Why Rental Housing Professionals Should Think About HR

Written by Landlord Property Management Magazine on . Posted in Blog

Shared post by The Mammoth HR Pros

Hand holding a Human Resources Word Sphere on white background.

Hand holding a Human Resources Word Sphere on white background.

With the minute-to-minute demands of managing and servicing rental properties, who has time for HR? Best hiring and retention practices can take a back seat to maintenance repairs, rent collection, showings and listings, right?

It’s true that HR usually can’t compete with maintenance emergencies and other such urgent matters, but it needs to be part of the regular routine. HR done well gives employers the tools to create a great workplace and to ensure compliance with employee-related laws and regulations. It sets and maintains a solid, stable foundation. Ignoring HR—or doing it poorly—is like building on unstable land: the foundation will eventually crack and, in a crisis, the structure will collapse. Bad HR is bad for business.

HR Helps You Create a Great Rental Workplace

Let’s imagine a common scene: two prospective tenants have taken their lunch hour to visit a couple of nearby apartment complexes. The two places have similar rates and offer comparable perks to renters. Nevertheless, the prospective tenants rule out the second one almost immediately after entering the property.

At the first location, they’re greeted warmly by the apartment management staff. They have to wait a few minutes to be seen, so they have a moment to take in the office atmosphere. The front office is busy, but not chaotic. Maintenance and janitorial employees pop in and out, and their interactions with the office manager are courteous and efficient. Overall, the employees seem happy, and the office has a welcoming vibe.

At the second location, the prospective tenants are seen to immediately, but there’s no warmth to the place. The employee at the front desk mutters that today was supposed to be his day off. Two others argue audibly in a back office. The employees clearly don’t want to be there, and the applicants conclude they feel the same. They leave, without having looked at any of the available apartments, and drive back to the first place.

When employees like where they work, they tend to be happier. That’s good for customers, clients, and prospects too—it makes the place they come to for business (or residence!) a happier place, a place they like to be. And when employees dislike their workplace, their disapproval shows. Having angry or disengaged employees is the fastest avenue to negative reviews and a negative reputation.

Whether a business has a good or bad reputation is no mere matter of chance: it’s largely a consequence of doing HR well or poorly. Doing HR well means valuing and honoring the work and contributions of employees, attending to their working conditions, establishing consistent employment practices and policies, setting clear channels for communication, building a workplace culture of collaboration and camaraderie, and providing perks and benefits when possible. Doing HR poorly means choosing to neglect one or more of these areas.

Human Resources Helps You Comply with Laws and Regulations

HR is also about the law, meaning HR can be a headache and a half. But whether or not an employer attends to HR, the laws and regulations are going to be there. And ignoring them has consequences.

Every employer needs to know about federal laws like the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FLMA), the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act, the Equal Pay Act (EPA) and the Affordance Care Act (ACA). Every law won’t apply to every employer, but violations can be expensive, so an employer shouldn’t just assume they’re exempt. Even simple oversights can be costly. A company can incur fines simply for not having the proper labor law posters displayed!

States too have their own labor-related laws, covering everything from minimum wages, to payroll deductions, to sick leaves, to travel reimbursements, to what questions employers can ask applicants. Twenty-three states even have social media privacy laws! Municipalities are getting more and more into the action as well: some cities have their own minimum wages and sick leaves, among other ordinances.

To handle all these laws and regulations, large companies have their own HR departments, but small and midsized companies can often afford to have only one person in charge of these matters. These one-person HR Departments often have many other responsibilities demanding their attention (like setting rentals rates, calculating taxes, and advertising vacancies). Consequently, HR often gets less priority, putting these organizations at risk.

Bottom Line

It’s vital to the health of an organization to put at least one person in charge of HR and give that person adequate time to attend to it – and not only during times of an HR crisis. Whoever oversees HR matters needs time to do research or seek the advice of other HR professionals. With sufficient time and resources, an HR individual or team can help ensure that the organization has a great and compliant workplace. And that’s good for increasing rental income and reducing expenses, no matter what the business!

By The Mammoth HR Pros

At Mammoth, our mission is to make HR approachable, simple and intuitive for small and medium-sized organizations nationwide. We serve over 15,000 businesses and offer live, 1-on-1 consultations with our certified HR Pros, a state-of-the-art online portal, exclusive HR compliance tools, support for all 50 states, live online chat assistance and more. Whether you need an employee handbook, answers to your HR questions, or help understanding the rules and regulations, our on-call HR team is here to help. And they’re awesome – 95% of our clients say they’d recommend us to others. Visit us at mammothhr.com.

Seven Under-The-Radar Cities For Renters

Written by Landlord Property Management Magazine on . Posted in Blog

By Carl Whitaker | Axiometrics Real Estate Analyst

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San Francisco. Los Angeles. New York. These are just a few metros that are constantly brought up in conversations regarding the apartment industry due to their high demand among renters.

But what about other metros not at the forefront of international – or even American – consciousness? “Under the radar” metros, if you will. Some metros such as Chattanooga, Ann Arbor and Reno may not have the same clout as the larger metros mentioned earlier, but would still make wonderful places for many people.

So from an apartment renter’s perspective, what are some of these under the radar metros?

Axiometrics has compiled a list of metros fitting this criteria. Whether it be their affordable rent, strong economy – e.g. strong job growth – or a certain je ne sais quoi,these metros are surely worth an under the radar discussion.

They’re also less expensive for renters than the national average.

Under the Radar

Athens, GA: Those familiar with the college football landscape immediately recognize Athens as the home of the University of Georgia. While it may seem as though this quintessential college town is a one-trick pony whose economic prosperity depends solely upon the university, recent job growth figures suggest the Athens metropolitan area has far more working in its favor.

In fact, Athens has seen some of the strongest job growth in the nation – an estimated 4.0% job growth between June 2015 and June 2016 – which means those looking to rent an apartment in the area probably won’t have much trouble finding a job. Music lovers will find more than their fair share of concerts to attend as well, as the city has a thriving music scene – not an uncommon phenomenon in college towns.

Savannah, GA: Located on the Georgia coast, Savannah is steeped in history and is one of the oldest cities in the southern U.S.

Much like the other Peach State city on this list, the Savannah metro has enjoyed healthy job growth over the past year (approximately 4.1% from June 2015 to June 2016), which of course makes the task of finding a job much easier. Furthermore, the 10% job growth within the Professional and Businesses Services sector suggests jobs coming to the area are higher paying jobs – another indicator of a strong local economy.

Given its antiquity, history buffs looking to rent an apartment might not have to look much farther than Savannah. As an added plus, Savannah’s proximity to the beach means you’re a history buff and a beach-goer, Savannah just might be your perfect city.

Cape Coral, FL: Cape Coral is included in this list because many people may overlook the coastal city in favor of larger Florida cities such as Miami, Orlando, and Tampa.

Make no mistake, though, that the Cape Coral area has plenty to offer those looking to rent an apartment. Job growth figures since 2015 suggest the area’s economy is doing well, and finding a job won’t prove to be too problematic.  Cape Coral’s job growth of 4.2% over the past twelve months – driven primarily by growth in the Leisure and Hospitality sector – places the city among the nation’s fastest job growth markets.

Baseball fans will be especially endeared to the area. With four minor-league baseball stadiums within a two-hour drive and the month-long sanctuary that is spring training, taking in a few dozen baseball games every year is as easy as can be.

Ann Arbor, MI: Ann Arbor is another city often associated with a university (the University of Michigan), but the city’s sheer size and importance for the region this means Ann Arbor is a town bustling with activities for residents. The low unemployment rate (3.2% according to the latest figures) and high job-growth rate (4.4% from June 2015 to June 2016) reinforces Ann Arbor’s importance as a regional employment hub.

Word to the wise – those looking to catch a college football game at Michigan’s stadium, “The Big House” (an appropriate name seeing that it’s the largest stadium in the nation), may want to consider buying tickets well in advance, as the stadium is consistently filled to capacity.

Reno, NV: Reno is yet another city enjoying its fair share of recent economic prosperity. The northwestern Nevada city can boast about its recent job growth, which is among the nation’s best since the beginning of 2015. Multiple employment sectors including Mining, Logging, and Construction, Professional and Business Services, and Trade, Transportation & Utilities have all grown more than 4% since June 2015.

Those looking to rent in Reno will also find plenty to do throughout the year. The city’s close proximity to the Sierra Nevada Mountains means renters can spend their winters skiing and the rest of the year enjoying an array of entertainment options around the city.

Chattanooga, TN: Tucked in between a few of the many ridges created by the Appalachian Mountains, Chattanooga is one of the nation’s most scenic cities. In fact, the official nickname of the city is the “Scenic City”.

Chattanooga, though, has far more to offer than just its natural beauty. Chattanooga was the first city in the nation to implement fiber optic internet service, which means residents have the luxury of incredibly fast internet speeds. This fiber optic network is helping spur the city’s economy forward as well.

Tacoma, WA: Tacoma may get overlooked in favor of nearby Seattle, but Tacoma has plenty to offer potential renters. For one, the rent in Tacoma is much cheaper than Seattle. While the average rent in Seattle will cost you almost $1,700 per month, the average rent in Tacoma is about $500 less.

A drive of 40+ miles may scare off some folks, but other transit options such as SoundTransit are viable options to cut down on the commute hassle. In addition, Tacoma has been adding a healthy amount of jobs – 3.5% job growth from June 2015 to June 2016 – so a commute to Seattle may not be necessary. Nearby Mount Rainier is also a plus for any outdoorsy types.

Axiometrics’ specialty is monitoring the apartment and student housing markets to provide a granular view of volatile market trends through the interactive AXIOPortal.

6 Ways To Reward Residents For Referrals

Written by Landlord Property Management Magazine on . Posted in Blog

Shared post from rent.uloop.com

refer a friend

When it comes to bringing in more tenants and keeping your rooms full, the best method is to get your current tenants to recommend the place. However, encouraging residents to go out of their way to promote their place can be a bit tricky.

This is where resident referral rewards come in. Most will go for the obvious money draw, but there are definitely other ways that may fit in better with your current residents (and save you more money). Here are six different ways to reward your residents for referrals.

1. Cash

The most tried and true method to gaining more residents through resident referrals is to give a flat rate of cash. Depending on your demand and need for referrals, this amount of money can vary greatly. Some apartment complexes will offer anywhere from $50 to $300 just for one valid referral.

Giving an unconditional flat rate appeals to all your residents. Everyone can use a little extra cash. Apartment owners know that no advertising is as good as a solid recommendation from another trusted person which makes resident referrals all the more worthwhile. They’re necessary to keeping your resident economy running at its best.

2. Rent decrease

Another way to reward your residents for giving referrals isn’t to pay them outright, but just to let them pay you less. This is most easily done by allowing some decrease in rent, whether it be waiving a half month’s or entire month’s fee. If your resident is loyal and plans to stay for a while, it could mean simply lowering their monthly rent by a small amount so that it adds up in savings over time. Essentially, a rent decrease is a similar bargain as the cash offer, but just handled in a different way that could be easier and more cost effective.

3. Gift cards

Another way to promote resident referrals if you aren’t keen on just giving out cash is to reward your tenants with gift cards. Most towns and areas have similar stores that are useful no matter the situation. From Walmart to McDonald’s to Applebee’s, give your residents a choice of whichever gift card they feel they’ll get the most use out of.

Some people like getting gift cards instead of cash because they’ll either end up just saving the cash or spending it all immediately. If they’re given a gift card, they may be more apt to treat themselves modestly on a nice meal or some new shirts.

4. Cleaning services

Some people will do almost anything to avoid cleaning their apartment. When you have people like this, sometimes a cleaning service can be of the most value. It also works as a win-win for you as the landlord because you know the space is being kept up. You could offer them a free carpet cleaning, window washing, painting, landscaping if they have it or whatever else they seem to be needing.

Sometimes it is best to reward tenants with something immediately practical and useful rather than something that could be spent on something trivial.

5. Local benefits

If you’re looking to boost your resident referrals and help out your local economy, consider giving them benefits and gift cards to local places and shops. Residents may find appeal in a free gym membership or tickets to a community event. They may also find appeal in small gift cards to multiple local shops around town.

If you go to some of these businesses, they may even give you free gift certificates for your residents to help promote their own sales. This could be a good way to keep your own costs down by not having to pay out of pocket and to bolster the community around you.

6. Use a point system

Some apartment complexes already have resident reward point systems that include resident referrals. Tenants can rack up differing amounts of points based on paying rent in a timely manner, renewing their lease, helping out in local community events, amongst other things.

Resident referrals can easily be worked into this system likely as the highest value of points. When your residents reach their point goal, they can then be rewarded with any of the aforementioned gifts above. Reward systems encourage residents to keep up their good work continuously rather than doing one good thing and stopping. This could also help the reward seem greater and the tenant more accomplished if they’ve been working toward it for some time.

If you’ve followed any of these ideas, or even come up with your own, you’ll soon see the benefits of the resident referral. One good personal review and recommendation can win someone over dozens of other online reviews and websites. They are absolutely key in making sure your complex stays full and profitable. Their power can’t be overstated.

Student Housing Sector Continues to Outperform

Written by Landlord Property Management Magazine on . Posted in Blog

students

The past two quarters were monumental for student housing. In the first quarter of 2016, a record $2.6 billion in capital poured into the sector, marking the largest single-quarter investment since 2006. In total, the sales volume made for 66.2 percent in year-over-year growth for this property type, according to Lucy Fletcher, a managing director and international capital expert at commercial real estate services firm JLL.

“We are seeing more direct deals by foreign investors this year,” she says, with about one half of the volume in this quarter coming from offshore investors. That $1.4 billion in foreign inflow came primarily from a joint venture deal between Scion, Canada Pension Plan Investment Board and GIC, which formed Scion Student Communities and acquired University House Communities Group’s portfolio.

“Why is global investment increasing? Resiliency of income,” Fletcher says.

This quarter and last quarter, we are seeing “increasing international investment through income funds and sovereign funds,” says Tom Errath, senior vice president of research for Harrison Street Real Estate Capital, the largest private equity firm focused on real estate investments in student housing, managing approximately $10.6 billion in AUM. For universities seeking to build on-campus housing, Errath says Harrison Street is one of a number of firms and investors who are starting to enter into 50-to 75-year ground lease agreements with universities.

Land lease agreements are becoming more popular for campuses that need repositioning or that have been vacant, sources say.

So far this year, the student housing sector is seeing cap rates that are consistently just north of 6.0 percent.

When investors consider student housing, the most crucial elements are real enrollment numbers, location, sponsor strength and site operation experience.

“Investors are buying into really well-managed platforms. There is large pent-up demand across the entire sector of core products,” says Scott Streiff, executive vice president with JLL.  He describes the core class-A product as having enrollment of 30,000 students plus. “We are seeing investors chasing core products that deliver attractive cap rates with projected student enrollment increases.”

Right now investors are seeing those types of properties trade at approximately 5.0 percent cap rates. “Larger campuses historically carry lower cap rates,” Streiff says.

Never quite even

“I don’t know if there will ever be a point of supply and demand meeting in this sector, says Jaclyn Fitts, national director of student housing at real estate services firm CBRE. Student housing tends to be recession-proof, since when times get tough, many people opt to return to school. Add to the equation the national trend of continually increasing enrollment rates for higher education. The year 2014-2015 was the biggest on record in this sector for new beds added, with approximately 60,000 new beds, according to CBRE data. The firm expects another 45,000 student housing beds added in 2016-2017.

“There will continue to be investment opportunities in 2017 and 2018,” says Fitts. “We will continue to see new development in 2017. Additionally, purpose-built student housing properties completed in the 2000s are primed for repositioning, so we will continue to see opportunity there in rehabbing first-generation purpose-built [properties] and raising rents.”

Although supply is being added yearly, there is still 96 percent occupancy nationally for the 2015-2016 academic school year, Errath says. There were some specific markets, however, that saw overdevelopment this year. One example is Texas A&M, a market that needs to absorb 7,500 more beds in the next three years, according to Fitts.

Student housing spin-offs

Post-graduation, many young adults find themselves facing an expensive housing market and a very tight apartment rental market. Those who are pursuing post-graduate degrees or already working at the university may not have the funds or credit history to qualify for traditional housing options.

One developer, Post Brothers, has sought to answer the needs of this market and is doing so by delving into a sub-sector called post-graduate housing. Post Brothers builds and invests in university housing-oriented cities that have college economies. College economies generally have large research budgets, NIH grants and major hospitals that act as employers for post-graduate students.

Post Brothers recently acquired Garden Court Plaza, a 13-story, 146-unit apartment building at 4701 Pine Street in Philadelphia for repositioning as part of its development strategy in University City. The developer has earmarked $250 million for continued development in that city in the next few years.

“We see it as better than student housing, because it is targeted to young professionals and graduate and medical students. They may not want to pay for class-A new construction and our properties offer a value proposition that doesn’t compromise quality,” says Matt Pestronk, CEO of Post Brothers. “ We are not seeing a lot of investor resistance to the concept.”

Source: nreionline.com

Homeowners Associations vs. Property Management – What’s the Difference?

Written by Landlord Property Management Magazine on . Posted in Blog

Shared post from Appfolio

HOA_shutterstock

It’s easy to confuse a homeowners association (HOA) with property managers. They are both involved in the management of housing communities. It could be helpful to view a brief description of both HOAs and property managers to see how the functions of each are different. In most cases, they work together, but sometimes they may come into conflict. This information should be useful to property owners, property management companies, and tenants who live in a community that is governed by an HOA.

What Are Homeowners Associations?

Neighborhoods, subdivisions, and condo complexes contain lots of housing units that are owned by many different owners. At the same time, homeowners may need to share the responsibility for certain things. They may also share expectations for the way that their neighbors will maintain their properties. Thus, these communities form HOAs to develop and enforce the rules (known as covenants, conditions, and restrictions, or CC&Rs for short) that all property owners need to abide by.

According to the Community Association Institute, over 63 million Americans reside in an estimated 320,000 association-governed communities.

The individuals who belong to these organizations also own property in that community. While all HOA members may propose and vote on rules, an elected HOA board usually has the final responsibility for ensuring that rules get kept and other responsibilities get met.

Besides making and enforcing rules, typical HOA responsibilities include:

  • Maintaining common areas, like playgrounds and swimming pools
  • Setting and collecting dues to pay for things like maintenance of common areas and security
  • Setting budgets for the items that HOA dues pay for
  • Obtaining insurance for common areas
  • Hiring staff and contractors

Obviously, the HOA doesn’t physically perform all of their responsibilities. For example, they may hire security people, secretaries, and maintenance crews. In some cases, overseeing all of the work requires a separate property manager to assist them. To help with all of the tasks involved, an HOA may also hire a property manager or property management company.

What Do Property Managers Do in a Homeowners Association?

There are two different situations when a community may have both property managers and homeowners associations. In the most commonly discussed case, the property management company works for the HOA. In another case, property owners may own some houses or condos in a community that also has owner-occupied units. In this second case, the property owners and their managers are just property owners with the same status as any other owners. If property owners occupy their own housing or lease it to tenants, they still have the same responsibilities to the HOA.

Property managers as employees of the HOA: HOA members may volunteer for their positions as an investment in their community. As volunteers, they may not have time to oversee all of the day-to-day obligations of the board. In this case, an HOA might hire a property manager or property management company to assist them.

The duties of property managers can vary, but they may include overseeing paid staff or contractors, communicating with residents, collecting dues, and handling emergencies. As employees of the HOA board, property managers report to them.

Property managers as owners within the community: In this case, property managers simply have to abide by the same rules that any owners who occupy their homes do. This situation is somewhat more complex because tenants actually occupy the property. The owners and tenants may have to cooperate to stay in compliance.

The property managers for leased housing units may make sure that HOA dues get paid if this cost is simply included in the rent. Still, they need to make certain their tenants don’t violate other rules. For example, there may be guidelines about maintaining lawns, how to handle garbage, behavior in common areas, and so on. It’s prudent to include a clause in the lease about adhering to HOA rules and to make sure that renters know the guidelines.

Many HOAs Have Power to Enforce Rules

Typical HOAs will issue warnings if rules get violated. However, they do have legal power to enforce their rules. For example, an HOA can put a lien on a property if HOA dues don’t get paid. If a lawn doesn’t get mowed after a warning, they might send their own landscapers and charge the property owner a high fee. If property managers work for the HOA or are simply managing properties in the community, the HOA will factor into management duties.

The post Homeowners Associations vs. Property Management – What’s the Difference? appeared first on The Official AppFolio Blog.

Ready or Not, New FASB Rules Are Here

Written by Landlord Property Management Magazine on . Posted in Blog

By Billy Fink | Shared post from the Hightower Blog

accounting_1

The long awaited new lease accounting standards are here. And despite years in the making, some companies are finding themselves behind the curve in putting processes and systems in place to adapt to the new regulations.

The Financial Accounting Standards Board (FASB) officially issued the new accounting standards in February. The changes are aimed at creating greater transparency as it relates to how companies record leases on their balance sheets. The proposed lease accounting changes will remove the distinction between finance leases and operating leases, and recognize operating leases as both an asset and a liability.

According to a new Deloitte survey poll, only 9.8% of financial and accounting professionals surveyed said their companies are prepared to comply with the new standards. “I think companies are starting to come out of the fog now and thinking about how they are going to implement the changes. But, I think the ones that are just starting now have a long road ahead of them,” says Katie Murphy, a partner in the Real Estate and Leasing group of law firm Goodwin.

Companies that have already started are ahead of the curve. Yet there are some legitimate reasons why firms have put FASB on the back burner. The process of circulating proposed drafts and fine tuning the proposed requirements has been dragging out for nearly a decade. Companies did not want to start too early before they had a firm idea of what the final standards would look like.

There has been more activity in putting new lease accounting processes and systems in place over the last year. Officially, public companies will have to start reporting in fiscal or calendar year 2019 and private companies in 2020. However, public companies that use Generally Accepted Accounting Principles (GAAP) accounting will have to report comparative figures starting two years prior, effectively 2017. Some firms are already looking at 2016 as a “dry run” to get up and running and work out any potential problems, says Murphy.

In a 2016 Lease Accounting Survey conducted jointly by PwC and CBRE, 70% of the firms surveyed said they plan to start implementing the new standard this year. However, only 10% had selected a software solution to accommodate the new standard.

Initially, the biggest stumbling block is gathering all of the data, because it requires a different level of analysis than the old rules, notes Murphy. Existing leases won’t be “grandfathered” in or accepted under the old rules. Companies will have to go back and look at all of their existing leases to make sure they have all of the needed information. “It is going to be a hard and painstaking process to get all of that data,” she says. As such, the new standards will also have a bigger impact on companies with a high number of leases, such as retail and restaurant chains that have hundreds of locations.

Deloitte’s survey found that retail/distribution firms were the least prepared with 61.2% of respondents expressing concerns over readiness. Other sectors that also rated high in that regard were automotive and telecoms at 59.3% and 56.9% respectively.

Another key difference is that companies have traditionally met reporting requirements by utilizing a hard lease abstract or by a spreadsheet. That is not going to work under the new standards, because there are assumptions that need to be made about lease trends that will require more than just plugging numbers into a spreadsheet. So, the two main steps for companies in preparing will be introducing new lease accounting software and also having increased coordination and communication between the accounting group and the business and legal people who negotiate and enter into the leases, notes Murphy.

“Under the new rules, if circumstances change, assumptions need to be reevaluated and the reporting adjusted,” she says. “So, it is more of an ongoing process than in the past, and it will require a lot more effort on behalf of companies to manage their portfolio.”

ABOUT
Billy Fink
Billy Fink is a marketing manager at Hightower focused on writing the best of CRE news and trends. He previously worked at Axial, and is a graduate of Columbia University.

The Top 5 Ways to Make More Money on Your Rental Properties

Written by Landlord Property Management Magazine on . Posted in Blog

Shared Post | Original Post seen on Time.com

RentalIncome

If you own rental property, be sure to maximize your profits on your current investments before rushing out to buy new ones.

Rather than just acquiring as many properties as possible, let’s take a step back and think about whether the best way to make more money is to focus on your current portfolio.

1. Decrease Vacancy

The best way to minimize vacancies is to find a long-term tenant so that you don’t have to deal with turnover. This is covered separately by my next point because it is not the only way to keep your property occupied.

In the event that your tenant must move, vacancy can also be minimized by keeping turnaround time to a minimum. A friend of mine owns a condo in the D.C. area that is rented to 3 individual roommates. Although multiple tenants have moved on, he has kept occupancy at essentially 100% by posting ads the minute he learns of the move. Demand in the area is so high that he will have immediate interest and line up a new tenant to move in on the coattails of the old one.

You might think, “how does that apply to my property in an area with lower demand?” The thing is, nearly every property in every neighborhood has solid demand at a price. If your vacancies are consistently high, you may be doing it to yourself and need to think about your price point.

Every month of vacancy costs you 8.3% of your potential yearly revenue, so you would be better off renting every property one month faster for 5% less rent, two months faster for 10% less rent, and so on.

Another way to think about vacancy is this. If a property does not have some characteristic that sets it apart from the rest and sells itself such as a prime location or a to-die-for kitchen, you can give it one by providing the best value in town.

2. Minimize Turnover

Turnover costs money in multiple ways. There are advertising costs, the cost of patching and painting walls and replacing flooring that your previous tenant would have lived with, and, of course, vacancy. It’s a little counterintuitive, but this is another area where relatively lower rent may have the tendency to increase revenue.

One of your goals should be to find quality tenants that take care of your property and pay consistently. When you find these people, do what you can to keep them!

Some people will inevitably leave because they are moving across the country or buying a home, but the last thing that you want is to lose your best tenants to the landlord down the street, dealing with the expense of acquiring a new tenant and lost revenue in the vacancy.

The price of rent is not the only factor involved in tenant retention. The other key is customer service. Whether you personally manage your properties or have a property manager, make sure your tenants are treated with respect and professionalism, their concerns are valued, and matters are dealt with urgently and to their satisfaction. A good tenant/landlord relationship keeps tenants from thinking about moving.

To assess whether your property manager is performing in a way that fosters good tenant/landlord relationships, send a postcard soliciting feedback from your tenants, letting them know their opinion is valued and they can contact you directly if they are dissatisfied with their manager.

3. Increase Rent Strategically

Now, after telling you that lower rents can lead to higher revenue, I will proceed to advise increasing your rents on your longer-term tenants. This is really not a contradiction at all. Rather, it is a delicate balance that requires knowledge of your property’s value relative to your competition.

As I mentioned, tenants may be more loyal if they can’t find lower rent elsewhere. But this doesn’t mean that you should never raise rents when you have good reason to do so. Moving costs tenants money too. If the value of their current rental is significantly better than the value of a new rental plus the cost of moving, you still have the upper hand.

Make sure you know the rents in the area, researching sites such as Zillow, Rentometer, Craigslist, and the MLS if you have access. You may find there is plenty of room to increase your revenue a small amount each year (1%-3%) while remaining competitive.

Two tactics I use to increase rents: Communicate an offset to new costs such as increased HOA fees, which cover utilities and amenities that they enjoy, and have them coincide with an upgrade to the rental. For instance, I may plan to paint the exterior of the home or upgrade old windows from single to dual pane anyway, but I will schedule the work to coincide with a lease renewal and the tenant feels they are getting something out of the deal.

I may even ask them if there is anything that would make them more comfortable and select items from this list that will justify rent increases while increasing the market value of the home. In other words, make improvements that are necessary for maintenance or have immediate return on investment.

4. Be Diligent on Late Fees

Showing kindness and respect to your tenants does not mean being a pushover when it comes to rent collection and late fees. Collections are not the most enjoyable part of being a landlord, but are essential to running a profitable business. Make sure your tenants understand that this is a business, they have signed a contract, and it is your job to complete this transaction, following the contract and all applicable laws (including eviction proceedings if necessary).

If you allow tenants to get away with paying late without the appropriate fees, you are leaving money on the table. And, your tenants may try to get away with late payments several more times, causing you extra work and stress.

If your tenant sends you a late check without including the late fees, politely explain that rent is not considered paid until all fees are collected, and that unfortunately you cannot accept this payment until all fees are paid. If you hold firm, they will quickly learn that you cannot be taken advantage of and will most likely comply.

5. Add Revenue Streams

In multi-family properties, look for the opportunity to add services like coin-operated laundry and vending machines, which will not only provide revenue but will add resale value by raising the property’s return on asset value, or capitalization rate.

In single-family homes, offer extra house cleaning and landscaping services to tenants when they sign the lease. They may be happy to pay extra to avoid responsibilities they’d otherwise take on. You can negotiate the rates of independent landscaping and cleaning services, contract them out, and collect a fee as the contractor. For instance, if a cleaner agrees on a $75/month fee, you may offer the service to your tenant for $85/month, increasing your annual revenue by $120.

Overall, you may find that you can reach your business goals not only through acquiring a large number of properties but by operating a smaller number of properties more intelligently.

4 Ways Competition is Heating Up in CRE

Written by Landlord Property Management Magazine on . Posted in Blog

By Billy Fink | Shared post from the Hightower Blog

Los Angeles, California, USA downtown cityscape.

Over the past 30 years, the commercial real estate industry has transformed from a “mom-and-pop” industry to an institutional asset class where owners manage massive, complex, and global portfolios.

Although this development is good news for many CRE professionals, it is not without its consequences. As more money flows into the asset class, competition has worsened across the entire industry.

Competition for Deals

The most significant rise in competition has been on deals. Over the past few years, billions of dollars — from institutional and foreign sources — have flowed into real estate and driven up prices for desired assets across primary, secondary, and tertiary markets. This flow of capital has far outpaced new construction and new development, leaving commercial owners in a classic supply and demand challenge: there are more dollars in the industry chasing each deal.

To handle this rise in competition for deals, many commercial owners have sought investors with deeper pockets, developed a clear specialization in their investment strategy, or sought secondary markets. 

Competition for Capital

Many GPs are fighting a two-front war, feeling pressure on both the deal side and the fundraising side. According to a recent survey of owners across the industry, 67% of commercial owners feel that competition for investment dollars is increasing. Institutional investors are not cavalier with their money. They want to pick the firms with the absolute best yields. Limited partners are placing greater emphasis on better tools, real-time reporting and visibility into performance.

Many proactive owners have decided to adopt new technology to help them better report and analyze their portfolio. 

Competition for Talent

The industry is also beginning to realize that firms are in a war for talent. The next generation of CRE leaders expect a different work environment with mobility, modern tools, and data at their fingertips. The companies that lag behind are finding it increasingly difficult to recruit top CRE employees and are suffering from a growing talent gap. This next generation of CRE professionals is demanding change in its employers, encouraging new ways of working, and new technologies to drive the business forward.

Competition for (the best) Tenants

The last major area of competition is for tenants. Although many believe it is an owner’s market — after all, office leasing activity is strong — that doesn’t mean competition for tenants is not still increasing as well. As a matter of fact, 80% of owners indicated in our survey that competition for tenants is increasing.

Over the past couple of years, low interest rates and a recovering economy encouraged billions of dollars of transactions, and many owners are now trying to find the right tenants to satisfy their specific ROI strategies. As a result, they’re waiting to satisfy certain returns, even if it means a short-term loss. Competition is heating up for tenants.

ABOUT
Billy Fink
Billy Fink is a marketing manager at Hightower focused on writing the best of CRE news and trends. He previously worked at Axial, and is a graduate of Columbia University.

How Do Renters in NYC & SF Feel about the Rental Market?

Written by Landlord Property Management Magazine on . Posted in Blog

Shared post from Appfolio

SF Iconic Homes

New York City and San Francisco – two of the most economically thriving cities in the U.S. and two of the top places to live. But how do renters in these cities feel about the “sometimes stressful” rental process? With the rental market competition at an all-time high, and rent prices through the roof, renters have a lot to consider when deciding whether to stay in their current place or find a new abode.

AppFolio recently conducted a bi-coastal survey in NYC and SF to gain deeper insight into what renters in these top metros want and need. Ultimately, renters not only have requirements for their physical apartments, but also for their property managers – think digital!

Below are some of the key findings from the survey:

Renters in both cities would pay more to stay in their current place

With extremely high rent prices in both NYC and SF, it may come as a surprise that the majority of renters in NYC (51.9%) said they’d be willing to pay between one and five percent more to stay in their current apartment. Of note, 7.1% of renters in NYC over the age of 65 were most likely to be willing to pay more than 11 percent to stay in their current apartment. That’s right – 11 percent! With the rental market going gray, this is something property managers with older tenants should keep top of mind.

In SF, almost half of renters (42.8%) said they’d be willing to pay between one and five percent more to stay in their current apartment, with 13.8% willing to pay between six and ten percent more. When broken down by household income, a little over half of respondents (58.5%) making less than $25,000 said they’d pay between one and five percent more, and almost half (41.2%) making between $100,000-$149,999 said they’d be willing to pay between six and ten percent more.

If you’re going to increase rent, tenants expect better maintenance & new amenities

When asked what makes an increase in rent acceptable, both renters NYC (30.2%) and SF (26.4%) listed better maintenance and upkeep as the top reason. Specifically for the younger generation of renters in NYC, this is important. Almost half of respondents between the ages of 18 and 24 (47.6%) said they think better maintenance and upkeep is the most acceptable reason for a rent increase. This is closely followed by new amenities (29.8%), which includes keyless entry, video doorbell, etc.

While maintenance ranks number one for SF renters, the survey also found that one in five males (20.6%) said keeping pace with rental market prices was the most acceptable reason for rent to increase in their city. This compares to just one in ten women (10.3%) who felt the same.

… But an increase in rent is the #1 reason to move

Although renters in both NYC and SF said maintenance and upkeep is the most acceptable reason for an increase in rent, both groups also said it is the top reason to look for a new apartment. Almost half of renters in NYC (40.6%) would consider moving if their rent increased, while even more renters in SF (48.5%) would do the same. This is especially true for younger renters – over half of respondents between the ages of 19 and 24 in both cities would consider moving if their current rent price increased. Moral of the story: it’s all about balance. While increasing rent is a main reason for tenants to jump ship, they would be ok with it should the heightened price tag come with better maintenance and amenities.

Broker fees, low-quality landlords & digital communication with property managers

When searching for a new apartment, the majority of respondents in NYC (42.3%) typically view between three and six locations before making a decision, whereas a majority of respondents in SF (37.8%) typically view between one and three. What’s the worst part of the rental process for these renters? Almost one in three renters in NYC (31.4%) said broker fees, while one in three renters in SF said low-quality landlords.

Lastly, it didn’t come as a surprise to us that renters in both cities expect communication online/via text from their property managers during the rental process – almost half of respondents in SF (44.8%) and 37.6% in NYC. This is especially true for young, tech-savvy renters. Nearly half of renters in NYC between the ages of 18 and 24 (46.5%) said they expect communicating online or via text from a property manager, and the majority of renters in SF in the same age group (52.1%) agreed. Makes sense since today’s millennials are glued to their mobile devices!

So what can property managers do to please their tenants in NYC & SF?

If you’re a property manager looking to retain current tenants in NYC and SF, keep in mind it’s ok to increase rent, as long as you ramp up your maintenance and property upkeep, and incorporate new, unique amenities. You may also want to consider adapting to this tech-savvy generation and using software that allows you to communicate online and via text with your tenants. Luckily, tasks are completed online seamlessly with AppFolio’s Property Management software!

Five Details That Make A Big Difference To Your Rental Property

Written by Landlord Property Management Magazine on . Posted in Blog

Shared post from AAOA | Source: wilmingtonbiz.com

kitchen remodel

A rental property can be a wonderful investment, if someone is renting it. The good news is that there are things you as a property owner can do to help your occupancy rate stay high and your rental income coming in.

We’ve already shared ways you can increase your rental’s curb appeal (and why that matters) and ways to make a good first impression with your rental property. But there are some very simple things you can do to beat the competition and have the property people want to rent.

Keep it clean. Be sure your rental property is spotless when potential tenants come. No one wants to move into a place that is dirty. Also, a clean home will signal to renters that the property is well-tended to and in good shape. When a home is dirty, renters assume that the property is neglected. Always hire a professional cleaning company. Treat your home as the business that it is. Would you stay in a hotel room that was not professionally cleaned? Why should a tenant move in to a property not handled by a professional?

Have good lighting. Renters want to see themselves living in the home. If they can’t see anything because the place is dark, they won’t feel inspired. Your property should have updated lighting, be well-lit and inviting. While you may not be able to increase the amount of natural light your property receives, you can certainly invest in good lighting solutions throughout the home. Features like larger lights in bathrooms, kitchen pendant lights and under-counter lighting are wonderful. Security lighting outside can be important, too.

Make it inviting. Even if you are not able to use the latest in home décor (granite or stainless steel), consider newer laminate kitchen counters, updated lighting, framed mirrors in bathrooms, replacing stained or damaged vinyl, replacing ceiling fans, or putting on new switch plates. These tasks can create a warm and inviting space that will encourage tenants to move in. These are easy and inexpensive fixes that go a long way.

Consider what helps with day-to-day living. Tenants can be won over by the little things. Updated anything, like newer counters (they don’t have to be granite) or ceiling fans, or spaces such as outside sheds or shelving in garages or floored attics, can leave a big impression. Privacy in the backyard and larger patio spaces also matter to tenants. To determine what things you can offer to set your property apart, think of what details make your life better on a day-to-day basis.

Control the temperature. Especially during a hot Wilmington summer, the temperature of a property can be crucial. Ensure that all of your heating and cooling systems are functional and in good condition. Make sure your thermostat is updated and working properly. Make sure your air filters are clean and the house smells good. The heat or the air should be on to avoid things like mold growth in your vents during a hot humid summer.

Of course, the main rule to follow is to make your property feel like a place where you would want to live. By doing this in big ways and little ways, you can increase your income property’s earnings and occupancy rate.

If you want help getting started, contact us today. With decades of experience managing properties in the area, we know what Cape Fear renters are looking for and can help you maximize your property’s potential.