The client has invested in real estate since 1987. After experiencing difficulties in renting an industrial property she owned for the past 13 years, it was time to sell. Having sold many properties in the past, the concept of doing a 1031 exchange was all too familiar to her. She questioned whether or not to do it this time. In consulting her financial advisor and CPA, she was informed of the tax consequences in selling this property. In hearing this information, she inquired into the best course of action for her tax situation. The advice was based on a simple question, “Do you want another rental property”? Emotionally, the client was tired of the responsibilities associated in being a landlord, in addition to everything involved in purchasing another rental. Logically, however, it was concluded that the best course of action was to purchase a replacement property and defer the taxes.
Another week, another lie about Proposition 13. The new narrative from the Prop. 13 opponents is that California’s high fees for building homes and commercial property is due to Proposition 13 denying local governments the ability to raise revenue.
A study just released by the University of California Center for Housing Innovation concluded that the “impact fees” that local governments charge developers are a big reason why it’s so expensive to build a home in California. The fees are not only costly, they’re also unpredictable, lack transparency and can kill a project’s viability, according to the study.
Real estate is a weird, weird world to work in. Being a landlord or rental property owner has its own challenges without trying to keep an eye on every single out-of-place law that there is. Most of the time, legislation can make sense, but some of the time, the “black sheep” of laws seems to come out of nowhere. Check out some of these nonsensical laws that seem difficult to explain.
One of the biggest disasters a property manager could face is a fire. According to FEMA, the cooling weather in fall and winter increases the number of fires and related accidents. It is crucial to inspect your properties for fire hazards now, and get acquainted with these tips to help prevent fires and keep residents safe and minimize damage if a fire does occur.
Things change: your perspective, your appetite for risk, and even your investment criteria. Sometimes the best thing you can do is move forward, and that can mean selling an investment property. When this time comes, you will have to pay off any existing liens before transferring title. For many investors, the biggest lien is their commercial mortgage. But just as you would do your research and preparation for the purchase of a property, you must also prepare to sell a property. That starts with organizing the paperwork. Are there any prepayment penalties that could cost you at closing? Do you have operating statements and rent rolls ready? Is the property in a condition fit to finance? Let’s take a closer look at potential hurdles to limit surprises.
Dear SKY, How Can We Change The Attitude of Landlord vs. Tenant?
The relationship between the landlord and the tenant is a professional and cordial one. The landlord or Housing Provider provides the property, and the tenant pays their rent and hopefully loves their apartment and community in return. The landlord and tenant relationship can be much more complicated than that if one of them does not fulfill their various obligations. As most of you know many relationships do not always remain steady. Problems and disputes arise with time, and things can go off track.
In this article, I’ll lay out five practices that the best property managers turn into longstanding habits. I’ve returned to them consistently throughout my career, and they apply to the management of all forms of real estate, from retail to residential, office to industrial. When managing, organization is of the utmost importance. You’ll find that principle at the heart of these tips.
The latest incarnation of California’s rent control measure that was defeated last November has returned. Proposition 10 2.0, Michael Weinstein’s Rental Affordability Act, is targeted to be back on the ballot in 2020.
The state’s Legislative Analyst’s Office (LAO) says the bill will result in a number of negative impacts, including California’s housing situation, the state’s finances as well as CRE market. The LAO says it would likely drive rental units from the market, decrease apartment property values, and possibly diminish annual tax revenues by tens of millions of dollars or more.
California voters turned down Proposition 10 last year, but the new version of the bill would allow cities and counties to impose rent control on buildings after they turn 15 years old. Under the Costa-Hawkins Rental Housing Act, local jurisdictions may not impose rent control on units built after 1995.
The proposed measure would also once again allow local governments to apply vacancy controls, meaning rents would remain regulated in rent-controlled jurisdictions even after changes in tenancy.
“The analysis clearly points to a reduction of available homes, as stricter rent control leads property owners to take units off the market, said Tom Bannon, CEO of the California Apartment Association. “Prop 10 2.0 would drive down property values and prompt an exodus from the rental housing market. California needs sensible housing policies that protect tenants and encourage the building of affordable homes for working families. This measure makes the crisis worse.”
by David Crown
As a property manager, I’m in the business of eliminating stress and headaches for property owners. Since nothing can complicate the life of a property owner quite like an irresponsible or malicious tenant, tenant selection is of the utmost importance in this industry, and it’s something I’ve devoted a great deal of time to refining.
Just the other day, I was at breakfast with a client of mine who owns a quadruplex in the San Fernando Valley. He mentioned that one difference he’s seen since he hired my company to manage his property—a difference it took him a few years to notice—is that the tenants we’ve rented his units to tend to stay put. He had told me in our first conversation that he could always fill his units immediately, that finding new tenants was never a problem. I remember my immediate thought back then was that he probably wasn’t getting top dollar for his apartments, and his rent-controlled units were suffering because of it. Now, he said he recognized that keeping the units full was a different story. It got me thinking about the mark of high-quality tenant selection criteria: it doesn’t just fill your apartments. It brings in tenants who stay longer and pay more each month. In this article, I’ll lay out the best ways to choose tenants to rent apartments to.
Firstly, it’s crucial to run an in-depth background check on all prospective tenants. We use an eviction search that spans the whole country in scope, telling us of any evictions the prospective tenant has been subject to. State-limited searches are out there, and if you use one of those, you could easily wind up renting to somebody who’s been evicted a dozen times in other states. In the national search, a record or lack thereof gives us some picture of the tenant’s prior dealings with landlords. We then begin to clarify that picture by contacting their former landlords.
Now, any property manager worth their salt knows to call a prospective tenant’s last listed landlord and ask how easy or difficult they were to deal with. But think about this: if the most recently listed landlord on an application is still currently renting to the prospective tenant, and has had a terrible time dealing with them, isn’t it possible that they’ll tell you the tenant is great, in hopes of pawning the them off on you? I’ve seen it happen before. This is why we call not only the most recently listed landlord, but also the one before that, and sometimes even a third if listed. We ask all of these landlords if the tenant was ever late on rent, if the police were ever called to the tenant’s unit, and if the tenant ever in any way violated their lease agreement. The more thorough you are with your questions, the better.
This brings me to my final point: don’t favor fast over thorough. You might be looking at these steps and thinking, “How can he do all this and fill the unit fast?” But I answer that question with a question of my own. What’s more important to you as an owner: finding tenants who move in immediately or who pay higher rent for a longer time? Plenty of owners and managers boast of their ability to fill units at lightning speed, without considering the fact that they might be leaving money on the table. Don’t get me wrong; we work hard to maximize quickness and efficiency as well. But that’s secondary to finding tenants who’ll pay the rent your property is worth, and who will furthermore stick around for years to come. This leads not only to higher profits for owners, but to the peace of mind that comes with not having to advertise vacancies every year. Don’t turn your apartments into revolving doors for a constant stream of new tenants. Difficult tenants—who turn in rent late, complain about nonexistent problems, and in some cases wrongfully sue landlords—are not worth filling a vacancy fast. Quality tenants, however, are worth the added work and wait.
David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at (818) 646-8151.