FORBES: Eight Reasons You Shouldn’t Manage Your Own Investment Properties

1Purchasing an investment property is an exciting business venture. If your building is in good shape and you find the right tenants, you stand to earn a lot of money from your rental units.

At first it may seem like a good idea to manage your own property and retain full control over costs, tenants and income. However, self-management can often be a headache: When something breaks down or your tenants are late with rent, you bear the sole responsibility to address it.

Hiring a third-party property management company can be worth every penny, especially if you’re looking to grow your investment business over time. Members of Forbes Real Estate Council shared eight common scenarios in which it makes more sense to outsource your property management tasks.

1. If Real Estate Investing Is Your Side Hustle

If an investor has a full-time job and they are investing as a side hustle, I would suggest hiring a property manager from day one. If the investor is fully focused on real estate investing, it makes sense to bring in a third party once they reach 10 units. At that point, their time is better used looking at more deals versus collecting rents or dealing with tenant maintenance issues. – Ali Jamal, Stablegold Hospitality

2. If You Lack Housing Expertise

Investors should not manage their own properties in situations where they are not familiar with the type of housing being managed. For example, with affordable housing, there is much compliance involved and making a mistake can result in fines. In that scenario, property management is best left to third-party companies that specialize in affordable housing. – Nathaniel Kunes, AppFolio Inc.

3. If You Want To Maximize Your Time As A Passive Investor

Your time is valuable, and technology is opening up many outsourcing options by connecting investors with qualified professionals in property management and skilled labor. Take advantage of every opportunity to maximize yourtime. In fact, investment platforms are allowing people to diversify across several properties without ever picking up a hammer. – Nav Athwal, RealtyShares

4. If You Need To Fill In Skill Or Resource Gaps

Each investor’s access to resources and prior skills and knowledge needs to be reviewed before providing this type of recommendation. It needs to be personalized. An investor who is a handyman likely doesn’t need to pay someone to make repairs. Finding the right tenant can make or break success, so evaluating candidates may be the best area to have help, particularly at first. – Michelle Ames, HorsePower Team Texas/Independent Realty

5. If You Don’t Have Time To Learn The Laws And Run It As A Business

Outsourcing will avoid legal liabilities from Fair Housing and Fair Credit Reporting Acts, state landlord-tenant laws and local regulations. Property managers will have resources that can perform services for less. You’ll also be less likely to lose income from tenants who don’t pay their rent or rents that end up being below market. – Alex Hemani, ALNA Companies

6. If Your Properties Are Located In Different Markets

Using third-party management is usually advisable when properties are located in different markets, as well as when owners don’t have the time or skills required to manage the property effectively. While it is tempting to save the 7-8% management fee typically paid to property managers, there are a host of tasks they take care of to keep the property occupied, cash-flowing and maintained. – Gary Beasley, Roofstock

7. If You’re New To Being A Landlord

You should hire a third-party manager if you’re new to being a landlord and don’t completely understand local ordinances and leasing practices, or don’t have all the contacts needed for repairs and maintenance items. A good third-party manager will know all of the above and you will learn them over time. – Lee Kiser, Kiser Group

8. If You Want To Scale Your Investment Business

If you want a large income property portfolio, don’t self-manage beyond one to two years. After that time, you will be better able to understand “a manager’s perspective.” Your highest and best use isn’t faucet repair or replacing bathrooms. It’s researching geographic markets and establishing competent teams. If you self-manage, ask yourself better questions like, “How scalable is this?” – Keith Weinhold, Get Rich Education

Source: forbes.com

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Southwest Wake County’s growth spike shows it’s no longer a bedroom community

What used to be a mere cluster of Triangle-outskirt towns is now one of North Carolina’s centers for economic growth. Even by Triangle region standards, which have been significant, Southwest Wake County’s growth has spiked over the last two decades.

The Census Bureau recently reported growth rateCaptures of approximately 26 percent in Apex, 35 percent in Holly Springs, and 44 percent in Fuquay-Varina, outpacing Raleigh in 2016. Residential growth in Holly Spring

 

s alone is expected to grow so rapidly that for every three residents today, there will be five by 2025.

As a site selection specialist and a local resident, I have seen the impact this has had on the workforce. Joanna Helms, Apex Economic Development Director shared, “Most people don’t realize that Apex has over 50 thriving companies that range from advanced manufacturing, wholesale distribution and precision machining to information technology, computer gaming and software development, as well as micro brewing.”

 

Following the population growth, retail market vacancies have been competitive, and are currently at 2.8 percent according to CoStar. It seems that almost every week, another grocer, restaurant, or other retailer announces an opening. As of November 2017, Southwest Wake had almost 30,000 square feet of retail space under construction, as well as five shopping centers proposed. Current mixed-use developments in Holly Springs and Fuquay-Varina create tremendous retail and mixed-use opportunities for business owners and consumers alike.

While retail development will always follow the rooftops and urban areas continue to thrive and grow, a new trend is emerging where many companies are migrating closer to their workforce. This has not only reduced geographic and traffic concerns during the recruiting process, but has also developed a quality of life for employees that, in turn, improves the quality of the company. Names such as Dell Inc., Rovisys, and Sequirus are located in the heart of Southwest Wake, producing thousands of jobs and catalyst for economic growth.

 

“Town leaders have strategically positioned the assets of the community to attract more life science companies. Highlights include: more than $100 million has been invested in roads, water and sewer projects and parks and recreation facilities in the last 10 years,’ said Holly Springs Economic Development Director, Irena Krstanovic.

Southwest Wake currently has over 75,000 square feet of industrial and flex space under construction. These properties are in addition to almost one million square feet of proposed development. Local municipalities are looking to grow their commercial tax base, as well as offer incentives for businesses to join their communities.

This, along with land availability, provides development opportunities for any

 

thing from spec space to owner-occupancy. Additionally, the construction of “Complete 540” project going through the southwest, there will soon be expedited access to RDU and other parts of the region. According to Economic Development Director, Jim Seymour, “Fuquay-Varina continues to see strong growth in the expansion of our medium to large manufacturing firms. Our geographical location is one of our community’s greatest assets for manufacturing and distribution.”

Source: https://www.bizjournals.com/triangle/news/2017/12/12/southwest-wake-county-s-growth-spike-shows-it-s-no.html

 

Renters Vs. Landlords: Who Wins In 2017?

1The answer to the question of who is coming out ahead in the apartment market – renters or landlords – has been fairly clear for a while now. Renters have rarely caught a break since many major markets began to recover from the Great Recession in 2010.

That may change in 2017.

The recovery years of 2010-2016 saw rent growth rise 150 basis points (bps) above the long-term average, and renters only began to see relief from continual price hikes toward the end of last year. This year promises to show further declines in some markets where rents have risen the most.

Occupancy and Rent Growth since 1998

U.S. Occupancy and Rent Growth since 1998.

Though apartment renting is not a zero sum game, slower rent growth in 2017 is expected to benefit renters more than landlords. Nationally, during the last six years, the average annual rent increase was about $516. It’s expected to lower to about $347 in 2017, reflecting about $168 in savings annually.

Ranking the Markets

The table below shows the top 10 metros with the largest expected savings in apartment rent during 2017 compared to the last six years. The projected savings for each market was calculated by subtracting the annual change for 2017 from the average annual change in rent from 2010-2016. Out of the 54 major U.S. metros analyzed, some 36 showed annual savings ranging from $8 to $2,647, with average decreases of about $360 from the average 2010-2016 price.

Top 10 Savings

Also included in the analysis was a calculation of change in elasticity, which is a measure of how sensitive consumers are to price changes. In this case, greater or lesser degrees of elasticity reflect how renters react to changes in rent. Generally, housing is an inelastic product, which means that the change in price doesn’t substantially affect the quantity demanded.

However, whether a rent increase is considered a hardship or a rent decrease is considered a win for renters depends on the perspective of residents in each market. Where renters are less sensitive to change, the savings or increase may be a minor factor in their housing decisions.

For this analysis, the long-term average for elasticity was calculated and compared with 2017’s figure. If the elasticity value in 2017 is less than the historical average, it is said that renters are getting less sensitive to changes in rent and vice versa.

Trends by Market

Bay Area: San Francisco, San Jose and Oakland, lead the pack for most savings in 2017. San Jose renters stand to pay $2,647 less a year compared to the 2010-2016 average rent, and annual savings will be $2,638 and $1,647 in San Francisco and Oakland, respectively, this year. These markets saw a substantial increase in rent during the last six years, often producing double-digit rent growth that was not sustainable over the long term. The positive change in elasticity value in 2017, compared to the long-term history, points to renters in these markets getting more sensitive to increases in price. The impact of new supply, combined with moderating job growth compared to the last six years, will lead to softer rent growth throughout 2017.

New York: Though New York renters stand to see substantially smaller savings than their counterparts on the opposite coast — about $630 a year — the positive elasticity value for the market indicates that they are more than ready for the decrease. Decelerating job growth and an increase in new supply in 2017 is expected to keep rent growth low this year.

Houston: Houston saw a larger impact on job growth from the drop in oil and gas prices, and continued weak employment numbers may be one reason that Houston renters show the highest sensitivity to price on this list. Houston residents will save about $509 this year, about half a month’s rent relative to the average effective rent in 2016. Though job growth is expected to pick up this year, it will most likely remain well below the metro’s capacity, keeping rent levels lower.

Denver: The Denver market’s performance slowed significantly last year, as rent growth returned to more sustainable levels after being in double digits for most of 2015. That should yield a savings of about $502 a year for Denver renters in 2017. New supply coming to market ramped up in 2012 and still has not slowed, with 3.6% inventory growth expected this year. Weaker job growth this year will mean that the new supply is absorbed at a slower pace, which will continue to keep rent growth at lower levels.

Boston: As with many markets on this list, increased new supply and slowing job growth will equate to lower levels of rent growth in Boston in 2017. Rent growth in the market has been varied since the start of the recovery, but slowed in 2016. Renters should see an annual savings on rent of $441 this year, as compared to annual average rent increases over the past six years.

Seattle: Though Seattle has not achieved the rent growth highs of the Bay Area markets, it also has not seen the same lows in the past year. While rent growth has recently dipped into the negative in Oakland, San Jose and San Francisco, the Seattle market’s performance in 2016 was still strong. Though renters in Seattle will see smaller savings than in other West Coast markets, about $407 a year, they will still get some relief from the rent hikes of recent times.

Portland: The combination of slowing job growth and increased new supply has also caused rent growth to decelerate in Portland, returning to more sustainable levels than the double-digit gains experienced in 2015 and early 2016. Portland renters will see about $356 in savings this year, though the lack of change in elasticity value in the market indicates less sensitivity to rent increases, as renters here may be getting used to paying higher rents than the long-term average.

Austin: Austin was among the markets experiencing the strongest job growth on this list, though that metric dropped in 2016 and will continue to moderate this year. With rent growth responding to the drop in demand caused by moderating job growth, Austin renters will see a break of about $323 in apartment rents. However, the negative change in elasticity value shows that renters in this market are much less sensitive to price changes than their counterparts in other markets. This may reflect the savings that Austin transplants are already seeing over their previous homes in more expensive coastal markets.

No matter how sensitive renters are to the change in price, there’s no disputing that having extra money in their pockets after rents are due will be a welcome change from the boom recovery years.

Source: forbes.com

Ask the Attorney: Tenant Not Paying Utilities

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

Q:  Dear Mr. Reno:

I have some one renting my house on a 30day lease and they are responsible for the electric bill but did not pay it. The utility co said they were going to cut it off. What do I do ?

I live in Indiana. Thank you

Chris J., IN

A:  So let’em cut it off. What’s the problem? (Most times, the tenants will get the money & pay it, rather than have no electricity- No TV? No Internet? God forbid! They’ll stop paying rent before they let the U-tube go off.) Of course, if you face the possibility of pipes freezing and serious damage to the home due to cold conditions, then you might have to take matters into your own hands and pay the bill yourself. The problem with that, is you may never get the tenant to pay and the tenant will stay warm and comfortable throughout your entire eviction process!!! Good luck! P.S.: If you do pay the bill, and it’s in the tenant’s name, at least keep it in the tenant’s name!

 

Legal Disclaimer
The Landlord Protection Agency’s “Ask the Attorney” column is for informational purposes only. The questions answered by Mr. Reno on this site do not constitute an attorney – client relationship and are not to be considered legal advice. Not all questions will be answered and some may appear in the LPA Q&A Forum.
The Landlord Protection Agency recommends that you seek legal advice before using any of the material offered on this web site, and makes no guarantee on the effectiveness, compliance with local laws or success of any of the material offered on this web site. The Landlord Protection Agency is not engaged in rendering legal advice.

Landlord Tip: Giving proper legal notice to tenant

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(This applies to month to month tenancies or if your lease allows you to make unilateral changes to the tenancy as the LPA Lease does.)
* It is important to remember that proper notice must also be given by the tenant or the landlord for the Intention of Non – Renewal. Even though the lease has an expiration date, the landlord must still require a written notice to vacate from the tenant.

If it is a 30 or 60 day notice, be sure that the written notice is served before the beginning of the next rent period. That means if the rent is due and payable on the 1st of the month, have the notice served before that date. Serving a notice in the middle of a rent period will not change the fact that the 30 or 60 days notice period starts on the first day of the next rent period. An official dated notice should be delivered / “served” to the tenant, (preferably by at least 2 of the following methods)

 

  • in person (preferable)
  • sent by certified mail- return receipt requested
  • regular first class mail combined with the above. We recommend getting a certificate of mailing receipt from the post office whenever you mail an official notice by 1st class (regular) mail.

 

Source: The Landlord Protection Agency

 

The value of an idea lies in the using of it, so give us a call! (919)306-5665

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The value of an idea lies in the using of it, so give us a call! (919)306-5665