For landlords in most markets, 2011 was a good year

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.

As a landlord, do you keep track of tenant lease renewal dates

If you’re on a one-year lease schedule, set reminders to contact tenants prior to the lease expiration to thank them for leasing your property and inform them it will soon be time to sign a new lease. If you will be raising the rent, now is the time to inform your tenant. You may wish to provide a perk such as an appliance upgrade or new carpet to entice them to renew at the higher rent.

At lease signing, have your tenant fill out an updated information form, so you can be sure to have current employment information, emergency contacts, current occupants and vehicle license numbers:

• You’ll want the employment information in case your tenant vacates the unit and owes you rent. If you’re forced to go to court to collect, you’ll want to know where you can garnish the tenant’s wages, if it comes to that.
• Personal and emergency contacts are important, not only in case of an actual emergency, but again, if the tenant breaks the lease and owes you rent, you’ll have a place to start looking for him or her.
• Vehicle license information is vital to keeping unauthorized or unknown vehicles off your property.
• Asking for current occupants are a great way to discover if there are unauthorized residents staying in your rental property. If there are “guests” over age 18, you’ll want to point out the lease clause that covers your guest policy (such as limiting guests to two consecutive weeks in any six month period) and require lease applications and tenant background checks from anyone living in your rental unit who is not on the lease. Of course, if the new tenant is permanent, you’ll need a to draw up a new lease that includes his or her name.

Remind tenants that they must provide written notice if they intend to move out at the end of the lease. Ask for an exact date they will be vacating. However, don’t promise the unit to a new tenant until you are absolutely sure that the old tenant is moving out.

Sometimes landlords simply can’t fill a vacancy

Consider these reasons you’re having trouble filling a vacant rental:

• Does it look inviting?
• Are there dead shrubs outside and broken window blinds inside?
• Does it need a paint job?
• Are carpets worn out?
• Do the fixtures and lighting need an upgrade?
• If it’s been awhile since you spruced up the place, it could be costing you money as potential tenants turn it down.

Finally, when you’re showing the unit, ask potential tenants if they can picture themselves living there. It doesn’t hurt to find out what they’re thinking, and you’ll learn very valuable information. If they offer an objection, find a way to overcome it—and fill that vacancy!

Tenant screening

In between is the professional tenant background check, which should include:

• SSN Validation
• OFAC/Patriot Act Search
• Evictions
• Bankruptcies
• Liens & Judgments
• Criminal Records Search
• Sex offender Search
• Credit Check
• Name and Address Validation

Skipping any of these necessary steps is usually a mistake – just ask landlords who have! You might be tempted to forget about calling previous landlords if the credit check comes out clean. You might be tempted to skip the tenant background screening if the applicant tells you up front that he had a drug conviction five years ago. When tenant applicants are so honest up front, they must have nothing else to hide, right? Maybe. Maybe not.

When your gut tells you someone is honest and deserves a chance, don’t listen! Do your due diligence and find out for sure if they can be trusted to live in your rental property, take care of it properly, and pay rent on time every single month.

Conducting due diligence on a potential tenant takes a little time and effort on your part. Experienced landlords will tell you to listen for clues when you’re talking to references and former landlords to determine whether you need to dig any further.

• Clue #1: Former landlord says that applicant was never any trouble and paid rent on time. Would happily rent to them again and again.
• Ask: Why are they moving? How long have you owned the property? How do you spell your name? What is the legal address of the rental property?
• Double-Check: Tax records to make sure the person you are talking to is indeed the owner of the property in question. Potential tenants have friends pose as landlords. How do you know you’re talking to the landlord? Hint: When calling the number, ask “how do you know John Doe?”
• Clue #2: Employer says applicant was never any trouble, makes enough money to cover rent and is still gainfully employed.
• Ask: What is your name and position at the company? Ask even if the name is on the application in front of you. Potential tenants have friends pose as supervisors.
• Double-Check: Google the company name, address, phone number. Call the business and ask for the person you were speaking to – don’t just call the number you were given.
• Clue #3: Tenant applicant cannot provide paystubs.
• Ask: For W2s or tax returns. If you don’t get them, move on to the next applicant.

Verifying tenant references is as important as formal tenant screening. Don’t base important decisions on your gut. Verify, then trust!

Verify Before You Hand Over the Keys to a New Tenant

When a new tenant moves in, do you welcome them with open arms, or just hand over the keys? Great tenants are few and far between, and even good tenants make your life much easier. So why not show your appreciation and start the landlord/tenant relationship off right?

Lots of landlords we know present a new tenant with a welcome package of goodies. Some cost them little to nothing out of pocket—say, $10 – $15. Others keep it strictly business and include just the legalities.

If you choose the former, here are a few items to include in a welcome package that will make your new tenant feel right at home:

• A list of emergency phone numbers. This might seem old-fashioned when a simple call to 911 will fetch police, fire and ambulance. But your tenants also need to know how to get in touch with your preferred maintenance people in an emergency. Do include the numbers for your plumber, electrician and general maintenance provider, along with utility companies.
• A floor plan clearly indicating the emergency evacuation route, location of fire extinguishers and smoke alarms and emergency water shut-offs.
• Coupons for local businesses. Stop by the neighborhood pizza shop, dry cleaner, deli and other businesses that might love to have your new tenants for customers. See if you can strike a deal with the pizza shop for discounted gift cards and include one as a gift for move-in day.
• Bus routes, trail and bike maps. More and more tenants are ditching their cars for alternative forms of transportation. Make it easier for them to find the right bus, bike to work, or go for a walk or run on nearby trail.
• A few of life’s necessities, like toilet paper, paper towels and a few extra batteries for the smoke detectors. These low-cost items can really make a big difference when moving into a new place.

Remember, a small effort can actually go a long way to establishing a good relationship with your new tenants. And even if some don’t seem to appreciate it, you might be reaping unseen rewards in the form of fewer problems and happier tenants!

Landlords and tenants

Here is a guide to help settle which is which when it comes to wear and tear:

Clearly, there are limitations to a landlord’s responsibility, whether a tenant doesn’t take proper care of a rental unit or an accident occurs. For example, a tenant may not be totally at fault for his friend’s dropping a bowling ball on the tile floor, but when it happens to someone else’s property, he who lives there must be held responsible.

And if a tenant can’t be bothered to clean her apartment, the landlord is entitled to have it done for her when she moves out—and deduct the fee from the security deposit.

On the other hand, it’s always up to the property owner to perform routine maintenance, which can go a long way to preventing bigger problems, like clogged pipes, water damage and worn out appliances.

Now, not only are those signs coming down, but rents are starting to climb as rental inventory drops and demand rises. How does a rental property owner determine what rent to charge? How do the changing conditions in your area affect the rent you can charge?

The obvious answer is to look at what the market will bear. Many landlords begin their research by checking the Fair Market Rent (FMR) for their area. FMR is the amount of money a property will lease for, based on variable factors like economic conditions, location, and local vacancy rates.

The U.S. Department of Housing and Urban Development (HUD) uses Fair Market Rent values to determine the eligibility of rental housing units for housing assistance, known as Section 8 payments. The values are designed to be high enough to ensure an adequate supply of rental units, but low enough to serve as many families as possible.

Once you’ve established the FMR for your area, compare it to what is being charged for similar unites. Check Craigslist.com, local advertising, and sites like ForRent.com, Rent.com, Rental.com and any local sites that cater to your city.

Don’t be tempted to set rent too high or too low for your properties. You are in business to make a profit—and while lower rents may keep your units full, if you’re not making money, you will not survive in the investment property business.

On the other hand, setting rents too high will almost guarantee that good tenants will pass up your property for similar amenities at a lower price. Still, when vacancies are low, you can away with charging a premium rent. Setting rent is a balancing act: keep an eye on the rental market at all times, and adjust your rents accordingly.

Resources:

http://www.huduser.org.
http://rentometer.com

Arizona state lawmakers

Rental property owners will be required to:

• Keep their units free of bedbugs.
• Provide tenants a copy of the law, once passed, as well as with educational materials on bedbugs, including prevention and control measures.
• Arrange for a licensed pest control company to inspect a unit within seven business days of a possible bedbug problem.
• Start the process of mitigating the bedbugs in the rental unit within seven days of finding evidence of infestation.

Tenants are responsible for:

• Notifying landlords in writing or via electronic document of infestations.
• Providing access to their units for inspection and bedbug treatment.
• Complying with the bedbug mitigation protocol established by the pest control company is required. This includes pre- and post-treatment procedures, temporary evacuation of the unit and notifying within three days of recurrence.

Additional Requirements:

• Landlords are prohibited from knowingly leasing a bedbug-infested rental unit.
• Tenants are prohibited from moving bedbug infested materials into a rental unit.
• Only licensed pest control applicators would be allowed to treat bedbugs in multifamily housing.
• Tenants must receive written notification of mitigation treatment three business days or more before it begins.

Perhaps most important is the allocation of financial responsibility. According to the bill, while the landlord is responsible for pest control expenses when tenants comply with their obligations, the responsibility falls to a tenant if they fail to comply. In this case, not only are tenants responsible for mitigating the problem in their own unit, but also any surrounding units that become infested due to non-compliance.
This bill is one of the first we’ve seen that tackles the bedbug problem in rental units. And, it seems to be pretty fair to landlords. What do you think?

We’ll follow the bill as it progresses through the Arizona state Senate.

1. Your rental property is kid- and pet-friendly. While this doesn’t work for every property, it does make things easier for parents of two-and four-legged kids. Provide and enforce clear-cut rules, along with designated areas for kids to play and dogs to do their business, and you can make nearly everyone happy—even your tenants who prefer to keep rugrats and furballs at arm’s length.
2. Your rental property is fun. Creating positive interactions between residents, through potluck dinners, book and movie exchanges, a game room, or picnics can go a long way toward creating a community. People who know their neighbors feel more safe—and are more willing to look out for each other.
3. Your rental property is welcoming. While it is the law that you do not discriminate on the basis of race, religion, family status, disability, sex and other factors covered by the Fair Housing Act, you create quite a different feeling when you advertise that everyone is welcome. Print a statement of welcome to all people on your leases, add it to your signage and your advertisements, too.
4. You provide excellent customer service. Great landlords remember that their tenants are their customers. Without them, there is no rental business. All landlords know the feeling of less-than-100% vacancy; try to keep it in mind when servicing your tenants.
5. You strive to accommodate everyone. Providing closer parking for disabled is the law, but reserving a few close spaces for older tenants, who might not have an actual disability is just a nice thing to do. Providing secure storage for bicycles encourages their use, which is good for the planet and the health of your tenants.
6. You treat your tenants with respect in every interaction and communication. Few people cannot tell when they’re being disrespected or on the receiving end of a condescending attitude. If showing respect is difficult for you, then leasing property might not be the best business to be in.

Being a great landlord is not just a nice way to conduct business—it IS good business! Happy tenants will stay longer, cause fewer problems and recommend your property to their friends, family and co-workers. Why not strive to be a great landlord?

Short-term leases

When the economy and job market are both doing well, the ideal situation for a landlord is a one-year lease with a strong tenant. But even though the rental markets across the country are starting to show improvement, many landlords are far from the ideal—and they still need to fill rental units.

When credit scores are less than perfect, and home sellers are knocking on your door, looking for short-term leases, it makes sense to adjust your lease terms from one-year to six-month or month-to-month.

Month-to-month leases mean that at the end of any month, the tenant can simply move—or the landlord can end the lease. Most leases require notice on each side, but if neither side ends the lease, it continues for another month.

7 Advantages of Short-term Leases:

1. Your rental units could be occupied instead of empty
2. Improved cash flow
3. Possibility of higher rent negotiation
4. Easier transition between tenants (less clean-up and maintenance)
5. Larger pool of possible tenants
6. You can get rid of a bad tenant more quickly
7. For month-to-month leases, the rent can be adjusted at any time

Remember, no matter what the length of the lease, proper tenant screening is the most important step you can take prior to signing it. Conduct a thorough tenant credit check and background check and you’ll feel better about offering a lease to short-term tenants.