10 Things All Landlords Should Remember To Ensure Good Tenant Relations

Investing in rental property can be highly rewarding if successful, as it can help build your net worth and make a profit by generating a steady monthly income. This type of investment takes work, however, with landlords having to worry not only about finding the right property but also about maintaining it, making it attractive for potential tenants and finding suitable and trustworthy renters.

All experienced landlords have their share of tenant horror stories, ranging from dealing with unruly renters to facing significant property damage, but with a proper screening process in place, most problems can be avoided. Establishing a professional, positive relationship between landlord and tenant can help the former obtain a solid return on investment and the latter achieve a higher quality of life. Below, 10 real estate experts with Forbes Real Estate Council share some of the most important things any landlord should remember to improve their tenant relations.

1. Over-Communication

Keeping good lines of communication open can solve many landlord/tenant problems. Make sure tenants understand why things are happening, and give good advance notice for anything disruptive. – Jeremy Brandt, WeBuyHouses.com

2. Tenants Are People, Too

The opportunity to serve others comes with a variety of faces. As a landlord, the ability to engage with tenants as stakeholders brings conscious leadership to our everyday interactions. Home is where the heart is, and supporting people as they create a home is a gift. Realizing you are part of impacting the social/emotional environment for others, brings a humanitarian vibe to a traditional role. – Susan Leger Ferraro, Peace, Love, Happiness Real Estate

3. Boundaries And Limitations

As our investment platform scaled nationally, we noted the variation of landlord-tenant laws as some geographic regions favored landlords disproportionately. We found it essential to understand the legislative dynamics of the community by partnering with local experts to mitigate our liability and legal exposure. – André Bueno, The BM Group

4. Being Approachable

Many tenants are afraid to contact their landlord about issues. From landlords, I hear that tenants don’t tell them about repairs until they are really bad. From tenants, I hear they don’t want to call because they don’t want to bother the landlord or are afraid. Be approachable. Be supportive of you tenants. One way we can help landlords have better tenants is teach tenants about maintenance. – Michelle Ames, HorsePower Realty/Realty Executives Metroplex

5. Trust Is The Key To A Better Relationship

My company was born from my own awful renting experience when I was pitted against other potential tenants in a bidding war. Even worse than the high monthly rent, I ended up with was the poor relationship with the landlord that ensued. Renters who have a poor experience leasing their home are more likely to churn from their lease. Landlords should make sure they build trust in the leasing phase. – Anthemos Georgiades, Zumper

6. Better Protocol

The majority of horror stories typically boil down to one thing: horrible tenants, right? However, it is incumbent upon the landlord or property manager to have a proper, thorough and strictly held vetting process for which to qualify the people who will be occupying your investment. If you’re allowing just anyone, the nightmare began before the lease even started; you just didn’t realize it yet. – Tracy Royce, Royce of Real Estate

7. The Little Things

I’ve come to the conclusion that succeeding in real estate comes down to doing the little things on a consistent basis. The same thing goes for being a landlord. Little things such as a move-in package and holiday gift cards for tenants, responding quickly to maintenance requests and being pleasant can be the difference between a tenant that will want to stay and pay and one that won’t. – Engelo Rumora, List’n Sell Realty

8. Careful Lease Review Before Signing

Many people sign documents without thoroughly reading them. Although it is not your job to hold your tenant’s hand through committing to the terms you have laid out, if you take the time, in the beginning, to make sure they understand and are willing to comply with all the terms, there will be fewer surprises later on and less chance of conflict. – Hillary Hobson, Highest Cash Offer

9. Tenants Are Clients

Every landlord should remind themselves that tenants are their clients. They’re also trusting those clients with a very valuable asset. It’s best to be respectful, communicate openly and professionally and take care of tenants so they take care of the rental property. A landlord’s behavior influences the tenants’ behavior. – Dave Zirnhelt, Snap Up Real Estate

10. Having A Property Manager

I own a property management company that collects rent, handles tenant requests/repairs, takes care of everything from A-Z. Take the stress off your shoulders as the landlord and let a professional handle the “dirty” work for you. Let us be the “bad” guy, while you vacation in the Bahamas with friends. The less you interact with your tenant, the better your relationship will be with them. – Angela Yaun, Day Realty Group

Source: forbes.com

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 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, but 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

How Much Should You Keep in Rental Reserves?

by Attorney William Bronchick, Legalwiz.com

“Cash is King”, so they say, and investor would be wise to keep an adequate cash reserve for things that can go wrong in real estate, particularly rentals. It is easy to buy real estate with no money down, but it’s difficult to survive when you have no cash set aside for a rainy day.

There’s no magic formula you can use to determine how much you should keep in reserve in the real estate business. When I have rental properties, the four key factors I consider are strength of the local rental market, eviction time line and cost, the age of the property, and the type of neighborhood.

Strength of the Local Rental Market

The lower the vacancy rates in your area, the fewer reserves you’ll need for vacancies. Your local newspaper or your city’s housing department may have articles or statistics on vacancy rates. You should, at a minimum, have enough cash reserves to pay for one month of vacancy per unit, which is only an 8-percent vacancy rate.

Even in a good market, you’ll deal with problem tenants who may stop paying rent and require an eviction. Good tenant screening will help solve this problem. If you plan to rent properties, you should always, without exception, do a rigorous background check on tenants. This includes reviewing credit reports, employment verification, references, and calling current and previous landlords.

Eviction Time Line and Cost

The length of time it takes to evict a tenant is relative to your cash reserves. In pro-tenant states like New York and Massachusetts, it could take months and thousands of dollars in legal fees to evict a tenant—all while you’re paying the mortgage. In addition, in our experience, collecting back rents or damages from tenants who’ve been evicted can be futile.

Age of the Property

With newer and recently renovated properties, you won’t need to anticipate many repairs in the first few years. As noted earlier, we recommend that you always hire a professional property inspector before you buy. Inspectors will go through the property with a fine-tooth comb, which helps ensure you’ll have no surprises later on. Another thing to keep in mind is that many utility companies offer a fixed monthly payment option so you don’t experience payment swings each season if you’re paying for heating, water, or other utilities as the landlord.

Type of Neighborhood

If you’re renting properties in low-income neighborhoods, you can expect the turnover to be much higher than in high-income areas. In addition, multiunit buildings with small units and one-bedroom condos will attract more single people who tend to move more often than families.

Cash flow management is the bedrock of survival in any business, with real estate being no exception. Investors must be careful not to run out of cash or they will be soon out of business.

Hidden Costs That Can Diminish Your Rental Property Profits

When purchasing their first rental properties, many investors believe that the assets will effortlessly bring in money. However, they soon discover the hard way, that owning rental units attract a myriad of costs, which can significantly dent the amount of rental income. It is, therefore, important for a rental property investor to understand what these associated costs are, and how to best avoid or keep them in check.

Unscrupulous or untrustworthy contractors As a landlord, you will have to work with contractors to grow and excel your rental investments. Some of these partners are property management companies, real estate agents, attorneys, accountants, as well as, service and repair contractors. Enlisting and retaining the services of these professionals naturally requires money, which ideally, should come from the rental property.
Hence, it is important that you get reasonably priced partners and contractors, who understand that for them to get their pay, your business needs to flourish. As such, their primary concern should not only be to get paid, but rather to help you grow your rental investments.

Problematic renters As ironic as it may sound, even though a tenant is supposed to give you income if you get a wrong one you might just realize that a large chunk of the rent goes to waste. For instance, the tenant might make you waste precious time to demand the rent each time it is due or compel you to spend countless hours mediating conflicts between him or her and other tenants. Similarly, you might incur costs evicting the tenant or fighting off legal suits filed by the renter.

A straightforward and economical way for you to avoid such costly inconveniences is to put in place a thorough tenant screening procedure to help you identify and qualify high-quality renters, who will pay the rent promptly.

Property maintenance One of the pains of a landlord is ensuring that the property is rent-ready and in the perfect habitable condition possible. While maintaining and servicing the rental units can be smooth and manageable, at times the cost can spiral out of control, more so, if the property is old and severely worn out. In such a case you might have to finance endless and costly repairs before the building becomes habitable.

If you wish to control such losses, make sure you carry out careful property inspection to evaluate the condition of the property before purchasing it. Moreover, only hire reliable, competent and affordable service or maintenance technicians, who will give the right solution. Lastly, inform your tenants through the rental agreement that they will be liable for certain types of property damages.

Insurance costs It makes perfect business sense for a property owner to protect his or her investment against any possible event. The challenge, however, sets in when the insurer considers the owner as an investor instead of the primary occupant. As a result, the owner has no option but to settle for the costly special landlord insurance coverage, whose premium averages about twenty-five percent more than the regular homeowners’ policy. Not only does this bite a huge chunk of the rental income, but it gets complicated if the resident terminates the lease before the full term, and the house goes for long without getting a new occupant.

A prudent way of managing such costs is to factor in the insurance premiums in the monthly rent and doing all you can to keep your renters happy so that they stay to the end of the lease. Furthermore, have in place effective measures that guarantee you always have prospective tenants who are ready to move in, immediately when the units become vacant.

Increased taxes Most states and municipalities have homestead exemptions where they offer tax breaks to owners who live in their properties. In contrast, however, they impose heavy tax burdens on the investment properties. Naturally, the tax burden will have an impact on the amount of rental income a landlord gets from his or her investment. Fortunately, there are other costs related to the rental properties which can entitle you to tax breaks. Talking to an experienced and credible rental property taxation expert can help you to identify such perks.

Miscellaneous Damages Another common yet difficult to predict cost are those that occur in the middle of another activity. For instance, a window could break during property maintenance or an AC unit could get damaged during servicing. Since it is practically impossible to foretell if and when you will incur such expenses, it becomes relatively difficult to keep the costs in check. Nonetheless, you can try to be extra careful when handling the repairs, and only let someone with the right experience and competence manage the repairs. If you hire a maintenance or service specialist, go for one who has adequate insurance coverage and offers service warranties.

Conclusion Most first-time rental property investors hardly think about the hidden costs associated with their investment until after they have purchased the units. Even though by then it might be too late to reverse the investment decision, it is still possible to keep those pesky costs in check. You only need to know what expenses are denting your income and take the necessary reactive measures to control them. Still, taking the time to assess and evaluate the property before purchasing it remains the best way to keep most of these hidden costs at bay.

Source: realtybiznews.com

What Do Renters Really Want?

Renters aren’t so different from homeowners in their wish to live in single-family houses, a new survey indicates. Nearly half of renters consider choosing a single-family house, with roughly another third expressing interest in townhomes, says a recent poll by Zillow Group.

Among homebuyers, 83% are in the market for houses, with 20% also viewing townhomes as a possibility, Zillow found. The online real estate database company determined that the top concern among both renters and homebuyers, though, is affordability — with 95% of renters and 78% of homeowners putting it high on their list of priorities. Safety ranked next among the drivers of home selection, cited by 60% of homebuyers and 54% of renters.

There’s a big gap between homebuyers and renters in terms of the dwellings they end up living in, though — and that may have to do with the issue of cost. Single-family houses comprised 78% of residential purchases, with townhomes making up another 10%. But only 28% of renters ended up in single-family houses. And more than half of renters landed in multiunit dwellings of less than 50 residences. The share of renters in townhomes, though, was only slightly less than that of homebuyers, at 9%.

The gap in median income is also large, with the typical homebuyer in Zillow’s survey having a household income at $87,500 annually while the typical renter’s is below $50,000.

The typical homebuyer is also “is in their mid-to-late 30s or early 40s, married (67%) and college-educated (75%).” The typical renter, meanwhile, “is most often female (57%)” and below 50 (84%), with 56% of all renters being millennials (ages 18-34) and 28% of them members of Generation X (ages 35-50).

Most renters (58%) told Zillow they are looking to buy, though only 19% said they are “seriously” house-hunting. On the other hand, most homebuyers (52%) said that, even while searching for a home, they would consider renting as an alternative, with 23% seriously evaluating that option.

The survey, part of Zillow’s Consumer Housing Trends Report 2016, was given as to consumers between April 27 and May 12 of this year and involved 3,000 renters who had moved in the previous 12 months and 3,003 homebuyers who had purchased their primary residences in that same period.

Source: investors.com