Rental Matters » Financial News

9/11 how does it relate to managing rentals?

Kathleen Richards — Wed, 21 Sep 2011 20:46:38 +0000

We just observed the 10 year anniversary of 9/11. The take away for me was the reminder of how precious life is and the fact that our lives as we know it can be turned upside down in an instant. So how does that impact owning rentals?

We need to be prepared. Once you own real estate you need to have a living trust, a will, written instructions for family, insurance such as Term Insurance, that would cover the mortgage on the rental so the loan would be paid off and the surviving family members can receive the income from the rental. Have a list of all your contacts associated with the rental – plumber, accountant, gardener, insurance agent etc. Have a file with everything related to the rental so people know where to go to get info.

Make sure bank accounts have appropriate names on the accounts for the rentals. I added my husband to my bank accounts even though I own the rentals so that in the event of my passing he can still access the accounts, pay bills etc.

Life can get complicated when things happen unexpectedly try to be as prepared as possible.

I have a client that knew he was ill and terminal and came to me to take over management of his rentals so that when the time came it wouldn’t be a burden to his wife. Now, we are educating his wife about the properties and working with her. Her comment to us all the time is, “Thank you for handling all this for me. It is such a relief.” I really admire her husband for taking action to protect his wife. He truly loved her. I feel blessed to be able to lift the burden and to protect her.

If you have property management needs in Santa Cruz County check us out we might be able to help you. www.PortolaRentals.com

Kathleen

Successful Landlording Cabrillo College Class

Kathleen Richards — Sun, 07 Mar 2010 22:55:52 +0000

Successful Landlording

Twice a year I co-teach this class with Karen Calcagno, Linda Murphy and this year with Paige White through the Cabrillo College Community Extension program.

Yesterday, March 6th, was a full day with 15 attendees. I am so pleased to find investment property owners willing to educate themselves about the process, and their responsibility to being a successful landlord.

The 1 day course covers:

Do you have the skill set/personality to be a landlord?
Advertising the property
Screening potential applicants/tenants
Fair Housing Requirements – Do’s and Don’ts
Preparing the property to rent
Showing the property
Application/Credit/Lease
Relationship Tips and Tricks
Dealing with problem tenants
Maintenance
Security Deposits & Move -Outs
The law – brief overview
Code Enforcement
Financing investment properties
System setup – how to get organized
How to hire a property manager
Where to find help

The course comes with a binder to help landlords get organized, provides materials covering all the topics outlined, along with actual lease, addendums, and application form to use.

As a former teacher, and university instructor, I love being in the classroom and helping self motivated people get the info they need to be able to meet their goals.

At the end of the class we did a quick take away from each student and I was pleased to see that they got it! They all walked out the door with the essentials of what they need to do and keep in mind.

I started out the morning stating that managing property is a Business and if they take that position from day one it will be so much easier mentally, physically and financially to do it themselves. Afterall, owning an investment property is expensive. They need to know their bottomline and future goal for what they want from the property. Do they want to pay it off and have an income stream in retirement, do they want to build equity and do a 1031 exchange in the future, do they want to hold and sell in 5 years, do they want to pass this property down through their estate?

Linda Murphy, with RPM Mortgage reiterated the exact thing when thinking about what type of financing you will want to get on the property. Linda shared with everyone that interest rates are low but unfortunately investors are being penalized for what happened in the past and that the points that are added onto loans for investments properties really add up so it is imperative to know your future plans when looking for financing because it will be expensive on the point side to get the loan.

Paige White, City of Santa Cruz, Code Compliance, shared some invaluable information about how landlords get into trouble with the City. She offered solutions and made it clear that as a Code Compliance Officer she is all about being proactive to help owners not to punish them. Her primary responsibility is to ensure that properties are safe and habitable.

Karen Calcagno, Advantage Family Business Center, shared with us her 35 years as a property owner, business owner and her expertise in building and maintaining relationships. Everything discussed in the course always went back to having good relationships with tenants, vendors, neighbors and other family members who may c0-own the property.

What I brought to the table was my professional and personal experience as a property manager and landlord. I covered the Do’s & Don’t of being a landlord, the Tips & Tricks to make life easier and if self-management isn’t for you then how to find a good property manager to handle it for you.

Students at the end of the class received a certificate of completion that will benefit them if they ever get a Code Compliance complaint they can show they took our class and the City will work with them to resolve the issue.

If you would like to contact any of the presenters:

Karen Calcagno, 831-475-4479, www.advantagefamilybusinesscenter.com

Linda Murphy, RPM Mortgage, 831-818-7075, www.rpm-mtg.com/lmurphy

Paige White, City of Santa Cruz, www.cityofsantacruz.com

Please check out my website at www.PortolaRentals.com if you are interested in properties in Santa Cruz or have rentals in Santa Cruz, CA.

Kathleen Richards

Property Management from A-Z: J

Kathleen Richards — Mon, 22 Feb 2010 15:02:09 +0000

Jaded, Job & Judge

Jaded – I see long time property owners who get to a point where they are jaded about tenants and being a property manager. This ultimately comes about because they, the owners, don’t have procedures in place so every interaction with their tenants is a new and taxing experience. This is when property owners will often seek out professionals like me to take over management and I am more than happy to help them out. After a life time of managing their properties they are now at the point where they don’t want to spend their free time doing maintenance, showing the property, doing the paperwork and the accounting. I personally believe these owners should start enjoying the fruits of their labor and leave it to me.

Job – Managing real estate should be viewed as a job. Often I see property owners who have either inherited the property, or moved up themselves and decide to keep the condo and rent it. Since there is emotion tied to the property the owners never go into it with an investors, business mind and they should. Management of rentals should be taken seriously and as a job. It should ultimately earn you money or help you achieve some future financial goal. If it is nothing but a financial drain, emotional drain, then the owner ends up not wanting to deal with it and that is where they get into trouble.

Judge – I mean the kind that sit in a black robe in a court. When owners find themselves before a judge or take a tenant to court (usually over security deposit issues) this creates stress, frustration, and often the owner loses, so loss of time energy and now frustration. The best way to stay out of court is to follow the lease, and enforce it. Keep accurate and detailed records, move in reports, photos, communication log with tenant and vendors, and always try to find a resolution that will create a win win situation for everyone. What I always tell owners is to put yourself in the the judges shoes – “what would the judge say?” If you follow the law and document everything you will be fine. It is often better to help the tenant move along. Example: tenant is not paying rent, you give them notice to move or post a 3 day notice to pay rent or move…think about it..they don’t have money to pay rent, they don’t have money to move. One solution that has worked for me is to get agreement with them that you are willing to give them half of their deposit upfront so they have money to put down on a new place, and if they are able to be out on time, leave the unit clean you will get the remaining deposit back to them within 24 hours instead of within the 21 days as required by law. The few times I have done this I have had excellent results. The tenant doesn’t want to not pay, they just can’t pay so by treating them with respect and understanding their financial situation and helping them move on you will have a very positive outcome.

Please check out my website at www.PortolaRentals.com if you are interested in properties in Santa Cruz or have rentals in Santa Cruz, CA.

Kathleen Richards

What Does the Medical Health Care Plan have to do with Rentals?

Kathleen Richards — Tue, 19 Jan 2010 15:00:03 +0000

Starting in 2011 all property owners will be required to issue 1099’s to companies (including property management, HOA, utility company, home depot etc) for expenses over $600 in the given year. Up until now this has only applied to non-corporate entities. Example your landscaper is a one man business or your house cleaner are two types of vendors you are supposed to issue 1099’s at year end. In the Medical health care bill that was passed by Congress there is a provision that now Corporations will also need to be given 1099’s. I guess they don’t think we are taxed enough.

Please check out my website at www.PortolaRentals.com if you are interested in properties in Santa Cruz or have rentals in Santa Cruz, CA.

Kathleen Richards, M.S. MPM, RMP

Home Retention Workshop January 21st

Kathleen Richards — Sun, 17 Jan 2010 01:12:08 +0000

Is your home worth less than you owe? Are you headed toward foreclosure? It’s not too late…you still have options.

Take control and get the answers you need to keep your home and avoid foreclosure. This workshop is being presented by local experts: Mortgage Banker, CPA, Realtor & Home Retention Consultant

Date: January 21, 2010

Time: 5:45pm – 7pm

Location: Keller Williams Realty office: 1414 Soquel Ave #100, Santa Cruz, CA 95062

RSVP: 831-457-5510

Renters Turn into Buyers – Yes it is True!

Kathleen Richards — Wed, 19 Aug 2009 18:52:38 +0000

Summer is always a busy month for property managers and DIYers. However, this year some things have been different. In the month of June I had 5 tenants give notice and it was because they had become First Time Home Buyers – Yeah for them. Finally, prices have come down enough in Santa Cruz County and interest rates are still at an all time low, and the $8,000 incentive for first time buyers helped. July I had 2 more current tenants become home owners and August I have 1. So that tells me the market has probably hit bottom. I am hearing from Realtor friends that some properties are getting multiple offers. These properties of course are the short sells and the foreclosures but it makes me happy to know that good tenants are becoming good qualified home owners who are establishing permanent roots in our community.

Kathleen Richards
Broker/Owner

Apartment Vacancy Rate Hits 22-Year High

Kathleen Richards — Wed, 22 Jul 2009 23:21:55 +0000

I reposted this article because I think it is informative about the current rental situation. The good news is that Santa Cruz is somewhat shielded from the huge drops and extended vacancies. Santa Cruz is more of a single family and small complex community.

However, I have seen rents dropping and applicants are really shopping around. If the property is priced right it rents quickly so Property Owners need to get real about the rental price. It is better to lose $50 per month or even $100 per month than an entire month to 60 days worth of rent that can’t be made up.

Apartment Vacancy Rate Hits 22-Year High
By Nick Timiraos, Wall Street Journal

The vacancy rate for U.S. apartments hit a 22-year high in the second quarter as rising unemployment reduced demand during what is usually the peak leasing season.
Rents fell the fastest in markets that have shed white-collar jobs, such as New York and San Jose, Calif., and in markets where many foreclosed homes and condominiums have been turned into rental property, including Las Vegas and Orange County, Calif.

Vacancy levels nationally rose to 7.5% in the April-to-June period, up from 6.1% a year earlier, according to Reis Inc., a New York real-estate research firm. Of the 79 markets tracked by Reis, 45 showed an increase in vacancies.

Generally more rental units turn over during the spring and summer than in any other time of the year, which means that the declines could have an outsized impact on revenue for apartment owners. The housing downturn initially offered landlords the chance to lure troubled homeowners into the rental market. But the pace of job losses shattered any inroads that apartments might have gained from the housing bust. Apartment vacancies began to rise at the end of 2007 before accelerating further as the economy deteriorated last fall.

Rents, meanwhile, are falling at the fastest pace in at least a decade. Effective rents, which include landlord concessions such as one month free rent, fell 1.1% in the first quarter and 0.9% in the second quarter to an average of $975 a month. The combined decline for the first half of the year was the largest since Reis began tracking the data in 1999. “It is one of the worst second-quarter performances that we’ve seen,” said Ron Johnsey, president of Axiometrics Inc., an apartment-research firm. Vacancies tend to rise during periods of high unemployment because household formation slows, as would-be renters double up or move in with family members. Those who do rent are more cost-conscious.

Meanwhile, shadow inventory of foreclosed properties and condominiums for rent continues to compete with rental apartments in the most oversupplied housing markets. While rental demand grew by 2.1% during the first quarter, apartments didn’t benefit, in part because former homeowners chose to live in vacant homes for rent, said Gleb Nechayev, senior economist at CBRE Torto Wheaton Research. There are signs that the shadow inventory may be leveling off. The number of vacant-housing units for rent declined to less than one million in the second quarter, from more than 1.1 million through most of 2008, according to Ron Witten, who runs a Dallas-based apartment-research firm.

Falling home prices could hit landlords in two ways. They could force landlords to lower rents to keep up, and could spur some renters to purchase homes. Still, the number of renters who move out to purchase homes isn’t expected to surpass levels seen during the housing boom earlier this decade.

From 2000 to 2003, around 30% of renters who moved out of apartments were becoming home buyers, while just 15% of move-outs left to buy homes during the first quarter of 2009, AvalonBay Communities Chief Executive Bryce Blair told investors at a real-estate conference last month.

Markets with better employment prospects saw modest rent growth during the second quarter. Effective rents increased in the second quarter by 0.3% in suburban Maryland and in Washington, D.C. Poorer-than-expected rental growth could push landlords who piled on debt during the years of easy credit into default on their mortgages.

CALNARPM – Why You Should Care?

Kathleen Richards — Sat, 09 May 2009 16:27:14 +0000

CALNARPM stands for California Chapter of the National Association of Residential Property Managers. I am the President of the Monterey California Chapter and the VP of the California State Chapter.

I just attended our annual California Conference last week – April 20-23, 2009 in Burlingame, California. Anyone that is a property manager can attend the conference. Go to www.NARPM.org to check out the classes, conferences and other resources available to property managers.

So, Why Should You Care?

Well to start with we had Jeff Davi, Commissioner for the Department of Real Estate, speak to us about the State of the Union of the DRE. It was very informative about where real estate is headed in the coming year. More Foreclosures….

We had the key Auditor of the DRE speak to us about the audit process and what can trigger an audit and how to go through an audit. This was very valuable information for Broker/Owners on how to keep their files, trust funds, and employees compliant.

We had representatives from the Franchise Tax Board (FTB) speak to us about compliance with the Resident and Nonresident Withholding Guidelines and our role as Withholding Agents. The FTB considers California residential property management companies to be withholding agents in terms of residential housing rental payments made to non-California property owners. They discussed the guidelines of withholding 7% of gross rental receipts and forwarding the funds to the FTB Quarterly.

Enforcement of this withholding was to go into effect this April 15th. Needless to say CALNARPM was able to negotiate with FTB representatives to delay compliance for another year in order to educate our members and owners. This is why you should care about what NARPM does and the California State Chapter. We are your Go To Source for Residential Property Management needs.

The other workshops covered topics such as:
§ What to do if a tenant dies in the property
§ What to do if the tenant goes to jail
§ How to prepare notices so they won’t be thrown out in court
§ Marketing your business and offering excellent customer service
§ Internet marketing
§ Accounting software
§ Applicant screening
§ How to grow your business with mergers and acquisitions
§ Time management and office procedures
§ Eviction Protection Programs and Rent Loss Guarantee Programs
§ Fair Housing – Are you in Compliance and Know the Law?
§ Finding Opportunity in Chaos – Foreclosures

In addition, members can work towards professional designations. Classes offered towards this end that were offered were: Marketing, Ethics (which is a required class for all members), Leadership, Starting a Maintenance Company.

I already have my RMP (Residential Management Professional) designation and will write about that later but it took a lot of work to get that designation. I am now working towards my MPM (Master Property Manager) again a lot of work and classes to attain this next level of professional development. Towards that end I took the 2 day class of Starting a Maintenance Company. It was well worth the time.

I learned:
§ It provides quicker response time to the property
§ More quality control of the work being done
§ Maintenance employees get to know properties and can handle emergencies faster
§ Costs are equal to or lower than independent vendors
§ Employees visit property on a more regular basis and become a second set of eyes and ears
§ Completion of work quicker
§ Tenants get to know maintenance crew and allow entry when at work
§ It provides another revenue stream for property management company
§ Your maintenance company has been trained in fair housing laws and your company procedures – leave house clean, don’t enter house with anyone under 18 alone in house etc.
§ Control over employees and their time (not gone surfing for the day)

I am not in a position to start another full fledge company but I am at the point where it might work better for me to hire my handyman for all of the reasons listed above.
Bottom line, providing consistent, quality, responsive maintenance services at a better price than the open market to Owner and Tenants would be my reason for implementing an in-house maintenance department.

If you ever want to learn more about property management attend a local NARPM chapter meeting. The two close ones to us in Santa Cruz are Monterey (I am the President and personally invite you) and the Santa Clara Chapter.

Professionalism through Education!

Kathleen