Michele - Thursday, November 3, 2016
Across our 350+ managed properties, 98% of the time the rent is paid on-time, the tenants fulfill their lease term, the property is maintained in good condition, and the landlords are happy with the performance of their investment property.
For the other 2% of our managed properties, there is a workload increase for our staff and a financial and/or emotional strain on the landlords. Our tenant selection criteria, along with our management practices, nearly always results in a smooth landlord experience. However, because “life happens”, I do want to share some of the less positive experiences so that new landlords have a realistic expectation of the risks associated with transitioning their homes into rental properties.
This month, we received an email from one of our tenants informing us that he had vacated the property halfway through the lease term. “Mr Smith” had lost his job, so he packed up his family and moved back to Ohio to live with relatives. With no notice, “Mr Smith” left the keys on the counter, left a refrigerator full of food, left several truckloads of personal property, and left the landlords with...
Michele - Thursday, October 20, 2016
New landlords often ask if we can use their favorite trusted vendor for any future maintenance needs. Of course we can! We already work with most of the larger local vendors and welcome the opportunity to meet new vendors recommended by our landlords. Landlords should provide us with a list of their preferred vendors before signing our management agreement so that we can contact the referred vendors to assure that they are licensed and insured as required by the Virginia Department of Professional and Occupational Regulation (DPOR).
Sorry, we can’t use your Uncle John, Cousin Bob, or Neighbor Ricky as a handyman to do minor repairs. While we understand that keeping maintenance costs low is an important goal, our liability insurance requires that we only allow properly licensed and insured vendors to enter the home. We do have an in-house property superintendent, who can address minor items such as changing locks, installing screens, replacing smoke detectors, installing microwaves or range hoods, and caulking tubs at rates less than would be charged by a general contractor.
As your home is a valuable investment, we require that any vendors tha...
Michele - Thursday, October 13, 2016
I’ve written several blogs in the past about the need for new landlords to budget for maintenance. I’m writing another, as I feel this is THE MOST IMPORTANT action that a landlord must take when transitioning their home into a rental property.
We have found that many new landlords have set aside funds to make mortgage payments during vacancy periods or if tenants are late with paying rent, but have not budgeted for required maintenance items that could occur at any time.
Regardless of the age of the appliances or the age of your rental property, maintenance problems happen! At any time, a faucet or angle stop can begin leaking, a toilet can run continuously, a main drain can back up due to tree roots, a AC condensation line can back up, an AC system can stop cooling, a roof can start leaking, a piece of siding or a shutter can blow off the house, a small decorative tree could begin leaning and trigger an HOA violation, deck boards could warp, split or splinter, a fence could begin leaning, a refrigerator could start leaking or stop cooling, a gas cooktop igniter could stop working, a microwave could start sparking, a basement could flood due to grading issues or sump pump failures, a hot wate...
Michele - Tuesday, October 11, 2016
When a landlord turns a rental property over to us, we’ll get started immediately with procuring a tenant and managing their property. At that point, we suggest that the landlord also contact their Certified Public Accountant (CPA) or tax preparer to ensure that they understand how their decisions regarding their rental property will impact their tax profile.
It is important that landlords understand which of their expenses will be tax deductible and which expenses will need to be depreciated over time. As some of the questions regarding limits on tax write-offs are dependent upon the rest of a landlord’s financial picture, only a tax professional can discuss tax implications and discuss strategies to maximize the financial benefits of owning an investment property. For long term planning purposes it is also important that landlords understand the requirement to live in the home for 2 of the last 5 years if they intend to take advantage of the capital gains exception.
For landlords who have prepared their own taxes prior to becoming an investor and do not yet have a CPA or tax preparer, we are happy to provide a recommendation to a local CPA with significant experi...
Michele - Thursday, September 29, 2016
Steven M. R. Covey published a book entitled “The Speed of Trust” which explains how trust—and the speed at which it is established with clients, employees and constituents—is the essential ingredient for any high–performance, successful organization.
When I read this book, I understood that it was imperative for our company to establish trust with our landlords at the very beginning of our business relationship.
Since most of our landlords plan to sell their rental properties once the market reaches a break-even or profitable level, our property management relationships typically last 4-6 years. During most of that time frame, our direct interaction with landlords will be minimal. We will collect rents, react to minor maintenance concerns, renew leases, or procure new tenants. Rarely, but possibly, we may need to contact a landlord in the midst of an emergency situation that requires a prompt decision and/or a significant and unexpected expense.
For instance, if a gas hot water heater leaks on a Friday night, a decision needs to be made whether to replace it immediately to allow tenants to have hot water over the weekend. Or if it is nearl...
Michele - Thursday, August 18, 2016
Landlords – If you own a large home with a basement rec room that has been converted into a poolroom, in most cases your incoming tenant will be excited about you leaving the pool table. Given the cost and hassle associated with moving a pool table, leaving it in the home is generally the best option for both landlord and tenant. Other than the pool table, landlords should plan to remove ALL of their personal property from the home when they convert their home into a rental property.
As landlords are packing up, they sometimes wonder if they can leave their bar stools, or large couch, thinking that the tenants may appreciate some furniture that fits perfectly in the house. Or landlords may wish to keep several large boxes or trunks in a storage area. In our experience, tenants want to walk into a completely empty house so that they can begin putting their own belongings in place. Tenants are concerned that they will be held responsible for the owner’s belongings and are really not comfortable with any such arrangement.
This month, we had three new landlords who asked tenants if they could leave a few things behind. In all three cases, th...
Michele - Wednesday, July 6, 2016
As part of our tenant screening process, we have always run a criminal background check on each applicant. We have provided our landlords with information regarding felony convictions within the past 7 years and any pending court dates that may have an impact on an applicant’s financial situation.
A recent Supreme Court ruling has upheld the determination that making housing decisions based on arrest and conviction records has a disparate impact on members of a protected class and therefore can not be used broadly as a reason for denying a rental application. Moving forward, property managers and rental listing agents must have clear policies and how and why data retrieved from a criminal history search will be used when screening tenants.
To comply with the new HUD guidelines, our company will provide landlords with the following information as part of the tenant screening process:
- Felony convictions in the past five years
- Drug distribution convictions in the past ten years
- Pattern of multiple drug possession convictions in the past five years
- Recent arrests awaiting trial which ...
Michele - Wednesday, April 27, 2016
When budgeting for annual expenses, owners should expect some minor “touch-ups” needed between tenants even when tenants take excellent care of their home. Outgoing tenants are allowed normal wear and tear, which includes minor scuffs/scrapes to walls in main living areas. Owners will most likely want to address those minor painting needs before the next tenant moves in. If more major painting touch-ups are needed, local judges restrict the amount that can be considered damages chargeable to the outgoing tenant depending on how recently the home was painted (See blog post “Collecting Damages from Tenants”).
Average carpet in a rental property is expected to last for 5-7 years when cleaned annually. So, depending on the age of the carpet, owners may need to budget for carpet replacement after long-term tenants. Carpets that do not need to be replaced may need to be stretched.
If a rental property is outfitted with relatively inexpensive blinds, these blinds are likely to need to be replaced every 5 years, or more frequently if they are used regularly to regulate sun into a home.
Michele - Sunday, March 13, 2016
When a landlord enters into a management agreement with us, we will require a copy of the declaration page of their dwelling policy with our company listed as Property Manager or Other Interested Party. At that time, we suggest that landlords review coverage with their insurer to note the differences in coverage between a homeowner’s policy and a dwelling policy that covers a rental property. We also suggest that landlords review the limitations of their policy associated with any extended vacancy periods. Some insurers have provisions forbidding aggressive breeds of dogs in tenant occupied properties, so it is important to review those guidelines as well.
Of course we hope to never need to interface with an insurance company, but due to pipe bursts, roof leaks, sump pump failures, condensation line blockages and sewage backups, we do find ourselves filing and coordinating insurance claims on behalf of our landlords, especially after major storms.
If major damage does occur due to an incident or event that is covered by the dwelling policy, we will discuss with the landlord whether a claim should be filed based on the policy deductible. Some l...
Michele - Wednesday, February 17, 2016
When processing an application for a new tenant, we review credit and criminal history. We also verify income, employment, and rental or mortgage history. Unfortunately, we cannot vet an applicant on their house keeping skills.
However, we do have one possible way to glimpse into the how well an applicant may keep a home. When an applicant is well organized in their financial business, paying all bills on-time and not over extending their credit, it is likely that their organizational habits may extend to their home life as well. My mother in-law has an 830 credit score and her home is immaculate 365 days per year, so she is my point of reference, but over the past 5+ years, I’ve also seen a trend with our tenants. When tenants are working multiple jobs and scrambling to pay rent, they often don’t have the time, energy, or ability to maintain their rental property in a way that the owners wish or expect. Typically this doesn’t mean that there will be any damage to the home. But it does mean that the home may not show well when it is time to sell or re-rent.
So…. Just something that I’d suggest new landlords consider &h...