Rental management might seem a bit mysterious if you’re not familiar with the field, so today we are sharing a bit about what a property manager actually does. In summary, we are acting on your behalf to market your property and manage your tenants to maximize the return on your investment. Let’s dig into those details. (more…)
When considering property maintenance, we usually think of those responsibilities: fixing or replacing broken appliances, changing locks and performing major repairs.
However, some tasks don’t necessarily always fall to property management. Your tenants also have responsibilities. This is where the lines get blurred for many real estate investors who put the wrong responsibilities on the wrong party and then wonder why they can collect for some maintenance from the tenants and not other maintenance.
Remember that these guidelines are typical and may vary under different legal regulations.
Core Tenant Maintenance Responsibilities
Cleanliness & Sanitation
At the top of the list of a tenant’s maintenance responsibilities is simply keeping things clean. Tenants are expected to take out the trash, keep cars off blocks and out of the yard, and keep the property neat — just to name a few basics. That means regular housework: cleaning toilets and countertops, dusting, mopping, vacuuming, and so on. While a little mess can be understandable, tenants can’t neglect these basic tasks.
When properties aren’t kept clean, they can be a breeding ground for mold and infestations of bugs. Keep an eye out for warning signs of this kind of neglect, as it can cost owners a lot to fix in the long run. Easy warning signs are visible from the street, while others need to be regularly inspected or watched after.
Reporting Issues in a Timely Manner
Tenants may not be responsible for fixing major property issues, but they’re responsible for reporting them as soon as possible. If they don’t mention a problem (leaking pipes, for instance) to the manager, they may be held liable for additional damages that wouldn’t have happened had the issue been reported and rectified earlier.
It’s vital for the health and condition of your investment property that tenants are actively encouraged to communicate with the property management when an issue arises. While it may be inconvenient at times, leaving a problem unaddressed is far more damaging.
Covering Personal Errors & Accidents
We know that tenants aren’t responsible for covering regular wear and tear. Things get damaged and worn just by virtue of being used, whether that’s the carpet or appliances, but that doesn’t mean that you’ll always have to foot the bill. Tenants who cause damages with carelessness are responsible for fixing the damages. That could be anything from cleaning the carpet after a wine spill to replacing a broken window.
Using the Property Properly
We all want and expect tenants to use the property as it was intended and without illegal activity, but we know that unfortunately, this isn’t always the case. If a tenant uses a room, fixture, or appliance in any way that is not within its intended use and it is damaged or broken as a result, they are absolutely liable for those damages.
If you are strapped for cash, time or both, it can be difficult to get your property rent-ready. Here are 7 ways to freshen up your rental and get it rented quickly.
7 Budget-Friendly Ways to Enhance Your Rental Property
Start With Curb Appeal
What does the outside of your property look like? Dead grass, dying trees and scrubby weeds don’t say “welcome home.” Some plants and flowers can take your yard from tired to lively, quickly and inexpensively. Purple fountain grass rapidly grows to about three feet wide and tall. It’s a lovely, rich shade of purple and is drought resistant, which means if you or your tenant forgets to water it, it isn’t going to die. Snapdragons are another great option because they are a great way to add color and are also drought resistant.
If you have an ugly chain link fence, I suggest morning glories since they’re a quick-growing vine with beautiful leaves and colorful flowers that open in the morning. They re-seed themselves and need almost no water.
Color Those Walls
A fresh coat of paint looks clean and crisp, especially if it is done right. White or cream used to be the go-to paint color for landlords, but adding a splash of neutral color can help your property stand out. Light to medium grey or tan creates a richer, more contemporary look, while costing you nothing extra. The smaller the property, the lighter you should go. Dark colors tend to suck the space out of a room.
One way to save on paint is to buy the five-gallon buckets. It costs less per gallon than individual gallons. Another way to save is to shop the “oops” paint section. These are mis-tinted gallons of paint that are sold at a steep discount.
Paint is absolutely your best bet for brightening up a property on the cheap — just make sure you use neutral colors. It would be disappointing to spend a lot of time painting, only to lose renters because the vivid paint you put on the walls clashed with their furniture. Remember, you aren’t living there. Choose colors that appeal to the widest array of renters.
Freshen Up the Kitchen
A lot of rental properties have an older style oak cabinet in the kitchen. When clean, they don’t look bad. Shiny or dull brass handles or knobs make them look outdated and can bring the whole kitchen down. The big box stores sell understated, classy door hardware in bulk packages of 50 for $45.
Do you have a backsplash? Tiling is a very inexpensive way to brighten up a room, and I have seen quality glass/stone mosaic tile at Costco for less than $5/sq ft. Another inexpensive option is to use beadboard or wainscoting. Cut it to fit the space and paint with a high gloss paint for ease in cleanup. You can pick up some 4′ x 8′ sheets for about $20.
Update Your Light Fixtures
Shiny brass was super popular back in the ’80s, but it’s horribly ugly now. Swapping out an old light fixture is a fairly easy process, and your room can only look better afterwards. Keep in mind that all finishes throughout a room — and ideally throughout the house — should match, so if you’re swapping out the brass light, make sure the door handles, etc. are changed out as well.
Don’t Forget the Bathroom
The old, grungy shower head may still work, but a newer one will look better. A high-efficiency shower head can save water and money. Changing out a shower head isn’t very difficult; you simply unscrew the old one and twist the new one on. (Turn off the water before you start, and make sure it’s on tight!)
I’m not a fan of oak cabinets from the ’80s. I think oak is ugly in general; however, it is a very sturdy building material. Those cabinets are probably in great shape and why spend money you don’t have to? If they just don’t do it for you, paint them.
Check Out the ReStore
Habitat for Humanity raises money for their program through their Discount Home Improvement stores called Habitat for Humanity ReStores. They sell new and gently used home improvement products at significantly discounted prices and can be a great source for unique items to update your home. Plus, you’re helping out a great cause!
A Little Improvement Can Go a Long Way
Walk around your rental property and take a hard look. What stands out as the biggest eyesore? Bring a friend with an objective eye and ask for honest feedback.
What is the best way to maximize revenue for a rental property? One key element would be reducing vacancies. Raising rents is important, but consider that one month’s worth of vacancy equals 8% of your revenue per year. You stand to lose much more in vacancy over the long term. This sounds simple, but keeping your units full of on-time paying tenants is the best way to stabilize a rental.
Today I will talk about three strategies to make that happen.
3 Tips to Transform Your Tenants From Uninterested Residents to Lively Customers
1. Take care of issues quickly
Want to get your tenants worked up? Try taking too long to address maintenance issues. This is the fastest way to tick a tenant off and encourage them to move. Tenants want their concerns to be addressed quickly. If you can’t afford the repair at the time, be in communication with the tenant so that they feel heard.
Tenants also want to know that you are committed to keeping the property in good condition even if there is not a pressing emergency. Do preventative maintenance walkthroughs to make sure things are in good working order. If it’s a multifamily, keep the common areas in good condition. These things aren’t hard, but do take budget and scheduling. Doing them will make your good tenants feel like you care about where they live.
2. Make it feel like home
Some tenants are just renting an apartment or a house while others would call your property their home. Some tenants stay for years. They decorate for the holidays. Units are clean, and they did some things to personalize them. Maybe they repainted a room or added something to spruce the place up. Some of these tenants will never leave, as long as they are taken care of.
So how do you create that feeling of home for your tenants? It does take the right situation which is outside your control. The 25-year-old fresh out of college may not stay for 10 years and the newlyweds living in a 1-bedroom may have a baby someday. You can’t control these things, but you can create an environment that encourages people feeling comfortable enough to stay long term.
Simple strategies include doing some simple things outside of the property like basic landscaping or lighting. Allow tenants to have a pet or two, as long as they pay a non-refundable pet fee ($250) and pet rent ($25 per month).
Another strategy that works is to remove bad neighbors. If a tenant in one of our multifamily buildings is causing problems with the other tenants, address it quickly. Your tenants may not feel comfortable engaging their neighbors and will eventually move if the neighbors cause enough problems for them.
3. Reward good tenants
I make sure that my good tenants know that we are happy with them. One option is to create a rewards program for tenants who have paid their rent on time each month. Each month take the names of all tenants who paid their rent on time and enter them into a drawing. Once a quarter draw a name and give them a gift card. You can also implement a grand prize at the end of the year!
If you have several properties this is not a large investment. Tenants will get so excited about this program that they will call to make sure we got their rent on time and to check to see if they won!
If you don’t have many units, find some other way to make your tenants feel appreciated. I have heard some landlords send their tenants birthday or holiday cards. Bottom line, find a way to show them you are grateful for their good tenancy.
There are many factors to making money as a buy and hold landlord. Whether you self-manage or have a property manager, taking initiatives to keep your good tenants in place long term is the best way to keep revenue up.
4 Vacation Rental Policies to Boost Bookings & Maximize Profits
You should treat your vacation home just like you do a business—income has to be equal to or greater than expenses. Here are a few ideas you might want to consider making to your reservation policies in 2016 to be more profitable.
Use Smart Pricing
During high booking season you should price your vacation home at the top of the market. After all, it is called high season because there are usually more guests coming to town than there are vacation homes. During low season, price your nightly rates closer to the bottom of the market since guest are looking for the best deal.
I like to look at my high and shoulder booking seasons as the time of year when I need to maximize my profits and I look at any bookings that I receive during the low season as freebies since I am not really counting on getting a whole lot of bookings during these slower times.
Perform Yield Management
You should keep a record of everyone who has booked with you in the past and send them an email offering them a great rate on the property they rented. This will allow you to do a little yield management to make more money.
Here is an example of how yield management works: If you have 16 nights already booked in your vacation home for the month of March, then you raise your nightly rates for the open nights a little, once you secure another booking in March, you raise the other open nights a little more. You will be shocked at how much more money you will make at the end of the year by just raising rates a few dollars here and a few dollars there.
Implement a Reservation Fee
The easier you make it for guests, the more guests you will end up having. During low season, make your non-refundable reservation fee really low. You might even want to consider doing a fully refundable reservation fee. During low season, if someone cancels, you are not really hurt that much. Now, with high season bookings you should charge a very high reservation fee because if someone cancels during high season, this could affect your income at the end of the year.
Charge a Property Protection Fee, Not a Security Deposit
It is unfortunate that in this day and age, if someone does damage to vacation home and you ask them about it, most of the time they deny that they did the damage. A property protection fee is non-refundable, and it works just like insurance on the vacation should any damage occur while the guest is staying in the house. This works much better than security deposits since the guests who were doing damages to the property were also disputing the charges as well.
These four simple tips should help you secure more bookings during the low season and maximize your profits during the high season. You also need to keep your eye on all your expenses and make decision accordingly.
Here are a few key points you should follow if you are going to hire a new property management company.
5 Steps to Changing Property Management Companies
1. Make a Wish List
Before making a change, write down everything you currently like and dislike about the property manager you have now. Use these notes to make a new list of everything that you require your new property manager to do for you.
Most companies will strive to meet your expectations, so the higher your expectations, the better service you will usually receive. This list will be a great tool, especially when it comes to interviewing new property managers.
2. Explore New Management Companies
First, you want to talk to other management companies who you might want to hire. A good place to find other management companies is either online or simply drive around and look at who is managing properties in the surrounding neighborhood.
Another idea is to ask your neighbors who they use to manage their property, or you might want to ask your realtor who sold you the house for a recommendation. After you have at least two possible management companies, contact them and set up an interview. After the interview process, pick the management company that you are most comfortable with.
3. Review Your Agreement
Review the legal agreement you have with your current management company to see if there are any grounds for immediate termination and to double check when the current agreement expires. If you’re happy with the current management company and you are leaving because another company is offering superior services for a cheaper price (like HCM Property Management’s owner special of $150 flat fee per month), then you might find it easier to let the agreement expire on its own.
If you choose to let the agreement expire be sure to send them a letter notifying them of your plans not to renew with them. Usually these agreements roll over or renew on their own if no notification is provided. However, if you are really unhappy with the current management company, then terminate the agreement immediately. Your rental property is an investment, and any long term neglect of your property can have a negative effect on the value of the property.
4. Notify the Old Management Company
You can notify them through a letter or on the phone.
If you do it over the phone or in person, you should also follow it up with a termination letter. Whenever you terminate an agreement, it’s smart to have it in writing as well. In the letter, outline why you are leaving, the actual date you want the agreement to be terminated, and the name and contact phone number of the new management company.
5. Follow Up
Every few months it is a good idea to check on the property and make sure the management company is doing what they are supposed to be doing. If the management company knows you will make unannounced visits to your property, they will do a better job than if you never check in on the property.
Any time you are looking to make a change it can be very stressful, but if you follow some of these steps it can make the change that much easier.
Don’t forget to subscribe to our new HCM Property Management YouTube channel where we will be posting weekly tips on property management and tricks to help save you time and money
Link to HCM Property Management YouTube Channel: https://www.youtube.com/channel/UCNcV19MkVChJWJZS14IBtKQ
Are you getting the most out of your property management company?
It’s surprising the number of investors/landlords who don’t take full advantage of the services, resources and skills that their property management company provide. Wise investors empower their property managers by making their job easier and more effective.
Characteristics of A Great Professional Property Management Company
A great property management company can save you money and maximize your return. Here are six ways they do that:
1.) Choosing Rent Prices
Setting the right rent is not an easy task. Rents are rising, but they are rising at different rates depending on location. Single family rentals are priced differently than multifamily because they offer more space and appeal to different tenants. Rents for single family homes nationally rose about 1 percent last year and demand is strong. These are things your professional property management company probably knows. He’s probably done considerable research on the local rental market and knows what competitive properties are charging today and plan to charge six months from now.
2.) Writing Ads that Sell
Writing and placing ads may be something that you enjoy doing, but you are not as good at it as someone who has years of experience working with online and print advertising. Your property manager knows which outlets work best in your market and he can maximize your advertising dollars. He also knows how to write and use photos that highlight your property’s selling points and reach out to kind of tenant you seek. Your property manager has relationships with the advertising media you will use, and he can get you deals you can’t get on your own.
3.) Navigating the Legal Waters
Unless you’re a lawyer, you’re probably not expert in landlord/tenant laws, but your property manager is. Professional property management companies must be familiar with the local laws that govern the landlord/tenant relationship. If you don’t have someone on your team with that kind of knowledge then you could be leaving themselves open to legal action. Good managers bring vital resources like lease forms, tax forms and other standardized documents.
4.) A Network of Contractors
A good management company has a network of reliable, cost-effective contractors for all contingencies ranging from plumbing, electrical, carpentry and landscaping skills to properly maintain your property. When emergencies arise, they can make one call and get help out.
5.) Tenant Screening
Today there are a variety of different sites that provide screening services for a fee. You could use half a dozen without knowing which is best for your purposes and most cost effective. Managers have access to several services that conduct credit checks, employment verification and criminal checks. They can weed out problems before they move in.
6.) Professional Problem Management
If you find yourself with a difficult tenant who violates rules and invites eviction, a good management company knows how to proceed in compliance with local landlord/tenant laws. If worse comes to worst, managers can call on professional legal support to resolve the dispute quickly.
If you empower your professional property management company, you’ll transform your relationship until you are a team that truly works together by complementing each other’s skills and abilities.
There are a lot of ways to invest in real estate. A great way for building serious wealth in this world is through investing in rental property. This post will take a look at why rental properties can be such a powerful investment tool and how you can begin investing in rental properties to increase your wealth.
Why Invest in Rental Property?
Some people invest to get rich while others invest for their children and grandchildren. Whatever your reason, investing in rental property can be one of the quickest and safest investment vehicles around. Rental property allows you to take advantage of several distinct benefits:
- Leverage– Leverage allows you to use only a small amount of cash to purchase a much larger investment. When investing in real estate, you don’t have to pay the full amount for the property. Instead, you can pay a down payment and have a private investor or bank fund the remainder. While you may only have 10-20% down, you are able to control 100% of the property and take advantage of 100% of the appreciation, cash-flow, and other benefits.
- Security– Investing in rental property is generally considered one of the most secure investments you can make. When you invest smart you are able to make more monthly income from rent than what it costs to own the property, and the extra monthly cash flow can be used to cover the times when the property is vacant or needs repairs.
- Tax Benefits– The government likes real estate investors and they reward rental property owners with tax breaks and incentives to encourage this type of investing. Benefits like depreciation or the ability to “trade up” to larger properties without paying any tax can help compound your wealth even faster.
- Directly Actionable– Lastly, investing in rental property gives you an investment that you can directly control. For example, when you buy a stock you have little control over what the company does and how it operates. Your trust is placed in the hands of Wall Street types and when things go down the only option is to sell the stock or hang on. When investing in rental property, you get to actively take a role in the destiny of your property. You can maintain it, improve it, choose the right tenants, pick the right manager, correct problems, and influence local government to support you.
Different Methods of Investing
There are several different ways that you can invest in rental property. Here are some possibilities:
- Single Family Homes – Probably the most popular method for investing in rental property, the single family home is a house that you can rent out to a single family. These properties are easy to find and fairly easy to finance. Single family homes generally have a higher likelihood of obtaining long-term renters which increases the chance for stability. The down-side of a single family home is vacancy. When there is a vacancy you lose 100% of the rent for that time.
- Small Multifamily Properties – The small multifamily is typically between two and four units and can be found in any area. The small multifamily offers the ability to receive multiple rents from different tenants, thus diversifying your income to compensate for times of vacancy. When one unit goes vacant, you still have income from the other units to help pay the bills. Another advantage of small multifamily properties is the ability to finance using conventional loans from banks. This is very helpful when you plan on living in one of the units, so you can take advantage of the 3.5% down payment requirements given by FHA insured loans.
- Large Multifamily– Investing in rental property with five or more units becomes a slightly different game, as far as lending goes. When buying this kind of property, you will be using a “commercial loan” which typically requires higher down payments and interest rates, but shorter term lengths. However, if you purchase the property at a good price, large multifamily properties can quickly produce significant cash flow and a high return on investment.
How to Get Started Investing in Rental Property
To get started you must create a plan to guide you. Your plan should include:
- your starting point
- your goal/destination
- deciding what kind of investment property you want
- how much you want to pay
- where you want to buy
- the level of risk you want to take
- the financing you plan on using
Once you have done this, thoroughly understand the kind of investing you want and follow your plan! It may change slightly and you may need to correct-in-course.
Single family properties are great rental properties, but like anything else they have both pros and cons. Here is a list of both.
Single Family Rental Property Pros
- Usually there are fewer expenses. Tenants tend to be responsible for yard maintenance and all utilities.
- Tenants tend to stay for a longer period in single family homes. Single family tenants tend to settle down more and usually have kids looking for a good school.
- Turnover will generally be reduced with a nice home and good tenant screening.
- A single family home can be sold at a retail price and allows an exit strategy for the property. Usually, the only person who is going to buy your multi-family property is another investor.
- Your potential buyer base is much broader with a single family home. There are more people out there who can and will buy a single-family home opposed to a multi-family. Making it an easier exit if needed.
- You may not be expected to furnish the property with appliances. Many single family tenants have their own appliances.
- Lower property taxes. Generally, non-owner occupied multi-family residential properties are assessed at a higher rate for property tax purposes.
Single Family Rental Property Cons
- When tenants move out your vacancy rate is at 100%. When a single family home is vacant there is no steady income. This lack of cash flow can hurt financially if the unit is not filled quickly.
- When vacant, theft and other vandalism can be more of a problem because there is no one there to keep an eye out for your property.
- With single family homes as your rental properties, everything you have that can break multiplies. You have more roofs that can leak, more air conditioners that can go out, etc.
- There is more upkeep. There are more fences to repair, eaves and dormers to paint, etc.
- Sometimes management can be more difficult as your properties are more spread out and not all under one roof.
None of these pros and cons are deal makers or breakers, but they may affect your thinking on how you want to invest. It is always good to look at both sides of the spectrum.
Investing Is Not Easy
Investing in a piece of real estate can be an exhausting task. You have several variables to pay attention to, lots of math to do, and your financial future rides on the efficacy of every decision you make as part of that process.
Once you have invested in a rental property and gotten it ready to rent, you should be completely done with that place. If you’re not, then you probably didn’t stress enough. But unfortunately, that level of exhaustion and declining interest makes it very easy to open a phone book, pick a name with “property manager” in the title, and hire them.
That is actually the worst idea you can have. It’s better to have an average property and a great manager than a great property with an average manager.
Why is This?
An average manager is going to allow many more problems to reach you than a great manager is. In addition, a great manager is going to save you more money compared to an average manager.
Here’s an example:
Investor #1 has a home with great investment qualities. He rents it out for $1,450/month, pays only $450/month total in all costs, and spent $35,000 cash to buy and $25,000 cash to renovate. He’s looking at a rental yield of 20% ,but his property manager is forced to evict two tenants within six months. Each tenant leaving the place empty for a month and costing $2,100 worth of repairs to complete. This was all due to a failure to properly screen out bad tenants.
Income for those six months: $5,800
Costs for those six months: $4,800
Net profit: $1,000
Investor #2 has a home with average investment qualities. He rents it out for $850/month, also pays $450/month in costs, and spent $52,000 with only $8,000 in renovations. Total rental yield is 8%. This is respectable, but not the best. However, his property manager screened his tenants properly, found one with a great credit history, good job, and no major issues. That tenant signed a two-year lease, and six months later:
Income for those six months: $5,100
Costs for those six months: $2,700
Net profit: $2,400
So not only did the lesser of the two investments pay more money, but there was also significantly less stress because a great property manager is worth more in the long run than a great property.
What we learn from this example is that after you have spent six months of hard work carefully reviewing the house, neighborhood, and your finances, don’t let your exhaustion come into play when picking the right property manager. Even if you need to wait a week or two and take a break, do it. Once you have had time to rest and recover find the best property manager available for your property. This will save you more trouble and money in the long run.