What Landlords Can Expect in 2012’s Rental Market

Posted by Teresa on January 5, 2012 under Rental Market | icon: commentBe the First to Comment

tenant screening, credit check tenantFor landlords in most markets, 2011 was a good year, with low vacancy rates and higher rents than previous years. What can landlords expect to see in 2012?

Strong growth in rental demand. Forecasters say demand will continue to grow for rental housing, based on a continued weak job market. Employment is expected to improve at a slow rate, which could increase demand as more people move out of shared housing situations.

A continued soft housing market. Losing renters to home purchases will probably not be a big issue for rental property owners. In some areas, such as Texas, home sales started increasing in the last half of 2011. Wherever employment growth occurs, demand for rentals will continue, and some home sale increases are expected.

Lower than normal supplies of multi-family housing. While construction permits are increasing and new development is starting to happen, most big construction projects are still in the planning phase. In most areas, new supply levels won’t be much higher in 2012. Exceptions are Washington DC, Dallas, Tex. and Orange County, Calif.

Higher occupancy rates. The economy will continue to produce renters for low- and mid-tier properties. High-end properties are still in high demand, but as wages stagnate, more renters will be pushed into lower rents, driving those occupancy rates higher.

Rent growth of 4% to 4.5%. Property owners who continue to increase rents could see higher turnover; others will likely see value in keeping existing tenants.

Top Ten Rental Markets for 2012

  1. San Francisco will continue to lead the nation in apartment rental growth, followed by:
  2. Austin, Tex.
  3. San Jose, Calif.
  4. Oakland, Calif.
  5. Boston, Mass
  6. New York City
  7. Denver, Colo.
  8. Dallas, Tex.
  9. Charlotte, North Carolina
  10. Houston, Tex.
Protect your rental property and assets through tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.

Finding Good Tenants Close to the Holidays

Posted by Teresa on October 31, 2011 under Fair Housing Act, Landlord Tips, Marketing for Landlords, Screening and Background Checks | icon: commentBe the First to Comment

tenantscreeningblog.comIf you’re landlord who has just closed on your first rental property, you may be wondering if this is a good time of year to find good tenants. After all, Thanksgiving is a few weeks away, and that means the winter holidays can’t be far behind. We often hear new landlords ask, “Do people move this time of year?” or, “Will my rental property be sitting vacant until after the New Year?”

Of course, every situation is different, but the short answers to the above questions are “yes” and “not necessarily.” Tenants move at all times of the year, and depending on their circumstances, plenty of people move just before or after Thanksgiving, or the week of Christmas, or even on New Year’s Eve.

If you have a rental property ready for your first tenant, you should create a plan for marketing the property right away. Here are a few tips for filling a vacant rental property fast, no matter what time of year it is:

Remember you may not screen out any tenants on the basis of race, color, religion, marital or family status, gender, or disability. New landlords should become very familiar with the Fair Housing Act and all state and local rental ordinances.

Define your best-fit tenant: Who do you want living in your rental unit (staying within the FHA, of course)? Is it a high-end property with a higher rent, or is it middle- or low-income? Will you seek out Section 8 tenants? Is it perfect for students? What is the income requirement to rent your property? Who can afford it?

Post plenty of signs: Place “Now Leasing” or “For Rent” signs in the windows and on the lawn. If possible, put “For Rent” directional signs at intersections, pointing the way to your rental property. Your signs should include the number of bedrooms and bathrooms and your phone number, along with a website where prospective tenants can view photos.

Put up a few fliers: Post fliers where your best-fit tenant will see them. This could be a coffee shop in the neighborhood, a Laundromat, a grocery store, or a community center bulletin board. Include a thorough, well-written description of the unit, and provide tear-off tabs with your contact info. Highlight any features that will sell the tenant on living there. Is it bright and sunny? Are there details like a fireplace or hardwood floors? A patio? A view? Close to trails, the grocery store or library?

Advertise: CraigsList.org is probably the most popular rental advertising site, although you can also post on Rentals.com, ForRent.com and ApartmentFinder.com. The more you advertise, the more exposure you’ll get and the faster you can fill the unit. Write a good ad that appeals to your best-fit tenant.

Incentivize: When you get closer to the holidays, you may find it tougher to get prospective tenants to agree to move. You can always offer an incentive, such as half off the first month’s rent, waiving the application fee, or offering an appliance upgrade if they sign a one-year lease before Thanksgiving.

Pre-screen tenants: Don’t get so antsy about filling the rental unit that you skip the tenant screening process. Background checks and tenant credit checks are vital to starting the landlord-tenant relationship off well. Protect yourself, your property and any other tenants you may have by properly screening each prospective tenant.

Back to School: Where is the Best College Rental Market?

Posted by Teresa on August 17, 2011 under Housing Trends, Rental Market | icon: commentBe the First to Comment

prescreening tenants, tenant background checksReal estate investors have long been active in college towns for a number of reasons. Rentals are often short-term and dealing with younger students as tenants can be problematic, but when mom and dad co-sign the lease, they tend to pay the rent on time every month.

College enrollments are up, and on-campus housing is in short supply. Demand for rentals is high and vacancies low, so rents are generally healthy. All told, college students who need a place to live can be excellent prospective tenants—and rental property in a college town can be a great opportunity, if the terms and price are right for you.

Move.com recently published a list of the best university cities for real estate investment. Here’s how their ratings shook out:

City Median List Price Average Rent, 2BR Average Rent, 3+BR
Boston $335,000 $3,122 $3,913
Nashville $189,000 $949 $1,020
Chicago $199,900 $1,780 $2,074
Washington DC $375,000 $3,086 $3,214
Houston $174,900 $1,218 $1,478
South Bend, IN $112,900 $790 $880
Atlanta $159,600 $1,236 $1,485
Baltimore $242,700 $1,443 $1,663
St. Louis, MO $163,945 $1,016 $1,283
Syracuse, NY $154,900 $838 $970
  • Boston has over 50 colleges and list prices have dropped nearly 3% since last June. Rents are on the rise.
  • Nashville’s average rents are higher than the average mortgage of $770.
  • Chicago’s median list price is down over 16% since last June.
  • Washington DC’s average mortgage for a median-priced home is around $1,530.
  • Houston has low-priced inventory and some top-ranked colleges. Average mortgage is about $710.
  • South Bend is home to Notre Dame and the average mortgage payment is around $990.
  • Atlanta’s median list price is down 13.68% from last June, and lower than the national median.
  • Baltimore is home to Johns Hopkins University, with median prices down 7.72% since last year.
  • St. Louis, MO ‘s median list price is also lower than the national average, and mortgage payments average around $670.
  • Syracuse is home to Syracuse University, as well as several other colleges. Median prices are down and the average mortgage payment is around $630.

College towns have a ready-made pool of renters, and generally, the rent money is not a problem. Manage the property correctly, and you could have a successful investment for years to come.

3 Reasons to Take a Tour of Your Rental Competition

Posted by Teresa on May 23, 2011 under Landlord Tips | icon: commentBe the First to Comment

tenant screening, tenant credit checkLandlords have lots to do, with interviewing and screening potential tenants, checking on rental properties, doing accounting tasks and paperwork, and working on their rental units. But it’s good idea to add another habit to your list: checking out the competition. Sure, you can view plenty of photos online, but visiting other rental properties in person will reveal way more detail.

3 Reasons to Check Out Your Rental Competition

  1. You can make more money: When you look first hand at other rental properties, you can rank your own accordingly. And, when you know what comparable properties are renting for, you might even discover you need to raise your rent. Are similarly sized properties renting for more or less than yours? What about those in the same area as yours? Do higher-priced rentals offer more or fewer amenities than you?
  2. You can see why your vacancies aren’t filling up: Looking at other rentals gives you the chance to see what upgrades other rental properties offer, such as higher-end floor coverings, countertops or light fixtures. How do your units stack up? If you install new fixtures or appliances, will you be able to upgrade your tenants and charge higher rents?
  3. You might forgo planned upgrades: Why spend money you don’t have to spend? If you are offering comparable units at competitive rents, then you might not recoup an investment of new carpets, upgrades in fixtures, or new appliances.

If you are a landlord who hasn’t toured competing rental houses, apartment complexes or duplexes lately, you’re missing an opportunity. You don’t have to confess why you’re there—just act like a potential tenant, or say you’re checking it out for a friend, your daughter or your son. Or say nothing. Many apartment complexes are happy to give tours.

Tips For Buying Investment Property

Posted by Teresa on March 1, 2011 under Landlord Tips | icon: commentBe the First to Comment

tenant screening, tenant credit checkTaking the plunge into rental property investment? Here are some tips to consider when searching for your first property.

  • Know how long you’ll own it. If you’re in for five years, you don’t want to invest a ton of cash into big-ticket items, like a new HVAC system, roof or major structural repairs. On the other hand, if you plan to own the property for 20 years, you’ll most likely need to make some major improvements. But that’s okay, since you’ll be holding a longer-term investment and will have a chance to recoup the costs.
  • Know the type of investment that fits you best. Is it apartment buildings or single-family homes? Do you want to be a long-term landlord, or buy and resell quickly?
  • Location is crucial. Just like when you open a business, you want the best location possible. Well, your investment property is a business, so the same thinking applies. A large pool of potential renters, such as a college town or higher-population area, is the first indicator of a great location. Next, look for nearby public transportation, recreational opportunities, shopping areas and a low crime rate.
  • Leave emotion out of the equation. Most investors don’t fall in love with rental properties. The only thing that should matter is how the numbers shake out.
  • Plan, plan, plan. Get your finances in shape long before you’re ready to buy. Meet with your financial advisor, lawyer and insurance agent to carefully scrutinize the assets you can devote to this investment, as well as the protection from risk and liability you’ll need.
  • Don’t pay too much. Negotiate for the best price you can get up front. If you overpay for an investment property, you’ll never recoup your money. Again, the numbers are the only thing that matters when buying investment property. If they don’t work on a particular property, walk away.
  • Learn your market. How does an investor know when the numbers make sense? It depends on your market. There are formulas you can try, such as paying no more than six to eight times the first year’s rents. Another formula we’ve seen is to pay no more than 70% of the price the property would be worth after making all the necessary repairs and upgrades after purchasing it.
  • Make sure rents will cover your out-of-pocket expenses. Mortgage, insurance, taxes, maintenance repairs and a percentage to cover vacancies must be paid out of the rental income so that the property at least breaks even.

This site is intended to provide useful information. It is not intended to provide professional financial or legal advice and cannot substitute for professional advice. Seek independent professional advice from a competent licensed professional before acting upon any information contained herein.

Feds Move to Dismantle Fannie and Freddie, and Promote Renting

Posted by Teresa on February 22, 2011 under Housing Trends | icon: commentBe the First to Comment

tenant screening, tenant background checkThe Obama administration recently revealed its proposal to reduce Fannie Mae (FNMA) and Freddie Mac (FMCC), the mortgage giants that have enabled homeownership for millions of Americans. The report offered three options for replacing the two agencies.

It also makes it clear that rental housing will remain a priority as more renters enter the market in coming years. In the white paper, the government recognizes Americans are giving up homeownership in favor of renting. With a record 37 million rental households and a possible 4.4 million additional by 2015, it’s not something that can be ignored—and the administration is not.

“Americans should have choices in housing that make sense for them and their families. This means rental options near good schools and good jobs,” the report states. It further indicates that finding ways to maintaining funding to the rental market will be “critical.”

One proposed action is expanding the Federal Housing Administration’s support to the multifamily industry, including developing programs to serve hard-to-reach segments, including the smaller properties that comprise one-third of all rental apartments. The report noted that half of renters spend more than one-third of their income on housing, while a quarter spend more than half; a commitment to affordable rental housing is indicated, although the term is not defined.

The National Multi Housing Council, a trade group, responded that reform is needed in the single-family sector, that Fannie and Freddie’s multifamily programs were not part of the financial meltdown and that “they are a vital capital source for the rental housing sector.”

5 Landlord Mistakes to Avoid

Posted by Teresa on September 14, 2010 under Landlord Paperwork and Forms, Landlord Tips, Tenant Screening & Background Checks | icon: commentBe the First to Comment

tenant screening, tenant background check1. Not approaching your rental business like a business. To be successful, all businesses need to follow a plan. They need to be capitalized. And they need to be run professionally. This takes time, energy and money. Some landlords are not willing to invest all of these resources into their businesses. Some don’t have a plan. Some don’t have enough capital to keep their businesses going when rent income falls below projections (if they even have projections). Being unable or unwilling to do all of these things will almost guarantee a rental property business that is not as successful as it should be.

2. Conducting less-than-professional relationships with tenants. Landlords vulnerable to becoming too personal with tenants are often sucked into giving extensions on paying rent, reducing security deposit requirements or otherwise allowing tenants to ignore the established rules. Tenants who suffer no consequences will usually continue to bend or break the rules. It may seem harsh, but just as you can’t walk out of store without paying for a gallon of milk, a tenant should not be allowed to live for free in your rental property—even for a day.

3. Treating tenants differently. Letting certain tenants slide on the rent, steering certain tenants toward certain units, and otherwise showing deferential treatment to an individual or group of tenants can land you in trouble quickly. Landlords are constantly taken to court on charges of discrimination for actions like these. You don’t want to be one of them.

4. Failing to document. Keeping excellent records is a habit that can save your business. It’s vital to make copies of everything from driver’s licenses (if legal in your area), move-in/move-out inspections, applications, tenant screening authorizations and lease documents. But consider making notes of phone and text messages, emails and snail mail communications, too. Even a simple spreadsheet can prove to a judge that you treat all tenants equally and  follow the law.

5. Not knowing when to call in the professionals. A licensed electrician and plumber, landscaper, lawyer, accountant, tenant screening service and possibly a property management company should be on every landlord’s list of resources. You may not need all of them all of the time, but you will likely need them at some point in running a rental property business. Trying to do it all has been the downfall of many a real estate investor. Knowing when help is needed in managing rentals can save your sanity—and maybe even some of your profit!

Some General Information about Landlord Liability

Posted by Teresa on September 10, 2010 under Landlord Tenant Lawsuits, Landlord Tips | icon: commentBe the First to Comment

tenant screeningWhat is an landlord  liable for? If a tenant falls on the sidewalk, is the landlord liable for damages? What about broken pipes? Read on for some general information about keeping yourself safe from liability as a landlord:

Landlords must provide a safe living space for their tenants. This means that if a faulty railing causes a child to fall from a landing, the landlord could be held liable. If there are large cracks in a sidewalk leading to an apartment building, the landlord can be held liable when a tenant’s guest trips and falls and injures him or herself. Or, if a rental house built prior to 1978 is being renovated, proper steps must be taken to protect occupants from lead paint poisoning. Landlords must also ensure smoke and CO2 alarms are installed and functioning. And plumbing systems must function properly—tenants could possibly sue for property damage from leaking pipes.

Landlords who hire property managers must be as careful about them as they are with potential tenants. Landlords can be responsible for any criminal actions by their employees. Exposing your tenants to harm and yourself to possible charges of discrimination, unfair treatment or harassment is a real threat to your rental property business.

Criminal Activity
In most states, landlords must reasonably protect tenants from criminal acts. Proper lighting and adequate door and window locks are the landlord’s responsibility. If a flimsy lock allows an assailant into a tenant’s rental home or apartment, it is possible that the landlord would be held liable. Subjecting residents to another tenant’s criminal activity could become a landlord’s liability, too. That’s one reason why tenant screening is so important. If a tenant is harmed by a parolee, for example, the landlord could be held liable for allowing a known criminal to move in.

For expert advice on how to protect yourself as a landlord, check with an attorney specializing in landlord/tenant issues. Protect your business, your tenants, and yourself from liability by screening tenants and making your rental properties safe for residents!

Why Not Host a Rental Open House?

Posted by Teresa on September 2, 2010 under Landlord Tips | icon: commentBe the First to Comment

tenantscreeningblog.comRealtors know that holding an open house is a great way to get lots of exposure for a property. They also use open houses to find potential new clients, often to the homeowner’s chagrin. But there are plenty of success stories of homes selling because of a well-run open house.

So why don’t more landlords adopt this idea? It’s certainly worth considering if you have a rental vacancy.

There are pros and cons to hosting a rental open house:

  • You save time by showing the rental to multiple people at once;
  • But you might not be able to spend quality time with each potential tenant;
  • An open house can cause a sense of urgency, when a potential tenant sees others interested in the property;
  • Spending too much time with Potential Tenant A could mean missing out on selling the rental to Potential Tenant B;
  • You could waste time with nothing but “tire-kickers.”

Qualify Potential Tenants Prior to Holding the Open House.
Pre-screen over the phone. Ask callers responding to your for rent ad where they presently live and work. Tell them the rent, the security deposit, and any other important lease-qualifying information. Let them know you will be conducting a thorough tenant screening on all applicants. Then, if they’re still interested, let them know you’ll be holding an open house and they’re welcome to view and apply to lease the property then.

Repeat this process for the next several interested callers. You may have a dozen people show up for your open house; you may have two. No matter—you’ll still save time showing it to multiple people at once.

Getting Ready for a Rental Open House
Make sure the property is at its best. Thoroughly clean the walls, floors and ceilings. Pay close attention to the bathrooms and kitchen. Make sure the tile gleams and the floors are spotless. Put a plant on the counter.
Inspect the property from the outside. Pick up trash. Trim low-hanging tree limbs. Cut the grass, and plant some flowers outside to add to the curb appeal.
If you have some extra furniture, place a chair and table in the living room and a bed in the bedroom, so potential tenants can envision their belongings in the space. Wash the windows and turn on all the lights.

Print up flyers and leave them where visitors can find them. Include photos and a list of the basic information as well as amenities offered with the property. Don’t forget to tell potential tenants what’s nearby that they might enjoy: parks, coffee shops, grocery stores, or bike trails.

Allow open house visitors to wander through the space. Don’t crowd them, but let them know you’ll be close by if they have any questions.

Be sure you have lease applications on hand—and don’t let any qualified potential tenants leave without filling one out! If anyone is super interested, offer to collect a security deposit and first month’s rent to hold the property, and inform them it will be refunded if they do not pass your tenant screening.

People might be more receptive to viewing your property through a friendly open house than in a one-on-one showing, so why not consider hosting one?

Why Invest in Rental Property?

Posted by Teresa on April 13, 2010 under Landlord Tips | icon: commentBe the First to Comment

iStock_000003697418XSmall-300x199Becoming a landlord is not for everyone. A few of the attributes one needs are patience, people skills, and good business practices—and there is still no guarantee it’ll work out.

But if you’re thinking about buying your first rental property, the same factors that most landlords consider before diving into the business apply to you, too. Here are a few reasons to consider investing in rental property:

You want a diversified investment portfolio. Ask your financial advisor (preferably a professional, not your brother-in-law!) how rental property would fit into your investment mix. Diversification can help you protect your assets.

You want additional income. Most rental property owners are middle-class working people who decide another income source would be beneficial. It takes time to manage a rental property business, but you can do it part time and keep your day job. And who knows? If you’re successful, you can always work into making your rental business a full-time venture.

There are tax advantages. Again, check with your tax professional, but real estate is one of the most favored investments, tax-wise. A few benefits are deductible expenses, depreciation write-offs, and favorable capital gains tax rates. Writing off depreciation alone can offer a large tax break against annual cash flow.

In the long run, real estate holds value. Despite the housing bubble the US recently experienced, depreciating home values and foreclosures, over the long term, rental properties have held their value through all the boom and bust housing market cycles. Of course every business has up periods and down periods, and rental property is no exception. Think long term, and be cautious.

Investing in rental property can help you in retirement. Done well, and with a thought-out strategy, real estate investment can augment your retirement fund. As with any investment, the earlier you begin, the better your results will be. Think about holding properties for 20—30 years, not 5. Think tortoise—not hare—when it comes to making decisions about rental property as an investment.

The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining tax advice applicable to your situation.