7 Ways to Market Rental Properties Online in 2016

Written by Apartment Management Magazine on . Posted in Blog

What’s the one word that keeps every landlord awake at night? Vacancy.

Every day that a rental property sits empty it costs you money. The income dries up. No one is paying you rent. You have to spend money marketing the property to reach new prospective tenants. Then, there are all those hours spent screening dozens of applicants, only to find out most, if not all, of them are a “no-go.”

The whole process can be emotional, tedious, tiring, and downright infuriating at times. Until today. In this post I’m going to share seven online strategies our property management company uses to maintain average occupancy rates above 98% across 400 rental properties in east Idaho.

Whether you’re a landlord managing a single residential property or a company with a large investment portfolio, this list of marketing tactics will help you build a strong online presence, attract quality tenants, and fill your rentals fast.

#1: Internet Listing Sites (ILS)

80% of renters start their search online.

Do a quick search for a rental property in your local area and you’ll likely see a page that looks something like this:

ILS

In the absence of local search listings, you’ll notice the majority of the first page positions are occupied by major brands like Zillow, Hotpads and Homes.com. Each website attracts millions of visitors each month; and most of these people are either looking for a place to rent or buy.

Think of it as a large pool of warm traffic. Create a free listing and gain immediate visibility for your property.

Note: Most listing sites provide paid ad services to get additional exposure (but not guaranteed leads, so you might be paying for nothing) by placing rental properties at the top of targeted searches. For example, you pay a monthly fee to have your property show in the top 3 results for “Chicago 3 bedroom apartment.” [See how AppFolio can cut out this expense with Premium Leads.]

Here is a list of the top sites to list your rental units. Go to each site and create a free profile. Upload some photos and fill out all the details. In a matter of minutes your property will be searchable by hundreds, maybe thousands of people looking for rentals in your area.

If this sounds like a lot of work, software like AppFolio can feed your listings to these sites in a single click.

#2: Email List

An email list is one of the most valuable assets of any online business. On average, 1-2% of the people that land on your site fill out a rental application, schedule a walk-through or complete some other type of online conversion.

Let me re-phrase that: 98% of the people visiting your website leave without doing one of these important things. Let that sink in nice and deep. Now let me ask: What are you doing to re-engage all that warm traffic, the people actively searching for a rental?

If you answered “nothing,” you’re not alone. In fact, you’re far from it. Most visitors will abandon your site for one of two reasons:

  1. They aren’t ready to apply for a new property yet.
  2. They didn’t find a property they liked.

You can’t let these people slip away without first trying to collect their contact information so you can re-engage with them at a later date. The best way to do this? Build an email list.

Here is what it looks like on our rental listing page:

Screen Shot 2016-03-18 at 9.25.19 AM

As people scroll down to the bottom of the page a form slides in from the side asking people if they want to be updated each month about new rental listings. But, what if they aren’t looking for a place to rent when you send the email?

Give subscribers an opportunity to share the property on social media or forward it to a friend.

At the very least, you’ll have ongoing communication with the subscriber, and as their lease draws to a close you’ll be top of mind when it comes to finding a new place to rent.

#3: Local SEO

SEO-JacobGrant

Search engine optimization (SEO) helps a website to rank in the search engines (Google, Bing etc.) for target keywords. Why is this important?

A couple reasons come to mind:

1. More than 80% of renters start their search online.
2. Search intent.

Think about it. When someone goes to Google and types in “Idaho Falls house rentals” you know that person is actively searching for a new place to rent in that specific geographic location.

Our company focuses heavily on local SEO. You can see below that we now rank high for local rental-related search terms:

Organic traffic now brings in over 4,800 visits a month to our website. That’s a LOT of qualified traffic.

Note: Idaho Falls only has 50,000 people.

#4: Craigslist

Craigslist technically falls under the ILS category. But, due to the fact that the site is often one of the first places a person goes to search for a place to live, I thought it deserved it’s own spot on the list.

The site is free, integrates with other major ILS sites, and provides simple location-based search functionality that increases the odds you will be reach targeted prospective tenants.

A couple years ago the site removed the ability to create enhanced listings, which made it more difficult to drive traffic and leads from the site. What changed?

Craigslist stopped supporting HTML tags that were once used to style listing pages and create a rich media experience for the user. Live links were disabled which meant users had to manually copy the link and paste it into the browser search bar. This significantly reduced referral traffic from the site, and skewed analytics data.

For example, in 2013 Craigslist accounted for 92% of our site’s “referral” traffic. Fast forward to 2015, and the platform is attributed with only 0.62% of total referral traffic.

To clarify, this is not a direct indication of the drop off in traffic actually coming from the platform, but since people need to copy and paste the URL from the listing ad into their browser the traffic is now attributed to a “Direct” referral in Google Analytics.

We talk more about these changes and how property owners can still leverage Craigslist to capture qualified leads over at jacobgrant.com.

#5: Facebook Advertising

Facebook has over 1 billion users. Due to the amount of information collected from users, the site offers a very robust and targeted ad platform. There are a million and one different ways you can leverage the platform to market rental properties, but here are a couple ways to get you started.

jacobFB

Boosted posts

This one is simple. Create a post that includes some quality images, a detailed description, call-to-action and link to the individual listing page:

When the post is live, click the “Boost Post” button. Next, set your targeting. Make sure at a minimum you are targeting by location. Then set your budget. This does not need to break the bank. For example, we usually run ads over the weekend for $10-15 that generate 200+ referral visits. That’s a cost-per-click of less than $0.05.

Retargeting

People rarely convert the first time they visit your site or see an offer. In fact, it usually takes an average of seven touch points before a consumer will convert. Rentals aren’t that different.

A prospective tenant will likely visit your website, check out all the rental properties and leave to “shop” around for a better property based on price, location, amenities, or a number of other factors. Your job is to stay in front of these people and bring them back to your site to convert.

The best way to do this is retargeting. In this case, we’re referring to showing ads to people who have already visited a particular page on your website.

To create a targeted audience based on website visitors, you must have a Facebook website custom audience in place. When someone visits a page with custom audience code on it, they are added to an audience list in the Facebook Ads Manager. This list continues to build over time. You can then use the list as a target audience in ad campaigns.

For example, we have a custom audience built that contains all the people who visit our rental listings page:

customeraudience

After someone visits our listing page AND doesn’t convert we remarket to them on Facebook by showing new listings over the next 1-2 weeks. The results?

Last month we spent just $40 on Facebook ads. The link in one of the ads was clicked over 200 times. We use bit.ly to shorten Google tracking URLs and monitor link clicks. And, the ads generated 8 online rental applications. Each application has a $25 value.

This social media marketing strategy is very simply, and easily scalable. Give it a try.

#6: YouTube

If a picture is worth a thousands words, a video is worth a million. Choosing a place to live is a big decision. Make it as easy as possible for prospective tenants to evaluate the rental property.

One of the best ways to do this is to offer a virtual tour of the property. Prospective renters are able more easily picture themselves living in the property if someone else is walking them through it.

This does not have to be an expensive or super time-consuming process. In fact, it can be done on a smartphone. Simply create a free YouTube channel, film a walk-through of the property, upload the video and embed it on the list page.

Bonus: Some people find your property while surfing YouTube. Use YouTube cards to channel traffic to your website. They allow you to add a call-to-action in video overlays.

You can also promote the walk-throughs on Facebook and other social media channels.

#7: User Experience

Getting qualified traffic to your website is only half the battle. What really matters is that you are converting those visitors once they land on your site.

For a landlord or property management company this usually means getting people to fill out some type of online rental application. In order for a prospective tenant to fill out a form they often need to have a great user experience. What does this mean? In a nutshell, the user is able to easily find all the information they need to make a decision.

Here are 5 optimization points to focus on:

  1. Easy navigation — If you have multiple properties, make it easy for users to search and filter properties.
  2. Pictures— Make sure the user can view high-quality photos of each room in the home.
  3. Details— Make a list of all the property details past renters have asked for, and include them in the description. Most renters will want information about pricing, deposits, application fees, square footage, utilities and pet policy. Always include a map of property locations, and a virtual tour video (if possible).
  4. Call-to-Action — Allow users to apply or schedule a walk-through of the property online.
  5. Mobile-friendly — Take a look at your analytics and you’ll likely see that around 50% of your traffic is coming from a mobile or tablet device. Google even gives preference to sites that are mobile-optimized. So, if you want to improve your chances of ranking in local search results, and increase conversions, make sure your website is mobile-friendly.

There you have it, seven ways any property management company can generate more online traffic and renter leads.

What other strategies are you using to fill your rental properties? Let us know in the comments below.

Robbie Richards is a member of the marketing team at Jacob Grant Property Management. The company manages over 400 rental properties across east Idaho. Learn the strategy they use to maintain average occupancy rates above 98% year-round here.

The post 7 Ways to Market Rental Properties Online in 2016 appeared first on The Official AppFolio Blog.

Prelude to Apartment Market Rent Growth?

Written by Apartment Management Magazine on . Posted in Blog

The rent growth of asset classes — especially Class A — could predict movement for an entire apartment market.

Contributed by Dave Sorter, March 21, 2016

Many factors enter into forecasting future performance of apartment markets, but often, the movement of asset classes’ annual effective rent growth is a possible indicator of short-term trends.

The direction in which Class A properties are headed can be especially prescient. If rent growth in the apartment communities in this class, representing the 20% highest rents in a market or submarket, begin trending upward, the metro as a whole will likely see a spike within the next couple of months. Class C represents the 20% lowest rent in a market or submarket, while Class B includes the rest.

Conversely, a couple months of sharp Class A rent-growth decreases could indicate the metric will enter a period of decline.

Class A properties are usually the newest, shiniest projects, as well as the most expensive. So increases in Class A rent growth often are signs of a strong metro economy with good job growth and moderate new supply. Class A rent growth has an inverse relationship with new supply.

Class A rent is driven by high-paying jobs, primarily in technology, education and health. Classes B and C, however, fall into the category of “workforce housing.”

Axiometrics looked at two metros that experienced significant rent-growth strengthening in the second half of 2015 and the first two months of 2016, and three other markets with quicker-than average declines. In most cases, class movement was a portent of the trend to come.

The Austin apartment market was at a low point of this cycle early in 2015. Possible oversupply in the urban-core Central submarket somewhat counteracting excellent job growth to reduce annual effective rent growth to less than 4% for the first time since mid-2013. But looking at class trends, Class A was on the way up starting in January 2015 and climbed steadily through August 2015.

Austin started to re-emerge in April 2015, and rent growth surpassed the national average in July.

Asset_Class_Austin.jpg

Job growth remained strong in Austin, and rents had dropped enough in the urban core by March 2015 that they were now affordable to more people, increasing absorption. In addition, suburban submarkets continued to strengthen. The Central submarket still has almost flat rent growth and construction is continuing there, but landlords there don’t have to lower rents as much as they did, allowing the suburbs to drive robust growth.

Sacramento – another high job-growth metro – climbed within 5 basis points of having the highest annual effective rent growth among Axiometrics’ top 50 apartment markets in February and was one of only two of those 50 metros to surpass 8% rent growth, much less double digits.

Unlike Austin’s steady climb, Sacramento’s rent-growth journey has been volatile, as have the asset classes – though rent growth has been an elite 7.9% or higher since June 2014. Its February rent growth was the highest of this apartment cycle – by just 1 basis point over the previous high in May 2015.

The most recent surge began in December 2015, and February’s rate was 150 basis points above November’s. Yet, Class A rent growth began surging in November, and Class C in October.

Asset_Class_Sacramento.jpg

Houston, Denver and San Francisco have had the most publicized decreases in annual effective rent growth over the past nine months. In San Francisco’s and Denver’s cases, unsustainably high performance combined with decline in job growth caught up with the markets. Job losses caused by the steep decline in oil prices along with undebatable oversupply in the urban-core Montrose/River Oaks submarket can be blamed for Houston’s recent performance.

Houston rent-growth has decreased for 13 of the past 14 months as of February, but the downward trend for Class A (and Class B) began in November 2014 – two months before the metro decline began. Both of the two higher asset classes have been constantly sliding since then, with Class C a little more volatile.

Asset_Class_Houston.jpg

San Francisco was among the top 5 for annual effective rent growth for most of 2014 and 2015, with rates above 11% as recently as September 2015. But the decline from such heights came swiftly, though at 4.7% in February, rent growth is still strong.

Class A started its downward pattern in August 2015, even as the metro rate was continuing to increase. Though Class A rent growth rebounded in September, the other two primary asset classes were starting a descent. Class A’s September strength was a last gasp for the year, as that rate decreased precipitously along with the metro’s through December.

But, as the chart below shows, Class A rent growth has increased slightly during the first two months of 2016. Is that a sign that San Francisco may have hit its valley and rent growth will begin climbing again? Tune in next month.

Asset_Class_San_Francisco.jpg

Denver was another top 5 rent-growth markets during parts of 2015, but declining job-growth rates overall and in most sectors – even though only Information actually lost jobs last year – and affordability issues resulted in a decline to the extent that Denver underperformed the nation in February. That hadn’t happened since December 2009, when the apartment market was in its recessionary tailspin.

The metro’s rent growth began declining in July 2015, but Class A foreshadowed the trend by starting its moderation in May 2015. Classes B and C soon followed.

Asset_Class_Denver.jpg

Though certainly not the only indicator, asset class trends often can predict what will happen in an apartment market in the short term, with a month or two lag. That’s one reason that monthly market intelligence is so important when analyzing individual metros and properties.

Tax Tips for Rental Property Owners

Written by Apartment Management Magazine on . Posted in Blog

TaxSeason

It’s tax season again. If you own a rental property, your tax strategy is more complex than for the home you live in. Here are some important tax tips for rental property owners.

Rental property tax considerations each year

Here are some points to keep in mind when you file your annual return:

  • Your rental property shows up on Schedule E of your tax returns, which logs rental income and expenses. The expenses include mortgage interest, property tax, maintenance, repairs, utilities, property management fees, depreciation, and all other costs associated with owning the property.
  • If you pay points when you close your rental property purchase loan, you cannot fully deduct them the year they were paid like on a primary residence purchase. Instead, you must deduct points over the life of your loan.
  • If your rental income exceeds expenses each year, the income is taxable just like any other income.
  • If expenses exceed rental income on Schedule E — which is common because of the depreciationexpense line item — you can deduct rental losses if your non-property income is up to $150,000 per year. If your non-property income is up to $100,000, you may be able to deduct rental property losses up to $25,000 annually. If you earn between $100,000 and $150,000, this potential deduction benefit is cut in half. And if you earn above $150,000, you cannot deduct rental property losses.
  • If you earn too much to deduct rental property losses, the losses can accrue as an offset to capital gains taxes when you sell.
  • Ask your tax adviser whether deductions or accrual of rental losses fits your tax profile.

Rental property tax considerations when you sell

When you sell a rental property, you will pay capital gains taxes on your appreciation. You must consult a tax adviser to get accurate figures, but here’s a simplified formula for estimating capital gains taxes and net profit on a sale.

Subtract purchase price, cost of improvements you made, and total selling cost (including realtor, title, and local tax fees) from sales price. The resulting number is your capital gain, and you’ll pay federal and state taxes of about 25 to 30 percent (based on your tax profile) on the capital gains.

Let’s see what this formula looks like if you bought a home eight years ago for $200,000 using 20 percent down and a 30-year fixed rate of 6 percent (the rate at the time). A quick mortgage calculator analysis tells us that your balance is now $140,435.

Suppose you made $10,000 in improvements to the home along the way, you earn less than $100,000 per year (so you didn’t accrue any rental losses to offset capital gains), and you’re now selling the property for $300,000. In a county that has a total of 7-percent selling cost (including real estate agent commission, transfer taxes, title, and settlement fees), your estimated capital gains would be about $69,000.

Using the capital gains tax formula above, you’d have about $17,250 to $20,700 in taxes due, and you’d therefore net about $117,865 to $121,315 on the sale.

How to avoid capital gains taxes on rental property

You can avoid this tax hit if your intent is to buy a new rental home immediately after you sell.

You do so with an IRS benefit called a 1031 Exchange, which is named after the IRS code number. This allows you to defer paying the capital gains taxes at closing as long as you identify a new rental property to buy (in writing) within 45 days, and close the new purchase within 180 days of closing your sale.

To get the full tax benefit, the new purchase must be of the same or greater than your sales price, and you must put every penny of net proceeds from the sale into the new purchase.

A 1031 Exchange defers rather than eliminates the tax hit in your sale.

If you plan to convert the new rental property to a primary residence at some point in the future after the exchange, the IRS has no specific rules prohibiting you from doing so. If this is your strategy long term, consult your tax adviser on capital gains tax implications before you enter into your exchange.

Source: zillow.com

Will Affordability Constrain Rents?

Written by Apartment Management Magazine on . Posted in Blog

calculators

In recent years, the number of renters increased as homeownership declined. According to the Joint Center of Housing Studies at Harvard, this country is enjoying the highest proportional rental demand in half of a century. As demand has grown, rental rates have spiked across most large markets in the United States. Average total rates have increased, and they have also grown as a percentage of the average renter’s income.

Of course, property owners and managers benefit from high rental demand and increasing rental prices. Still, rental affordability has become a serious concern with urban planners and housing departments. Rental demand is expected to keep growing during the next decade and maybe even after that. There might be some concerns that both the issue of affordability and an increased inventory supply will put a cap on that growth in the future; however, that doesn’t mean that demand is expected to decline.

Why Affordability Might Constrain Rental Prices

Despite recent growth in rental prices, according to the Urban Land Institute, these are some signs that affordability may start putting the lid on increasing prices soon:

Millennials: One of the major populations to favor renting over buying more than they used to has been 25- to 34-year old adults. Getting married and having kids tend to be the kind of life events that are associated with purchasing a home. These events were also declining, but that trend seems to be reversing. An increase in homeownership is expected to follow.

Interest rates for mortgages: Interest rates did increase a little, but they rose only slightly from historically low levels. If borrowers can obtain low-interest mortgages, homeownership might seem cheaper than renting for some individuals and families. This may be particularly true for the high-end rental markets where most renters do have a choice.

Rental inventories: Right now, many U.S. markets enjoy occupancy rates of 95 percent or more. However, these occupancy rates have attracted more investors into the market. As more apartments get built or single-family homes get converted to rentals, supply will increase. If supplies begin to overtake demand, rental rates could soften.

Renter incomes: In addition, about 46 percent of renters paid more than 30 percent of their household rents in 2014. Typically, rent between 25 to 30 percent of income is considered affordable. This is an increase in rent as a percentage of income from about 40 percent for renters in 2004. At some point, unaffordable rents could force people to find some other housing alternative, and this could decrease demand.

There is Still Plenty of Room for the Rental Market to Grow

Despite these concerns, there’s no reason to feel pessimistic about the U.S. rental market. Officially, rents have increased by about three percent a year, but that calculation includes some rent-controlled areas. According to investment trusts, the true rate of increases has been approaching five percent. In 2009, there were only a little over 100,000 multifamily starts in the entire country. That number should increase to over 400,000 this year and approach 460,000 in the next couple of years.

The demand for rental properties is still expected to increase over the next decade. The Urban Land Institute’s report was very optimistic about the rental market as a whole. Concerns that were expressed centered mostly about the issue of affordability, particularly in some parts of the country. Even though the market for more expensive rentals for high-income families and individuals is expected to increase, it may be more limited than the market for middle-class and working-class housing. The caution was to make sure that the particular market for each type of property was really as large as anticipated.

The post Will Affordability Constrain Rents? appeared first on The Official AppFolio Blog.

The Rise of the NERDS

Written by Apartment Management Magazine on . Posted in Blog

 

Original post on the Hightower Blog

EastBay Investment Property

No, not those types of nerds. We’re not talking thick glasses, pocket protectors, or the popularity of The Big Bang Theory. It’s the five office markets you should be keeping an eye on for strong talent, affordability, and investment opportunity.

JLL coined the term at the end of 2014 to describe five hot secondary markets—Nashville, East Bay (California), Raleigh-Durham, Denver, and Salt Lake City—for their ability to attract investors and occupiers as the economy expands and larger metros overheat or tap out on talent. Among their attributes, according to JLL:

  • Their populations have grown by an average 7.4% since 2010, more than double the national rate;
  • Educational attainment in NERDS is higher than the national average, and they employ a higher percentage of their workforces in corporate office environments;
  • In the past year, they recorded occupancy growth of 7.9 million SF, nearly two times faster than the U.S. overall, while still offering close to a 25% discount on office asking rents;
  • Investors are able to acquire core product without sacrificing yield, as average PSF pricing for Class-A buildings is between $150 and $300, with discounted cap rates ranging between 4.9% and 6.1%.

If you’re an investor and haven’t been looking at these markets already, now’s the time. JLL recently warned that the window to catch these market on the upswing is beginning to narrow—and you may miss the opportunity to open a satellite office or relocate at a fraction of the price of other popular markets.

Last year, these markets attracted strong corporate demand and population migration—but as this interest grows, so does pricing. And NERDS saw large leasing activity from companies such as Anadarko and URS (Denver), Dell (Nashville), SAP (East Bay), Allscripts (Raleigh), and Health Equity (Salt Lake City), contributing to a dwindling amount of space. Overall vacancy remains well below average at 10.2%, compared to the total U.S. vacancy rate of 14.7%, JLL reports.

Crash Course: The NERDS Today

Nashville: Seeking appreciation? Music City is one of the few markets tracked by JLL that has not exceeded peak pricing. Institutions have taken note, snapping up seven properties for $160 million in 2015, which may rep a shift in Nashville’s buyer landscape. The result: Yield compression was down 81 bp in 2015, to 6.1%.

Vacancy: 6.7% (Class-A, 2.7%)

Asking Rents: $20.32 (Class-A, $26.45)

Under Development: 2.8 million SF (81.9% preleased)

Total Sales Volume: $717 million ($137/SF average price)

East Bay: While previous years saw a focus on Class-A space, 2015 was all about Class-B, which JLL expects to continue. Institutional investment hasn’t been as  strong here as in the other NERDS, but the argument for acquisitions is strengthening as rents go skyward in fellow Bay Area markets.

Vacancy: 13.1% (Class-A, 14.3%)

Asking Rents: $31.46 (Class-A, $35.94)

Under Development: 0 SF

Total Sales Volume: $751 million ($235/SF average price)

Raleigh-Durham: Unlike its fellow NERDS, this part of the Research Triangle saw softening prices and higher cap rates than secondary markets as a whole, JLL reports. But it had the largest transactional increase, from $493 million in 2014 to $1.2 billion in 2015, mainly due the Trinity-Starwood-Vanderbilt JV’s purchase of Duke Realty’s portfolio, $500 million of which was in Raleigh. As the Research Triangle continues to grow, this market will likely have strong positioning in coming years.

Vacancy: 11.9% (Class-A, 9.8%)

Asking Rents: $20.53 (Class-A, $23.71)

Under Development: 629,214 SF (63.3% preleased)

Total Sales Volume: $1.0 billion ($143/SF average price)

Denver: The Mile High City also saw a notable uptick in institutional investment, with institutions accounting for 48% investment activity over 2015. While it compressed to a 4.9% cap rate last year, it’s unlikely that the trend will continue, as the market has reached peak pricing levels (highest since 2000), according to JLL.

Vacancy: 13.1% (Class-A, 11.4%)

Asking Rents: $25.62 (Class-A, $31.53)

Under Development: 2.7 million SF (24.1% preleased)

Total Sales Volume: $2.2 billion ($182/SF average price)

Salt Lake City: Although it is currently the smallest market on this list for investment, Salt Lake City is experiencing a change. The 2014 transaction that brought Goldman Sachs’ largest corporate office outside of New York (222 Main Street) represents the diversification and growth of the city’s tenant base, which will attract further investment, JLL says.

Vacancy: 6.4% (Class-A, 6.0%)

Asking Rents: $25.62 (Class-A, $31.53)

Under Development: 2.7 million SF (58.3% preleased)

Total Sales Volume: $81.1 million ($167/SF average price)

Looking Ahead: The NERDS in 2016

In 2016, JLL expects the NERDS markets to remain some of the most active office markets in the U.S., particularly if they continue to take on demand from markets with high barriers to entry. But if you miss out on the opportunity in the NERDS, there may be other markets to consider. JLL expects similar geographies — such as Austin, Charlotte, Fort Lauderdale, Minneapolis, Pittsburgh, and Portland — to complement NERDS in output and innovation.


 

AmandaMarshABOUT AMANDA MARSH

Amanda Marsh is the founder of Buzzmaestro, a business writing and editing firm. She has been a commercial real estate journalist for over a decade, with stories published in Bisnow, Commercial Property Executive, Multi-Housing News, Real Estate Weekly, BOMA Magazine, and other industry publications.

Home flipping reached 10-year high: Can you say froth?

Written by Apartment Management Magazine on . Posted in Blog

house flipping
Rising home prices are bringing more house flippers out of the woodwork, and that may be a sign of an overheating housing market. The number of active home flippers last year was the highest in nearly a decade, and it is only growing.

Nearly 180,000 family homes and condos were flipped in 2015, according to RealtyTrac. A flip is defined as a home that is bought and sold again within the same 12 months. Flips made up 5.5 percent of all sales last year, and that is the first increase in the flip share after four years of shrinking. Flipping increased in 75 percent of U.S. markets, and the profits are growing as well.

“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” said Daren Blomquist, senior vice president at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year.”

Jim Pinson works with investors to flip houses on the south side of Chicago and does two or three flips of his own each year in the Oak Lawn area. Home prices in Chicago have not soared as much as in other parts of the nation, but there are still a lot of distressed homes available for sale, and plenty of investor demand.

“Oh my God, there are multiple offers on almost every decent margin profit house that pops on the market,” said Pinson.

The concern now is that prices are rising too fast, not because buyers can afford to pay more but because of extremely short supply of homes for sale, especially on the lower end of the market. Home prices in January were 6.9 percent higher than the January 2015, according to CoreLogic, a higher annual gain than in December. Home flipping can push prices artificially higher, especially in markets with the tightest inventory.

“When home flipping numbers go up, it is usually an indication that the housing market is in trouble,” said Matthew Gardner, chief economist at Windermere Real Estate in Seattle, who was quoted in the RealtyTrac report.

That was the case during the housing boom in the mid-2000s, but at that time flippers were putting next to no money into their investments, instead using cheap credit. That credit no longer exists. They have to put significant money into their flips, even when using investor loans.

“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicate that flippers in 2015 continued to operate within relatively conservative margins,” said Blomquist. “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and resold by the flipper at a 5 percent premium above estimated market value.”

Still, affordability for that end-user, the owner occupant looking to buy perhaps a first home, is weakening. First-time home buyers are still a much lower share of home buyers today than they are historically. The risk of another home price bubble could push them even further away.

As home prices rise, even in Chicago, investors have to put more money down and put money into renovating the homes, which are often in severe disrepair. Investors have to be careful to make sure they’re buying the right house in the right place, otherwise they won’t find buyers ready to move in.

“Demand is block by block, and you’ll have people running out and making offers, but it depends on what block you’re in,” added Pinson.

Just after the housing crash, large institutional investors moved in and bought thousands of distressed properties and turned the vast majority of them into rental homes. They are now buying fewer homes, leaving the field open for smaller investors who would rather flip than hold the homes. The total number of investors who completed at least one flip in 2015 was at the highest level since 2007, and the number of flips per investor was at the lowest level since 2008, according to RealtyTrac.

Flippers are watching home prices rise, and in turn seeing returns rise. Homes flipped in 2015 yielded an average gross profit of $55,000 nationwide, the highest for flips nationally since 2005, according to RealtyTrac. The return on investment was close to 46 percent, up from 44 percent in 2014 and up from 35 percent in 2005. 2005 was when flipping was rampant, thanks to super easy credit. Back then, over 8 percent of all sales were flips.

Today flippers are seeing the best returns in Pittsburgh, New Orleans, Philadelphia, Cincinnati and New Haven, Connecticut. The biggest dollar returns are in California and New York, but investors there must put bigger dollars down for those flips.

Source: cnbc.com

– See more at: http://www.american-apartment-owners-association.org/property-management/latest-news/home-flipping-reached-10-year-high-can-say-froth/#sthash.xVe1M5ty.dpuf

A Quick Check Up on the 2016 Property Management Industry

Written by Apartment Management Magazine on . Posted in Blog

It’s always smart to prepare for changes in the real estate market, but busy property managers may find that keeping up with the demands of their rental units leaves them with little time to follow industry trends. Take a few minutes to check in with regional and national forecasts for 2016 to make the right decisions and keep your property full all year long.

2016 National and Regional Vacancy Rates

2015 was a good year for real estate, and 2016 is poised to be another. Expect to see vacancy rates dip even lower nationwide, with rents remaining strong. This is good news for property managers in much of the U.S. and tough news for renters. Tenants looking for a good deal will have a difficult time. Compared to 2008, when there was a supply of vacant new construction apartments in need of filling, there are far fewer vacancies to drive rent prices down.

While vacancy rates are low nationwide, some cities may have higher vacancy rates at present. New York City, for example, is seeing an increase in new construction that is driving the city’s vacancy rate up. To stay competitive amidst the wider stock of open units, landlords in the five boroughs area will need to put the brakes on rent increases. If this trend spills over into other metro markets, it could cool the rental market nationwide.

Low oil prices can also have a negative effect on some markets, namely Houston. As oil prices remains stagnant and drilling is on hold in oil-rich states, many who worked in the industry face job cuts that threaten their livelihood. Property managers in affected metro markets may need to keep rents stable or be extra attentive to renters to keep units occupied despite the sector slump.

Urban vs. Suburban Rental Stock

Along with Millennials, who are committed to renting either by personal preference or an inability to quality for a mortgage of their own, expect Boomers to sell off the suburban empty nest and seek to move closer to the city for the full live/work/play experience.

While the suburbs do have a higher vacancy rate, reduced rental unit supply in urban areas along with high costs of rent will help drive some renters out to the suburbs. Look for renewed interest in suburban homes among renters who want more value for their dollar. If you manage units in the city as well as in the suburbs just outside, this renewed interest in the suburbs is good news.

Expect these rental patterns to hold through 2016. Savvy property managers can add value to their rental units and incentivize tenants to continue to pay premium rents by creating an attractive and elegant common area that creates community in the apartment complex.

How Property Managers Can Stay Ahead in 2016

Busy property managers who are still doing things by hand should consider 2016 the year to invest in effective property management software. Such software can help property managers save time, stay on top of vacancies, easily advertise units, quickly screen tenants, and handle tenant applications.

Since low vacancies mean that maximum profit is gleaned from every rental unit, 2016 is a good year to invest in infrastructure and maintenance. If property owners have been putting off needed repairs to common areas, or you know that the building’s HVAC systems are old and inefficient, suggest spending money modernizing the apartment. These improvements are easily offset by the income from rental units, and help to make the apartment or condo complex more attractive in down cycles as well.

Owner-managers who seek additional real estate holdings should invest in multifamily units, which offer a greater return on investment than single family homes. In the second half of 2015, demand for multifamily units was strong and Freddie Mac forecasts that this demand will remain strong into the foreseeable future.

We always want you to stay up on the trends, so don’t miss our upcoming webinar (3/24) with Axiometrics. Register Today.

What other regional or national trends are you watching for 2016? Let us know in the comments!

The post A Quick Check Up on the 2016 Property Management Industry appeared first on The Official AppFolio Blog.

Experts Share Top Rental Investment Tips

Written by Apartment Management Magazine on . Posted in Blog

LA2016-IPME-Postcard

To become a truly successful real estate investor, it’s important to be aware of future predictions for the housing market. Learn how to stay ahead of the curve by joining us at the Income Property Management Expo on March 15, 2016, at the Pasadena Convention Center where real estate experts will be sharing their insight into the current economy and how your investment may be affected.

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You’ll also learn more about legal trends, investing strategies, crime prevention, and marketing. Here is a quick snap shot of the speakers and time for each seminar:

MORNING SESSIONS 

The Latest Opportunities

For real estate investments & 1031 Exchanges

Speakers: William L. Exeter, 1031 Exchange Services LLC and Robert Tweed, Tweed Financial Services, Inc.


 

Sell High, Tax Low

What every real estate investor should know

Speaker: Tony Watson, Robert Hall & Associates


 

Legal Issues Traps and Trends

Stuff you must know to thrive and survive as a landlord

Speaker: Stephen C. Duringer, Duringer Law Group


 

Residential Assisted Living Academy

Turn a single family home into a cash flow machine!

Speaker: Gene Guarino, Residential Assisted Living Academy


AFTERNOON SESSIONS

 

The Southland Rental Market

A macro-to-micro perspective

Speaker: Ralph McLaughlin, Zillow Group


 

The World at your Fingertips

Important key global market highlights in order to ensure you are set up for success!

Speaker: Elizabeth Reynolds, Owner/Broker of Reynolds Realty Advisors


 

Building Your Buyer’s Box

Learn how multi-cultural markets have a direct impact on rents, growth, and asset valuations.

Speaker: John Wilhoit, President Wilhoit Investment Network, LLC.


 

Top 10 Things Today’s Landlord Must Know

Everything you need to know from marketing vacancies to minimizing litigation.

Speakers: Brian Gordon and Vincent Medina, Lotus Property Services


 

Maintenance, Habitability & Landlords Rights of Entry

Learn about your rights as a landlord and how to get back in control of your unit.

Speaker: Mike Brennan, Brennan Law Firm


 

Crime Prevention and Tenant Selection

Get education on how you can take steps to reduce crime on your rental properties.

Speaker: Leslie Born, Managing Attorney FastEvict.com Law Group

How Not to Get Sued (Part 2)

Written by Apartment Management Magazine on . Posted in Blog

lawsuit

We had such an overwhelming number of great questions during a recent webinar with Puneet Singh on How Not to Get Sued. So here you go! Your questions, answered by various attorneys at the Law Offices of Kimball, Tirey, and St. John LLC.

Kimball, Tirey & St. John LLP specializes in business and real estate law, landlord/tenant, and collections with offices throughout California. This article is informational only and should not be used as legal advice. Check with your attorney before acting. If you have any questions regarding the answers provided below please call (800) 525-1690.

Service Animals

Q. Can you ask for paperwork showing that a pet is an assistance animal? May we ask for proof on assisted animals and not take the word of the applicant? What type of proof will do?

A. You are entitled to verification that the resident has a disability and needs the animal due to the disability, unless the disability and need are apparent. The verification does not need to be in any particular form or format and can come from a health care provider or a non-health care provider source such as a credible third party in a position to know about the person’s disability and needs, a peer support group, or a non-medical service agency.

Q. The TAA conference says even if it’s an ADA pet, it’s a good idea they sign the TAA pet addendum. Do they need to or not?

A. Since pet addenda often contain things that are not appropriate for assistive animals (such as pet deposits, pet rent, restrictions on size, type, breed or numbers of pets and restrictions on where the resident can take the animal in the community) we recommend utilizing a separate addendum of rules of conduct for assistive animals that covers behavior issues such as keeping the animal leashed, cleaning up after it, making sure it doesn’t create a nuisance or act aggressively, etc.

Q. I’ve seen online that people can buy an emotional distress animal form for $150. Is that something that can be used or do the pet owners have to have a form from a medical professional?

A. The HUD and Department of Justice Joint Statements on Reasonable Accommodations and Assistance Animals state that verification can come from a medical professional or other sources: a credible third party in a position to know about the person’s disability and needs, a non-medical service agency, a peer support group or a self-statement such as proof that a person under 65 is receiving SSI or SSDI (which would prove the disability itself, but you would still be entitled to verification of the disability-related need for an animal). A certificate or card showing that the animal is registered as an emotional support animal does not meet the verification test as those certificates and cards can be purchased without any proof of disability and disability-related need.

Q. Do accommodation pets still have to follow community policies?

A. Landlords may establish reasonable rules of conduct for assistive animals. Since pet addenda often contain things that are not appropriate for assistive animals (such as pet deposits, pet rent, restrictions on size, type, breed or numbers of pets and restrictions on where the resident can take the animal in the community) we recommend utilizing a separate addendum of rules of conduct for assistive animals that covers behavior issues such as keeping the animal leashed, cleaning up after it, making sure it doesn’t create a nuisance or act aggressively, etc.

Q. Are we able to charge a Pet Deposit for Service Animals?

A. No, you cannot charge a pet deposit or an increased security deposit for an assistive animal.

Q. If I charge two times the rent for an unfurnished property can I also add a pet deposit?

A. It depends on the laws of your state regarding security deposit. In California, you would not be able to charge an additional pet deposit because the maximum total security deposit allowed by CA law is 2x the rent for an unfurnished unit. You can never charge a pet deposit for an assistive animal, regardless of what state you are in.

Security Deposits

Q. Does a tenant lose the right to dispute the deposit if the payment was made electronically? Do you need to have them accept the amount of the deposit before transferring?

A. No, the tenant does not lose the right to dispute the deposit if the payment was made electronically. The second part of the question is unclear so more information is needed before an answer can be provided.

Harassment/Discrimination

Q. What is the landlord’s obligation to address harassment of protected classes by other tenants?

Landlords should have a zero tolerance policy towards harassment of any kind. When tenants are harassing others based on their protected class, the landlord can be held liable for discrimination if the landlord does not take affirmative action to stop the harassment. The harassers should be warned in writing that the behavior is unacceptable, that it constitutes discrimination (which the landlord does not tolerate from anyone) and that if it continues, the landlord may have to terminate the tenancy. If the harassment doesn’t stop, the landlord should take steps to terminate the tenancy in accordance with relevant state landlord-tenant law.

Disabilities

Q. I have a senior apartment building and I only have room for 3 handicapped parking spaces. What can I do if I have more than 3 tenants with handicapped tags?

A. The first thing you should do is have the property evaluated by a Certified Access Specialist (CAsP) to make sure that the current parking configuration complies with all applicable accessibility laws. Assuming the parking configuration is in compliance, then your only obligation would be to try and accommodate any resident that asked for a parking accommodation. This can include things like giving a resident an assigned space if parking is not normally assigned; giving the resident a different assigned space (if one is available); putting the resident at the top of any wait list for the next available space that meets his/her needs (behind anyone on the list that does not have a disability-related parking request, but ahead of any other parking accommodation requests already on the list); or offering to let the person out of their lease without penalty if you cannot meet their disability-related parking needs.

Q. If we were built in 1988, then we do not need handicap parking, correct?

A. Not necessarily. If you have any public parking (for example, future resident parking) the property must have disabled parking in order to comply with the ADA, which does not grandfather-in older properties. If all of your parking is private (i.e., reserved for residents) then you may not need disabled parking under the federal Fair Housing Act. However, some states and local jurisdictions may require it. The best way to ensure that your property is in compliance with all relevant accessibility laws is to have the property evaluated by a Certified Access Specialist (CAsP).

Q. What notification is required from a tenant in the event of a change of disability status, i.e. if in mid-lease he or she becomes disabled, or now requires a service animal?

A. The only time a tenant would be required to notify you of a disability would be if the tenant was requesting a reasonable accommodation (such as an assistive animal) or a reasonable modification (a physical change to the unit or common areas to allow the resident full and equal use and enjoyment of the property). If the tenant makes an accommodation or modification request, then you are entitled to verification of disability and disability-related need for the accommodation/modification, unless either or both are readily apparent.

Q. We are an historic building and we do not have elevators or parking spaces and we only have stairs. Are we in danger of ADA Laws?

A. Possibly. The best way to ensure that your property is in compliance with all relevant accessibility laws is to have the property evaluated by a Certified Access Specialist (CAsP).

Q. If someone breaches the lease and we have multiple complaints in writing, why can’t we evict them? Since we are not allowed to ask about their mental illness?

If a resident’s behavior is caused by a known or suspected mental disability, there is generally a responsibility to try and accommodate the person before evicting. This generally means giving the person extra opportunities to comply with the lease before taking steps to evict. If the person still doesn’t comply, you may ultimately have to evict.

No-Smoking

Q. Can tenants who use e-cigarettes be denied for tenancy in a non-smoking building?

A. Tenants who use e-cigarettes cannot be denied housing (Fair Housing issues), even in smoke-free complexes, based on their use of e-cigarettes, however, complexes can regulate smoking on the premises, including the use of e-cigarettes. Existing laws in California restrict or prohibit the smoking of tobacco in various public places, including residential dwelling units. Senate Bill 648 was proposed in 2013 to expand the definition of smoking tobacco to include e-cigarettes and “vaping.” Many California cities have ordinances that prohibit smoking (including vaping) in multi-unit housing complexes, including, Santa Rosa, Foster City, San Mateo County, El Cerrito, Los Angeles County, Corte Madera, and Mammoth Lakes, and many leases will individually regulate smoking and vaping within their buildings and/or common areas.

Q. If a tenant is smoking pot in a unit and then produces a medical card, must I allow him to smoke in the unit?

A. There are arguments to be made for not allowing it. Even if your state has legalized marijuana for medical purposes, marijuana is still an illegal drug under federal law. Also, if the drifting smoke is bothering other residents, you may be able to argue that this is a nuisance. Some landlords decide not to focus on the issue of state vs federal law and instead focus on the drifting smoke. If the resident can find another method of using the medical marijuana that doesn’t involve smoking (and thus doesn’t disturb the neighbors) then the landlord will allow it. Other landlords take a “zero tolerance” approach due to the illegality under federal law and the issue of drifting smoke.

Cleaning/Maintenance/Inspections

Q. What would you suggest we do if a tenant is not cooperating with management’s efforts to perform pest control (bed bug) treatments?

If a resident is not complying with management’s efforts to perform pest control for bed bugs, such as not preparing their unit, first look to the lease agreement to see if it contains language that would make it possible to enforce the necessary treatment. However, if the lease agreement does not include specific language about bed bugs, or pest control in general, it may be possible to serve a 3-Day Cure Covenant or Quit Notice for a breach of some other provision of the lease agreement, such as failing to maintain a clean and sanitary household, in order to either obtain possession of the unit or to force the resident to comply with pest control requirements.

Q. Are bed bugs a tenant-caused problem therefore it’s there responsibility to get rid of them?

A. Bed Bugs are known as the hitchhikers of the insect world. They are most often carried into the unit on someone’s clothing or by hiding in used electronics, furnishings, or other items. It is often very difficult to determine the source of a bed bug infestation unless it can be pinpointed to one specific unit. However, even then, the resident may not even know how the infestation occurred or that they are the source. Because California Civil Code Section 1941 states that a landlord must repair items that make the property uninhabitable, it is the landlord’s responsibility to obtain and provide proper pest control treatment unless the lease agreement provides specific language that places the responsibility on the tenant to pay for, or reimburse the landlord for, the cost of necessary treatment.

Q. What if you can certify that that you did not rent the unit infested with bed bugs? That the resident brought them in?

A. Many landlords now use leases that include a bed bug addendum that states, among other things, that the unit was free of any bed bug infestation at the time the resident took possession of the unit. The addendum will often shift the burden of the cost of any bed bug treatment needed after the resident takes possession of the unit to the resident, unless it can be shown that the source of the infestation is another unit. Absent specific language to that effect, the landlord remains responsible under California law to provide a habitable property and provide necessary treatment and/or repairs for uninhabitable conditions, including a bed bug infestation.

Q. Under the new mold law, if a tenant requests a mold test by a third-party are we required to have it done? Is it only considered mold when code compliance says it is mold?

A. The new mold law does not require testing by a third-party if requested by a tenant. The new law also provides that in order for suspected mold to be considered a substandard condition, it must be identified as mold by a health or code enforcement officer.

Q. What about mold in a garage? Is that enough for a tenant to break a lease?

A. A tenant may terminate the lease in situations where defects in the premises (including the garage) are serious and directly related to the tenant’s health and safety and the defect was not of the tenant’s own making. In order for the tenant to utilize this remedy, the tenant must first give the landlord oral or written notice of the defect and a reasonable time to make repairs.

Q. On the topic of hoarding, would you recommend contacting the city officials to help with the residence being unsanitary?

A. This is a possibility. However, you need to realize that many city agencies (such as fire, health, or code enforcement) will cite the landlord for violations, rather than citing the tenant. You might check to see if there is a hoarding task force in your area as sometimes they can point you and/or your tenant in the direction of resources that can help without getting the property cited for code violations. If you Google “hoarding task forces” it will direct you to a website that has a list of all hoarding tasks forces in the U.S.

Q. How do we accommodate hoarding? Health and Safety, Fire Hazard. Why should a landlord spend money cleaning up their messes?

A. Because hoarding is a mental disability, landlords are generally required to try and accommodate by working with the resident to give them time to remedy the health and safety issues. The goal is not for the landlord to spend money cleaning up the unit, but rather to get the tenant to clean up the unit. This can involve breaking what needs to be done down into manageable tasks and giving reasonable time periods for accomplishment of each task. You should consult with an attorney who has experience dealing with fair housing and hoarding situations for specific advice if you encounter a hoarding situation, as no two situations are exactly alike and mishandling the matter can result in potential fair housing liability.

Employment

Q. What would you do if an employee request to have a dog in the office and some of your employee are allergic to pet?

A. The Americans with Disabilities Act (ADA) does require employers to make “reasonable accommodations” for employees with qualifying disability if doing so won’t impose an “undue hardship” on the operation of the employer’s business. An allergy is likely to be covered as a disability under the ADA (which covers “a physical or mental impairment that substantially limits one or more of the major life activities”). If a doctor can come up with some reasonable accommodations to address the allergy, the employer has to either grant the accommodation, engage in the interactive process with the doctor and the employee to come up with an alternative accommodation, or demonstrate an undue hardship.

If there is no accommodation that would allow the employee to work in the presence of dogs, then the other question to ask is of the employer, namely, whether the dogs are an accommodation for anyone else’s disability. (The ADA also covers emotional support dogs and service dogs, so you have a real problem if the dogs are there due to disabilities of coworkers.) If not, then a reasonable accommodation might be to ask that the dogs be kept at home or in a doggy day care.

One accommodation that would work would be banning all the dogs (except service dogs) from the office. That is something the employer needs to consider seriously. An accommodation is not reasonable and does not need to be offered if it would create an ‘undue hardship’ for the employer. Usually that means an unreasonable expense to the employer. But here, there would not be a direct expense of banning dogs from the office. Rather the employer should consider the impact of the accommodation upon the operation of the facility, including the impact on the ability of other employees to perform their duties and the impact on the facility’s ability to conduct business. Banning the dogs would lower morale, but it would not appear to harm the business itself or the business’ operations. This is not a veterinary clinic where it is necessary to have dogs in the workplace. The business can presumably operate without animals in the workplace. So while banning dogs may be a drastic change and hurt morale, the employer must consider doing this in order to comply with the ADA.

Other

Q. Can you give example of an out of pocket loss for late rent? And, is this California law? Does it apply to all states?

A. An example of “out of pocket loss” for late rent would include time and money a landlord may spend on collecting rent from a tenant when they pay rent late. Late fees are allowed only if they are specified in the lease and only if the actual cost to the landlord can be determined. In this case, it is important to only charge the tenant the actual cost and keep back up materials used to calculate the actual cost.

Under California law, if the exact cost to the landlord for a tenant breach can be calculated, only the actual cost may be charged to a tenant. If the actual cost to the landlord cannot be determined with certainty then consider refraining from charging any amount, or be very conservative when setting the amount. You should also keep backup materials used in your unsuccessful attempt to calculate the actual cost to the landlord. If you decide to list an amount in the lease as a liquidated damage amount, include specific language in liquidated damage clauses to increase the likelihood of surviving judicial scrutiny. Your attorney can assist you in drafting the appropriate language for your lease.

Lastly, before imposing late fees, the landlord should conduct a risk/benefit analysis. Keep in mind that if a late fee is challenged, a landlord may be required to defend itself in a lawsuit and will incur defense costs even if the charge is later deemed by a court to be acceptable

This advice is specific to California only, we recommend you contact an attorney in your state to determine which laws apply to late fees.

Q. Regarding outdated leases which were signed in a time period where the details WERE legal, should they be resigned with currently legal leases?

A. The legal terms of the original lease would still apply. However, the costs of outdated leases with provisions that are no longer legal, could lead to unwanted rent claims, attorney’s fees and litigation costs, therefore, whenever possible it is best to execute new, updated leases with updated provisions. For a comprehensive list of prohibited items, see California Civil Code Section 1953.

Q. Can a tenant deny requests for showings after giving notice to move out?

A. Under California Civil Code Section 1954(a)(2), a landlord has a right to enter a rental unit to show the unit to prospective tenants after giving at least 24-hours written notice to the tenant, or if the tenant consents to the entry. Entry must be made during regular business hours and should otherwise be reasonable. This is the case whether the tenant gives the landlord a notice of intent to vacate the unit or the landlord terminates the tenancy. However, it is never a good idea to force the issue and demand entry into a unit if a tenant makes it clear that they do not consent to entry into their unit, as they might try to claim that the landlord is invading the tenant’s privacy or using the entry as a means to harass the tenant.

Q. Would like to know if the 21 day security deposit refund requirement refers to the day the deposit is mailed and what about ACH payments that take an extra day to process. Tenants often think they should “receive” the deposit in 21 days.

A landlord must provide an accounting of a security deposit to the tenant no later than 21 days after the tenant has vacated. The accounting, and any refund of the deposit, must be postmarked on or before the 21st day. If you are returning the refund via automated clearinghouse (ACH), you must initiate the transfer before the end of the 21st day.

Q. We are an SRO, if a person or applicant have a child, we tell them that this building is only for one person…is this okay?

A. It may depend on the laws of your state that govern SROs as well as your state fair housing enforcing agency’s position on what a reasonable occupancy standard is for an SRO. You should consult with an attorney in your state that is experienced in handling fair housing matters.

 

The post How Not to Get Sued (Part 2) appeared first on The Official AppFolio Blog.

4 Signs a Property Is Worth Buying and Renting Out

Written by Apartment Management Magazine on . Posted in Blog

real estate key

Do you have fantasies of becoming a landlord? That is, do you dream that one day, you’ll purchase a promising piece of property, move in some reliable tenants, then kick back and collect rent well into retirement?

If you’ve got the cash and ambition to follow through, there are plenty of condos, homes, and buildings you could buy and rent out—but pinpointing the right one is tough. Don’t give up the dream! Insiders insist there are a few ways to separate the cash cows from the turkeys. Here are some signs a rental property is primed to gush big bucks.

It makes money for you immediately

While many mistakenly size up an investment property by the amount of money it could eventually make them later—once they’ve made a ton of renovations—that’s exactly the wrong approach. As the saying goes in real estate, you should “Make your profit when you buy.” That means: Your income (in the form of rent checks) should cover your costs upfront.

Financial planner and real estate investor Jim Ludwick at MainStreet Financial Planning recommends looking for properties that will generate enough rent in 10 months to cover all costs, including mortgage payments, taxes, and insurance. Another popular rule of thumb is the “2% rule,” which holds that your monthly rent should be at least 2% of the total purchase price of a property. Look at comparable rental listings online to get a sense of what you could reasonably charge for rent. Then, try punching in your numbers, from your rent to mortgage to maintenance costs, into an online investment calculator like this one from CalcXML, to see if you end up in the black.

A dwindling DOM

DOM stands for days on market—how long a property has been for sale. And if the DOM is plummeting across the board in a neighborhood, that’s a key harbinger that this particular housing market is heating up. And since this typically precedes price hikes, that means you can still score a deal on a property that could make you beaucoup bucks in rent (and if you resell down the road).

Another set of listings to check? Rentals in the area. If landlords are offering concessions to tenants, such as a free month of rent or a lower security deposit, those are signs that they’re having a hard time filling apartments, so you may want to steer clear.

Gourmet groceries nearby

Scouts for Whole Foods, Starbucks, and other high-end chains get paid a lot of money to research the up-and-coming neighborhoods with residents (aka your future tenants) who have the disposable income to support their stores. So, if you can buy heirloom tomatoes and a pour-over coffee in a five-block stretch, things are looking good. The presence of Trader Joe’s, Whole Foods, and Starbucks, in particular, bode well for real estate desirability.

“You can’t just look at the numbers,” ways Justin Cohen, chief marketing officer of Pangea Properties, a Chicago-based real estate investment and management company. “You’ve got to really look at the neighborhood and understand what’s happening there.” Get a sense of what type of tenant the neighborhood and property would attract. A property in a college town, for example, might have a high turnover, while one near a desirable elementary school (get stats atGreatSchools.org) might tend to draw families that want to put down roots for years.

And since many millennials favor “walkable” neighborhoods, areas near public transportation are bound to be a good bet. And we’re not just talking about buses and subways in urban jungles; transportation matters in the suburbs and small towns too, although in a different way: Look for towns near (but not right next to) major turnpikes or highways.

A squeaky-clean tenant

If you’re inheriting tenants with the property you’re considering, don’t just trust that current landlord’s word that they “always pay on time.” Run a background check and a credit check (it’s worth paying for a service such as TransUnion SmartMove to do one for you) on any current or potential tenants to see if there are credit issues or a history of evictions, and ask to see pay stubs or a 1099 to show the tenant has the enough income to cover the cost of living there.

And if the tenant has a less than stellar payment history? There actually is a way to turn this into an opportunity to negotiate a lower price for the property, factoring in the cost (and hassle) of a potential eviction. “Whether you keep the tenant or not, by buying someone else’s problem, you’ve gained some equity,” says Jorge Newbery, a real estate investor and the founder and CEO of American Homeowner Preservation.

Source: realtor.com