So you are sitting back, relaxing, because your rentals are all full of high quality tenants who pay their bills on time. Life is good, right?
Not so fast.
When you are fortunate enough to land top notch renters, you must be diligent in keeping them feeling safe and happy on your property. Landlords that don’t stay on their toes can end up losing good tenants.
6 easy ways landlords can lose good tenants are:
Not answering the phone or reacting slowly to a current renter’s request will not sit well. One of the most important aspects of a positive tenant/landlord relationship is communication. Lack of communication can drive the relations downhill fast.
Solution: If you want to keep the renter in your property, put a priority on answering their questions and requests in a timely manner. Talk through all issues in a calm manner, and strive to reach an acceptable conclusion for both parties.
It is highly frustrating when good renter is forced to wait days for a toilet to be unclogged, or the air conditioner to be repaired. If this happens often enough, the tenant may decide to move to a better place.
Solution: When your tenants call about repair work, keep them abreast of the progress so they don’t feel like you’re ignoring them. The most important factor in handling these calls is to have a stable of high quality, dependable people on hand to tend to the situations fast. Establish relationships with plumbers, electricians, and other service providers so you don’t have to scramble when you need one.
Straying from a proper screening process.
Let’s be honest here, folks. Good quality tenants do not want to live beside neighbors who don’t respect the property, engage in domestic disturbances, or illegal activity. If a landlord becomes lax in their tenant screening processes, they will end up eventually renting to an unsavory tenant. If the current tenant feels unsafe, he will end up moving somewhere else.
Solution: Always conduct a rigorous rental background screen on every potential tenant. Check out their criminal history record, eviction history, credit report, and verify their employment. Completing a rental background screen will minimize the chance you will end up with a tenant who is dangerous, destructive, or who won’t pay his bills on time. A rental background screen also helps keep current tenants feeling secure and happy so they will remain in your rental.
Failing to respect the renters’ privacy.
Having the attitude that the property is yours and you will come and go as you please will end up irritating choice tenants. All people expect a modicum of privacy, and this is a big stumbling block in a productive tenant/landlord relationship.
Solution: Resist the temptation to barge anytime you want without notice. Call the tenants and schedule a visit that is mutually convenient. High quality renters will appreciate this courtesy.
Allowing the property to deteriorate.
High quality renters want to live in a nicely maintained and safe environment. If your property is being neglected and falling into disrepair, you could end up losing good tenants.
Solution: Make property upkeep and maintenance of your rental property a top priority. The time and money you spend on keeping the property in good condition will be less than the cost of losing good tenants because of run down rental property.
Dramatically increasing the rent.
A significant jump in rent can shock a renter’s budget. They may deem it too large of an increase and begin looking for another place to live, leaving you with the job of finding a replacement. Even with your best efforts, you may end up with the newer tenant not being as top notch as the tenant the rate increase scared away.
Solution: Apply more manageable rent increases. A small increase of 2% or so per year is more easily digestible to a person’s budget. A smaller increase will provoke fewer tenants to move, and you can keep your high quality tenants for longer.
High turnover in renters is costly and time consuming. It hurts even more if you begin losing good, solid tenants who pay their rent on time, respect your property, and abide by the law. Avoid these circumstances in order to keep your high quality tenants happy!
Cary, Raleigh, Apex, Fuquay, Morrisville, Holly Springs, Durham, Chapel Hill, Garner, Wake Forest. http://www.RobertsRentals.net. Triangle area rental homes and property management. Bev Roberts Rentals
By John Gittelsohn and Heather PerlbergDec 19, 2014 1:48 PM ET
Corporate landlords are benefiting from the worst U.S. rental-housing shortage in more than a decade as construction trails demand and more Americans opt to lease rather than buy.
There’s an undersupply of single-family houses and apartments to rent for the first time since 2001, according to an analysis by Frank Nothaft, chief economist at mortgage buyer Freddie Mac, based on available inventory and historic vacancy rates. The deficit in the third quarter was about 350,000, the most in records dating back 14 years.
The shortage is giving the upper hand to institutional investors who spent more than $25 billion since 2012 buying single-family homes to rent. While the market for apartments has been in favor of landlords for five years, owners of houses are now able to increase rents and reduce turnover to boost profits.
“It’s that supply-demand equation that allows us to get aggressive about raising rents,” Stephen Schmitz, chief executive officer ofAmerican Residential Properties Inc. (ARPI), a landlord with more than 8,500 homes, said at an investor conference this month. “Three years ago, you would go to raise somebody’s rent and they could say, ‘I’ll go down the street and pay $100 less than I’m paying you now.’ But today they can’t because all those houses down the street are occupied.”
The U.S. rental-vacancy rate fell to 7.4 percent in the third quarter, according to Census Bureau data. The market is considered balanced, with neither landlords nor tenants having the upper hand when it comes to rents, at a vacancy rate of 8.2 percent, based on the average from 1994 through 2003, according to Freddie Mac (FMCC)’s Nothaft.
The housing surplus peaked at almost 2 million units, including 1.2 million rentals, in the third quarter of 2009, when foreclosures were soaring and years of speculative construction led to a glut of empty houses.
“The surplus of vacant housing has shrunk over the last few years because there has been household growth and limited new construction,” Nothaft said in a telephone interview. “In most markets and in the national data, what we’ve observed is that rents have been rising faster than inflation.”
Rents on all single-family homes and multifamily units are expected to climb 3.5 percent next year, compared with a 2.5 percent increase for home purchase prices, according to estimates this month by Zillow Inc. (Z) Chief Economist Stan Humphries. The U.S. inflation rate was 1.3 percent in November, with a goal of 2 percent set by the Federal Reserve.
Wall Street-backed landlords already are enjoying higher rents for single-family homes in markets hit hardest by the housing crash, where they first started buying in bulk.
The average monthly rent for a three-bedroom home in Phoenix surged more than 9 percent this year to $1,158, data from Westminster, Colorado-based RentRange LLC show. Houses now lease about 10 days faster than apartments, according to a report this week from the Center for Real Estate Theory and Practice at Arizona State University.
In Las Vegas, rents on houses rose more than 3 percent to a median of $1,248 in the 12 months through November, according to RentRange. In Orlando, Florida, they climbed 5 percent the same month to $1,294.
A reviving job market is driving household formation and fueling demand for homes faster than builders are delivering them. In the Orlando area, for example, 56,000 jobs were added in the 12 months through October, benefiting landlords such as Aaron Edelheit, chief executive officer of Atlanta-based American Home, a rental company with 2,500 houses, including about 200 in central Florida.
“They’re not producing many entry-level homes,” he said in a telephone interview. “That’s what creates housing shortages, and it’s going to drive up the price of rents.”
Raising rents is likely to become a higher priority for institutional single-family landlords next year as they get a better grip on operations and how higher rates affect their pace of leasing, said Anthony Paolone, an analyst with JPMorgan Chase & Co. (JPM) who follows real estate investment trusts including American Homes 4 Rent and Silver Bay Realty Trust Corp. (SBY)
Investors have positioned themselves to house some of the former owners of 5 million homes lost to foreclosure since the real estate crash, according to research company CoreLogic Inc. (CLGX)Many of those former owners prefer houses over apartments because they want more space for their children and pets. Landlords also are getting a boost from some of the 75 million millennials — 18-to-34-year-olds — who are starting out as renters rather than buyers.
The typical family renting a house from American Homes 4 Rent (AMH), an Agoura Hills, California-based REIT with more than 30,000 single-family homes, is in their mid-thirties with an annual income of $80,400, enough to afford to buy if they wanted to, according to CEO David Singelyn.
“Many of these kids saw their parents lose their home, and they’re a little bit disillusioned,” Singelyn said at the Information Management Network Single Family Rental Investment Forum in Scottsdale, Arizona, on Dec. 4. “How long will that last? I don’t know. But today there’s a significant movement to becoming a renter nation as opposed to an owner nation.”
Those tenants often pay a premium to rent from new firms like American Homes 4 Rent, which mostly owns houses less than 12 years old near good schools and provides better service than mom-and-pop landlords, Singelyn said. They also move less often, with 68 percent of tenants opting to stay in the most recent quarter when their lease came up for renewal, compared with less than 50 percent for apartments, he said.
Blackstone Group LP (BX)’s Invitation Homes, the largest single-family landlord, with more than 46,000 properties, as of Sept. 30 raised rents an average of 1.8 percent to $1,474 from a year earlier on 3,200 homes that were financed through the industry’s first mortgage-backed security deal, according to Kroll Bond Rating Agency.
“We’ve seen strong demand for our homes in all 14 markets we operate,” said Denise Dunckel, a spokeswoman for Dallas-based Invitation Homes. “That’s just an indication that there’s a large market that likes the flexibility that renting provides.”
American Homes 4 Rent raised rents 3 percent on renewals and 4 percent for new tenants in the third quarter, Singelyn said during a Nov. 3 conference call. American Residential Properties increased rents an average of 3.4 percent from a year earlier on renewals, while Silver Bay’s rents rose 3 percent on renewals.
Some of the recent rent increases and reduced turnover may be a result of seasonality, with fewer people moving in late autumn and winter, said Jeff Brock, CEO of Key Property Services, a Marietta, Georgia-based real estate investment and management company he founded in 2001.
“People don’t move during the winter unless they have to,” said Brock. “If the increases we are getting in the seasonal tightness hold up this spring and summer, when vacancy cyclically increases, then you are seeing an institutional effect on the way rents are going.”
Single-family landlords also face limits on their ability to raise rents because tenants with expensive leases have more options than apartment renters, according to Dave Bragg, an analyst with Green Street Advisors Inc. in Newport Beach, California.
“Many apartment renters purposely pay a premium for convenience and superior sub-market locations,” Bragg wrote in report this week. “The highest-earning single-family renters will likely ultimately buy a single-family home.”
While increasing rents may help the Wall-Street backed landlords, it may slow the recovery for families and communities hurt by the housing crash, according to Sarah Edelman, a policy analyst with the Center for American Progress, a Washington-based think tank aligned with Democrats.
“These companies can run profitable businesses without pushing rents higher than most families can afford,” she said.
Wall Street-backed firms have extended their purchasing even as property prices rise and low-costforeclosures become harder to find, making it more important for them to charge higher rents to make a profit. Blackstone is spending as much as $35 million a week on houses through Invitation Homes. While that’s down from last year’s peak of $150 million a week, the company is still finding “attractive opportunities to invest,” Dunckel said.
American Homes 4 Rent is spending $500 million a quarter on property, an amount constrained by limits on the ability to raise capital.
The largest firms are buying some homes in bulk, snapping up pools from investors who began acquiring rental homes after values plunged 35 percent from their July 2006 peak and expected to sell when prices rebounded.
“We see lots of $5 million, $10 million and $15 million portfolios,” David Miller, CEO of Silver Bay, said in an interview at the Scottsdale conference.
While walking from a panel discussion to the restroom, he was handed about 15 business cards from people interested in selling collections of homes.
“There’s still plenty of opportunity to buy,” he said.