9 Sneaky Fees to Watch for When Hiring a Property Manager

To many landlords, property management services are superfluous, cutting their profit margins to a minimum in exchange for basic services. But the reality is that property managers can make your life extraordinarily easier—and most

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charge a reasonable enough rate that you can draw a monthly profit from your properties (headache-free).

However, when you’re searching for a property manager to handle your landlord responsibilities, it’s important to note that not all fee structures are the same. If you don’t understand how a manager’s fees work, you won’t be able to compare apples to apples, and you might end up shaving your profit more than necessary if you aren’t prepared for those fees when they come up.

9 Fees to Watch For

These are some of the most common “hidden” fees, extra fees, and differences in fee structure to watch for when comparing providers or finalizing a contract:

1. Rent Due and Rent Collected

Many property managers will charge fees as a percentage of rent, but watch how this is worded—there’s a difference between charging as a percentage of rent due and a percentage of rent collected. A percentage of

rent due means your company will charge you based on how much money a tenant owes you; a percentage of rent collected means your company will charge you based on how much money a tenant actually pays you—and is generally more favorable. If you’re charged based on rent due, you’ll end up paying for property management even when your property is vacant and you have no money coming in.

2. Early Cancellation

You may also be charged an early cancellation fee should you break the contract with your property manager before the end of its outlined term. For example, if you agree to work with them for a year and you want out after eight months, you might pay an additional few hundred dollars. Be especially wary of this fee with untested property managers.

3. A La Carte Management Fees

“A la carte” management fees refer to a suite of extra fees a property manager may charge you in addition to basic services. Usually, a property manager will either charge a higher price (and no additional fees) or a lower price, with multiple additional fees, somewhat evening out. Accordingly, it pays to know what fees are applicable and what they might run you. The remaining items in this list could all be classified as a la carte management fees.

4. Vacancy

If a company isn’t charging you the full cost of management while your property is vacant, there may still be an additional vacancy fee. Rather than collecting a percentage of rent due, they may collect a smaller amount from you as a kind of retainer.

5. Advertising

When it comes time to seek a new tenant, some property managers may charge you an additional advertising fee. This would cover the cost of creating media (such as taking photos) and placing it on sources like online listings or paper publications.

6. Leasing

A leasing fee may apply when you find a new tenant for your property. This covers the cost of drafting and securing a new lease agreement and is generally low in cost. If the cost here is high, it should raise a red flag, especially if your resulting tenant turnover seems to increase.

7. Lease Renewal

Lease renewal is even simpler than initial leasing, b

ut it may still require a fee. You may need to draw up new paperwork or renegotiate terms with a tenant, and that means your property managers will be doing a bit of extra work. Expect minimal fees here as well.

8. Maintenance

Property management fees should cover basic instances of maintenance and repair, but some companies may charge extra for big jobs, or for an inspection between tenants.

9. Eviction

Eviction can be a messy process, and if you ever need to evict, you’ll be grateful you have a property management service in your corner. Most property managers will handle the eviction completely on your behalf, but some will charge you an extra fee for the extra work involved. Expect to pay at least a few hundred dollars for this process.

Apples to Apples

Different companies might charge money in different ways, but if they’re offering similar services, you’ll likely find the bottom-line price of each to be competitive with one another. The big difference here is how you plan on using your property management company; for example, if you’re looking for long-term arrangements, an early cancellation fee shouldn’t factor much into your decision. Try to consider all these factors and all price points when comparing providers and making your decision.

Source: biggerpockets.com

A Skilled Property Manager isn’t Cheap & a Cheap Property Manager isn’t Skilled.

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Why The Cheapest Property Manager Isn’t Necessarily The Best

When it comes to choosing a property management company, it’s worth paying attention to that age-old saying that ‘you get what you pay for’.

Choosing the cheapest property management company may seem like a good idea at the time, particularly if you’re feeling the pressure on your bank balance after purchasing an investment property, but cheap is not satisfactory when it comes to protecting your very valuable asset and it’s important to choose wisely.

Very simply, property managers aren’t all equal and quite possibly, the one that’s offering its services at the lowest fee could also be the one that delivers the least amount of value.   Of course, as a property investor, you would be looking at maximizing the returns on your investment so you wouldn’t want to waste money, but saving a few dollars on cheaper property management upfront could very likely cost you a lot more over the long run.

Let’s look at why price is misleading when it comes to making a choice of property manager.

Firstly, you need to evaluate what the property manager is offering for that price. You should ascertain how many properties each person manages and what services they provide. If they have a multitude of properties on their books with only one property manager looking after them all, they could end up being too busy to focus on the important details of your investment.

You should check how often they will be performing inspections and whether they will be corresponding directly with the tenant to handle any maintenance requests and so on. Very often, a property management company that offers its services for at a very cheap rate will do little more than place tenants and collect rent every month, leaving the property owner to do all the running around.

And that brings us to another very important point – quality of tenant. A reputable property management company will have an extensive database of prospective tenants and a proven strategy for attracting quality tenants quickly and efficiently.   And that’s important because if the leasing real estate agent isn’t totally focused on getting your property tenanted with the right type of person as quickly as possible, you could end up with costly vacancies or a high turnover of inappropriate tenants.

The best property managers also know their areas very well, and they’re able to make informed recommendations about what rents can realistically be achieved, what property upgrades are necessary in order to make the property more marketable or if anything can be done to attract a higher rent, etc. They are also proactive when it comes to alerting owners when leases are due for renewals, advising owners of changes to state and federal regulations.

Warning bells should ring if a property management company that is offering cheap rates has a reputation for high staff turnover.   If the employees aren’t happy, you probably won’t be happy either.

Ideally, your property manager should pride themselves on their ability to communicate and the way they diligently return phone calls – as they do at Bev Roberts Rentals, Inc., leaders in property management in the North Carolina Triangle Area.   Another thing that sets Bev Roberts Rentals, Inc. apart from their competitors is that each property owner has a single point of contact with one real estate agent from leasing to property management within our company – and that’s not something that happens too often in the property management game. In addition We are a family owned and operated business. We believe that working together as a family gives us an advantage over our competitors and has been the key to our success. Our family is committed to outstanding customer service that goes beyond normal client expectations. It’s been proven that family owned businesses are more stable, and tend to have a high level of trust and commitment to customers, because how the company behaves reflects the family’s personal integrity.

If this level of service appeals to you, feel free to contact one of Bev Roberts Rentals professional property managers at (919) 306-5665 or visit our website to see what personalized property management service looks like at http://www.RobertsRentals.net.

Landlord Insurance 101: A Guide to Rental Property Insurance for Owners

More and more Americans are becoming landlords – either by necessity or choice – but do they know what it takes to insure their rental property?

Consider the trend: For more than a decade, homeownership rates have declined while rentals have increased. According to a recent report from Harvard University’s Joint Center for Housing Studies, the nation’s homeownership rate has fallen to just under 64 percent. Plus, the number of new rental households has increased by roughly 770,000 annually since 2004.home-insurance-300x110

Many homeowners who couldn’t sell their homes during the housing crisis decided to rent them out, says Bob Freitag, a North Carolina-based public adjuster.

“A lot of these new landlords didn’t know that they needed more than their existing homeowner policy to insure the property,” he says.

Now that the housing crisis has passed — and interest rates remain low — the idea of buying a second home as a rental property sounds lucrative to many who may be new to the real estate market.

Regardless of the situation that turned you into a landlord, it’s smart to talk to an insurance agent to make sure you have the proper coverage.

“Consider whether your needs or your circumstances have changed,” says Robert P. Hartwig, past president of the Insurance Information Institute. “And if they have — or if you don’t understand something — call your agent. A simple conversation can save you thousands of dollars in e future.”

Landlords and insurance: Getting the right policy

Rule No. 1: New landlords need to call their insurance agent as soon as they decide to rent their property.

“Some insurance companies don’t even want to insure rental properties because of the added risks,” Freitag says. “So you may need to find a new insurer all together. At the very least, you’re going to make significant changes to your existing policy.”

An average homeowners insurance policy doesn’t cover the property if the homeowner is not living there, according to Trent Zachmann, chief operating officer of Renters Warehouse. That’s because renters occupying a property carry a different set of risks and liabilities than homeowners do.

For instance, insurance companies know that homeowners generally take better care of a property than renters, which means they file fewer claims and are cheaper to insure. What’s more, once a house or condo is being rented, the insurance company considers this a commercial use of the property, which changes the insurance equation a bit.

Types of landlord or rental dwelling policies

What type of policy will you need?

“You’re going to need what’s called a landlord or rental dwelling policy,” Zachman says, “and there are some distinct differences between that and a traditional homeowner’s policy.”

But not all dwelling policies — sometimes called tenant occupied dwelling insurance — do the same things. Dwelling policies usually fall into three categories: DP-1, DP-2, and DP-3. Here’s how they break down:

  • DP-1 policy is the most basic and affordable dwelling policy you can buy, and it covers risks like vandalism and theft.
  • DP-2 policy expands coverage to risks like fire and windstorm damage.
  • DP-3 policy is the most comprehensive of all three, covering all perils unless they’re expressly excluded.

Freitag suggests landlords purchase a DP-3 policy. Not only does it cover the broadest range of risks, but it also pays out full replacement costs on a claim as opposed to just “actual cash value.” The difference is critical, he says.

For instance, let’s say a fire causes $10,000 in damage to your 20-year-old rental property. If your dwelling policy only pays out cash value the insurance company will consider the depreciated value of the home, which could cause 20 or 30 percent depreciation on the final claim payout.

However, if your policy pays out full replacement costs, the insurance company will reimburse you for the present-day cost of rebuilding or making repairs, regardless of the home’s age.

Freitag doesn’t favor a cash-value policies, because landlords often need out-of-pocket money to make repairs after filing a claim. “Make sure you tell your agent that you want a policy written for replacement costs,” he says.

Landlord policies may protect against loss of rental income

Landlord policies may also cover the loss of rental income, which is a critical consideration for landlords.

For instance, extensive fire or water damage may make your rental property uninhabitable for several months. If your dwelling policy covers loss of rent — sometimes called fair rental income protection — the insurance company will reimburse you for that unexpected financial hit.

“Make sure you ask your agent to include loss of rent in the policy,” Freitag says. “It only costs pennies on the dollar and it’s incredibly worth it if you need it.”

How much does a landlord insurance policy cost?

Many variables go into pricing a dwelling policy for landlords, but according to Melissa Neis, vice president of Chicago-based Parr Insurance Brokerage, it will probably cost between 20 percent and 30 percent more than a typical homeowner policy.

“That’s because the insurer is taking on more risk,” Neis says.

According to a 2016 study by the National Association of Insurance Commissioners, the average homeowners insurance premium across the United States in 2013 (the most recent data available) was $1,096. So a landlord policy will cost between $220 and $330 more per year than a traditional homeowners policy.

Important to note: No matter what type of dwelling policy you purchase, it will not cover the possessions of your renter (such as clothes, electronics or furniture.) Neis suggests landlords require tenants to carry renters insurance, which will protect you against a potential lawsuit if a tenant’s possessions are destroyed.

Source: huffingtonpost.com

10 Rental Property Tax Deductions Landlords Love: Did You Take Them All?

Whether you rent out a place or room to a tenant full time or just for a few weeks while you’re away on vacation, you already know it’s a great way to make money. But did you know it can also save you cash at tax time? That’s right, being even a part-time landlord For-Rent-Landlord-Tenant-Investment-300x300comes with tons of rental property tax deductions you’ll want to take advantage of. Pass them up, and you’re essentially throwing wads of moolah out the window.

“You could be losing hundreds, if not thousands, of dollars in deductions,” says St. Petersburg, FL, Realtor® Lisa Cahill, a CPA and former tax manager.

One caveat, though: If you rent out part or all of your primary residence to others for fewer than 15 days out of the year, you can’t deduct any expenses. But on the other hand, you don’t have to report the money as rental income (meaning it’s tax-free).

However, if you rented out all or part of your home for 15 days or more in 2016, make sure you claim these tax deductions from Uncle Sam when you file before the deadline this year.

1. Rental service fees

If you found a tenant using a rental or home-sharing service like Airbnb, VRBO, or HomeAway, you paid the company a fee. Airbnb, for example, takes a 3% cut of whatever guests pay. But guess what? You can deduct that (annoying) fee as a business expense.

“Any fees that you paid directly as the host are tax-deductible,” says Lisa Greene-Lewis, CPA and tax expert at TurboTax. This is true even if it came off the top and never hit your bank account. In addition to this fee, you can deduct value-added tax, which may have been taken off the top, too.

2. Advertising fees

If you had trouble finding a renter, you may have paid for advertising outside of what was offered by the rental service. If so, that money is tax-deductible. Roommate-matching websites like Roommates.com, for instance, charge hosts a fee in order to read messages received from other members. (A 30-day membership is $20.)

3. Utilities

Yes, your electric, heating, and water bills are also deductible, even if you live with your tenant. In the latter case, you’d just deduct a portion.

“How much you can deduct is based on the square footage of the space you rent out,” explains Greene-Lewis. So if a tenant is renting 1,500 square feet of the total 4,500 square feet, including living quarters and common areas, you’re allowed to deduct for one-third (1,500/4,500) of the utilities that you paid.

Tax deductions for vacation homes, meanwhile, are based on how many days the house is rented out compared with how many days you used it personally. For example, if the house is rented out for 90 days and used personally for 30 days a year for a total of 120 days, then you would be able to deduct 75% (90/120) of the utility costs.

4. Cleaning, gardening, and maintenance

“Whether you clean the house yourself or pay a professional cleaning service, the money is tax-deductible,” says Greene-Lewis. This includes cleaning supplies, which can add up, as well as gardening, lawn mowing, and other maintenance fees.

5. Repairs and painting

“If you have a handyman come to repair a window or repaint a room, those costs are deductible,” says Cahill. If you rent out a room in a home you live in and pay for whole-house maintenance, such as a furnace tuneup or a roof replacement, a part of that cost will be deductible as well, depending on the square footage devoted to your rental.

6. Property taxes

Property taxes work the same way: You can write off the portion of your property taxes equal to the portion of your home being rented out. These can be deducted either as personal expenses on Schedule A or deducted as rental expenses, says Cahill. (Here’s help on how to calculate your property taxes.)

7. Property insurance

If you need to pay more insurance on your home because you have renters present, you can deduct the extra cost. And even if your property insurance fees haven’t increased, you can still write off a portion of the expense as a business expense.

8. Furniture, linens, and food

If you buy new furniture for the space being rented out or provide renters with household items such as linens, curtains, and shower supplies, you can claim a tax deduction for those costs. Ditto for any food or drinks that you provide guests.

9. Municipality services

Some expenses paid to the local government, such as fees for trash and snow removal, are also tax-deductible.

10. Structural improvements

You can deduct the cost—or the interest paid on a loan, if you don’t pay cash—of structural improvements (like new roofing) made to the property if they apply to the rented area. (Depending on the project, you may also be able to snag a home improvement deduction.) However, these costs will need to be depreciated over time—meaning you won’t get all of the money back upfront, but will have to divvy it up over the life of the loan.

 

Source: realtor.com

Welcome to North Carolina!

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On November 21, 1789, North Carolina ratified the Constitution to become the twelfth state. The vote came approximately two hundred years after the first settlers arrived on the Atlantic coastal plain.
#ThisDayInHistory #NorthCarolina #CaryNC

What’s The Secret To A Successful Property Management Selection?

SAN DIEGO—Experience is one of the most important factors when selecting a property manager, particularly experience that is asset-type and market specific, Cushman & Wakefield SVP and IREM president-elect Mike Lanning tells GlobeSt.com. We spoke exclusively with Lanning about some of the less-obvious reasons to choose one particular property-management firm over another, the role of leadership in property management and how property management fits into an owner’s overall strategy.43008669_s-300x199

GlobeSt.com: What are the lesser-known reasons for using a property-management firm?

Lanning: I think experience is one of the most important factors when selecting a property-management firm, and it also depends on the property type an owner owns—multifamily, office, industrial or retail. It’s also important to match up the objectives of an ownership group with a property-management firm, and it’s difficult to hire a firm that focuses on multifamily when you own retail properties or even a company that focuses on office management if you have an industrial portfolio. It’s important to match experience with the property type.

Also, when the property is entrusted to someone else to manage, the owners/investors need absolute assurance that their investment is protected. Coming from the IREM perspective, it’s important to have an educated asset or property manager to provide local expertise and real market insight. This can make a significant impact on a property’s bottom line. As a professional property-management firm, we work on behalf of the client, so Cushman & Wakefield is a third-party property-management firm, and we are creating a level of confidence earned through experience. We feel we’re transparent with our clients, adhere to code of professional ethics and have integrity beyond reproach. Management companies across the country bear the AMO accreditation through IREM so that the owner knows the company will stay on top of their properties, provide local expertise and bring true market insight to the assets they manage.

GlobeSt.com: How does leadership come into play in property management?

Lanning: Property managers lead the team that includes brokerage, marketing and overseeing a group of vendors that service the property, so it’s important to develop leadership skills because you have to be a leader of a team. We think that’s important. We think that basic real estate skills will always form the prerequisite for successful real estate management. You must be prepared to analyze marketing statements and leasing plans, manage engineering functions and all the rest of the responsibilities that go under that job, but leadership and relationship management skills become more important as your career progresses. The higher up you are in an organization, the more you have to manage people and relationships rather than the properties themselves. Instead, you’re managing the people who manage the properties, so leadership competencies really distinguish top real estate professionals from real estate technicians handling day-to-day responsibilities.

GlobeSt.com: How does property management fit into an owner’s overall strategy for an asset or portfolio?

Lanning: Every owner going into owning an asset has financial goals or objectives when acquiring a property. The property manager helps them create and implement strategies to achieve those goals. Oftentimes, we see property managers who are responsible for their clients’ needs and meeting ownership objectives, or those who work with an asset manager representing an ownership group, and they must generate the greatest potential income and operate efficiently in terms of operation expenses. Operational strategies will change upon the goals of the investor. Maintenance decisions will change based on goals, so property managers play a critical role in achieving the desired outcome of the owners’ goals.

GlobeSt.com: What else should our readers know about best practices and leadership?

Lanning: The concept behind best practices is that certain proven solutions and guidelines for operating properties enhance effectiveness in operating them and ultimately give those properties a competitive advantage. But just because something is a best practice doesn’t mean it’s executed well. You must get buy-in from owners and property staff to execute those best practices, and you must lead your staff in effective implementation of that practice. The best practice that is poorly executed won’t deliver intended results. Unless it is a very small property, the property manager must rely on his or her staff for operational excellence, so without strong leadership skills, most likely the property won’t meet owners’ objectives. Best practices continue to evolve, and what was established practice seven years ago may not be today. We make sure we’re staying up on today’s best practices and what’s going to happen with an asset three to five years from now. We’re continually evaluating our best practices to see if they are current; they must be enhanced periodically. And as an AMO Firm, we have to meet certain top-line industry standards regarding operations and servicing our clients.

Source: globest.com

The housing cycle: Is Raleigh approaching its peak?

Those who keep track of estate markets know that they run in cycles of good times, not-so-good times and sometimes downright depressing times, like what the markets experienced following the 2008 economic recession.

But the Triangle housing market has been in a pretty strong recovery mode for a few years now. Is it time to start preparing for the market’s peak and impending downturn cycle?

Well, not quite yet, according to a research note by the John Burns Real Estate Consulting firm. Its report, released Thursday, shows a bell curve chart of the 20 largest new home volume markets in the U.S. with the Raleigh market falling somewhere in about the fifth inning of a nine-inning game, to use the baseball game analogy.

Poll: Is Raleigh approaching the peak of its housing cycle?

“Raleigh is one of the Southeast markets that a lot of builders entered and scaled up on during this recovery, which is why we have it a bit higher than Charlotte and much higher than Atlanta,” says Rick Palacios Jr., director of research at John Burns Real Estate Consulting.

Home values in Raleigh, he says, are already 13 percent above their prior peak, whereas in Atlanta home values are still about 1 percent below its market peak. Charlotte home values are about 8 percent above market peak, whereas the new home market in Nashville, Tennessee, has been “growing gangbusters” with home values 28 percent above prior peak, Palacios says.

The report shows that about a dozen of the largest new home markets, including all that were mentioned above, are in what Palacios describes as “phase 2” or expansion phase of a five-phase housing cycle: Capital investment is picking up, homes sales and prices are rising, there’s good affordability and moderate construction.

“Many of our clients today are laser-focused on these geographies, continuously adding to their investments in these markets,” Palacious wrote, noting also that investment risk remains fairly muted. “Job growth has come back nicely, with the lion’s share of expansion markets recovering all of the jobs lost during the Great Recession.”

Phase 3, or the “exuberance” phase, is next, which includes markets like Austin, Dallas, the San Francisco bay area and Seattle, where home values are up 20 to 50 percent, affordability is getting tougher and markets are beginning to see signs that resemble the prior boom and bust cycles.

Only Houston, Palacious writes, has reached the Phase 4 contraction and early downturn phase where construction activity has started to pull back. “We believe Houston will remain in Phase 4 through 2017 and will most likely avoid the full-fledged downturn/recession association with Phase 5,” he writes. Phase 5 is full downturn and recession with capital losses becoming the norm.

So it looks like Raleigh and the Triangle housing market still has some room to grow before builders have to really start getting concerned about another downturn coming our way.

Amanda Hoyle covers commercial and residential real estate. Follow her on Twitter @TBJrealestate