2012 Housing Forecast
Great information came out of the 2012 Housing Forecast. Bottom line – more of the same until 2013.
Larsen Properties adds QR codes
Larsen Properties adds QR codes to our For Rent signs. This feature allows users quick access from a smart phone to our website. High Tech!
Trying out HootSuite.com to see how the
Trying out HootSuite.com to see how the one stop updates work out!
Finding and Choosing Contractors
As any experienced property investor will tell you, finding a crew of reliable, expert home-improvement professionals to help you keep your property in good condition is crucial to your success as a landlord. In fact, many people choose to use property managers because they typically have longstanding relationships with a variety of contractors, and are often able to negotiate the best prices for their services.
Whether you’re looking to hire a general contractor for a major construction project, or just putting together a basic maintenance crew to keep your rental’s systems in top shape, here are some tips you can use along the way:
Finding a Good Contractor
When looking for a home improvement professional with a solid reputation and extensive list of references, one of the best ways to start your search is by asking your family, friends, colleagues, and other service professionals you like and trust for recommendations. Ironically, some of the best contractors are often some of the hardest to find, because they often get so much business through word of mouth that they don’t need to advertise. In fact, according to Money Magazine’s Josh Garskof, contractors who solicit business door-to-door or send flyers in the mail are contractors you should be skeptical about hiring.
If your word-of-mouth search comes up empty, your next best bet is to look online. Google reviews, Yelp reviews, and other website comments can be a good source of information and feedback that will help you find and evaluate potential contractors. In addition, depending on what kind of project you’re hiring for, some contractors may have online portfolios displaying photos of some of their completed projects.
Choosing the Right Contractor for Your Job
Once you’ve done your research and made a list of the potential contractors you think might be right for your home-improvement or maintenance project, taking the following steps will help ensure you get the best results for the best price:
- Provide a clear description of your project: The more detailed your description, the more accurate your potential contractors can be in giving you an estimate of the time it will take to complete the work, and of how much it will cost.
- Get multiple bids: The common rule of thumb is to get estimates from at least three contractors before making a decision about who to hire. Not only does this give you a range of choices, it encourages the contractors you interview to lower their prices to beat their competition.
- Check references: You’d be surprised at how many people don’t bother to actually call this list of references provided by a potential contractor. While it’s true that most of these contacts will have mostly good things to say (otherwise, why would they be included on the list?), you can still learn a lot about a contractor’s general approach to a project by conducting reference checks.
- Watch out for red flags: The FTC suggests steering clear of contractors who aren’t listed anywhere, ask you to pay for an entire project up-front, accept cash only, and/or ask you to obtain any needed permits for the work.
Closing the Deal with a Contractor
Once you’ve identified the perfect contractor for your job, it’s time to draw up the contract. This document should include start and finish dates, the payment schedule, a description of the materials to be used, and instructions for handling any changes to the project plan. It should also specify who is responsible for things like securing permits and handling clean-up tasks.
With a good selection process in place and a solid contract in hand, you’ll stand an excellent chance of ending up happy with your contractor and with how your project turns out.
Property Management Fees
In general, hiring a property management company is more economical than most people expect, especially when you consider what you get in return—money coming in each month in the form of rent checks, without the time commitment of managing a property.
What you’ll pay your property manager will vary depending on what services you require, the type of property you own, and where your property is located, but here are some standard fee structures:
- Percentage of monthly rent: If you choose to employ a property management company on a full-service basis, you’ll most likely be charged a percentage of the monthly rent on your property. This can range anywhere from 5-15%, with 8-10% being common. Under this fee structure, if your unit isn’t rented, you don’t pay.
- Flat-fee: For larger buildings, property managers often charge a flat fee per month, regardless of how many units are rented at any given time. Property managers typically work on a flat-fee basis when they expect managing your building to require a significant percentage of their company’s time and resources.
- Project-based: When you employ a property manager for selected services only, project-based fees are common. For example, if you hire a property management company to fill a vacant property, you might be charged the equivalent of one month’s rent for the privilege.
Your Property Management Agreement: What to Expect
A property management agreement lays out all of the tasks and responsibilities a management team is accountable for, among other things.
When you hire a property management firm to represent your property, you are allowing them to handle all of the vital day-to-day operations of the residences and the tenants that live in them. Additionally, you are making a considerable – but wise – financial decision.
Hiring a property management company provides you with a substantial amount of help with running your rental properties and ensuring every aspect of your investment operates smoothly.
One part of the process of employing a management firm that you must take very seriously and pay attention to is the property management agreement you and a company will sign.
According to some experts regarding the layout of property management contracts, there are some basic pieces of information property owners and management businesses generally agree to include in an agreement.
Duties Performed by Management
All responsibilities and tasks related to taking care of tenant needs and requests, as well as the maintenance of a property, are the main duties owners mandate from management teams in a standard contract.
From hiring inspectors to look at your property and dealing with marketing efforts, to interviewing prospective tenants and collecting rent from current tenants, managers are typically accountable for the intricate details regarding the daily operation of a property.
Additionally, ChoiceOfHomes.com says it’s common for property owners to mandate in an agreement that a manager handle evictions of renters when necessary to do so.
Dealing with Fees
Generally, a contract’s stated fees are charged to managers on a monthly rate are usually based on gross rent collected, according to PropertyManagementBlog. Additionally, the site states some management companies require added-on fees for large properties and the type of properties they may work with.
Experts advise owners to negotiate these prices, though, as many managers are willing to compromise about rates based on several factors, such as a property owner’s expenses and comparable rates charged by managers to other property owners.
Manager’s Legal Liability
According to the legal resource website NoLo, property managers are held legally liable for a handful of issues per the typical contract. Specifically, these liabilities pertain to serious concerns including bed bugs, injuries, vandalism and crimes at a property.
Regarding any of these potential problems which may arise with tenants, an agreement should clearly state in what situations a property management company is legally at fault. Managers are usually adamant about including language in a contract that distinctly states what they are and aren’t liable for.
Laws.com states a management firm will likely want some things added to the contract regarding liability – chiefly, a mandate about the property owner having sufficient liability insurance.
Owner’s Responsibilities
Essentially, anything you don’t want to handle for your property are things you need to add to a property management agreement. Otherwise, those responsibilities fall on your shoulders, not a manager’s, PropertyManagementBlog says.
For example, if you want a management team to handle 100 percent of marketing and advertising of a property, you should clearly state so in an agreement.
Term of Contract and Grounds for Termination
The term of contract should clearly define all specific dates for the tenure of a management firm in your services, including the start date and end date, if known prior to the signing of the contract. Oftentimes, property managers sign deals on a one-year basis with owners, the blog states.
Though you hopefully won’t have to terminate a contract with a management firm due to poor revenues or a lack of quality on their part, the website states there may come a time when you don’t need their services any longer. This is why it’s vital to expressly indicate in an agreement that you have the right to end a contract during a given period.
Maximizing Investment Property ROI
When it comes to reaping maximum gains from your investment property, choosing the right property in the right area—and pricing the rent correctly—are only half the battle. Once you’ve purchased a rental property with excellent profit potential, you can help ensure you actually realize that profit by taking certain steps used by veteran landlords.
Give Tenants the Amenities They Want
Prospective renters on the hunt for the right apartment look for a number of things in an apartment, including location, neighborhood character, crime rate and attractions nearby. Once they’ve identified the general area where they’d like to live, amenities are often a key criteria when it comes to evaluating individual properties.
With renting in high demand nationwide—and expected to increase in the next few years—the American Apartment Owners Association advises landlords to take a long look at what they can do to make their units more appealing to renters. Whether it’s replacing worn carpet with hardwood flooring, modernizing counter tops and cabinets, adding more storage, or letting tenants choose paint for an “accent wall,” upgrades will allow you to keep vacancies low while marketing your property to an affluent demographic.
Choose and Retain the Right Tenants
Once you’ve renovated your rental, you can expect to have a larger-than-average pool of interested applicants to choose from when it comes to selecting a tenant. Taking care to properly interview and screen each potential renter is the next step in maximizing your property’s ROI.
When you add up the cost of rent lost during a vacancy, plus cleaning fees, advertising expenses, and the time it takes to show a rental and select a tenant, you quickly realize that minimizing turnover is key to maintaining your profits. Finding a tenant who you can envision renting to long-term is the best case scenario.
Beyond meeting your basic income and credit score criteria, look for a tenant history of stability, whether in the form of multiple years at the same job or long-term stays at former residences.
Be Sure to Keep Up with Maintenance
Keeping your property in good shape not only inspires renters to want to stay put, it ultimately saves you money in the form of preventing major maintenance disasters. Many landlords choose to use property management companies to handle routine upkeep, which can range from performing regular inspections of major household systems, to replacing furnace filters, to winterizing pipes and outside spigots, to responding to tenants’ service requests.
Property Manager Interview Questions
The property management company you hire will play a key role in the success of your property investment venture. Here are some interview questions that will help you determine which property manager you should hire:
Experience
- How many years have you been a property manager?
- Have you had any formal training in the field?
- What systems do you have in place that allow you to do your job efficiently?
- What aspects of property management do you find particularly rewarding/challenging?
Availability and Communication
- What are your office hours?
- What is your availability after hours? What arrangements do you have in place to handle emergencies?
- How quickly do you return phone calls?
- What types of regular communication can I expect to receive from you?
Practical Skills
- How do you go about pricing rentals?
- What vendors do you use for maintenance and other projects? How long have you worked with each of them?
- Do you use property management software for recording-keeping purposes? What types of records do you keep?
- In your view, what are the key elements of keeping an income property turning a profit?
Dealing With Difficult Tenants
- Tell me about a time when you’ve had to deal with a disruptive tenant. What steps did you take to remedy the situation?
- What percentage of past tenants have you had to evict?
- How does the evictions process work in this state?
- What legal services do you employ?
Property Investment Opportunities in College Towns
One sector of the country’s real estate market that will likely never endure a substantial slump is student housing. Millions of young adults head off to college for the first time each fall—many of whom choose to reside in off-campus rental properties instead of dorms.
Due to this consistently high demand for apartments in college towns among the 18-22 crowd, many property investors know just how lucrative properties in these communities can be. “Demand and supply conditions for housing are bad,” Fiserv chief economist David Stiff told MarketWatch last year. “But in college towns demand conditions are slightly better. There’s a stable source of new demand every year.”
Buying College Town Real Estate
According to Inman News, obtaining a property in an area with numerous colleges and universities is a very attractive proposition for many investors.
With property values low in a number of real estate markets nationwide—both big and small—that have numerous undergraduates renting or looking to rent, investors would be wise to perform due diligence and investigate the pros and cons of putting down their money on college-town residences, the source states.
Inman News notes many people investing in these properties aren’t just major development firms building new properties or hot-shot investors with dozens of residences in their name. Instead, a number of these rental property buyers are new to the world of real estate investment, and are only looking to secure a few properties to create modest revenues by leasing them out to college students.
A report by MSNBC states housing investors searching for properties in college towns should do their research and ensure they know what they’re getting into, though. While prices, neighborhood and community safety and an area’s school enrollment figures should play a role in an investment decision, the source states location to nearby schools is the most important factor to take into consideration when contemplating a real estate investment.
Hot Student Housing Markets in 2011
Nearly every one of the major U.S. markets can be considered college towns, or at the very least, have a number of smaller college towns around them. Some markets, though, have proven to be the marquee spots for investors to put down some capital and secure properties, a survey by a real estate information website indicates.
With substantial average rental rates, stable property values and an always-high demand for apartments in a college-rich community, including notable schools Harvard and MIT, Boston topped Move.com’s recent list of the best college towns for prospective property owners to invest in. The list was based on a report of American cities with the best schools from U.S. News and World Report.
The nation’s capital also ranked highly on the website’s list. Washington, D.C.’s property values are some of the highest in the nation, and the district is one housing market that has remained strong throughout the housing crisis. With substantially populated colleges and universities in D.C., including Georgetown and George Washington, renting in the area continues to go through the roof. Additionally, affordable median list prices for properties in metros with many schools, including Nashville, Chicago and Houston, makes them viable candidates for real estate investment, according to the survey.
“Local markets with universities or colleges can be an attractive option for many local real estate investors,” Move chief executive officer Steve Berkowitz said regarding the survey results. “Housing demand in college towns is generally high and vacancy rates are usually low. Combine the supply and demand ratio with rising admissions and the five percent rise in rental rates expected by the end of the year, and rental property in college towns can be a smart option for the right investor.”
Managing Student Tenants
While you may be experienced in the art of dealing with tenants—including meeting their needs, communicating with them through the application process and responding appropriately to their complaints, among other tasks—handling student renters can be a bit different.
Many college students who rent apartments are new to leasing, and therefore may not know the typical tenant etiquette. Some of these youngsters disobey property rules, pay rent late and don’t take care of their units as a renter should.
However, with student renters making up a substantial portion of the apartment market each year, it’s unlikely the number of undergraduates leasing will dwindle anytime soon, so property managers have good reason to learn how to handle student renters.
Marketing to Student Renters
Since demand for off-campus rental properties is considerable, property managers have to compete with one another to get quality tenants in their residences. Multifamily Insiders states before managers decide to get the word out about their apartment unit; they should research their market thoroughly.
By understanding the trends in a given area, the source states property managers can determine the most appropriate plan of action in terms of advertising their properties and units. Should a manager find out a rental property down the street is offering one month of rent free to students looking for apartments, they may want to market a concession of their own, such as a free television or a free utility for a month, to attract those same applicants.
The student renting season each fall typically moves quickly, according to Multifamily Insiders, so property managers should have their paperwork ready to go once undergrads begin searching the market, which usually begins in late summer.
Interviewing Potential Student Tenants
To avoid leasing to students who may not be suitable tenants, DoItYourself.com says property managers should determine if they are quality prospective applicants for an available rental unit. This includes a thorough investigation into their financial history, the source states.
As most college students are typically in the 18-22 age range, this means they likely have little or no credit history. But, that doesn’t mean property managers can’t figure out if they’re financially responsible. For example, if an undergrad applicant is employed and has been for an extensive period, that could be an indication of a fiscally knowledgeable applicant, which makes them a more viable candidate to be approved.
Additionally, the website says if multiple students intend on living together during the school year, that means each one could put their name on the rental lease agreement. By having each tenant sign their names on the dotted line, the chances of getting burned by renters who can’t pay their bills on time (or at all) are substantially diminished, making them a lesser risk.
Party Time? Not Excellent
Though it may be a stereotype that all college students like to party all the time and make a mess of their off-campus residences, property managers should still ensure there is language in a lease agreement that states clear rules about having guests over, loud noises and other things that may prove disruptive to neighbors and the property itself, according to DoItYourself.
The last thing a property manager wants to deal with is complaints from loyal, quality tenants at 3 a.m. regarding considerably loud music coming from the unit next door. This could lead a manager to have to deal with issues from multiple renters based on the actions of tenants at one unit, and may spur some residents to get out of or not renew their lease again.
