Sunday, August 25, 2013

Latest New and Existing Home Sales

New home sales were down in July while sales of existing homes continues to rise.





Click HERE to read the full article from the National Association of Realtors website by the NAR's chief economist. Or click HERE for the video.




Friday, July 12, 2013

Basel III Down: The Specter of Regulation Eases

Basel III Down: The Specter of Regulation Eases

There are more changes afloat which will impact the availability and costs of mortgages.  The adoption of new regulations may shift more mortgage business to smaller banks.

Tuesday, July 2, 2013

Should I Use a Professional Property Manager/ (continued - post #2)

This is a continuation of a previous article discussing the various reasons why investors choose to hire a professional property manager.  Click HERE to view the original post.

In this post I will cover items #4-#7 in reasons for hiring a professional manager.

Reasons for Hiring A Professional Manager
1) Professional collections at the highest performance level
2) Access to quality, cost effective repair resources
3) Advanced marketing knowledge and expertise
4) Extensive background checks on prospective tenants
5) Comprehensive record keeping
6) Expertise in tenant relations
7) Privacy/Protection from Tenant Interaction
8) Someone to manage the process of tenant acquisition so I can focus on my personal life
9) Someone to provide a quality lease which protects my interests
10) Someone who will stay current on laws which cover the Landlord/Tenant relationship
11) 24-hour live support for tenant emergencies
12) Expert advice on when to raise rents
13) Expertise in tenant retention
14) Expert advice on making effective repairs decisions

Here are details on items #4 - $7.  I will tackle future items in later posts.

4) Extensive background checks on prospective tenants.  A professional property manager should have access to and provide you an extensive background check.  The four main areas are 1) a verification of a tenant's income, 2) an analysis of a credit history, 3) a comprehensive criminal history check and 4) a verification of rental history.  To summarize, you want to understand if the tenant has the ability to pay their rent, a history of paying their bills, you want to be sure your tenant is not someone with a history of breaking laws (especially felonies or sex crimes) and if they have any derogatory rental activities.  It may seem obvious that it is desirable to know these things before you make a decision about letting someone rent your home, but it is amazing how many landlords agree to rent to person based on their initial meeting of the person and their 'gut feelings" about this person.  I am sure that most of the people who gave their assets to Bernie Madoff had good "gut feelings" about Bernie.  All I am asking is that if you trust your feelings, back it up with a verification of available information.

Having all this information available is a key to making a decision which allows you to be a happy landlord and allows you to have a happy tenant.  This background information is used to decide when you may want to require an additional deposit to offset risk, and sometimes this additional deposit is the key to motivating a tenant to follow the rules and pay their rent on time and in full.  If someone has been challenged to pay their bills on time, the extra deposit you collect allows someone a second chance to improve their credit habits and the motivation to follow through.  ONEprop's data shows that a tenant with poor credit and an extra deposit is more likely to fulfill the terms of the lease than a person with good credit and a normal deposit.  One of the other advantages to having a professional property manager collect this data is that they can help you understand the risks and coach you through right decisions based on many more data points than you may have as an individual landlord.  ONEprop puts over 1,000 tenants in homes each year and sees how this background information collected can be used to forecast their success potential as a tenant.

5) Comprehensive record keeping.  This is one of the most overlooked advantages of using a professional property manager.  The time and effort involved in receiving rent, posting rent, paying bills on your behalf and organizing all the income and expenses in an easy to use report is extensive.  This alone is probably worth the total cost of what you pay for a manager's services.  If you do all this yourself, you are going to spend 2-4 hours each month on these tasks.  Wouldn't it be better to spend this time growing your own business or career and/or spending this time with family or friends.  Most of our clients spend about 5-10 minutes each month reviewing their reports and their funds are automatically deposited into their checking account.  At the end of the year an annual report of income and expenses, organized with summary totals is presented so you can easily prepare your taxes.  An income producing asset provides the landlord with many tax deductions, do you really want to be collecting these receipts, organizing them by hand or in an electronic accounting package and risk missing an entry or losing a receipt?  If you ever get audited it is great to be able to provide a professionally prepared report of all income and expenses, all at the click of a button.  Everyone has enough stress in their life, this is an easy way to relieve the stress in a cost effective manner with many, many additonal advantages.

6) Expertise in tenant relations.  A typical ONEprop manager is dealing with about 200-300 active tenants and about 1/3 of these are new tenants each year.  This experience allows them to become experts in dealing with the different personalities who are tenants.  A mismatch with a landlord and tenant personality can make the experience miserable for an owner or a tenant, and the time and effort involved in dealing with a mismatch can ruin the financial benefit of being a landlord.  A professional manager also has the advantage of staying up on the legal aspects which affect the landlord/tenant relationship.  So this is not just a case of dealing with different personalities, it is also protecting you from becoming embroiled in a situation where a change in the laws creates a tension when a tenant is more attuned to your legal responsibilities the you are.  A professional manager is skilled at bringing a tenant into a home and coaching them into being a good tenant, making for a better situation for all.

7) Privacy/Protection from Tenant Interaction.  This is the primary reason why someone who "self manages" their rental properties moves to professional management.  Professional management allows you to have the benefits of owning income real estate without the direct, personal interactions.  Tenants don't have to know who you are, where you live, where you bank.  As I discussed in the rent collection comments, you can still be nice to your tenants and do nice things for them, but you get to control the situation on your terms.  You are not getting calls from tenants at odd hours or strange requests.  The lease you use should require the tenant to use your manager for all communication, this way you can focus on your business and enjoying your life while your manager handles your tenant interactions.


I hope this information is helpful in outlining the potential upside to partnering with a professional property manager.  In my next post I will provide detail on the next set of criteria, items 8-11.  If you would like to talk to someone now - please contact mgmtservices@oneprop.com and someone will discuss these and any other questions you may have about professional property management so you can decide if this is right for you.

Sunday, June 9, 2013

Should I Use a Professional Property Manager?

 Here are a list of things you might use as reasons for hiring a professional property manager.  If you are considering hiring a manager to oversee your investment property you should look at this list and prioritize what is important to you.  Rate the items on "Must Have", "Nice to Have" and "Not Important".  After you decide on why you want to hire a manager the second step is finding and interviewing potential candidates, but first you need to decide what you are looking for.

Here is a basic list.  There may be more items which are not listed here, but based on interactions with our clients these are some of the highest priority items.

Reasons for Hiring A Professional Manager
1) Professional collections at the highest performance level
2) Access to quality, cost effective repair resources
3) Advanced marketing knowledge and expertise
4) Extensive background checks on prospective tenants
5) Comprehensive record keeping
6) Expertise in tenant relations
7) Privacy/Protection from Tenant Interaction
8) Someone to manage the process of tenant acquisition so I can focus on my personal life
9) Someone to provide a quality lease which protects my interests
10) Someone who will stay current on laws which cover the Landlord/Tenant relationship
11) 24-hour live support for tenant emergencies
12) Expert advice on when to raise rents
13) Expertise in tenant retention
14) Expert advice on making effective repairs decisions

Here is detail on the first three items.  I will tackle future items in later posts.

1) Professional collections at the highest level.  A professional property manager should provide methodical, legal collection procedures where tenants are always treated, fairly, consistently and with dignity.  One of the biggest issues I hear from Landlords who self manage is that the personal relationship they develop with their tenants can have a negative effect when they are trying to get a tenant to pay their rent on time and in full.  Using a professional manager can shield you from the gut wrenching emotion when a tenant has difficulty placing their responsibility to pay their rent as a high priority.  Having the manager as an intermediary does not mean you can't be nice to your tenants and provide them special consideration if you want, but this makes it easier to do.  I have more than one client who sends each tenant a $50.00 gift card as a thank you for renewing their lease demonstrating that having consistent collections does not mean it is a mechanized relationship.  We provide this service for them with a handwritten thank you card so the tenant knows that their Landlord is showing them unique appreciation.  So the goal is to have professional collections which insures that the revenue keeps coming, but with a separation of the emotion when you need it.  On the other side of this equation, some Landlords take great pleasure in knowing their tenants and their families.  They treat their tenants almost as an extension of their own family.  If you are the type of landlord which places a high value on their own personal interaction with a tenant you would rate this item as a "nice to have" or "not important".

2) Access to quality, cost effective repair resources.  Professional property managers pride themselves on having ready access to the vendors who can make prompt, reasonably priced repairs.  A good portion of a property managers time is invested in training repair vendors how to make the type of repairs which are appropriate for a rental house  It is also important that when a repair needs to be a rush job the Landlord is not punished by a higher repair cost.  Professional managers can often use their volume of work to receive appropriate discounts and better warranties from repair firms.  Repair firms will do this for professional managers because the manager helps reduce their cost to provide service.  A professional manager oversees the interaction, providing quality information to the vendor so they can accomplish the task more quickly and with fewer trips.  The professional manager also manages the tenant/vendor interaction and makes sure the vendor gets paid promptly.  Because a professional manager can provide ongoing revenue to the vendor it is more likely to have the work warranted.  If an individual Landlord uses a vendor one time for one job, then the vendor is simply not as motivated to take as good care of a single Landlord as they will for a professional manager who is providing them multiple opportunities for work.  On the other side of this equation is the semi-retired Landlord who likes to perform minor repairs on the property.  If you fall into this category you will supply the labor and the materials for repair and keep the money you would normally pay a handyman or even a specialized repair person.  However, if you already have a full time job it is often better use of your time and money to focus on your business specialty and grow your business (or spend time with your friends/family) while you let a repair person do the repairs on your property.

3) Advanced marketing knowledge and expertise.  Our firm, like many others, do not get paid any money while a home is vacant.  This puts our goals and our clients in alignment.  You should never accept a professional manager who gets paid while your home is vacant, it is the job of the manager to get you rental revenue unless you are specifically asking them to manage a vacant home. ONEprop operates in 10 markets, each with its own unique variables and skill sets, which can sometimes be migrated to other markets.  We usually have ~150 homes on the market at any one time and process over 300 tenant applications each month.  We use every one of our interactions to constantly fine tune our marketing efforts and tools to maximize your revenue at each tenant turn and to minimize the vacancy time.  If you market your own home once every two years, you may be working with outdated tools and/or opportunities.  If a house rents for $2,000/month and using advance tools saves you one week of vacancy you have made a significant contribution to your personal revenue, but this must also be done while achieving the highest rent possible in the allowed marketing time.  ONEprop uses over ten different marketing channels, including co-brokering with other Realtors, signage, newspaper (yes we still do this in certain markets) and a multi-channel web advertising strategy.  All these efforts are to find you the right tenant at the highest rent in the shortest amount of time.  In each market we have specialists in this marketing effort, which can only be provided because of the volume of interactions we have with clients, homes and tenants.  When done at the highest level you get the highest rent, with the best tenants with the least amount of vacancy.  This leads directly into the next item, background checking of prospective tenants which will be discussed in my next post.

I hope this information is helpful in deciding if you want to use a professional manager.  In my next post I will provide detail on the next set of criteria, items 4-7.  If you need to talk to someone now - please contact mgmtservices@oneprop.com and someone will discuss these and any other questions you may have about professional management so you can decide if it is right for you.



Thursday, June 6, 2013

Why Extended Home Warranties are Bad for Investment Properties

I last discussed this issue in May of 2008, five years ago.  Over the last five years it turns out that our experience has not changed or altered our opinion that "Extended Home Warranties" are generally a bad investment for Landlord/Investors as a long term strategy.  You can read my original post by clicking HERE. Please read the original post which I wrote when our company was still called Prime Properties.

Extended Home Warranties can be a valuable tools but there are specific negative issues which may make it a poor use of your money, especially if you are holding a rental property for 5+ years.  The two main issues involve the financial impact.  A homeowner warranty means you are paying for the repairs, plus the management of the repair, plus the bookkeeping and overhead to manage the program and a profit for the warranty company.  Because of these issues an extended home warranty is usually a net loss for most of our clients.

The second reason an extended home warranty can hurt your pocketbook is because of the negative impact on tenant relations.  Home Warranty companies have no obligation to respond in a specific time frame, which can lead to disatisfied tenants who move more frequently.  The biggest negative impact to an owner is tenant turnover.  Some things you can't control, but this you can.

If you read my previous blog post I detail when these products make sense.  If you already have a warranty in place when we take over management of your home ONEprop will make every effort to maximize your benefit of this tool, but we may also recommend that you ask for a rebate and put the money in your pocket.  Please ask your ONEprop Property Manager for the factors you should consider when deciding if an extended  home warranty is right for you.