American Apartment Owners Association

4 “Must-Knows” Before Taking on a Distressed Property

Thu, 04/20/2017 - 10:39pm

Have you ever looked at a distressed property—a truly distressed property—and been thrilled with the idea of buying it, renovating it, and renting it?

It can be an appealing notion, especially if you’re an investor with an imagination.

With so many areas undergoing revitalization, the idea of taking a cheaper distressed property and making it something valuable in an up-and-coming market seems attractive.

But is it actually worth it?

To really answer the question, we have to first get on the same page about exactly what is a distressed property and what makes it different than, say, a regular fixer-upper.

Think of it this way. Your average, everyday fixer-upper is a property where an investor can see some subtle changes and improvements in their mind’s eye and know that those improvements will increase the value. This would include basics like quality paint, new flooring, maybe removing a wall or moving some rooms to change the flow of the house. An investor can see minor changes that are relatively small-dollar improvements and know that those changes will help them meet their ROI.

Whether an investor intends to hold for long-term or to try for a quick turnaround sale, these types of properties are ideal because of forced appreciation. If an investor can perform the right renovations and do them inexpensively, then the return comes from the forced increase in value. This allows them to pay more and consider more properties with lower discounts.

On the other hand, a distressed property, for the sake of this discussion anyway, is one that has a few more warts than your average ole fixer-upper. Those warts could be fire damage, water damage, foundation issues, and years or even decades of neglect and vacancy. A distressed property comes with its own set of issues, and they are truly unique.

Those issues are often enough to scare even experienced renovation investors away from a deal. They are simply too big, there are too many unknowns, and they come with increased risk. So, why the appeal?

Along with risk, they often promise an even bigger reward. It takes nerves of steel to walk into a distressed property in need of a complete overhaul and smile like you know this is going to be a home run.

With all of the unknowns, the questions and the risks, these highly distressed properties hold a promise that is very enticing. So what does an investor need to know before embarking on a challenge like this? We’ll start here and see where this list takes us.

4 “Must-Knows” Before Taking on a Distressed Property 1. Low market price doesn’t mean low-cost.

New investors often make the mistake of buying the cheapest properties on the market, thinking that they’re going to make the best investments. It’s not bad logic: Reduce your costs by saving on the property, and you’ll earn more, right? Not so fast!

A low-cost price tag for a property does not always mean the property isn’t as valuable. You can rightly assume the quality isn’t there, at least when you buy it as-is. You can assume the property is discounted due to the condition and work needed. But that does not mean that you ignore basic investing 101.

An investor still needs to know the basics of how they are going to earn a return on a property. A cheap property in a bad area is still going to demand the same low rent no matter how nice you make it. Therefore, you cash flow won’t be as good. Ask me how I know this!

Obviously, a distressed property has that nice low price tag because it has some problems. Those problems have to be fixed. Even if that initial price tag looks nice, you have to know that you’re about to need to go through the costs of getting it to a place where it pays off. And you have to be open to the fact that the payoff simply may not happen with that property, no matter how low-cost and attractive the price may be.

Maybe you aren’t going to go through the full lengths a flipper would, but it still adds up—and you don’t necessarily have the advantage of leveraging a bank loan to pay for your renovation costs. It’s an investment in and of itself to fix it up!

So make sure on the front end that you know exactly how you are going to make the numbers work. Are you holding for a long-term rent or are you planning to sell the property quickly? Either way, know your numbers on the front end and understand how every dollar you spend will effect your final ROI.

Never forget that highly distressed properties hold secrets. You have to budget and account for them. This is not some arbitrary number. You really need to go through and consider what major costs may be hidden due to age of the property, amount of time it has been sitting distressed, and what special distresses that property holds. Each of those factors can increase your hidden costs and makes what looks like a sound, quality investment turn into a money pit.

2. They take much more direct investment.

Speaking of the renovation costs, handling a distressed property does take much more investment and involvement than a traditional investment property. Distressed properties don’t need sprucing up. They need major overhauls that often take long renovation timelines—you might be completely overhauling the sub-flooring, foundation, roof, plumbing, electric, and flooring. You might need to create new spaces or redo the layout.

There are any number of big-ticket items that could come into play on a distressed renovation. Those big overhauls can be very, very costly. Sometimes they can cost as much as you paid for the property itself. Not only that, but it’s not necessarily something you want to be hands-off with. Honestly, distressed real estate can be a little unpredictable.

3. Unanticipated risks abound.

Whether it was old or neglected, distressed rental properties can be chock full of hidden risks. Inspections may not save you here when you’re calculating costs. There are the property issues you could run into, such as mold, septic issues, asbestos, foundation problems, and any number of costly problems.

But there are other things that we don’t always consider: an unclean title, unforeseen issues with the bank, issues with neighbors, and even zoning issues.

It can get tricky. It can turn into a massive headache and can consume much more of your time than you budget for on the front end. And it really isn’t for the faint of heart! These types of projects have the ability to suck the passion out of an investor, so you have to be strong-minded on the front-end.

There will be issues—be prepared to deal with them or don’t bother in the first place!

4. It’s a flipper’s game.

Buy and hold investors typically aren’t the ones who go after these highly distressed properties. One of the reasons is this: When a flipper takes on a distressed property, they have a few advantages when they flip it versus trying to rehab it as a rental. One, they’re looking at the short term. They don’t have to worry about future market fluctuations to wonder if their current investment is going to pay off down the line.

They pretty much know what they’re going to get out of it in the end, and they understand the risks associated with the unknown.

Two, experienced quick turnaround investors have this down to a fine art at this point. Experienced investors know how to handle the unexpected horrors of distressed real estate. Inexperience can kill you when it comes to these types of properties, but knowing how to handle them can reap big rewards.

They have a shorter runway from purchase to return and therefore they are able to calculate a slightly different risk tolerance. A buy and hold investor who needs a property to hit a very particular number on the bottom line in order to be profitable may find themselves either cutting corners or pushing the rental market to make a deal work for the long haul.

Again, in this scenario, an experienced buy and hold investor who targets these types of projects may already know on the front end that they can break even with a rental for a short period of time (usually two years or less) and then sell the property for a more modest return when the market allows.

Bottom line: Experience rules the day, and having a very open mind and clear understanding of risk usually only comes with experience.

If You’re a Buy and Hold Investor, Know This…

You don’t need to rely on capital appreciation to succeed.

Renovating cheap properties and renting them out isn’t going to bring you success. It might work for you as a strategy, but there is so much risk involved! You can invest successfully without so much leg work and risk.

If you want to flip, by all means, buy all the distressed properties that you want. But if you’re looking for long-term real estate investment, you don’t need to look for cheap properties to be profitable. What you need is quality.

I will save the argument of DIY real estate versus passive real estate for another day, but the idea of finishing with quality plays an important role when deciding whether or not to buy highly distressed properties and what your ultimate strategy will be.

As for the original question of “are they worth it?”

As a very experienced real estate investor and entrepreneur, I can attest to one recurring theme: Highly distressed properties work best for investors who have a lot of experience, capital, and talented teams at their disposal. Regardless of long-term buy and hold or quick turnaround, the key is experience. If you have that, they are definitely worth the effort!

What’s your opinion—do you take on highly distressed properties or are these something you avoid?

 

Source: biggerpockets.com

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Here’s why the housing market continues to struggle with low inventory

Thu, 04/20/2017 - 10:26pm

Tight housing inventory supply could put a strain on this year’s spring home-buying season, according to the monthly Outlook released Tuesday by Freddie Mac.

The low supply of inventory continues to push home prices up as they outpace rising incomes. Rising home prices combined with higher interest rates caused affordability to decrease in March.

“Tight housing inventory has been an important feature of the housing market at least since 2016,” Freddie Mac Chief Economist Sean Becketti said. “For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years.”

“If inventory continues to remain tight, home sales will likely decline from their 2016 levels,” Becketti said. “As we enter the spring home-buying season, all eyes are on housing inventory and whether or not it will meet the high demand.”

Freddie Mac outlines four reasons why housing inventory remains low. They are:

1. Fear of low inventory

One of the main reasons for low inventory, is, ironically, the fear of low inventory. Homeowners are hesitant to put their home on the market as they are unsure if they will be able to find a new home in their budget once they sell theirs.

2. Mortgage rates

As mortgage rates rise, homeowners are less likely to put their homes up for sale because they don’t want to forfeit their current low interest rate.

3. Home prices

While home prices are high, in some areas they are not quite back to their pre-crisis levels. Because of that, homeowners are unable to sell their home for enough to pay back what they currently owe.

4. Housing starts

Housing starts were a disappointment in March as the annual rate of housing starts slipped nearly 7%. And housing economists explained this lackluster growth won’t be enough to meet the rising demand. Freddie Mac’s report explains the projected 1.26 million starts for 2017 will not be enough to cover the needed 1.7 million new housing units.

And this tight inventory will pull down home sales for the year. Freddie Mac predicts home sales will come in at 5.9 million in 2017, falling from 5.97 million in 2016, which was housing’s best year in a decade.

Source: housingwire.com

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Risk Management 101: Avoiding Partnership and Employee Issues

Thu, 04/20/2017 - 3:20pm

Partnership/ Investor Disputes:

Some partners fight with each other as a hobby, others do it as a form of sport! Some of the biggest financial fights occur between blood family members.  Family members can end up in divorce court fighting about property and asset division.   This is a big source of legal wrangling.

Important preventive measures:

  • If you are concerned about divorce, and you have substantial assets, consider getting a pre-nuptial agreement to “contract out” of the community property system.
  • Another potential solution is to have a well drafted partnership agreement in place between partners that sets forth the responsibilities and duties of the partners, how day to day management will manage the property, how expenses are to be paid, how income and profits are to be divided, and how the partnership will handle financial and legal disputes. Every aspect of “partnership life” can be delineated in the partnership agreement.
  • I would suggest having a mandatory mediation clause in the partnership agreement. Participation in mediation may help the parties settle the dispute short of protracted litigation.

Employee and Professional Embezzlement:

Nursery school office bank accounts and petty cash boxes, local bar association bank accounts, bank accounts of the elderly property owners, even federal court bank accounts have all been enterprise victims of sophisticated schemes of monetary theft and embezzlement by employees.  The federal court bank account theft occurred by the human resources manager creating phony payroll accounts for fictitious employees and then transferring the funds to his own account. It takes a lot of chutzpah to steal money from the courthouse bank accounts, but it has been done!

The bank accounts and rent rolls of a property management company or real estate investor are also a vulnerable target to financial fraud if you don’t have tight financial controls in place.  The embezzlement can be done by an internal employee as low on the totem pole as a receptionist, or an external professional such as your own business manager, bookkeeper, or accountant.   Common schemes include writing checks to strangely named entities, transferring money to linked accounts, and using wire transfers.

Important preventive measures:

  • Have tight accounting controls
  • Perform a periodic audit of bank transfers, checks written, payroll transfers, bank statements, withdrawals, and transfers
  • Check whether your rent roll matches the rent and account for vacancies
  • Verify vacancies by visiting the apartment unit
  • Have two people review and approve each and every check expenditure
  • Avoid using large cash transfers and payments

Frivolous or “Well Grounded” Employment Law Lawsuits:

This is a big ticket liability item that you need to be careful with.  Labor law shakedown type lawsuits have become a burgeoning cottage industry for plaintiffs’ labor attorneys in California. The courthouse is filled with them.  The reason is that by statute attorney’s fees may be available for the prevailing party.  Property owners and management companies may be targeted by plaintiffs’ employment law firms.  Plaintiffs do not have to be American citizens or holders of a green card. Illegal aliens can and do file these lawsuits, and are encouraged to do so by plaintiffs’ attorneys.  These plaintiffs get legal standing in the courts to go forward with these lawsuits.

Lawsuits generally come in three categories: failure to provide meal and rest breaks, failure to pay and report payroll taxes to state and federal agencies, and the biggest financial  exposure is if you have an employee and you fail to pay wages for overtime. Also, employees may forge signatures on written employment agreements and claim rights and compensation pursuant to these phony agreements.  Don’t forget your exposure for sexual harassment and employee discrimination claims based on race, sexual orientation, gender, transgender, and other protected categories.

Important preventive measures:

  • Practice preventive legal maintenance
  • Take an educational course to learn about labor law
  • Prepare an employee policy and labor law handbook
  • Review your employment agreements and files
  • Have at will employees sign a disclosure that they are “at will” employees
  • Sign any agreements with witnesses present
  • Have payroll services in place
  • Send 1099 agreements to independent contractors
  • Have an attorney on board to consult with or retained to resolve or defend any types of actions

Copyright 2017 Nate Bernstein, Attorney at Law. LA Real Estate Law Group. All Rights Reserved.

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.  Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases. 

Any statement, information, or image contained on any page of this article not a promise, representation, express warranty, or implied warranty, or guarantee about the outcome of a legal matter, and shall not be construed as being formal legal advice. All statements, information, and images are promotional. All legal matters are factually specific, laws change on a daily basis, and courts interpret laws differently. No express or implied attorney client relationship shall be inferred from any statement, information, or image contained any pages of this website. No attorney client relationship is formed until the client or the client’s representative, and the attorney signs a written retainer agreement.

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Risk Management Guide for Investment Property Owners

Thu, 04/20/2017 - 2:59pm

INTRODUCTION

I have compiled this useful checklist of many of the common legal and economic risk factors that exist when you own your own real estate investment company, and or manage rental properties.  This is not a complete list, there are always new and novel types claims and liabilities coming up every year. Factual circumstances are specific, and each scenario is different.

I have written this article for the sake of raising important issues and concerns, so property owners and managers can be proactive in protecting themselves and can take active steps to manage and deal with common risks. The best solution for some of these problems is to use common sense, and to have appropriate insurance coverage in place, and professionals accessible in your rolodex for consultation and retention. This is an important checklist to use to make sure you are protecting yourself and your company from unforeseen liabilities and scenarios that effect your bottom line.

Premises Liability Claims:

Personal injury attorneys specifically target apartment building investors, management companies, and general partners for lawsuits.   This is an important area of concern. Typical scenarios that lead to litigation are slip and fall accidents in common areas, young children falling off balconies, and women get assaulted in parking lots without adequate lighting.  Dog bites may occur.   Swimming pools present certain risks of injury.  There are serious risks with apartment buildings that have children- children are always playing and running around in areas where they should not be present, may be skateboarding, and may be unsupervised by irresponsible parents.

My recommendations:

  • Have a great maintenance crew on board to fix items in your complex
  • Have a proactive on-site property manager that is taking care of the property and telling kids to stop running around
  • Have warning signs posted at pools and other common areas
  • Have liability and property/ casualty insurance in place with proper limits.

Interior Apartment Liability Claims:

The biggest issues are water leaks, complaints of growth of “mold,” risk of fire, and problems with pests such as cockroaches or bed bug infestation.

My recommendations:

  • Hire a professional plumber and an appliance repair person: For some water leaks it may be hard to detect the source of the leak. If a leak occurs, act promptly to fix it and remove the water, avoid mold growth, and document any losses.
  • Replace old appliances
  • Stop tenants that are causing a fire risk with barbecues
  • Have a no smoking building if possible
  • Have rules in place that are posted and distributed as it relates to barbecues and smoking
  • Repair leaks promptly to prevent mold problems
  • It really helps to have a competent licensed plumber on your team that understands the systems as it relates to appliances. For example, a refrigerator/ ice maker can back up and cause a plumbing leak behind the walls and cause a flood in your kitchen and bathroom.
  • You should have a pest control professional with expertise in eradication of bed bugs: As of late, there has been a rise in bed bug complaints, and small claims court actions are filed if you try to evict the tenant with a bed bug problem for nonpayment of rent.
  • Consult with your insurance agent about getting broad coverage, and have liability and property/ casualty insurance in place with proper limits.

Difficult/ Nuisance Type / Unreasonable Tenants:

We have all had these annoying situations – loud domestic arguments, police and complaining neighbor calls at 1 a.m., fights in the common areas, loud, drunken pool parties, tenants who bring dangerous pets into the property without authorization after the rental agreement is signed, tenants who fail to update their rental agreements, and tenants who don’t let your repair contractors into the property. Tenants have more than 2 cars parked at the premises, and are running an oil dripping car part chop shop at the premises. Tenants who abandon salvage and non-operating vehicles at the premises for months.

My recommendations:

  • Set all clear and strict apartment behavior covenants and rules in the rental agreement from the outset of the tenancy.
  • Put these stipulations in the rental agreement: Y
    • You can only have 2 vehicles parked inside the complex
    • No broken down salvage vehicles may be stored at the complex
    • No loud parties after 11 p.m., respect the rights to quiet enjoyment of your neighbors
    • You must allow repair contractors into the property
    • No pets are allowed without prior approval of management
  • Enforce the rules and regulations by timely notifying your tenants of the complaints by email, and serve notices to perform and comply with rental covenants

Jury Trial Demands for Eviction Cases:

One of the increased risk factors over the past 3 years has been the increase in demand for jury trials by tenants for unlawful detainer cases involving a breach of a rental covenant such as nuisance like behavior.   The tenant’s constitutional right to a jury trial in an unlawful detainer case is a nasty glitch in the law in California.  The tenant files a demand for a jury trial and timely posts jury fees, and you are facing a more complex and expensive legal situation than you anticipated when you started the eviction process.   You need to be ready for this situation if it comes across your desk.  You and your attorney are now preparing for a jury trial which means you need jury instructions, special verdict forms, exhibits, etc.

The decision to proceed with an eviction case before a jury or settle the case is largely one of economics, the strength of your case, and common sense.  Do you have other third party witnesses under subpoena that will corroborate the facts presented by a property manager?   Usually what is driving the jury demand is the tenant’s law firm that is demanding a monetary settlement and other financial concessions.   It is important to realize that jurors who rent tend to favor tenants in the majority of contested factual situations, as they feel sympathy to a tenant that is being evicted.

My recommendations:

  • You should try to avoid eviction court if you can
  • It pays to have good communications and managerial relations with your tenants
  • For cases where the facts are disputed by your manager and the tenant, you should have other corroborating witnesses and residents who can testify that the tenant is a problem and nuisance in the complex, and in violation of the rental agreement
  • Perhaps forms of dispute resolution may work with certain tenants such as mediation with a private mediator or the office of the Los Angeles City Attorney Dispute Resolution Program.

Copyright 2017 Nate Bernstein, Attorney at Law. LA Real Estate Law Group. All Rights Reserved.

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.  Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases. 

Any statement, information, or image contained on any page of this article not a promise, representation, express warranty, or implied warranty, or guarantee about the outcome of a legal matter, and shall not be construed as being formal legal advice. All statements, information, and images are promotional. All legal matters are factually specific, laws change on a daily basis, and courts interpret laws differently. No express or implied attorney client relationship shall be inferred from any statement, information, or image contained any pages of this website. No attorney client relationship is formed until the client or the client’s representative, and the attorney signs a written retainer agreement.

 

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Berkeley landlords sued over deaths by carbon monoxide poisoning

Thu, 04/20/2017 - 2:46pm

BERKELEY — The deaths of a Berkeley married couple by carbon monoxide poisoning in January could have been prevented had their landlords followed state law and properly installed carbon monoxide detectors in their Deakin Street apartment, a wrongful death lawsuit filed in Alameda County Superior Court alleges.

Valerie Morash, 32, and her husband of nine years, 35-year-old Roger Hanna Morash, were found dead on the second floor of their home in the No. 4 unit of 3028 Deakin St., on Jan. 23. While carbon monoxide poisoning was initially ruled out as the cause of death because Pacific Gas & Electric crews could not find evidence of a carbon monoxide leak, authorities later determined that the couple and their two cats died of carbon monoxide poisoning, attorney Michael Bracamontes said Tuesday. Autopsy results showed “extremely high” levels of carboxyhemogloben in their blood, he said.

Susan Hanna, the mother of Hanna Morash, is suing the Deakin Street landlord/building owners Cindy M. Kwong, Tony M. Wong, and the Kwong/Wong Family Trust for damages on allegations that her son’s death would have been prevented had a carbon monoxide detector been installed near the couple’s sleeping quarters pursuant to California building code. A carbon monoxide detector was installed on the bottom floor, the lawsuit notes, but not on the second floor where Morash was found dead in a bedroom and Hanna Morash in a home office.

The source of the carbon monoxide has still not been determined, according to Bracamontes, and the couple’s former apartment remains tagged as unsafe while authorities continue their investigation. The other three units in the building remain occupied. The city of Berkeley did not return a call for comment Tuesday. An attorney for the defendants could not be reached.

“These were easily preventable deaths and that’s why we have carbon monoxide laws that require carbon monoxide detectors outside each sleeping area,” Bracamontes said.

The couple met while they were both undergraduates at the Massachusetts Institute of Technology and had lived in the Deakin Street residence for seven years. Valerie Morash received her Ph.D. in psychology from UC Berkeley and was working on her post-doctoral fellowship at the Smith-Kettlewell Eye-Research Institute at UC Berkeley. Roger Hanna Morash was a game developer who worked on numerous titles before starting his own gaming company, Glug Glug.

“These were two well-liked, young, successful individuals who were not only productive members of their community but were loved and respected by everyone who knew them,” Bracamontes said. “It is certainly a tragic loss when loved ones are taken from you in a senseless and preventable fashion.”

Source: eastbaytimes.com

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Why most renters don’t want to buy homes right now

Thu, 04/20/2017 - 2:44pm

Even though they’re becoming more optimistic about their financial situations, more people who rent their homes are foregoing buying a house.

One in five renters now say they have no interest in ever owning a home, up from 13% in January 2016, according to a report released this week by Freddie Mac. And nearly 60% of current renters expect to rent their next property when they make their next move, up from 55% in September.

This shift toward renting versus buying is occurring despite a relative improvement in the financial situations for many renters: 41% of them say they have enough funds to go beyond each payday, as opposed to living paycheck to paycheck or not having enough money for basic necessities, the highest level since October 2015, Freddie Mac found. Harris Poll surveyed more than 4,000 adults on Freddie Mac’s behalf, of which 1,282 were renters, to help produce the report.

And yet a sizable chunk of people are unhappy with renting. Nearly 40% of people Freddie Mac surveyed were dissatisfied to some extent with their rental experience, with young and urban renters — who are likely to be living in smaller, more expensive spaces — more likely to be displeased.

So why are they not buying? People’s attitudes toward affordability, which cut across generations, is a big factor. “Although their finances are better, renters are comfortable with continuing to rent with many believing renting will be more affordable or stay the same for them in the next 12 months,” Freddie Mac noted.

In particular, rising home values have hurt many would-be homebuyers. A recent report from real-estate website Zillow found that more than two-thirds of renters cite the down payment as the biggest obstacle to owning a home. Indeed, it can take more than a typical year’s salary in some markets to be able to afford one.

At the same time, rental markets have stabilized recently. “Rents have been relatively flat over the last year and we don’t expect them to rise much in the next year in most areas,” Svenja Gudell, chief economist at Zillow, said. “That urgency that once existed is not there anymore.”

Affordability is just one factor though — the availability of homes also plays a role. “Even if you were to go out and try to buy a home, inventory is so constrained you’ll have trouble to find one,” Gudell said. “If there’s not much advantage to owning a home versus renting, people will feel comfortable in the decision to continue to rent.”

 

Source: marketwatch.com

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Wow Home Buyers With These 5 Front Yard Landscaping Tips

Thu, 04/20/2017 - 2:24pm

Your front yard is the red carpet inviting buyers into the beauty that is your home. If it’s rugged, messy and unkempt, buyers will take one look and then keep on driving to the next property on their list. Don’t let that happen by making your front yard luscious and as amazing as the inside of your home.

What areas should you focus on in your front yard? Where do you start? To help you break down the revitalization of your front yard, here are the steps you should take:

1. Cut the grass.

Buyers don’t want to trudge through high grass as though they were in the Amazon or on a safari in Africa. This means the lawn mower needs to be out at least once a week if not every other week, keeping it trimmed and maintained. It also needs to be green so it looks alive and lush. Water so the sun doesn’t dry out the lawn and turn it yellow or brown. A professional landscaper can help maintain a balance of trimming and growth so it looks just right for buyers.

2. Plant more shade trees.

One or two trees in the front yard are all right, but if you want to really add some shade, plant more. Shade trees will detract from the glare of the sun, and it can help decrease the temperature of the house if they’re placed close to windows. It also will help keep the lawn green with moisture. You can plant trees that are shorter and will grow by the time the new owner buys the home, but be sure they’re strong and can handle the climate.

3. Install outdoor lighting.

Outdoor lighting is a good way to both illuminate the house at night and accent parts of your yard. Depending on where you install the lights, your house will look very appealing at night to those buyers who might not have time to do their shopping during the day. Outdoor lighting also helps to illuminate a path like a sidewalk to get from the curb to your front door for easier navigation. It helps to accent the beauty of your landscaping which all together increases the beauty of your home.

4. Consider adding flowers for more color.

If your front yard has a lot of greenery, you should increase the yard appeal by adding more colors. Flowers are a great and simple way to do this, as well as shrubbery with different blooms. Perennials are the best for this because they last for more than a year, which means less maintenance for the seller and the new homeowner. They come in a wide variety of colors and types so the yard can be decorated with any number of them while still requiring less maintenance.

5. Keep everything clean!

In addition to keeping the lawn trimmed, everything else should be clean. Anywhere that can build up dirt or grime – siding, porch, front door, driveway – should be cleaned on a regular basis. Buyers don’t want to see a lot of dirt and mess, and it will detract from them wanting to walk into the house. So take a broom, a power washer and a few hours on the weekend to keep everything sparkling clean. Don’t have a power washer? A professional power washing service can cost as little as $293.

 

Source: realtytimes.com

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The Fair Housing Act: an explainer

Mon, 04/17/2017 - 10:15pm

“Now, with this bill, the voice of justice speaks again.”

Housing laws don’t normally receive such fulsome praise. But when President Lyndon Johnson signed the Fair Housing Act into law in April 1968, he felt the legislation, and its impact deserved the acclaim. “It proclaims that fair housing for all, all human beings who live in this country, is now a part of the American way of life” Johnson said.

Considered a cornerstone of anti-discrimination law, the Fair Housing Act has been thrust back into the news due to comments from the incoming Secretary of Housing and Urban Development, Ben Carson. On the 49th anniversary of its signing on April 11, 1968, here’s an explanation of why the law still matters, and how it has impacted our cities and neighborhoods.

Why was the act necessary?

The Fair Housing Act is often portrayed as complementary to the Civil Rights Act of 1964, as it aimed to address entrenched housing segregation.

Practices such as redlining and restrictive covenants (denying people of color access to insurance or home loans) fostered segregation in many areas. In a now-legendary piece for The Atlantic, writer Ta-Nahesi Coates outlined many of these practices as they played out in Chicago, but it was a common story in most major American cities, too, such as Los Angeles, San Francisco, and New York.

In fact, George Romney, one of the first HUD secretaries, said in 1969that America’s housing patterns were a “high-income white noose” around the black inner city.

What does the act do?

In short, the act is meant to create a unitary housing market, where only your financial resources, not your background, can prevent you from renting or purchasing a home.

The act bans any refusal to rent or sell a dwelling based on race, color, religion, sex, familial status, national origin, or disability (in addition, a set of design guidelines and accessibility requirements apply to certain types of housing). In addition, it bans any discrimination in the form of applying different terms or conditions for the sale or rental of property, based on those characteristics, as well any advertising that expresses a preference for those characteristics.

Finally, threats, coercion, intimidation, or interference with someone’s right to enjoy the freedom to rent or buy property is also prohibited. Here’s a full explanation of the act’s power via HUD.

How does it work?

The Department of Housing and Urban Development is charged with enforcing the Fair Housing Act.

HUD’s Office of Fair Housing and Equal Opportunity (FHEO), one of the country’s largest civil rights agencies—with a staff of more than 600 people—receives complaints, and works with local housing agencies as well as local nonprofit housing advocates to enforce the law. It was created by the act.

In addition, Federal District Courts also have jurisdiction over such cases, in addition to HUD and other administrative channels.

How was it passed?

The act was finally passed in 1968, after a protracted push by civil rights leaders.

Martin Luther King Jr. and others had begun to make segregated housing a cornerstone of protests and action (King famously journeyed to Chicagoto fight for fair housing, and was struck in the head by a stone during a march).

In addition, groups such as the National Association for the Advancement of Colored People (NAACP), the G.I. Forum, and the National Committee Against Discrimination in Housing lobbied for legislation, in part because African-American and Hispanic soldiers returning from Vietnam were having difficulty renting in certain neighborhoods. During Senate consideration of the bill, Senator Edward Brooke of Massachusetts, spoke about his difficulty as an African-American renting a home after returning from his service overseas in WWII.

The federal legislation was signed into law by President Lyndon Johnson a week after Martin Luther King, Jr. was assassinated in Memphis, Tennessee. It was considered the final major legislative act of the Civil Rights era.

Did it work?

While the Fair Housing Act made housing discrimination illegal in practice, in reality, significant degrees of segregation still exist across much of the country. According to a 2012 study by the American Constitution Society, “fair housing in the United States remains a pressing civil rights issue.”

Despite the passage of the law, a generation of politicians from both parties have failed to fully enforce the law, as documented in a lengthy ProPublica series. There are also significant social and economic costs to continued segregation: A recent study showed that Chicago segregation costs residents $4.4 billion every year in potential earnings.

The Obama administration made a handful of moves in its final years to address this historic inequality. The Affirmatively Furthering Fair Housing Rule, introduced in 2015, asks cities to do more to protect the non-discrimination policies enshrined in the Fair Housing Act.

In brief, the AFFH rule requires any jurisdictions that receive federal money for housing to document barriers to integration and create plans to overcome them. While the rule has been praised by housing advocates, many conservatives, including Secretary Carson, consider AFFH to be heavy-handed, and even have described it as “social engineering.”

Recently, due to a case of rental discrimination in Boulder, Colorado, Fair Housing Act protection has also been expanded to cover discrimination against the LGBTQ community.

What’s the future?

Secretary Carson, whose previous comments suggest a tough-love approach to housing laws and enforcement, has spoken out against the AFFH rule, which says that cities and communities receiving HUD funding need to create plans that address segregation and inequities. He’s said some federal Fair Housing actions have been examples of “government overreach” and that there are better ways to provide low-income housing. The Trump administration’s proposed cuts would not impact the FHEO.

 

Source: curbed.com

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DOWN PAYMENT BIGGEST HURDLE FOR RENTERS

Mon, 04/17/2017 - 3:23pm

Renters say they can’t buy a home due to the pricey down payment, according to the first Zillow® Housing Aspirations Report (ZHAR).

Almost 70% of renters surveyed cite the down payment as a greater barrier to home ownership than debt, job security and qualifying for a mortgage. More than half of renters cite qualifying for a mortgage as a barrier to home ownership, and half say debt is holding them back. Almost 40% of renters say job security is keeping them from buying a home.

The report, a semi-annual survey sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and home owners in 20 metros across the country about their views on home ownership and their personal housing expectations going forward.

Among key findings:

  • More than half (63%) of renters are confident that they will be able to afford a home someday, with 25% planning on buying in the next three to five years.
  • Millennial renters are more confident than any other generation that they will be able to afford a home someday, with 34% planning on buying in three to five years. Almost a quarter (22%) said they plan to buy in one to two years and 2% of millennial renters said they never plan on buying a home.
  • The majority of respondents (66%) believe owning a home is necessary to live The American Dream, and 72% believe owning a home increases your standing in the local community — millennials believe these two statements more than any other generation.

With home values across the country at their highest point since June 2007, cobbling together a 20-percent down payment on a home costs more than two-thirds of the U.S. median household annual income. In pricier markets like San Jose and Los Angeles, buyers must come up with more than 180 percent of the median annual income, making a home purchase out of reach for many aspiring homeowners.

“With home values close to record highs, it’s no surprise renters are concerned about coming up with enough money to buy a home,” said Zillow Chief Economist Dr. Svenja Gudell. “Rising rents are also a factor — it’s extremely difficult to save when you’re paying record-high rents. While it is possible to put down as little as 3% on a home, the trade-off is a higher interest rate and costly private mortgage insurance, a financial trade-off that may make sense for some buyers. But with interest rates rising in 2017, it’s important to remember that a lower interest rate can save buyers thousands of dollars over the life of their loan. For those trying to save for a down payment, it’s important to set realistic goals and realize it may take a few years.”

San Jose, San Diego and Los Angeles had the greatest share of renters say affording the down payment is the number one barrier to owning, at over 72%. Women (72%) were more likely than men (62%) to select the down payment as the top barrier to home ownership.

One-third of buyers used more than one source of funds for their down payment, including gifts and loans from family, according to the report. More than half of buyers saved by setting aside a little money at a time.

Source: builderonline.com

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Weighing the benefits of selling a home vs. renting it when relocating

Mon, 04/17/2017 - 3:22pm

I am 55 and own a townhouse in Chicago. My property taxes are rising more rapidly than home values, relatively speaking. I decided to change my career and to pursue a PhD beginning in the fall of 2018. Meanwhile, I just accepted a one-year position in Seattle, and am not sure after my year away whether I will return to Chicago, stay in Seattle or potentially move to Ann Arbor, Mich., the three top cities for programs in my field of study.

Here’s my question: Should I sell my home or rent it out?

Time is the most important consideration when it comes to buying or selling a home That’s because real estate is such an illiquid investment.

We often say that if you’re not sure you’re going to be in your next home for the next five to 10 years, you should rent rather than buy. That’s because home prices typically move upward at just over the rate of inflation. If inflation is 1 to 2 percent, you could reasonably expect your home price to rise 2 to 3 percent per year.

In addition, there are costs and expenses that could reach between 6 and 10 percent of the sales price of your home, including the sales commission, transfer taxes and fees, title insurance (which sellers often provide), and many others. And many sellers will face moving costs, storage costs and move-in costs for their new home, whether they buy or rent it.

So, back to your situation. You’re moving to Seattle for a year and planning a big change in your life. You’re going to change careers and pursue a PhD program. All of this will unfold over the next five years and you don’t know where you’ll be. From your email, it looks as though Chicago has only a 33 percent or less chance of being the place where you’ll wind up. We’re not sure we’d bet on those odds.

And there’s this: Let’s say you do wind up in Chicago. Will the PhD program you attend be close enough to your townhouse for the commute to make sense? And will you be able to afford it?

While you’re noticing that your property tax bill is rising faster than your home value, there are other costs and expenses required to maintain your property. If you’re managing the property all the way from Seattle and there is a problem, it will take time to figure out who to call and manage the situation for your tenants. And even if you get great tenants, and your townhouse doesn’t really have any problems in the first year, what happens if you decide to stay in Seattle but the market is a little slower in a year?

You should also know that your real estate taxes may go up a bit once you rent your property. Many places give homeowners who live in their homes a break on their real estate taxes, and once they rent the home they lose that break.

So we don’t think that trying to manage a rental property in Chicago from Seattle makes a lot of sense unless you’re fairly certain you’re returning, and that it would make sense to live in your house as you move forward with your new career.

But there are a lot of advantages to selling now. If you sell now, you may take advantage of the hot spring market, and have cash in your pocket in case you decide to stay in Seattle and find a good property there to buy. You also don’t have to worry about what’s happening to your property, like finding good tenants, fixing broken appliances and rising property taxes, which means less stress for you. Even if you come back to Chicago, you have more flexibility.

In short, we think you should sell now, and go off to Seattle focused only on your new job and future career.

Good luck.

Source: washingtonpost.com

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How to avoid a lawsuit if you’re renting out your home

Mon, 04/17/2017 - 3:13pm

My very first tenant sued me. Not exactly an illustrious start to my residential rental business.

On the morning of my case, I took the entire master bedroom carpet to Virginia Beach Circuit Court. I dragged it out of the minivan and onto the loading dock where the deputies unrolled it and put it through security.

“If the judge wants it, we’ll bring it up,” one of them wearily said. During the proceeding, I told the judge I withheld the security deposit because the carpet had 23 pet stains plus another red Kool-Aid stain. He liked my hand-drawn doggy diagram showing the stains. I added that the carpet doesn’t exactly smell the best, but it was at the loading dock if he wanted to see it.

“I don’t think that will be necessary Mr. Marshall,” the judge said.

Turning to the plaintiff, the judge said, “Would you want to rent a home with a red Kool-Aid stain on the carpet?’” The plaintiff replied, “Actually it was Crystal Light …,” thusly admitting her guilt. Case dismissed. Day wasted.

In the 10 years I’ve managed my own rental properties, I’ve tried to maintain excellent communication with tenants, fix problems quickly and document everything. As an owner renting your home, your best protection against tenant lawsuits — most of them are security deposit disagreements — is to simply explain in writing why you are withholding some or all of the deposit.

But no matter how meticulous you are with repair receipts and pictures, sooner or later you may be sued by a tenant who disagrees with your assessment of the cost of repairs or simply has never learned to take responsibility. Every so often you may need to consider suing a tenant when the cost of repairs exceeds the security deposit. When lawsuits happen, you must be prepared to win. Here’s how:

• Prevent a lawsuit in the first place by maintaining good communication with your tenant. Do you think your tenant could tell this joke? “What do landlords do for fun? Answer: How would I know? I haven’t seen mine in the past 9 months.”

• “That’s not my damage!” I actually had a former tenant say that when I initially texted her pictures. Photos or a video of the premises before the tenant moved in, showing how clean and undamaged the place was, are always a good idea. Most homeowners only take pictures after the damage is done. That’s only half of it and a much weaker case if you go to court.

• Always have the tenant complete and sign a move-in report. Once a tenant has paid the security deposit and first month’s rent, and is happily moved in, it is easy to forget the move-in report. When I give the tenant the keys, I always tell them to document any problems over the next few days.

I like move-in reports because they not only remind the tenant in a year or two that any damages are actually theirs, but provides an excellent punch list of repairs. You will make a good impression and provide a safer, more enjoyable home for your tenant when you jump right in and fix any problems they identify.

• Receipts. When tenants move out, there are often repairs that are wear and tear (your cost) and damage to the home (tenant’s cost). When transitioning to a new tenant, I find it critical to keep receipts for these two types of repairs separate. Recently, I had my fix-it guy provide two repair receipts: One for the damages I provided to the tenant, and one for repainting the back deck which was not their responsibility.

• Save damaged items. If a picture is worth a thousand words, the actual damaged item is worth a million. I now proudly possess a cigarette-burned sink in case I get sued. My wife kindly tolerated the stinky carpet in the garage for months.

• Have witnesses who are familiar with the property, saw it after the tenant left, and who will testify that the place was damaged. If your fix-it guy is too busy, or just doesn’t enjoy sitting in court all day, ask him for a signed written statement on the damages.

Managing your rental property yourself can save you money on property management fees and keep you better connected to the occupant of your home, but it can also increase your chances of getting sued and losing in court if you don’t take steps to mitigate your risk. Just remember there are two types of landlords: Those that know their tenants, and those that know the judge.

 

Source: pilotonline.com

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Rents Climb, Vacancies Decline

Mon, 04/17/2017 - 3:04pm

As expected, retention of renters when leases expired continued to increase in March as people find it difficult to find lower rents for comparable properties in this tight rental market. This is based on the analysis of just under 105,000 properties by Morningstar Credit Ratings, LLC. The retention rate for full-term leases increased for the second-consecutive month as the average rate reached 79.0% for January, the most recent data available. This contributed to lowering the vacancy rate across the same sector to 4.6% in February.

The Morningstar report tracks the performance of 27 single-borrower deals. Retention rates were above 70.0% for all but one single-borrower, while 12 deals posted rates above 80.0%. Additionally, the overall turnover rate was 2.4% for three months, as of the most recent data available. Morningstar expects that these factors may lead to lower vacancies in the coming months.

Housing Trends

The relationship between homeowner and rental vacancies is a balancing equilibrium. When home prices are high and it makes more financial sense to rent, vacancies in rental housing go down and homeowner vacancies go up. Over time, the dominance of one type of housing (homeowner vs. rental) is equalized by a shift in favor of the other type of housing, a fact borne out by simple arithmetic.

In today’s market we see a limited inventory of homes for sale primarily intended for the homeowner market. Coupling this with a low rental vacancy rate bucks the balancing equilibrium we expect between the two markets.

Still, the United States is a vast real estate market. Data from the heavily populated metropolitan and economic centers often is not representative of what is going on in smaller but much more numerous markets. Brokers, agents, and investors can only rely on these vacancy rates for certain niches of the market — cities, as centers of culture, commerce and government, will work through their inventory more quickly than will their suburban bedroom community counterparts. Watch for rentals and homeowner inventory in urban markets to continue drying up.

As prices continue spiraling higher and inventory decreases (both rentals and sales), the high cost of opportunity begins skewing the risk/reward ratio. Possibly the high cost of opportunity will result in even higher profits or the market may rebalance to sap all profit out of those high risk endeavors.

Balancing the Equilibrium

The expected result to bring the two back into equilibrium should be new construction of one or both residential types (homeowner and rentals). Reality is that current new construction is mixed at best and does not indicate a significant surge is coming this spring.

Construction surged last month in the West, offsetting declines in the Northeast, Midwest and South that were largely caused by a decline in apartment building starts. Considering the seasonally adjusted annual rate (SAAR), housing starts are running 7.5% higher than they did during the first two months of 2016. Last year, builders started the most new homes since 2007, the year the Great Recession began.

But permits are down. Going into the spring building season and home sales season, growth in home building permits is lagging. Building permits – an indicator of future home construction – slipped 6.2 % in February to an annual rate of 1.2 million. Builders have been adding supply to the market but not enough to overcome the tight inventory of existing homes that make up the bulk of the real estate market. The National Association of Realtors continues reporting that the number of existing homes on the market is near its lowest level since 1999, while the inventory of new homes on the market is near a post-recessionary high.

Those are the statistics but they must be tempered with location, location, location that varies from the high-rises in the city to the cow pastures in the county.

 

Source: realtybiznews.com

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Risk Management Guide for Investment Property Owners

Thu, 04/13/2017 - 9:25am

INTRODUCTION

I have compiled this useful checklist of many of the common legal and economic risk factors that exist when you own your own real estate investment company, and or manage rental properties.  This is not a complete list, there are always new and novel types claims and liabilities coming up every year. Factual circumstances are specific, and each scenario is different.

I have written this article for the sake of raising important issues and concerns, so property owners and managers can be proactive in protecting themselves and can take active steps to manage and deal with common risks. The best solution for some of these problems is to use common sense, and to have appropriate insurance coverage in place, and professionals accessible in your rolodex for consultation and retention. This is an important checklist to use to make sure you are protecting yourself and your company from unforeseen liabilities and scenarios that effect your bottom line.

Premises Liability Claims:

Personal injury attorneys specifically target apartment building investors, management companies, and general partners for lawsuits.   This is an important area of concern. Typical scenarios that lead to litigation are slip and fall accidents in common areas, young children falling off balconies, and women get assaulted in parking lots without adequate lighting.  Dog bites may occur.   Swimming pools present certain risks of injury.  There are serious risks with apartment buildings that have children- children are always playing and running around in areas where they should not be present, may be skateboarding, and may be unsupervised by irresponsible parents.

My recommendations:

  • Have a great maintenance crew on board to fix items in your complex
  • Have a proactive on-site property manager that is taking care of the property and telling kids to stop running around
  • Have warning signs posted at pools and other common areas
  • Have liability and property/ casualty insurance in place with proper limits.

Interior Apartment Liability Claims:

The biggest issues are water leaks, complaints of growth of “mold,” risk of fire, and problems with pests such as cockroaches or bed bug infestation.

My recommendations:

  • Hire a professional plumber and an appliance repair person: For some water leaks it may be hard to detect the source of the leak. If a leak occurs, act promptly to fix it and remove the water, avoid mold growth, and document any losses.
  • Replace old appliances
  • Stop tenants that are causing a fire risk with barbecues
  • Have a no smoking building if possible
  • Have rules in place that are posted and distributed as it relates to barbecues and smoking
  • Repair leaks promptly to prevent mold problems
  • It really helps to have a competent licensed plumber on your team that understands the systems as it relates to appliances. For example, a refrigerator/ ice maker can back up and cause a plumbing leak behind the walls and cause a flood in your kitchen and bathroom.
  • You should have a pest control professional with expertise in eradication of bed bugs: As of late, there has been a rise in bed bug complaints, and small claims court actions are filed if you try to evict the tenant with a bed bug problem for nonpayment of rent.
  • Consult with your insurance agent about getting broad coverage, and have liability and property/ casualty insurance in place with proper limits.

Difficult/ Nuisance Type / Unreasonable Tenants:

We have all had these annoying situations – loud domestic arguments, police and complaining neighbor calls at 1 a.m., fights in the common areas, loud, drunken pool parties, tenants who bring dangerous pets into the property without authorization after the rental agreement is signed, tenants who fail to update their rental agreements, and tenants who don’t let your repair contractors into the property. Tenants have more than 2 cars parked at the premises, and are running an oil dripping car part chop shop at the premises. Tenants who abandon salvage and non-operating vehicles at the premises for months.

My recommendations:

  • Set all clear and strict apartment behavior covenants and rules in the rental agreement from the outset of the tenancy.
  • Put these stipulations in the rental agreement: Y
    • You can only have 2 vehicles parked inside the complex
    • No broken down salvage vehicles may be stored at the complex
    • No loud parties after 11 p.m., respect the rights to quiet enjoyment of your neighbors
    • You must allow repair contractors into the property
    • No pets are allowed without prior approval of management
  • Enforce the rules and regulations by timely notifying your tenants of the complaints by email, and serve notices to perform and comply with rental covenants

Jury Trial Demands for Eviction Cases:

One of the increased risk factors over the past 3 years has been the increase in demand for jury trials by tenants for unlawful detainer cases involving a breach of a rental covenant such as nuisance like behavior.   The tenant’s constitutional right to a jury trial in an unlawful detainer case is a nasty glitch in the law in California.  The tenant files a demand for a jury trial and timely posts jury fees, and you are facing a more complex and expensive legal situation than you anticipated when you started the eviction process.   You need to be ready for this situation if it comes across your desk.  You and your attorney are now preparing for a jury trial which means you need jury instructions, special verdict forms, exhibits, etc.

The decision to proceed with an eviction case before a jury or settle the case is largely one of economics, the strength of your case, and common sense.  Do you have other third party witnesses under subpoena that will corroborate the facts presented by a property manager?   Usually what is driving the jury demand is the tenant’s law firm that is demanding a monetary settlement and other financial concessions.   It is important to realize that jurors who rent tend to favor tenants in the majority of contested factual situations, as they feel sympathy to a tenant that is being evicted.

My recommendations:

  • You should try to avoid eviction court if you can
  • It pays to have good communications and managerial relations with your tenants
  • For cases where the facts are disputed by your manager and the tenant, you should have other corroborating witnesses and residents who can testify that the tenant is a problem and nuisance in the complex, and in violation of the rental agreement
  • Perhaps forms of dispute resolution may work with certain tenants such as mediation with a private mediator or the office of the Los Angeles City Attorney Dispute Resolution Program.

Copyright 2017 Nate Bernstein, Attorney at Law. LA Real Estate Law Group. All Rights Reserved.

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.  Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases. 

Any statement, information, or image contained on any page of this article not a promise, representation, express warranty, or implied warranty, or guarantee about the outcome of a legal matter, and shall not be construed as being formal legal advice. All statements, information, and images are promotional. All legal matters are factually specific, laws change on a daily basis, and courts interpret laws differently. No express or implied attorney client relationship shall be inferred from any statement, information, or image contained any pages of this website. No attorney client relationship is formed until the client or the client’s representative, and the attorney signs a written retainer agreement.

 

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New Law Could Impose Fines, Imprison Shady Landlords for Harassing Rent-Regulated Tenants, AG Says

Thu, 04/13/2017 - 9:08am

City lawmakers are sending a message to unscrupulous landlords — tenant harassment will not be tolerated.

A new law amends the existing rent-regulated tenants statute by eliminating the need to prove physical injury to a tenant and a landlord’s intent in order to secure a criminal conviction for tenant harassment, New York Attorney General Eric Schneiderman announced Wednesday.

The AG says the existing code creates an “inexplicably high bar” that’s never been met since its inception 20 years ago.

“Our current laws are outdated, ineffective and totally inadequate to keep tenants safe from unscrupulous landlords seeking to unlawfully evict New York families,” he said. “With affordable housing as scarce as ever, it’s time for lawmakers to give prosecutors new tools to stop the menacing – and often dangerous – measures these landlords use to force tenants out of their homes.”

Landlords could face up to four years in prison if they’re found to have repeatedly committed acts like withholding heat or hot water for extended periods of time to force rent-regulated tenants to vacate their apartments. They’ll also be charged for alleged harassment or endangering practices.

Under the existing law, a prosecutor must prove that the offending landlord intentionally forced the tenant out of their home, but also that the occupant was physically harmed due to their landlord’s actions.

Schneiderman also launched the Tenant Harassment Prevention Task Force, a team that will help combat various housing issues renters face, such as deceptive lending practices and deed theft.

No landlord has ever been convicted of harassment of a rent regulated tenant, according to a recent analysis of data from the state’s Division of Criminal Justice Services.

 

Source: nbcnewyork.com

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How To Get A Mortgage For Rental Or Investment Property

Thu, 04/13/2017 - 8:39am

Rental Property Purchase: Your Timeframe Really, Really Matters

Investors receive property income from regular rental payments and / or capital gains, but the timing changes the transaction considerably.

Property “flippers” like to pick up “distressed” listings, fix them fast and resell immediately at a profit.

Other investors may make repairs to improve the home’s value or rentability. However, their goal is a long-term investment that yields monthly income and some tax advantages.

Most experts advise newbies to invest for the long term rather than the quick killing.

Click to see today’s rates (Apr 13th, 2017)

Flipping For Short-Term Profit

A good fast flip should have potential and then some. You need to analyse all three components of your investment — what you pay, what you spend rehabbing and what you can sell for fast.

Daren Blomquist, senior vice president for ATTOM Data Solutions (a division of Realty Trac), recommends the following:

  • Know your rehab. You or a partner must be able to accurately predict rehab costs.
  • Keep an emergency account. You need a cushion for unexpected expenses or cash flow glitches.
  • Do work you know. If you can repair serious structural issues, there is money to be made. But if that’s beyond your expertise, stick with cosmetic stuff only.
  • Buy at least 30 percent below the after-repair value of the property.
Long-Term Cash Flow

Blomquist says that home flipping is an “aggressive and active investing strategy that requires a lot of time, know-how and hard work.”

Analyze your income potential like an underwriter or an appraiser would.

The investment property appraisal form calculates property value by subtracting expenses, including landlord-paid utilities, from gross rents. Next, determine what you’ll need to put aside each month for appliance and fixture replacement.

Your monthly operating income equals rent less these expenses. That gets hit with a “vacancy factor” of (usually) 25 percent, giving you 75 percent of the operating income.

Finally, subtract the mortgage payment to get your net cash flow. The underwriter uses that number to adjust your total income up or down to see if you qualify for an investment property mortgage.

Cash Flow Is Not Income

Keep in mind that your actual after-tax income will be different. Your mortgage payment includes principal repayment, which you recoup as home equity. You also get to deduct your operating expenses as well as depreciation at tax time.

That means money that actually makes it into your back account — cash flow — can seriously outstrip the property income that mortgage lenders count.

You can have negative operating income but still have a positive cash flow. Running the figures through income tax software can show you how the property will really affect your finances.

Investment Property Mortgages

There are many types of loans usable for investor property purchases. Some lend themselves more to flipping, while others work best for buying and holding.

In general, the shorter the term, the higher the rate and fees, the lower the credit standards, and the greater the down payment.

Hard Money

Flippers frequently use “hard money,” loans from private lenders.  It’s expensive because it’s very short-term. Buyers pay several points upfront, a high interest rate and make big down payments.

You can see the risk. If you can’t sell fast and at a profit, this kind of financing can drain your resources very quickly.

Conforming Mortgages

You can get mortgages for rental property backed by good old Fannie Mae and Freddie Mac. These home loan rates are likely to be lower than those of other programs, but there are risk-based pricing adjustments and tighter credit guidelines.

Investor property surcharges range between 2.125 percent (to the loan fees, not the interest rate) for 60 percent loans to 4.125 percent for 85 percent loans. That represents a .5 to one percent rate increase.

Nonconforming Mortgages

Not all mortgage lenders must conform to Fannie or Freddie guidelines. Nonconforming (also called “jumbo”, “non-prime,” or “portfolio”) lenders, like your may finance your purchase more easily.

Or, if you have enough home equity, you could finance an investment property with a loan against your primary residence. This strategy could get you better mortgage terms.

Government Mortgages?

One requirement for most government-backed home loan programs is that the borrower must live in the house as a primary residence. So you can only get a government mortgage by buying a primary residence that you convert to a rental later. You might also take over someone’s assumable loan, or buy a multi-unit property and live in one of the units.

Some of the richest people in the country started in real estate investing. Chances are good that if you can get approved for a rental property loan, the house is a decent investment for long-term cash flow.

What Are Today’s Mortgage Rates?

Current mortgage rates for rental or investment property are, as noted, typically .50 to one percent higher than those of primary residences for well-qualified borrowers. But even within that category, there are opportunities to pay less.

Comparison shop and you could find yourself paying .50 percent less than the next guy.

 

Source: themortgagereports.com

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3 Changes Coming to Rental Markets in 2017

Thu, 04/13/2017 - 8:36am

Since the housing crisis in 2008 Americans have been rethinking their housing decisions. As a result, entrepreneurs and industry leaders have been quickly working to create solutions that meet shifting demands and expectations.

One of the significant changes has been how discerning customers have become. Leading up to and immediately following the recession, there were only a few digital tools consumers could leverage to assist with housing decisions. Compounding that problem, the data needed to provide actionable insights didn’t exist yet. Now the number of listing and support services abound, and the market is shifting as well.

In 2014 rental vacancy rates decreased by 2% which indicates more people were opting to rent instead of purchasing a home. It is also likely that the maturing Millennial population which is beginning to move away from home is driving up the number of renters in the market.

The last few years have seen steady growth in all housing related sectors, and as a result, the entire industry is in transition. The following are the top trends that will impact housing in the coming year.

Concierge services gaining popularity

With an overall increase in the number of Americans renting apartments, there is a need for more effective listing services. Sites like Zillow and Redfin specialize in home value data but do not have user-friendly listing platforms. Similarly, existing apartment listing sites don’t vet the data from buildings that are listing, which leaves renters in a bind when listings don’t meet their expectations.

Ashrit Kamireddi, CEO and founder of VeryApt, a concierge apartment service, explains why online listing services like these struggle. “The most frequent complaint from renters is that traditional sites don’t verify their listings. Anyone can post a rental unit on these sites and there is never any data verification. This results in duplicate listings, inaccurate and outdated pricing, and in more extreme cases, bait and switch or outright fraudulent postings. Because of the erosion of trust with traditional rental sites, we’ve seen an increase in demand for a concierge rental experience.”

Concierge services are gaining popularity in all industries, so it comes as no surprise that the rental industry is beginning to make the shift as well. While scale is an issue for many companies in launching a concierge platform, Kamireddi says technology simplifies the process. “Machine learning enables our recommendation algorithm to get smarter over time by analyzing which apartments our users ended up selecting.” As the technologies backing these services improve many will be better prepared to meet consumer needs that have been previously unmet.

Millennials taking longer to buy homes

The housing crisis had a significant impact on the purchasing behavior of Millennial consumers. As they watched the market crash during their early years, many of them became hesitant to invest in a hard asset that might not retain its value. Now there is concern that Millennials, which represent the largest consumer group in American history, might not buy homes as frequently as their parents did, meaning increased inventory that will likely drive down profits in the real estate sector. Derek Thompson of The Atlantic details, “the share of 18- to- 34 year olds–a.k.a.: Millennials–who own a home has fallen to a 30-year low.”

This is causing an increase in housing inventory that is causing concern for the real estate market. Not everyone Millennials that do purchase homes are buying later than their GenX counterparts. This has increased demand for rental properties, while significantly impacting the demand for new construction. There are many theories on how to engage Millennial buyers, but some are giving up on the traditional home as a model and encouraging Millennials to buy for short term rental investments on platforms like Airbnb and VRBO.

Empty nesters opting for smaller format rentals sooner

While Millennials are a significant consumer group, Baby Boomers and older GenX’ers are opting for rental properties faster as well. The reasons are numerous, but one of the most important is the looming retirement savings crisis. Over 66 million Americans don’t have money saved for retirement, making the idea of selling their home for a quick return and then renting cheaper properties an enticing solution for retirement.

There are also more and more Baby Boomers opting for smaller spaces simply because they are easier to maintain. Jason Koitz, a condominium realtor, shared in a report, “Probably 50 to 60 percent of my business in the last couple years has been these empty nesters.” He cites lifestyle choices as one of the main reasons for the shift. With America’s second largest consumer group changing their real estate choices it remains to be see how the housing industry will adapt.

While markets are shifting nationwide, it’s important to note that home sales are still up in many areas and new construction is happening all the time. There is no sign that the traditional home buying experience is going away, but it does seem to be experiencing a slow decline. As purchasing behavior changes the markets that serve renters will continue to innovate to try and compete for market share. Concierge services like VeryApt will continue to target discerning renters, while major listing sites like Zillow and Apartments.com continue to use higher inventory to reach as many renters as possible.

For businesses in the industry, it will be crucial to follow these trends and develop new services to meet the shifting demands for housing options. Additionally, marketing efforts will need to be tailored to these emerging consumer groups.

 

Source: inc.com

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Flip your own house: 5 ways to turn simple fixes into big returns

Thu, 04/13/2017 - 8:32am

If you watch HGTV, you’re probably familiar with shows like “Rehab Addict” and “Flip or Flop,” which feature the same theme in every episode: Put some money and sweat equity into fixing up a house, then resell it for a huge profit.

Can it really be that simple, especially if you want to do that with your own home?

Investors or “flippers” can sell their homes for top dollar because they offer them up as move-in ready. And in today’s market, that type of house can sell in a few days or even hours. But if you have a full-time job and family that keeps you busy, you probably don’t have a lot of time and energy to do HGTV-style renovations and home staging.

The good news: You can prepare your home to sell for top dollar, and do it with simple fixes that don’t take a lot of time or stress.

Here are five methods to borrow from professional flippers that add big value at low cost.

1. Think like a buyer. Look at your home with an objective eye: What are the factors that would make you buy it today? Decide what aspects of the home or property are the most appealing and make those areas center-stage. Do you have a large lot? Then consider putting in an outdoor living area or spruce up landscaping with hardy plants and economical mulch. Do you have a large floor plan? Think about taking down a wall that’s not load-bearing or installing French doors to open it up, or stage your home with the help of a professional to show off the space. Figure out your home’s best assets and focus most of your attention and dollars to showing them off.

2. Make it modern. What would it take to give your home an updated look? A flipper will generally gut the kitchen and bathrooms, and look for ways to improve the floor plan, but there are less-pricey ways to get the same effect. Paint is an inexpensive way to make your home look fresh. Same with flooring – there are quality wood laminates and tiles that don’t break the bank. The kitchen is a major focus for homebuyers, but simple fixes, from refinishing your cabinets to installing new lighting fixtures and appliances, can add a big boost to your sales price. Go through each room and evaluate if you should update and modernize your flooring, lighting, plumbing fixtures and even the ceilings (popcorn is definitely not in style these days). You may not need to call in the pros for these fixes – a good way to improve your home for less is to buy supplies retail off the shelf, then hire a handyman to install them.

3. Give your home TLC. Demonstrate to potential buyers that you are proud of your home and have given it the care it deserves. Evaluate what needs to be repaired and fix it before the home inspector comes. Paint what needs to be painted, from touching up scrapes and dents, to redoing rooms in neutral colors that will appeal to the biggest group of buyers. Clean, clean, clean, including the windows. And don’t forget the outside – buyers still do drive-bys to look at homes from the outside before making appointments to see the inside, so curb appeal is still very important.

4. Store your stuff. The most important thing you can do to get your home ready to sell is to get rid of your clutter. One major contributor to a cluttered look is having too much furniture – professional home stagers often take away as much as half the furnishings, making the home look much bigger. Follow their example by getting rid of big sofas and tables that block space. Remove knickknacks, family photos and accent furniture to make the rooms more neutral. That helps prospective buyers imagine themselves in your home. Store those items in a pod or storage space while your home is on the market – the upside is that you’ll be pre-packed and better ready to move into the next home.

5. Make this very important list. That’s the list of all the repairs and upgrades you’ve done to the house. In today’s market, with rapidly appreciating prices, it’s common for homes to not appraise at the purchase price. To show that your house is indeed worth the price it sold for, document all the improvements you made, and have your Realtor present this information to the appraiser.

While the house-flipping shows on HGTV offer some great inspiration, there are still plenty of things to consider when selling your own house.

Before you use these flipping tips to prep your own house for sale, you’ll still need to answer two questions for yourself. One is, “How much work should I do on the house?” The second is, “What return on my investment should I expect?”

That’s where the advice of a good real estate professional is advantageous and will help you make your home truly market-ready.

 

Source: dailyrepublic.com

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Top Remodel Projects Renters Wish Their Property Managers Would Invest In…

Mon, 04/10/2017 - 10:27pm

Renting a house or apartment carries many benefits for renters, including saving money and offering flexibility. However, home improvement restrictions on rented properties mean that many renters often feel frustrated that they cannot update their homes in the ways they need or want. At Home Improvement Leads, we believe that property managers have the ability to alleviate some of the potential home improvement stressors often felt by renters. We’ve compiled a list of some of the top remodel projects that renters wish their property managers would invest in to help you understand your renters and improve both your and their rental experience.

New windows

If you are considering any large scale home renovations before next renting your property, new and improved windows should be at the top of your list. Older properties in particular will benefit from an upgrade to double or triple paned windows, which increase temperature regulation and drastically improve the soundproofing inside the building. While a well-regulated home means increased energy efficiency and lower energy bills, a soundproofed home is even more important to many renters–especially if your property is in an urban area.

Energy efficiency products

As the national energy focus shifts towards renewable sources rather than ozone depleting fossil fuels, renters will become more aware of their own carbon footprints and want to do something to minimize their impact on the earth. If your budget allows, making use of renewable energy sources such as solar panels or water heaters will stand you in good environmental stead and encourage renters to choose your property over others. If this change is too significant, other pieces of smart home technology such as energy meters, smart thermostats, and energy efficient lighting systems all work towards the same energy-saving end and will satisfy many of your renters’ eco-friendly needs.

Increased storage

One of the most bemoaned aspects of rental living is the lack of storage space in small properties. While you cannot increase the size of your property, there are several ways to create storage space where it didn’t exist before, as well as ways to make the most of the storage areas you already have. Hallways, bathrooms, and kitchens are particularly reliant on storage, so put your energy into these spaces by installing floating shelves throughout the home, space saving cupboards in narrow hallways, and modular storage options in closets and kitchen areas. Your renters will thank you a thousand times over for your (fairly minimal) efforts here.

Kitchen upgrades

For most people (homeowners and renters alike), the kitchen is considered the heart of the home. If you can only focus on one or two areas during your next remodeling spree, make the kitchen a priority whenever possible. Small but impactful projects such as new taps, faucets, cupboard and drawer handles, light fixtures, backsplashes, and even oven hoods will change the look of your kitchen and make your renters want to spend time in this family oriented space. Finally, don’t forget a fresh coat of paint and storage, as mentioned above.

Bathroom upgrades

Next to the kitchen, a clean and updated bathroom is at the top of most renters’ project wishlists. New tiles, flooring, sinks, showers, and toilets will transform a once dull bathroom and increase your chances of sealing the deal with renters. Fixtures and fittings such as faucets, taps, and shower heads can all do with an occasional upgrade as well. Finish your bathroom remodel with a bright white mildew-resistant paint to protect this humid space from the buildup of mold and grime.

Landscaping and entryway

If your property has a front-of-house outdoor area or porch, you can easily increase its curb appeal with some attractive, low-maintenance landscaping and a lick of paint on the exterior. Renters will feel safer and more secluded with shrubbery, a few trees, or even a flower bed as a barrier between their home and the outside world. Some rental properties have no accessible outdoor areas, so landscaping won’t be a solvable issue for you as a property manager in these cases. Instead, a quick repainting job and a shiny new number plate for the door will be all you need to make your renters’ entryway fresh and new.

Fresh walls/ceilings

Whether or not you have time and budget for larger home improvements, you should never turn over a rented property without giving the entire home a fresh coat of paint. Neutral hues such as white, magnolia, and subtle brown will suit all tastes and can easily be topped up when marks appear. Choose hard-wearing, mark resistant brands that will stand the test of time and keep your property looking fresh for more than the first six months. Last but not least, don’t forget to paint your property’s ceilings (if applicable). Your efforts will instantly brighten up the rooms in your property and leave renters satisfied with the results.

 

Source: propertymanagementinsider.com

The post Top Remodel Projects Renters Wish Their Property Managers Would Invest In… appeared first on AAOA.

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Top Remodel Projects Renters Wish Their Property Managers Would Invest In…

Mon, 04/10/2017 - 10:27pm

Renting a house or apartment carries many benefits for renters, including saving money and offering flexibility. However, home improvement restrictions on rented properties mean that many renters often feel frustrated that they cannot update their homes in the ways they need or want. At Home Improvement Leads, we believe that property managers have the ability to alleviate some of the potential home improvement stressors often felt by renters. We’ve compiled a list of some of the top remodel projects that renters wish their property managers would invest in to help you understand your renters and improve both your and their rental experience.

New windows

If you are considering any large scale home renovations before next renting your property, new and improved windows should be at the top of your list. Older properties in particular will benefit from an upgrade to double or triple paned windows, which increase temperature regulation and drastically improve the soundproofing inside the building. While a well-regulated home means increased energy efficiency and lower energy bills, a soundproofed home is even more important to many renters–especially if your property is in an urban area.

Energy efficiency products

As the national energy focus shifts towards renewable sources rather than ozone depleting fossil fuels, renters will become more aware of their own carbon footprints and want to do something to minimize their impact on the earth. If your budget allows, making use of renewable energy sources such as solar panels or water heaters will stand you in good environmental stead and encourage renters to choose your property over others. If this change is too significant, other pieces of smart home technology such as energy meters, smart thermostats, and energy efficient lighting systems all work towards the same energy-saving end and will satisfy many of your renters’ eco-friendly needs.

Increased storage

One of the most bemoaned aspects of rental living is the lack of storage space in small properties. While you cannot increase the size of your property, there are several ways to create storage space where it didn’t exist before, as well as ways to make the most of the storage areas you already have. Hallways, bathrooms, and kitchens are particularly reliant on storage, so put your energy into these spaces by installing floating shelves throughout the home, space saving cupboards in narrow hallways, and modular storage options in closets and kitchen areas. Your renters will thank you a thousand times over for your (fairly minimal) efforts here.

Kitchen upgrades

For most people (homeowners and renters alike), the kitchen is considered the heart of the home. If you can only focus on one or two areas during your next remodeling spree, make the kitchen a priority whenever possible. Small but impactful projects such as new taps, faucets, cupboard and drawer handles, light fixtures, backsplashes, and even oven hoods will change the look of your kitchen and make your renters want to spend time in this family oriented space. Finally, don’t forget a fresh coat of paint and storage, as mentioned above.

Bathroom upgrades

Next to the kitchen, a clean and updated bathroom is at the top of most renters’ project wishlists. New tiles, flooring, sinks, showers, and toilets will transform a once dull bathroom and increase your chances of sealing the deal with renters. Fixtures and fittings such as faucets, taps, and shower heads can all do with an occasional upgrade as well. Finish your bathroom remodel with a bright white mildew-resistant paint to protect this humid space from the buildup of mold and grime.

Landscaping and entryway

If your property has a front-of-house outdoor area or porch, you can easily increase its curb appeal with some attractive, low-maintenance landscaping and a lick of paint on the exterior. Renters will feel safer and more secluded with shrubbery, a few trees, or even a flower bed as a barrier between their home and the outside world. Some rental properties have no accessible outdoor areas, so landscaping won’t be a solvable issue for you as a property manager in these cases. Instead, a quick repainting job and a shiny new number plate for the door will be all you need to make your renters’ entryway fresh and new.

Fresh walls/ceilings

Whether or not you have time and budget for larger home improvements, you should never turn over a rented property without giving the entire home a fresh coat of paint. Neutral hues such as white, magnolia, and subtle brown will suit all tastes and can easily be topped up when marks appear. Choose hard-wearing, mark resistant brands that will stand the test of time and keep your property looking fresh for more than the first six months. Last but not least, don’t forget to paint your property’s ceilings (if applicable). Your efforts will instantly brighten up the rooms in your property and leave renters satisfied with the results.

 

Source: propertymanagementinsider.com

The post Top Remodel Projects Renters Wish Their Property Managers Would Invest In… appeared first on AAOA.

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How to manage your vacation rental property

Mon, 04/10/2017 - 3:40pm

STUART — This is the final chapter of a three-part series on investing in vacation rental properties.

In our previous columns, we addressed what type of property to purchase and how to furnish and remodel your unit. This final column will provide an overview of managing your property. If you missed either of the first two chapters, you may read them on our website at Norman-PageTeam.c21.com.

If you are a year-round resident and live within 30 minutes of your rental, you may be able to manage your new investment yourself. You should have some knowledge about how to market your rental online and enjoy promptly answering emails inquiring about your rental.

You should be prepared to perform background checks on potential guests, enjoy meeting guests for check-in and check-out, and respond promptly to phone calls reporting a broken air conditioner, plugged plumbing, non-functioning Wi-Fi, etc.

You should also be prepared to clean the unit, restock essential items, laundry, etc., after each guest. If this sounds a bit overwhelming, consider hiring a professional rental management company. Some key points to think about:

1. A professional vacation rental agency focuses on marketing and renting your unit to an international audience.

2. The agency will handle all aspects of your rental, including vetting potential tenants, securing deposits, ensuring the unit is ready for guests, check-in and check-out of all guests, inspections, maintenance of the unit, etc.

3. The agency is knowledgeable about the local rental market and competitive rates for various communities. They provide added value by being able to lease your unit efficiently and frequently in order to maximize your rental income.

Source: tcpalm.com

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