins. Here in California and in many other states, by law, a tenant must provide a certain amount of notice — typically 30 days — before moving out, meaning the property owner can legally charge rent for that amount of time after they’ve been given that notice. But you should never settle for a verbal notice: Always demand that tenants provide written documentation of their intention to move. This will leave zero room for misunderstandings or bad-faith actions on the part of the tenant. As long as the Intent to Vacate is signed and dated, it’s valid, even if it’s written on a cocktail napkin. Saying they’ll move out in a month is one thing; signing any form of document that details their intention to do so is another. If they fail to vacate the unit within the appropriate time after providing notice, they may be responsible for paying another month’s rent.

2. Tell Tenants What You Expect

Avoid surprising your tenant with any charges by instead telling them exactly what it is you expect from them during the move-out process. My company sends a Receipt of 30-Day Notice to Move-Out document, which includes a bulleted list of things the tenant can do to keep as much of their security deposit as possible. This includes informing them that we require the unit to be professionally cleaned, so if they wish to have it cleaned by a company of their choosing rather than have us pay for it with part of their deposit, they must provide us with a receipt. It also lets them know what items they must return to management before vacating. I highly recommend creating a form like this that you can use repeatedly

3. Provide An Itemized List of Damages

Tenants don’t often take kindly to a landlord taking anything out of their security deposit, no matter how warranted the charge is. Some animosity from a tenant may be unavoidable. But don’t give them additional (and valid) reason to be upset with your service by failing to clearly detail the charges you’ve extracted and exactly what they’re paying for. If you don’t provide this information, you’re opening the door to nasty reviews online or, far worse, putting yourself at risk of serious legal action. I’ve harped on the importance of clear communication in the past, and I’ll do it again here: Don’t neglect to communicate.

4. Document In Detail

This key is also in the spirit of communication. When you provide your itemized list of damages, be painstakingly specific about each and every item you’ve charged the tenant for. The more specific you are with your inspection report, the harder it will be for a tenant to falsely dispute the damages. Walk the unit with a new tenant before they move in, taking photographs of every surface and marking down all current damages. Then take another set of pictures when they move out. A comparison between the two sets of photos will leave nothing to interpretation.

5. Refund On Time

The next crucial key to a smooth move-out may sound simple, but just like the itemized listing of charges, taking it for granted could get you into legal trouble: Always refund your tenant the remainder of their security deposit on time. In fact, make it a point of principle to always refund tenants a week early to avoid any possible dispute. Don’t cut yourself any slack on this. Scheduling is essential, here and in all things property-management related.

By making these strategies a routine that you follow every time a tenant tells you they intend to move out of a unit, you’ll spare both parties many headaches, and protect yourself from the dangers that befall less attentive managers.

David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at (818) 646-8151.

By Eric D. Jarvis, Esq., Founder of ReassureRent

Ask any attorney what the cost of an eviction is, and he or she will provide you a list of their services and fees, along with a schedule of court costs.  Legal fees and costs are money out of your pocket, but an eviction exacts a much heavier toll.  Every day in which your property is occupied by a non-paying renter is another day without income.  In the meantime, you are still responsible for the mortgage, property taxes, insurance, and maintenance.  And now, in many California courts and jurisdictions, it is taking longer and longer to get an eviction.  The 2018 Court Statistics Report of the Judicial Council of California reports that less than 75% of all eviction cases will be resolved in 45 days or less.  More cases than ever will take months to resolve.  The loss of rental income for two months, three months, or even as long as six months, is the real cost of an eviction, and can be devastating for rental property owners who are not adequately protected. 

The unlawful detainer process in California was originally designed to be a fairly quick legal process.  Legal timelines were shortened, and proceedings were held on a speedy basis, with the goal of getting property back into the hands of the landlord quickly, so it could become income producing again.

In the current legal and political climate, however, the unlawful detainer process has been swept up in the sympathies associated with homelessness and the “housing shortage” and “affordable housing”.  The result is that more and more resources are being made available to tenants who have defaulted on their rent.  These resources range from public assistance and charitable organizations with honorable intentions, to mercenary law firms who have jumped on the bandwagon to shake down honest landlords. 

When a tenant becomes attorney-represented, the unlawful detainer is no longer going to be a speedy process.  One goal of the attorney is to provide the tenant with rent-free possession for as long as they can!  The delaying tactics used include making numerous motions and objections, each of which requires its own individual court hearings, propounding extensive discovery, which requires the landlord to supply numerous documents, respond to written questions, and possibly even be examined under oath, and even demanding trial by jury.  Even if you win, the tenant can file bankruptcy, which will result in another round of hearings in federal court, just to enforce the judgement.  All of these tactics will extend the eviction process by weeks or even months.

The delaying tactics of tenants and their attorneys affect even “simple” evictions, because of their impact on the courts.  Most California counties have only one or two courtrooms which hear unlawful detainer cases.  These were perfectly adequate when most cases took a relatively short time to resolve.  However, when cases started to stretch out longer and longer, the courts have become backlogged beyond their intended capacity.  The result is that more and more unlawful detainer cases are being scheduled further into the future, and even then, may be rescheduled again.  Once a judgement is obtained, the court clerk’s offices are backed up and delayed in issuing the paperwork that is required to get the property back. 

In some California counties, the average time to get a non-paying tenant out of your unit has expanded from six weeks to three months.  In many cases, it now takes as long as six months to get your property back.  During that time, you are still making payments on the mortgage, property taxes, insurance, and maintenance, and probably eating into your own savings to do so.

One solution to protect rental income in the event of an eviction caused by non-payment of rent, is tenant default insurance.  Tenant default insurance is a brand-new type of insurance.  It is an insurance policy that protects the landlord in the event the tenant defaults by not paying rent.  This insurance will hire and pay for the attorney and court costs, up to $1500.  Most importantly, it will reimburse the landlord for the missing rent, from the day the original rent was due through the day the property is restored back to the landlord’s possession, up to six months (subject to a small deductible). 

If you have an eviction, it could well be delayed, and you could be without rental income for up to six months.  If you have tenant default insurance, however, your rental income will be protected.  Going through an eviction is difficult, but the real cost of the eviction can be greatly reduced with tenant default insurance.

Eric D. Jarvis is the founder of ReassureRent tenant default insurance.  Eric is also an attorney, who, prior to his 20 years as an insurance professional, practiced landlord/tenant law in Southern California.  ReassureRent can be reached at (833) 5TENANT (833-583-6268), and at www.reassurerent.com/AptNews.

By Nate Bernstein, Esq., Managing Counsel, LA Real Estate Law Group

INTRODUCTION TO THE SUBJECT OF REAL ESTATE TITLE FRAUD AND HOW YOU CAN UNWIND IT AND PROTECT YOUR CHAIN OF TITLE

Crooks can perpetrate a real estate fraud scheme to manipulate the title of your property in an attempt to rob you of your equity, and profit at your expense.    Real estate title fraud schemes can take on several creative forms- a forged grant deed, a forged quitclaim deed, fraudulent sale, recording deeds of trust for loans which you did not receive, elder abuse, undue influence, and or starting an unlawful foreclosure. Sometimes there can be several people involved with the scheme, especially if partial interests are transferred without your consent. A corrupt notary public may be a co-conspirator in the scheme. A family member also may be a ring leader in the scheme.   Another common scenario, is a “voluntary” transfer of title during a duress situation of a mortgage lender’s foreclosure before the trustee’s sale to delay the sale.    A borrower who is seriously behind on his mortgage is vulnerable and susceptible to abuse by title crooks who want to steal title for much less than fair market value on the eve of foreclosure.  Even if the foreclosure is stalled, the crooked transferee refuses to transfer the title back to you, and then tries to sell the property or lease the property without your consent.  

If you are the victim of real estate title fraud or loan fraud, you can and should file a criminal complaint with the city attorney or district attorney, but these government agencies cannot directly fix your damaged title chain through a criminal prosecution.   Even if the title crook is in jail, your title, unless restored, is still is defective and not marketable. 

You need to take prompt action to protect your title and restore clear title by filing a civil action.    In considering whether to file a civil action to clear your title, the first step is to review, what my law school real property professor called, “the current state of the title.” Get a real estate title checkup.  What is in a preliminary title report for your property ?  Has a fraudulent instrument been recorded in the county where the property is located ?   Has a fraudulent deed of trust been recorded ?  Who is involved in the title fraud, and who will be named as a defendant ?    Is there a wild deed in the chain of title that you did not sign and looks peculiar ?   Was your signature forged ?   Call a reputable title company and obtain a title report is a very important first step to obtain the county recording numbers for the fraudulent instruments.  

PULL OUT YOUR TITLE INSURANCE POLICY FROM STORAGE

When you purchased the property you probably received a policy of title insurance as a property owner.  If you have a title insurance policy, and you have been a victim of title fraud, it is highly recommended to file a claim with your title insurance carrier to seek relief and protection under your title insurance policy.  If the title insurance company accepts your claim, the title insurance company can review your title report, investigate the situation, and may appoint a real estate attorney who can file a lawsuit to clear the title. An owner’s title insurance policy is a very important asset protection device that should be obtained each time you purchase a property.  

SEEK INJUNCTIVE RELIEF IN APPROPRIATE SITUATIONS

In contemplating legal action, an important issue is whether you should file a lawsuit for injunctive relief to block future fraudulent action.   Injunctive relief is a court order to restrain a third party from doing something injurious to the title of your property.   Perhaps the title crook is trying to sell the property to a third party.    The claim and remedy of injunctive relief can ask a judge with local jurisdiction to block a sale or future transfer.    Filing for an injunction can be in three forms-  the form of a temporary restraining order or TRO- which asks for emergency relief immediately in a case,  and or preliminary injunction to stop the unlawful action well before trial, and or a permanent injunction- which prohibits the unlawful act at trial.   If you prevail in a preliminary injunction hearing, this can set the tone for a successful case, beneficial settlement, or favorable outcome at trial.  If you obtain injunctive relief you can record the court order or judgment at the County Recorder’s Office to give notice to the world that the judge has ordered the crook to stop the activity well before the trial date, and that any potential transferee could be named in a lawsuit and may be subject to the claims.    

RECORD AND SERVE A LIS PENDENS

If and when a lawsuit is filed, the plaintiff also must record a lis pendens at the County recorder’s office.  The definition, rules, and procedures about a “lis pendens” notice are found in California statutes, namely,    Cal. Code of Civil Procedure Sections 405-405.24. to  405.39. 

The lis pendens notice is then served on all party defendants and  parties with an interest in the property.  If recorded properly, the lis pendens notice will be in the chain of title with its own county recording number.  The term “lis pendens” is a latin term for “action pending.” The lis pendens provides notice to the world in the title profile that a lawsuit is pending, and that any subsequent grantee, subsequent purchaser, assignee, or lender, takes title subject to the lawsuit claims.  Generally, a lender will not make a loan secured by a title that is subject to a lis pendens.  Generally, a title insurance company will not write a title insurance policy if the company is aware of the lis pendens.  Recording and serving a lis pendens is a key step in protecting the property owner’s interest against future title transfers while a lawsuit is pending.    For more information about recording a lis pendens contact LA Real Estate Law Group. 

MAIN LAWSUIT CLAIMS TO ATTACK TITLE FRAUD

Along with injunctive relief, your counsel can file a lawsuit for such claims as quiet title, fraud, declaratory relief, and cancellation of instruments. These claims are the “bullets” for your attack on title fraud activity.   One legal resource for learning more about the nuances of quiet title actions is the website “LAquiettitleattorney.com.”    Also, please review California Civil Code 3412-3415.  California Civil Code 3412 empowers a judge to cancel a fraudulently recorded instrument-  This code section provides,    

“3412.  A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.”

As noted above, if you file a quiet title action, you are also required by law to record a lis pendens on the title, to provide notice that an action is pending with regard to the title of specific property.  In egregious cases, if you have applicable facts, you can also allege a cause of action for “slander of title”- this claim has the threat of punitive damages attached to it.  

CONCLUDING THOUGHTS ON ATTACKING REAL ESTATE TITLE FRAUD

If you have been the victim of real estate title fraud as to any property that you own, California civil law provides victims with claims and remedies that can be asserted to protect your property or to get the title to your property back in your name.  To file a civil action in proper form with knowledgeable real estate counsel, you will need to have some reasonable financial resources to sue the responsible defendants, and to move the case expeditiously in front of a judge in your local jurisdiction. If the claim is covered by title insurance, that is highly beneficial to reduce the expense of title litigation.     Experienced civil judges see these types of cases fairly often, and are interested in protecting the public.     Making a criminal complaint is also an important step, but a civil action needs to be filed to fix the cloud on your title, and to prevent block future transfers. 

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy/creditor’s rights matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.   Nate Bernstein is a 25 year veteran Los Angeles real estate and business attorney and trial lawyer.   Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options.    He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation.     Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law.    Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases.

By Christopher Miller, MBA, Specialized Wealth Management

In addition to income, we landlords also enjoy the appreciation of our investments.  This appreciation, with the use of leverage, accounts for how many of us have made our fortunes.  My client list includes a former gas company technician, several engineers and many former teachers who have become multi-millionaires as a result of their appreciating real estate investments.

This week, I am going to talk about where this appreciation comes from.  This article was inspired by a conversation I had with a client last week.  He asked me “Will I get better appreciation if I invest in California?”  We will get an answer for him later in the article.

Investment Properties are Different than Residences

It is important to point out that your house is valued differently than investment property is.  Although we real estate investors sometimes buy single family houses to rent for income and growth potential, most home buyers do not – they are simply buying a place for their family to live.  Most homebuyers buy houses the same way they buy cars or a refrigerator:  by look for one with the features they desire.  Wealthier buyers can afford more, and often buy more expensive models.

An investment property, like an 8-unit apartment building, is valued based on the income that it can produce.  If you own an apartment property that is empty and want to sell, every real estate broker you meet with will suggest that you lease it up before listing the property.  This is good advice:  real estate investors buy property for the income it generates, and they will pay a multiple of that income for the property.  When you use a Gross Rent Multiplier (GRM) or a Net Operating Income (NOI) measurement to value a property – you are placing a dollar value on every dollar of income that the property generates.  No matter which measurement you use, more income = a higher value.

How Appreciation Happens

Now that we have established that higher income = higher value, we see that rising income in the future can lead to rising values in the future.  A property with rents that doubled over 25 years will have appreciated faster than one with rents that only rose by 70%.

Where Can We See More Appreciation

There’s a reason that all stockbrokers’ literature contains the disclaimer “past performance is no indication of future returns” – because it certainly is not.  (Although he’ll tell you it is.)  Sears stock cost $6.07 / share in January of 1981 and hit $51.95 in November of 2004.  Not counting dividends or proceeds from the spin-offs on Dean Witter and Allstate in the 1990’s that is a 9.78% annual return from appreciation alone.  Pretty good, but what happened over the next 23 years?  (It looks like Sears died 15 years in.)

In the same way, we shouldn’t expect the hot real estate markets of the past to continue as they have.  Orange County exploded between 1985 and today.  Can we expect the same level of growth over the next 35 years?  That wouldn’t be reasonable – there isn’t enough room left to build.  When we read about sky-high rents in San Francisco; can we assume they will continue to grow at the same rates into the future? 

Will We See Higher Appreciation In California?

Let’s move back to my investor’s original question.  My answer is that nobody has a crystal ball that tells these things, but let’s take a look at where we are:

California has seen explosive growth, but we are running out of land to develop and places to put everyone – particularly on our freeways.  At the same time, our residents are fleeing to states with lower costs of living that look like California did many years ago (wide open and ready to grow.)  Prices simply can’t rise until nobody can afford to live here – they will need to naturally correct by slowing their rate of growth.

Certain areas in Texas and Florida, and the Atlanta suburbs, on the other hand; look like Orange County did back in 1985.  Businesses and people are moving in, and there is plenty of space to develop.  I think a good case can be made that rents will grow faster in these areas than in California – and therefore we can see more appreciation.

Both of my sets of grandparents were from Ohio – from Cleveland and Toledo.  John D. Rockefeller – once the richest man in the world, chose to live (and be buried in) Cleveland.  Both of these cities saw fantastic growth in the early 20^th century.  Things changed by the middle of the century, and now my grandparents’ former homes aren’t worth much more than they sold for in the 1980’s.  I certainly don’t think that California is going the way of the rust belt cities.  My point is that things change and we, as investors, want to be where the positive change and growth is happening.  If you have any questions, my office number is (877) 313-1868.

Christopher Miller is a Managing Director with Specialized Wealth Management and specializes in tax-advantaged investments including 1031 replacement properties.  Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator and as an advisor helping clients through over three hundred 1031 Exchanges.  Chris has been featured as an expert in several industry publications and on television and earned an undergraduate business degree and an MBA emphasizing Real Estate Finance from the University of Southern California.  Chris began his real estate career in 1998, began working in the partial interest industry in 2001 and has been a broker advising clients since 2003.  Call him toll-free at (877) 313 – 1868.

This does not constitute an offer to buy or sell any security.  Investments in securities are not suitable for all investors. Investment in any security may involve a high degree of risk and investors should review all “Risk Factors” before investing. Investors should perform their own due diligence before considering any investment. Past performance and/or forward-looking statements are never an assurance of future results. Examples given in this article are for illustrative purposes only.  Individual results may vary based on IRS tax changes, market conditions or tenant occupancy.  Securities offered through Emerson Equity LLC, member FINRA/SIPC.  Emerson Equity LLC is not affiliated with Specialized Wealth Management. California Insurance License # 0I80282.  Copyright 2019 Specialized Wealth Management. All rights reserved.

by Kari Negri

I am not an attorney.

Dear SKY, how can I Collect Past Due Balances in Rent Controlled Buildings?

Many tenants in Los Angeles, California enjoy the advantages of rent stabilization and rent control. It keeps the amount of a rent increase ridiculously low while they live in a rental property. 

 In Los Angeles California, rent control laws allow Housing Providers to increase the rent by a maximum of about 3% for several years now.  This year, THE CALCULATED ANNUAL INCREASE PERCENTAGE EFFECTIVE JULY 1, 2019 THROUGH JUNE 30, 2020 IS FOUR PERCENT (4%) while expenses increase by about 7%.

As rent is due on the dates specified in the lease agreement, a tenant is bound to pay the rent on time.  If your tenant doesn’t pay rent on the due date, you can charge a late fee but it is not really enforceable and any late fees that they have paid even willingly should be deducted from any 3 Day Notice to Pay or Quit (per our attorney) that you serve and intend to begin an Unlawful Detainer. Under LA rent control laws, a Housing Provider can charge a 6% late fee, in some areas like Santa Monica and West Hollywood the amount is less – about 1%; but how do you collect it when technically you can’t.

Despite the law, tenants refuse to pay post fees including  late fees, administrative fees or repair reimbursement fees for damages they caused or created. For most of them they think it is unfair and the rent control laws protect the tenant and not the Housing Providers which makes collecting past due balances in rent controlled buildings a daunting task.  Add to that, most judges will always side with the tenant and there are some laws on the books that make them liquidated damages and therefore uncollectable.

This situation doesn’t only disrupt the finances, but also causes inconvenience to the accounting department or a record keeper. Fortunately, you can diminish the issue of late fees collection in rent controlled buildings if you use the following tips.

Don’t Forget to Include Late Fee Policy in the Lease Agreement

If your tenant is in California, make sure you check the state laws and the specific laws in the city your building is located. This will help you determine the percentage of late fee you can charge.  Make sure you have the correct amount in your lease. 

Plus, check to see if there is a waiting period (“grace period”) before sending your tenants a late fee notice. Once you understand the law, include a late fee policy in the lease agreement – it must be reasonable. If you miss this point, you cannot charge or collect due balances.

There are some general guidelines most states follow but in a rent controlled building you need to know what the law is in your city specifically. 

Add Clause “Allocation of Payment” in the Lease Agreement

Having this clause in the rental agreement suggests that any fee you collect for next month’s rent will be counted as unpaid fees of the prior month – this could be helpful in getting them from your tenant but the court will not look at it this way here in Los Angeles. In other words, the clause could make it easier to collect these fees, but to enforce them is another story.  Filing a lawsuit against tenants for his/her unpaid dues even for repair reimbursements or pest control issues is nearly impossible except possibly in small claims court.

Remind Tenants Constantly They Owe

It is clearly one of the simplest ways to collect past due balances from the tenants. Talk to them and/or send them notices each and every month that they have past due balances, whether it is unpaid rent or late fees for repair reimbursements – refer to your lease as well as to the applicable rent control laws in your city.  At least for rent – you can file an Unlawful Detainer or UD or Eviction but never include a late fee your resident has paid when you fill out your notice to evict.

Withholding Security Deposit

Withholding money from the security deposit has become much harder to do where the courts are concerned as well.  We used to be able to recover money out of the security deposit for damages, any cleaning or repairs above normal wear and tear, late fees, pest control issue (caused by tenant), past due rent, etc. when your tenant refused to pay past due balances. However, now SKY has had a judge tell us that only damages, cleaning and rent can be deducted from the security deposit.  It is important that you explain (in writing) the reason of withholding ANY AMOUNT FROM the deposit.  All of this is will not keep us from trying to get the correct amount paid by a tenant but all of these things make it harder every day for a Housing Provider to collect the money due to them and before proceeding you should check with an attorney so you do not waste your time.

Overall, hopefully the above tips are somewhat effective for collecting past due balances and managing your property collections smoothly even if you have problem tenants and the laws in California are getting more and more impossible.

If you have a question, please email me at Kari@SKYprop.LA

Although I am not an attorney, I am a very qualified property management company with 26 years of experience so if you have questions, you can always email me and “ask SKY” at Kari@SKYprop.LA.

By Stephen C. Duringer, Esq., The Duringer Law Group, PLC

Question         

Street parking spaces are few and far between near my building. My apartment complex has just enough parking spaces for my residents to each have one space.  If a resident has more than one car, they must try to park it on the street.  It has been working out fine for years but now I have this one tenant who refuses to follow the rules.  He is constantly parking his second car in someone else’s assigned spot.  I’ve told him several times but he just ignores me.  What do I do?

Answer                       

Your community rules and regulations should specify your parking rules, specifically stating that only one vehicle may be parked on the premises, and that all parking is assigned.  Ensure that you have the proper signage at the entrances to the parking area.  Most cities require the sign to contain certain restrictive parking language, plus the local police department telephone number, and the California Vehicle Code section that provides for towing of unauthorized vehicles.   Contact your local police department for their specific requirements, as they vary from city to city.  Next if you know the offender, then provide a written warning of the violation.  Attempt to serve it at his residence, post it on his door if he’s not in, and also put the warning on the windshield of his car. If practical, take and save a photograph of the warning on the vehicle windshield, because the offender will always claim that you did not give prior notice before towing.  If he fails to remove the offending vehicle, the car may be towed.

Question         

I rented an apartment to four roommates quite a while ago.  One of the four is now moving out, but the other three want to stay.  The one moving out is demanding that I return his portion of the security deposit, he says that he paid it so he should get it back.  Do I have to?

Answer

No, the security deposit remains with you as long as any of the roommates remains in possession of the rental unit.  Often, owners and residents will enter into an agreement replacing one resident with another, thereby removing the one original resident from the lease. The agreement will further provide that the ‘new’ roommate pay the ‘old’ roommate his portion of the security deposit.  Absent a written agreement to the contrary, the owner should retain the entire security deposit, then when all the remaining roommates vacate, the refund check should be made payable to all four of the original roommates named in the rental agreement.    

Question

I’ve been doing my own prospective resident screening for quite a while now.  I think I’m pretty thorough, but I’m just not sure any more.  I’ve been noticing more and more inconsistencies in the applications I review, and I even came across one who out and out lied about who she was!   I’m concerned about all of the stories I’ve heard about identity theft.  I just can’t afford to make a mistake.  What can I do to weed out these undesirables and minimize my chances of being fooled?

Answer           

Identity theft has been a growing problem for several years.  Landlords have increasingly been victimized by prospects posing as someone else, using false or fraudulent information.  Often times, these thieves take advantage of a desperate landlord, eager to fill a vacancy, or a newbie landlord, who hasn’t gone through the school of hard knocks yet.  Completed and signed applications by all adults are a must.  Verify the information provided.  Personally inspect some form of U.S. government issued photo identification.  Make a photo copy of the ID and keep it secured with your file.  Verify that the social security or the tax ID number provided by the prospect is actually his number, and is valid.  Run and thoroughly review, an eviction and credit check through your apartment association.  If practical, go outside to the prospect’s vehicle, and verify that the license number on the car he just drove, matches the license number he just wrote down on the rental application.  Many ‘hands on’ owners will actually visit the prospect’s current residence unannounced, prior to approval to ensure the prospect actually lives there, and doesn’t just sleep on the couch.  You’d be amazed at what you will learn by a simple visit.  Inform all prospective applicants that you have a policy of taking a picture of all residents for the tenancy file.  Follow through with this policy and actually take a picture of all proposed occupants and keep the picture in your tenancy records. When verifying employment, and residency, ask for a description of the person, and compare the description with the person who filled out the application.  Ask for original utility bills, electric, telephone, cell phone, cable, anything with his name on it.  All of these are tools that may be used in proper screening to avoid renting to an identity thief.  Use these tools consistently, and apply them equally to all applicants, and your risk will be dramatically reduced.

Question         

What types of repairs can I require the tenant to take responsibility for?

Answer                       

A landlord and tenant can agree, in writing by the rental agreement, to allocate responsibility for minor repairs between them.  Often landlords and tenants may agree that certain items, amenities, will be the tenant’s responsibility to maintain. These may include refrigerators, washing machines, pools or spas, air conditioning, and minor plumbing issues.

This article is presented in a general nature to address typical landlord tenant legal issues.  Specific inquiries regarding a specific situation should be addressed to your attorney.  Stephen C. Duringer is the founder of The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms in the country. The firm has successfully handled over 285,000 landlord tenant matters throughout California and has collected over $200,000,000 in debt since 1988. The firm may be reached at 714.279.1100 or 800.829.6994.  Please visit www.DuringerLaw.com for more information.  

By Edward Ring

Solutions to California’s housing shortage invariably focus on increasing the density of preexisting cities and suburbs. Legislative solutions include SB 375, passed in 2008, which “incentivizes” cities and counties to approve high density land developments, and the failed (this time) SB 50, which would have forced cities and counties to approve high density development proposals.

One cannot ignore the fact that high density land development benefits special interests. Politically connected developers enjoy windfall profits by selling overpriced homes crowded onto smaller parcels of land. Existing cities collect higher taxes from property owners and shoppers who would otherwise have moved into new cities. Government at all levels can spend more money on pay and benefits, and less on infrastructure. Investors harvest higher returns thanks to the real estate bubble.

In front of the hidden agenda of special interests, however, are moral arguments for so-called “smart growth.” The crux of these moral arguments for high density “smart growth” are that regional ecosystems bordering urban areas should not be sullied by new growth, and that high density development reduces emissions of greenhouse gasses, which furthers global ecosystem health.

Both of these moral arguments are flawed. As documented in an earlier analysis “Grand Bargains to Make California Affordable,” if 10 million new residents moved into homes on half-acre lots, three persons per home (with an equal amount of space allocated for new roads, retail, commercial, and industrial development), it would only use up 3.2 percent of California’s land. If all this growth was concentrated onto grazing land, much which is being taken out of production anyway, it would only consume 21 percent of it. If all this growth were to fall onto non-irrigated cropland, which is not prime agricultural land, it would only use up 19 percent. Much growth, of course, could be in the 58 percent of California not used for either farming or ranching of this.

California’s ecosystems can easily withstand significant urban expansion. Even this extreme low density growth scenario – as if there wouldn’t still be parallel development within existing urban areas – only consumes 3.2 percent of the land in this vast state. Similar concerns about greenhouse gasses are unfounded, because they rest on the assumption that higher greenhouse gas emissions are correlated with low density development. But correlation does not mean causation. Telecommuting, dispersion of jobs into new suburban nodes, clean energy, and clean vehicles, are all examples of future trends that prove growth does not need to be confined to existing cities.

It is unlikely, if not impossible, for high-density development alone to ever deliver a supply of homes that meets demand, lowering prices to affordable levels. Part of the reason for this is the understandable resistance high-density proposals arouse from existing residents who don’t want to see the ambiance of their neighborhoods destroyed. Equally significant is the extraordinary cost of construction in California. But evidence from around the nation is clear – in areas such as the San Francisco Bay Area where urban containment is practiced, home prices are unaffordable, and in areas such as Houston where urban growth is permitted, home prices are affordable.

If you accept these premises – that urban expansion will not cause unacceptable harm to the environment, and that urban expansion is the only way to deliver enough new homes to lower prices, “smart growth” starts to take on a different meaning. “Special interest growth” might be more descriptive.

New Suburbanism Offers An Alternative to Smart Growth

The concept of New Suburbanism is not original, but it also isn’t well established. This makes it malleable, or, at least, this leaves room for a fresh interpretation of its meaning. First expressed in 2005 by urban geographer Joel Kotkin, New Suburbanism is a complement to New Urbanism, a movement initially devoted to the twin principles of architectural and landscape design that celebrates local history and traditions, along with promoting accessible, pedestrian friendly, aesthetically engaging public spaces. Over time, New Urbanism and New Suburbanism have been taken over by the smart growth crowd, with high-density neighborhood design now the overwhelming priority of these movements. But consider these quotes from Kotkin, written in 2006:

“One critical aspect of New Suburbanism lies in its pragmatism. One cannot always assume, for example, that building a new town center, constructing denser housing, or introducing mixed-use development would automatically improve quality of life.”

Kotkin goes on to explain how “sprawling, multipolar” cities that permit suburban growth are creating more jobs and have more affordable homes, how most people starting families prefer single family detached homes, and average commutes in these cities are actually less because “jobs move to the suburban periphery.” He writes:

“We instead should follow a pragmatic, market-oriented approach to improving the areas in which people increasingly choose to live. For example, in a low-density suburban community that seeks to retain its single-family character, it may be more appropriate to introduce single-family detached housing, rather than assume multi-family apartments and lofts must be part of the solution.”

New Suburbanism is a necessary alternative to Smart Growth because Smart Growth is failing. It not only delivers an inadequate supply of homes, it delivers the wrong mixture of homes, because it delivers apartments, condominiums, townhouses, and “detached” homes with yards barely big enough for an outdoor grill, but it does not deliver what people want, which is a home with a yard.

New Urbanism has become an intellectual movement indistinguishable from the Smart Growth policies that mandate high-density development. Here, from the website “New Urbanism” is an accurate representation of the principles of New Urbanism:

1 – Walkability,
2 – Connectivity,
3 – Mixed-Use & Diversity,
4 – Mixed Housing,
5 – Quality Architecture & Urban Design,
6 – Traditional Neighborhood Structure,
7 – Increased Density,
8 – Smart Transportation,
9 – Sustainability, and,
10 – Quality of Life.

And here is a summary of why New Urbanism, or “Smart Growth,” is not so smart:

1 – Artificially and selectively inflates land values, making housing less affordable,
2 – Emphasizes public space over private space,
3 – Makes war on the car,
4 – Promotes high-density infill in low density neighborhoods,
5 – Prefers open space to homes, but not to biofuel crops, solar fields, or wind farms,
6 – Presumes that social problems will be alleviated through forcing everyone to live in ultra high density, mixed neighborhoods,
7 – Incorrectly claims there is a shortage of open space and farmland, and,
8 – Presumes to have the final answer; that its precepts are beyond debate.

New Suburbanism offers an alternative ideology – one that embraces much of New Urbanist concepts, but from an entirely different perspective. These “Principles of New Suburbanism,” are not intended to refute the virtues of high density, but to extol the virtues of low density. Embodied in these principles is the idea that human stewardship and private land ownership, combined with 21st century clean technologies, can enable a suburban and exurban landscape to host bucolic and utterly clean low density communities across thousands of square miles.

Principles of New Suburbanism

(1) Embraces Aesthetic Values: Suburbs can be beautiful. Spacious, forested, with architectural character. New suburban communities can be built with an emphasis on aesthetics, as well as towards creating a sense of place, especially when high density isn’t the prevailing mandate.

(2) Low and High Density Are Not Mutually Exclusive: New Suburbanists support high density zoning in the urban core of large cities. New Suburbanists enthusiastically support building 21st century cities, with high-rises and plentiful car-independent transit options and everything else inimical to the central cores of megacities.

(3) Land is Abundant: There is abundant available land for low density suburban and exurban development. New Suburbanists encourage zoning that recognizes the importance of progressively lower density zoning from urban cores, instead of draconian “urban service boundaries” that arbitrarily restrict development, especially low density development.

(4) Car Friendly: Cars are the future, not the past. Personal transportation devices are tantalizingly close to becoming ultra safe conveyances that can drive on full autopilot and have zero environmental footprint, and we are within a few decades at most of having abundant clean energy. The age of the personal driving machine has just begun.

(4) Road Friendly: Roads are the most versatile of all mass transit corridors since people, bicycles, cars, busses, and trucks can all travel on or alongside roads. Commercial areas should be car-friendly as well as bike and pedestrian friendly. Since land is abundant, this is not all that difficult.

(5) Decentralized & Off-Grid Friendly: New communities can have neighborhood-scale groundwater extraction, distribution and recharge systems. Using new off-grid technologies, sustainable and cost-effective energy and even water independence can be achieved at a household or neighborhood basis, often enabling lower taxes through avoiding more expensive larger public infrastructure.

(6) Farm & Ecosystem Friendly: Via the economic pluralism fostered by permitting flexible and low density residential zoning, i.e., small independently owned, often independently constructed homes on large lots of .5 to 20 acres, you create the potential for a vibrant market in small property leases for specialty farming. Through zoning (or protecting) vast tracts of outer suburb and exurban lands according to New Suburbanist precepts where low density home building and road building is encouraged instead of discouraged, you create a market for relatively cheap abundant land, making more affordable acquisition of land set-asides for agriculture or nature conservancies.

New Suburbanism embraces the inspiring original vision of New Urbanism, its call to create the 21st century’s version of cities and buildings that are welcoming spaces. But New Suburbanism rejects the ideological stridency, the coercion, and the porcine corruption of the powerful high density coalition.

At its heart, New Suburbanism is the necessary counterpart to New Urbanism and Smart Growth, because they are constrained by an imbalanced, unnecessary bias towards high density. New Suburbanism gives back to our cities and towns their freedom; gives us abundant land; gives us affordable homes; gives our cities turned suburbs turned exurbs the unforced, organic, natural and easy transition from dense to sparse. If New Urbanism defines the aesthetic of our new and renewed cities, than New Suburbanism helps define the aesthetic interface between city and country; it gives us back the smooth transition from urban chic to country soul.

Edward Ring is a co-founder of the California Policy Center and served as its first president. This article originally appeared on the website California Globe.

By Megan Eales Monroe

Today, anyone can stream a TV show on-demand, click a computer mouse to order a week’s worth of groceries, or open an app on their smartphone to catch up instantly on local and world news. Yes, we live in an on-demand economy, where consumers expect reliable, instantaneous information.

You already know that it pays — literally — to have all of your properties leased out to renters. But, have you considered how this on-demand economy will revolutionize the real estate industry as well, especially residential leasing?

Would-be residents want information and responses to property listings the same way they want everything else in their lives — fast. From fast replies to following up with interested prospects, here’s a look at five ways you can use AI to improve your lead-to-lease conversion process, filling vacancies fast and bringing your operations into the on-demand economy:

1. Respond to Inquiries as Fast as Possible

The faster you’re able to respond to an inquiry, the less likely it is that you’ll lose out on a qualified renter to the property down the street. And we’re not just talking about within a few hours, we’re talking about within minutes. In fact, research suggests that landlords who respond to inquiries within one or two minutes are up to 40 percent more likely to directly engage with a prospective renter. And while you may not think that waiting even 10 minutes to respond to an inquiry is a big deal, research shows that as many as 20 percent of prospective renters will have already moved on to a new property by that time.

Although a fast response time makes a big difference to your lead conversion rate, it’s not always easy for leasing staff to stay on top of a high volume of inquiries. With leads flowing in from your website and third-party listing sites 24/7, including weekends and holidays, an instant reply to every prospective renter isn’t always humanly possible — though it is possible when teams can collaborate with Artificial Intelligence.

By leveraging recent advancements in AI technology, you can actually reply instantly to each inquiry around the clock, and not just with a stale canned reply or one-dimensional chatbot. New innovations have made it possible for Conversational AI to actually respond intelligently to a variety of questions about open listings and help leads actually schedule showings, creating a personalized, on-demand experience for prospective renters.

2. Qualify Leads Efficiently

Once you have an interested renter, you need to determine whether or not the property is the right fit for them. You don’t want to find out that they’re planning to move in with their dog after showing them a unit that isn’t pet-friendly.

To avoid spending valuable time and resources on a lead who isn’t the right fit, you need a system in place to pre-qualify them before investing any further time in them

Set consistent criteria for prospective renters, and make sure you communicate this information with them upon first contact. You should also include as much information in the listing as possible so they have accurate expectations before they reach out.

However, as every leasing agent knows, prospective residents don’t always read the listing thoroughly before they call or email. Conversational AI can also alleviate this challenge, by asking important qualification questions and answering other questions to help potential residents determine if the unit is the right fit.

If all checks out for both parties, then you can proceed to the showing. Otherwise, you can save time and go your separate ways, or — see if they are a good fit for a different unit.

3. Remember to Cross-Sell

Don’t write off a potential renter if they aren’t a good fit for the property they initially inquired about. Instead, see if they might be a good fit for another property that you own or manage. By cross-selling, you can turn more leads into leases by offering other options.

This is another opportunity to leverage Conversational AI by automatically cross-selling other vacant units that are available. AI can remember the resident’s answers to questions and recommend another unit or property that would better meet their needs, then answer questions and schedule a showing there instead.

4. Follow Up

Following up is an important part of trying to fill vacancies, but research shows that many property managers aren’t doing enough of it. According to Zillow, about 30 percent of property managers follow up with would-be residents just once after the initial point of contact. However, their research indicated that the most effective way to convert leads to leases is to follow up five times within four days of initial contact.

If you follow up only once, consider adding additional touchpoints to keep leads engaged beyond the initial interaction. This doesn’t all have to be done over the phone, either. You can send follow-up e-mails, text messages (if given permission) or even by mail.

Following up with would-be renters is another way AI can pay big dividends. Conversational AI can automatically follow up with leads on a set schedule, using the communication channel they most prefer.

5. Bring Leasing Online

Still relying on printers, scanners, and fax machines for would-be renters to go through screening, submit applications, and sign leases?

It’s time to catch up to modern times. If you don’t yet have an online leasing platform that makes it possible for renters to submit an application, consent for screening, pay application fees, and even sign their lease online — then it’s time to invest in digital leasing.

By letting renters progress through each step of the leasing journey when and where they please, you’ll be sure to wind up with more signed leases, and decrease the amount of time your units sit vacant.

When your leasing flow is digital rather than offline, Conversational AI can even keep residents moving through these steps after the showing is booked — allowing your team to focus on the big-picture rather than managing each step of the leasing flow manually.

Make the most of these five strategies, and stop letting your properties sit vacant because of inefficient follow-up and repetitive manual processes. Do it right, and it can even save time for your team and increase your cash flow.

AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money.  Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.