Archive

Oct 13

Selling Occupied Rentals

By PMV Network3 Comments

Author: Lambert Munz 

Our leases, and many others, address the showing of units to prospective buyers. The agreement language refers to this as “exhibiting the premises to prospective or actual purchasers”.

When a tenant is given notice to allow agents to show units as well as being reminded that their lease requires them to do so, guess how they feel. They are upset because a) strangers are going to disturb their daily routine and work schedules. b) They are going to be kicked out as soon as it sells. At this point they do not give a tinker’s damn about the owner’s need to sell. They are going to be hard to reach and are not going to cooperate by taking off work to show units. Also, the tenants are probably in no mood to clean the unit every time an agent calls.

What about putting a lockbox on door allowing agents to enter when the tenant is gone? At our company, we reserve the right to cancel our contract if a lockbox is put on a door without the tenant’s permission. It is a liability we don’t wish to share. If a tenant does agree to the lockbox, then we will ask in writing that we be excused from liability as we have no control over who is entering the home. The listing agent doesn’t even know who the parties are and agents will enter without calling. Anyone could walk in the middle of something private/personal.

THE SOLUTION TO THE PROBLEM IS SO SIMPLE – It is called compensation, AKA money. Money does wonder to gain cooperation. Resentment seems to vanish.

This reminds me of a story about my wife. Years ago, she was managing a large community of over 400 units. The owner decided to sell. Of course, my wife became concerned about whether or not the new owner would retain her or that the company she worked for would transfer her to another job.

This was a large transaction and the seller was a sophisticated investor. He told my wife’s boss that he wanted to give my wife a $4,000 bonus for help with the sale with the new buyer. The boss told the owner that this was not necessary. The owner insisted that my wife be given this bonus as he wanted the transaction to go smoothly. He knew my wife had other concerns besides his successful sale. However, with the added bonus, my wife was enthusiastic to help the sale be consummated. With a $4000 bonus, she could worry about another job later.

The magic of cooperation is so simple and is often overlooked or purposely ignored.

The tenant is being inconvenienced and their privacy disturbed. It only makes sense that they should be given the courtesy of compensation for their cooperation.

An addendum can be prepared that will give them a free month’s rent or a move out bonus. A condition of receiving the bonus will be a tidy house for showing and agreed upon showing times. No knocks on the door without proper notice.

Agents should use this same strategy regarding property managers when needing their cooperation with the sale of an owner’s property. The property manager at this point is thinking that they will no longer manage the home and the enthusiasm for helping is disappearing. Think about cutting them a bonus if the sale goes through. The result will help in spades — simply because nobody else does it.

I had an agent one time ask me if I would show the units for her. Guess what my answer was. 

My name is Lambert Munz and I have been licensed as a Real Estate Broker for 44 years with the CA Dept of Real Estate. I currently am President of Arbour Real Estate Management, Inc. Background was as a Buyer’s Broker for Investment properties. Currently a property manager and have been for 27 years. We offer residential and commercial management services. I hold two designations: RMP Residential Management Professional and MPM Master Property Manager. Awarded by NARPM National Association of Residential Managers. Past President of NARPM Sacramento chapter. My services are available in Sacramento CA. Visit my web site at Arbour Real Estate Management, Inc.

Aug 22

So you want to be a Landlord

By PMV Network4 Comments

 So you’ve purchased your first rental property and are now ready to dive into the world of being a landlord. You got a pretty good deal on that house, have run the numbers and have decided in order to cut costs to manage the property yourself instead of hiring a full service property management company. How hard can it be; you know how to fix a leaky toilet and paint. Plus it would be fun taken on a more hands-on approach with your investment.

You’ve already got a pretty good idea of what type of tenant you want, right? And you’re going to tailor your ads to target this type. And of course you’ve got a rental rate already in mind that will not leave you with a negative every month. You also went to the local office supply store and picked up one of those ready made “one-size-fits-all” lease agreements. Cool…
You’re feeling like that weekend real estate seminar you went to called “How to become a Landlord in 3 Easy Steps” is paying off. Just do a few more of these deals and you’ll be out of the rat race in no time. Sounds great, right? Yes that sounds great, but now comes the realty.

Being a landlord does not happen over night. It takes lots of experience, knowledge and lessons learned.
- It can become a full time job if handled properly.
- It can become a nightmare if not handled properly.
- It can be fun and stressful at the same time.
- It can become overwhelming
- It can make you laugh
- It can make you cry
- It can make you rich
- It can make you poor
- It can make you the hero
- It can make you the villain

I would never discourage anyone from not giving it a try. The best way to learn something is by hands-on experience. Just keep in mind, being a landlord is the same as running a business and there are legalities you must follow and adhered too.

Here are just a few things to consider before deciding if landlording is right for you:

- On a federal level, tenants can not be discriminated against based on race, color, religion, sex, national origin or disability.

- On a state or local level, it can go further by not allowing discrimination based on marital status, sexual orientation, presence of children, age, occupation, source of income (government assistance, section 8), educational status or medical status.

- Market condition, location and amenities or lack of will dictate how much you can set your rent at. It has nothing to do with making sure you cover any negative scenarios.

- You better know more than how to fix a leaky toilet and paint.

- Never schedule a vacation around the 1st of the month. Actually no time is good.

- Have the yellow pages handy, or just rip out the pages listed under “handyman”, “plumber”, “electrician”, “carpet”, “carpet cleaning”, “painter”, “hardware stores” and just cause in case “Lawyer” for quick reference.

- You’ll need a cell phone at all times

- Always keep money set aside for the “just in case”, because the “just in case” will happen.

- Once you’ve run the numbers and have come up with the monthly expenses of running your property, go ahead and add at least 10% more; because you’ll need it.

- Attend as many of your local hardware stores “How-To” home repair demos. Being a jack-of-all-trades comes with the territory.

- Locate the nearest marshall office or district court from your rental property. You may need them in case you need to start the eviction process.

When I hear people talk about all their horror stories, how they lost their shirt investing in real estate and how you can’t make money owning rentals, you can bet it’s because they didn’t know how to play the game. They didn’t even know the rules. I’ve had my share of horror stories, but I’ve learned from them and have moved on and will make better choices in the future.

Understand the rules of the game, play by the rules and you just might succeed.
Happy investing.

Aug 17

Landlord and Property Managers must change with the times

By PMV Network5 Comments

 This economy has been tough on the real estate market to say the least. And many real estate companies have had to change the way they do business, especially when it comes time to finding new clients.

What about the rental management industry? We would think the rental market would be doing well, since so many homeowners are now being forced to become tenants, that landlords or property manager phones would be ringing off the hook. And that these new tenants would be flocking to their offices looking for a place to live. Maybe some are getting extra business, but the rental climate and type of tenants in todays market are quite different then pre-economic woes.

In today environment the prospective tenant has more options than ever could be imagined. The inventory of available rental properties is enormous, lease with option to buy are becoming the norm as well as the desperate landlord that has no choice but to reduced his rental rate to unrealistic levels so as to bring some type of income in or face foreclosure.

Today rental market is a tenants dream scenario and a landlords nightmare that unfortunately has few winners.

Even though rental rates are at record lows, tenants are still finding it difficult to qualify for a lease for the following reasons:

1- Many new tenants are previous homeowners that have poor credit due to a recent foreclosure which makes it difficult to qualify
2- Many new tenants recently lost a job and can not show steady employment
3- Many new tenants are looking for short term leases due to unstable jobs
4- Many new tenants household incomes have been cut in half making it impossible to qualify
5- Many new tenants can not come up with the required security deposit or other monies to secure a property

For the Landlord or property manager many new challenges have become apparent:

1- You are competing amongst not only the current pool of rental properties, but now all the homeowners who can not sell so will rent their property instead.
2- Its very difficult to find a qualified tenant and if you do chances are you better give them a offer they cannot refuse, cause the next landlord will.
3- You may have to loosen the reigns when it comes time to your screening
4- You may have to loosen the reigns when it comes time to asking for full security deposits upfront
5- You may have to change your per policy and start accepting pets if you did not before

If you have a property management company helping you to secure a tenant, they should be doing things different. They can not wait in the office for the phone to ring anymore.
They must be more aggressive in they advertising, showing properties even if this means after hours, move-in incentives, freebies…you get the picture.

Times are tough and this means making tough decisions. There no winners, but hopefully by making some changes we will be the one that are still standing after its all said and done.

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