5 most common issues faced by landlords

Concerns over unpaid rent, unoccupied property and unruly tenants rank highly among the worries that can keep landlords up at night.21384546_s

A specialized form of landlord insurance can provide landlords with peace of mind knowing they are covered for the risks associated with property investment, should the unforeseen occur.

With preparation and dedication, property investment can be an attractive wealth creation strategy for Australians. Like any investment, it’s not without its risks.

These are the top five pain points
of property investment:

1. Unpaid rent

Concerns over rent being paid on time can become a major stress point for property owners relying on the income. It’s an issue that needs to be addressed as soon as possible.

If the tenant falls into arrears, a breach notice should be sent for non-payment of rent. If the tenant still doesn’t pay rent after receiving the first notice, a second notice should be sent to terminate the lease and request vacation from the property. Landlords should refer to their local laws and their lease agreement as these requirements may differ in each state/territory.

Landlords should complete thorough checks of potential tenants’ references during the screening process, specifically looking for issues with missed or late payments.

2. Unoccupied property

Having a rental property unoccupied can place significant strain on an owner’s cash flow.

Presenting a well-managed property may help to broaden your pool of prospective tenants, reduce time and money spent on advertising and decrease the number of days your property remains unoccupied between tenancies.

Items once considered luxuries are now standard requirements. Not offering these comforts can make a real difference to the property’s appeal and may impact the amount of rental income the landlord earns.

3. Managing paperwork

There is a sizeable amount of paperwork that goes with being a landlord, and left unchecked it can build up and become a burden.

A good property manager can save landlords from potential paperwork headaches by managing the administrative side of the investment property for them.

4. Maintenance issues

Leaky taps, broken tiles and repairing faulty appliances can create headaches for tenants and landlords.

Landlords who skimp on maintenance with quick fix solutions often find that it actually costs them more in the long run. With the popularity of home renovation shows like The Block, landlords are given the false impression that improvements to their properties are achievable within tight time frames and with limited practical experience or knowledge.

Do-it-yourself fixes can result in substandard workmanship and legal liability claims if there is an injury or loss resulting from a safety hazard.

5. Unruly tenants

No landlord wants to wake up to news that their property has been trashed.

While most tenants do the right thing, there is a minority that violate their lease agreement by behaving poorly or undertaking illegal activity at the property.

Some tenants may breach their pet policy, fail to adhere to noise requirements or smoke at the property. Although it’s rare, other tenants may use the property to distribute or manufacture illegal drugs.

Tenants involved in illegal activity go to great lengths to hide their activities. Routine property inspections can help mitigate these risks by identifying problems before they escalate.

Source: smartpropertyinvestment.com

 

Landlord Planning To Not Renew Lease With Tenant

AttorneyThe Landlord Protection Agency® presents John Reno, Esq., a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q: Dear Mr. Reno:
My tenants lease will expired the end of May. I do not wish to renew the lease, planning on remodeling. What would you recommend. I anticipate that the tenant may be difficult.
Thank you,
Lee Fadavi

A: I would notify them as soon as possible that their lease will not be renewed. Also, review your lease carefully about what notice, if any, is required and how to give it. But even if no notice is required, I strongly recommend it.

Security Deposit Tips For Rental Properties

Money security concept

Requiring a security deposit is one of the standard components of renting out your investment property. Holding a deposit benefits the owner as it protects you from paying out of pocket for repairs that exceed the standards of normal wear and tear. But do you know what you should be doing as a property owner with that security deposit?

The security deposit is a predetermined amount that is provided by the tenants upon their approval to lease a property, and it is meant to cover any unusual or extreme damages that occur during their occupancy. When the lease expires and the tenants vacate, the security deposit is returned to them, minus any costs you may have to deduct to cover excessive damages.

It sounds simple, right?

Unfortunately there can be a lot of confusion regarding the collection of a security deposit, where it must be held, and disbursing it at lease end. This may not only cause friction between the tenants and owners, but in some cases can lead to legal action being taken by tenants.

If you own rental properties, there are a few tips you should keep in mind regarding managing security deposis:

  1. Set clear expectations in writing. Be sure that your tenants understand before they even put the deposit down what they are responsible for and what costs you will be forced to deduct at the end of their lease if applicable. Put it in writing! Don’t allow for any negotiable items at the end of a lease term.
  2. Know the law. As a property owner, the security deposit is meant to protect you, but there are certain items and repairs for which you cannot legally deduct money or charge a tenant.
  3. Keep the security deposit in a trust account. According to North Carolina law, tenants’ security deposits must be kept in trust accounts for the duration of tenancy. Keeping the security deposit in the appropriate bank account is vitally important to long-term property ownership. Not only will this help end-of-year reconciliations, but it will assure that the security deposit is properly earmarked and ready to be disbursed back to the tenants when they vacate. You should never comingle accounts (this is illegal) and you should talk to an accountant about establishing a trust or escrow account.
  4. Charge the appropriate amount. Be sure to get the number right. You need to make sure the amount charged for a security deposit is enough to cover any repairs you may need to make; however, keep in mind that a security deposit in North Carolina can never exceed an amount equal to two months’ rent.
  5. Know your community association’s rules and be sure those are part of the tenants’ expectations. If your rental property is in a community governed by association rules, be sure that tenants understand that they must comply with those rules. If your tenants are in violation of community covenants, you will need funds at your disposal to get your property into compliance, pay any fines or both. These types of situations can be avoided if you are sure all expectations are clearly set in writing with your tenants and that they’ve been provided a copy of the community rules.
  6. Document the property. Before new tenants occupy your rental home, be sure to do a walk through and make a video of the entire property, inside and out. This will make any damage claims at the end of the lease easier to prove as the video provides you visual proof of the property’s condition at the beginning of the lease.

The importance of collecting a security deposit and setting clear expectations at the outset of a tenant’s occupancy cannot be emphasized enough. As a property owner, it is vital that you seize the opportunity to set expectations and collect funds to protect your property from potential damages. It is in an owner’s best interest to document property condition, be knowledgeable of community rules, set clear expectations, request the correct amount in deposit funds, and comply with all state laws.

Source: wilmingtonbiz.com

Bankrate survey: Nearly half of renters are afraid they can’t buy

owner and renterRents are steadily climbing; still, many Americans aren’t quite ready to buy a home.

Who owns and who rents?About one-quarter of respondents ages 18-29 own their homes, and the proportion of homeowners goes up with age. The “other arrangement” category includes people who live rent-free with parents, other family or friends.

More than a third of non-homeowning consumers say the main reason they don’t own is that they just don’t want to be homeowners yet. That’s according to a survey commissioned by Bankrate.com.

Nearly half of respondents say they’re not homeowners right now because they either can’t afford a down payment (29%) or they believe their credit isn’t good enough to qualify for a mortgage (16%).

“A lot of people make assumptions that they can’t afford to buy based on just some perceptions, and many have not taken the step to figure out how mortgage-ready they are,” says Marietta Rodriguez, vice president of national home ownership programs at NeighborWorks America in Washington, D.C.

Hispanics were the ethnic group most likely to report that their credit is holding them back from home ownership, while the most-cited reason among blacks and whites was they just don’t want to own a home yet. The findings also indicate that as respondents’ education level increases, they are less likely to report that the reason they don’t own is due to credit problems.

Recession pains linger

Among all ages, 35% of non-homeowners don’t want a house yet. That’s the reason given by 44% of millennials (ages 18-29), 28% of non-owners ages 30 to 49, 29% of those ages 50 to 64, and 30% of those 65 and older.

The share of non-homeowners who have counted themselves out of home ownership for the time being is somewhat expected, considering the lasting effects of the housing meltdown, says Pava Leyrer, chief operating officer for Northern Mortgage Services in Grandville, Michigan.

“A lot of people went through some deep pains in the past 10 years or less,” she says, citing foreclosures, job losses and bankruptcy filings. “All of those things are traumatic in your life.”

The down payment dilemma

The survey also asked non-homeowners what percentage of the total cost they would contribute as a down payment on a hypothetical home purchase. Nearly 2 in 10 said somewhere between 11% and 20% down, and another 17% of respondents would put down 6%-10%.

The most popular response, however, was “don’t know” — almost a quarter of non-owners report they don’t have a clue how much they would put down to buy a home.

Although it appears to be a substantial percentage of people, Rob Chrane, president and CEO at Atlanta-based Down Payment Resource, says it’s consistent with what his company has encountered.

Only 9% of non-homeowners said they would put down 1% to 5% of the purchase price as a down payment, which speaks to the overall dearth of knowledge about down payment requirements, Chrane says. It’s possible to get an FHA loan with just 3.5% down, or a conventional loan with 3% down.

Additionally, the survey underscores the fact that many aren’t aware that down payment assistance is available, which could be keeping them on the sidelines.

“The biggest single issue is that consumers just don’t know these programs even exist,” Chrane says. “If you don’t know of the possibility then you don’t know to ask people for help with it.”

Know where you stand financially

The solution to misinformation about the homebuying process is to reach out to a nonprofit housing counseling agency, Rodriguez says.

And, even if you’re not ready to buy, it helps to find out where you stand financially, advises Leyrer.

“As you plan your financial life moving forward in the future, you can plug that in and say, ‘I have a good idea of where I’m at (and) what I need to do,’” she says.

Bankrate’s February Money Pulse survey was conducted by Princeton Survey Research Associates International and included responses from a nationally representative sample of 2,002 adults living in the continental U.S. The margin of error is plus or minus 2.6 percentage points.

Source: bankrate.com

Here’s how the US housing market has been impacted by the 2008 crash

Older millennials, minorities, especially Hispanics, men and the wealthy in overheated housing markets were most likely to be displaced from homeowners to renters.

The financial crisis of 2008 created the biggest disruption to the U.S. housing market since the Great Depression. From the top of the housing bubble roughly a decade ago until just recently, there’s been a five percentage-point increase in the number of renters to owners to 43.3% from 38.5%. But who are these renters?

To get a clearer picture of who lost out on the American Dream of homeownership, we used the American Community Survey data from 2006 to 2014 to uncover who saw the biggest shift from being a homeowner to a renter by age, gender, race, and income in the 50 largest U.S. metros. We excluded eight cities due to data quality. Among the hardest hit were:

Who Lost The American Dream

08 created the biggest disruption to the U.S. housing market since the Great Depression. From the top of the housing bubble roughly a decade ago until just recently, there’s been a five percentage-point increase in the number of renters to owners to 43.3% from 38.5%. But who are these renters?

To get a clearer picture of who lost out on the American Dream of homeownership, we used the American Community Survey data from 2006 to 2014 to uncover who saw the biggest shift from being a homeowner to a renter by age, gender, race, and income in the 50 largest U.S. metros. We excluded eight cities due to data quality. Among the hardest hit were:

Ultimately, housing markets with larger spikes in foreclosures during the crisis were more likely to exhibit larger jumps in renting through that time period, especially in housing markets on the West and East Coasts. In fact, Las Vegas saw the number of renter households jump nine percentage points to 49.4% of all households in the nine years prior to 2015.

A Steady Decline in Homeownership and Increase in RentingWhile America is still far from becoming a nation of renters, the percentage of renters in the 50 largest U.S. metros who rent rose from 36.1%, pre-crisis in 2006, to 41.1%, post-crisis 2014. This is a 5-percentage point jump. Meanwhile, homeownership declined 5 percentage points. More than half of the areas with the greatest shift from owners to renters were on the seaboards.

Not only are the percentage of renters increasing, so are the rents – which have risen faster than incomes. Average rents in the top 50 markets have risen 22.3%, while incomes nationally fell 5.8% in the nine years since 2006. To put this into context, a typical household spent just 29.7% of their income on rent in 2006. Since the economic crisis, this number peaked in 2011 at 31.5%, then fell slightly to 30.7% in 2014.

At the local level, we found that in 40 out of the 50 metros examined, households spent a larger fraction of their income towards paying rent than they did in 2006. At the most extreme, renters in Jacksonville, Fla., spent 32.3% of their income on rent – up 4 percentage points from 2006.

More Renters Where Foreclosures Struck HardestEach of the 50 largest metros that we examined in this study saw an increase in renters from 2006 to 2014. Many of these markets were hit hardest by foreclosures as homeowners became renters by circumstance. Las Vegas, which was the epicenter of the foreclosure crisis, had the biggest jump from 39.5% in 2006 to 49.4% in 2014 – rising 9.9 percentage points. It’s followed by Phoenix, Fort Lauderdale, Fla.West Palm Beach, Fla., and Tampa, Fla.

On the other hand, housing markets that were largely unaffected by the boom and bust of the recession saw the smallest increase in renters. This includes Buffalo, N.Y.Long Island, N.Y.Hartford, Conn., and Boston.

Source: businessinsider.com

A landlord’s guide to keeping the peace

mad personAny landlord who’s been around the block a few times knows there is plenty that can go wrong with an investment property.

Managing the upkeep is one thing, but managing tenants – and their relationship with the neighbors – can sometimes get a little more complex.

Barking dogs, strong smells, rubbish dumpers, renovators, loud music and noisy shift workers are among the most common gripes for tenants. Then of course there’s the fact that no one ever enjoys taking the bins in or out.

Amy Sanderson, head of property management at LJ Hooker, says there’s also one other major factor that can lead to conflict.

“You’ve got the investor who wants to make as much money as they can from their investment property, and then you’ve got the tenant who wants to make a home – and they’re diametrically opposed,” says Ms Anderson. “And then you’ve got the property manager in the middle.”

Ms Sanderson says many landlords forget that a property needs to be clean and tidy when it’s on the rental market.

“I always say to investors: look at the property and think ‘would I be happy to live here?’”

While she recommends investors not shirk on maintaining the property, Ms Sanderson says you don’t necessarily have to do every little thing a tenant asks if it’s unreasonable.

If there’s a scratch on the wall, for example, it doesn’t mean you have to urgently repaint.

“You need to explain to the tenant that there are certain things that may not be done,” she says. “That’s where you lean back on the legislation.”

But keeping, say, the heater and air-conditioner in good order might win you a long-term tenant, and dodge the costs of finding new renters.

“There’s the cost of re-letting the property, there’s also the vacancy and wear and tear when people move in and out,” says Ms Sanderson.

Karina Reed, department manager of property management for Hocking Stuart says the main problems she encounters include the settling of the bond, differing views over maintenance and landlords who expect too much rent for too little.

Ms Reed says some of these problems can be nipped in the bud by selecting a good agent.

“The landlord should actually ask when they’re appointing an agent, ‘what are you like at problem solving, what are you like at conflict management?’”.

A thorough initial condition report should provide a solution to any disputes at the end of the tenancy.

As for maintenance, Ms Reed says, something a landlord might consider a minor problem can really aggravate a tenant.

“The tenant with the blind that keeps falling down – to the tenants that’s a pain in the backside.”

Source: domain.com.au

The Delicate Art of Rent Increases

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

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

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

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

Ensure Compliance With the Law

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

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

Give Extra Notice

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

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

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

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

Calculate the Rent Increase

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

Determine Why You’re Raising the Rent

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

Keep Your Tenants Happy

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

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

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

Source: realtormag.realtor.org