American Apartment Owners Association


Thu, 03/02/2017 - 10:42pm

Beauty is not just on the inside.

Property owners primary goal is to maximize the value of their investments. Attracting and retaining tenants is of utmost importance, and prospective tenants’ first impression is immediately formed by viewing the building’s outside. Property managers are keenly aware that the structure and entire property grounds need year-round upkeep and maintenance.

Bisnow spoke with Beverly Companies regional manager Don Kerwin about the expansion of the Chicago-based company’s services and its value-add tips for building owners and property managers.

The following are the four most important services managers should maintain year-round.

1. Topsoil

Before construction of a new building can begin, the existing topsoil needs to be excavated and sometimes removed. Beverly Companies has become a leading source by operating multiple topsoil pulverizing plants throughout the area. After the topsoil is stockpiled, it is then screened and pulverized, and can even be enhanced with organic materials, before it is shipped via truck, to be used by homeowners, nurseries and road projects.

2. Landscaping — Design, Build And Maintain

Professional landscaping is a fundamental requirement of all commercial properties that boast great curb appeal. A good landscape design followed by a properly formulated maintenance program is essential and, more times than not, expected by tenants and their neighbors. Good landscaping enables even multifamily and commercial developments in the heart of New York City or Chicago to maintain green space and natural balance amid a concrete jungle. 625 West Adams is an example of how green space can add value and comfort to a property; it benefits from its own outdoor spaces as well as Heritage Park directly across the street. “Obviously, landscaping entails making the property look great,” Beverly Companies general manager Tom Marsan said. “But this requires extensive consideration and planning on the part of property managers as to what specifically makes the building look good while remaining within the constraints of the budget.”

3. Pavement Solutions

Pavement maintenance is an item on the property management checklist that often gets overlooked. Asphalt pavement will eventually begin to degenerate, with potholes and cracks forming. A proper maintenance schedule, such as crack sealing, sealcoating and repaving, can greatly expand the life of the concrete outside your building. Pavement maintenance is a vital step toward maintaining your property’s health, safety and value.

4. Snow And Ice Management

Responsible, quality snow and ice management is extremely important to ensure the safety of all tenants and their guests. Beverly Companies houses a fleet of plow trucks, skid steers, wheel loaders and specially designed salting equipment. It monitors the weather so it can maintain properties before, during and after a snow or ice storm. Beverly Companies’ communication systems allow building owners and managers to know when services are performed, enabling them to manage their buildings while it manages the snow. Whether pre-construction or regular maintenance, Beverly Companies. shares the same goals with the real estate companies it services — to provide a safe, clean and comfortable environment, inside and especially outside.



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Iowa bill may give landlord rights edge over disabled veterans

Thu, 03/02/2017 - 10:23pm

MARION, Ia. — On a tree-lined thruway, veteran Joe Stutler spends his days doing his best to maintain the squat reddish-brown ranch house he shares with his wife, tending to its aging plumbing and electrical wiring

The Stutlers render this upkeep and other services in lieu of rent to the homeowner, a friend who suffered a stroke a few years ago and lives in the home’s basement apartment.

For Stutler, 53, an Army veteran who is unable to work because of concussive head trauma he sustained in Desert Storm, the arrangement is perfect but precarious. Stutler doesn’t have a formal lease, meaning his friend would be within his rights to evict the couple at any time. And if anything grave should befall his ailing friend, Stutler would have no claim on the house.

In all that uncertainty, there is one thing Stutler doesn’t have to worry about: A landlord refusing to rent to him because his entire income comes from his Veterans Administration disability checks. A statute in the Marion Civil Rights Code bars landlords from discriminating against someone based on their source of income.

But a bill moving though the Iowa House of Representatives threatens to roll back that protection.

House File 295, authored by Rep. Jake Highfill, R-Johnston, proposes sweeping changes to local government’s authority. In addition to stopping cities and counties from setting minimum wages, requiring paid family leave, implementing a soda tax or banning the use of plastic bags, the bill as originally authored also sought to rescind local governments’ ability to pass stricter protections than laid out in the Iowa Civil Rights Act.

After getting pushback, legislators proposed an amendment last week to strike the broader civil rights restrictions, zeroing in instead on the source-of-income protections Marion and Iowa City approved for renters.

Highfill said the amendment is targeted at those using housing vouchers, such as participants in the federal Section 8 program that helps the poor. Republicans and business leaders argue landlords shouldn’t be forced to do business with the government.

But advocates say that’s just an excuse, that landlords really want to avoid renting to low-income people who receive disability payments, Social Security, child support or even alimony, advocates said.

And Stutler said those receiving veterans’ benefits like him would be caught up in that mix.

“They didn’t think their net was going to snag me,” Stutler said. “This bites off way more than they think.”

Landlords: We shouldn’t be forced

Stutler defines himself as a “service-connected” disabled vet with health issues that stretch from his “head to his toes.”

“I had an accident in the Gulf that rattled my brain pretty good, bounced off the steering wheel, the whole bit, so I was knocked out, unconsciousness,” he said. “I didn’t face any IEDs or anything, thank goodness, but if you come home broken, you come home broken.”

He hasn’t had a full-time job for almost a decade, but he sits on all the community boards he can. Volunteering makes him feel like he is giving back to society, that he “isn’t a sponge,” he said.

He and his wife live a “meager lifestyle,” but with his disability check and her earnings as a cheese specialist at Hy-Vee, they survive.

He doesn’t participate in the federal housing choice vouchers program, but he has qualified for it, and if anything were to happen with his current living arrangement, he would look into it again.

Andrew Lietzow said he encourages landlords to participate in the vouchers program. But the executive director of the Iowa Landlords Association and the Iowa Real Estate Investors Association said landlords shouldn’t be forced to accept renters who pay with vouchers.

Landlords should be able to screen prospective tenants by considering a variety of factors, including where they get their rent money, he said.

“We have some members that do like the voucher program and we have some others that choose not to participate because they’ve had some bad experiences,” Lietzow said. “In a free enterprise world, we tend to resist anything that would be mandatory.”

Devin Kelly, the Marion attorney, said his city’s income protection ordinance is being misrepresented. Landlords can’t discriminate against those using entitlements, he said, but they don’t have to give those renters preference.

“Our city code allows for a potential landlord or seller to look at a totality of factors and to evaluate renters on their security, credit, stability and a whole host of other concerns,” he said. “They just can’t say they absolutely won’t take subsidies or vouchers.”

Funding for the vouchers comes from the U.S. Department of Housing and Urban Development, but local agencies, such as the Des Moines Public Housing Authority, distribute them.

The program pays market rate according to a federal formula that calculates the average local rental price. To qualify, families must earn less than half the median income of their county or metropolitan area.

But Lietzow said tenants using federal housing funds may struggle to pay rent on time. Plus, landlords face more regulatory red tape when accepting housing vouchers, including additional inspections of rental units.

The voucher program often requires the renter to pay a small portion of the monthly rent, while the federal government picks up the lion’s share. Lietzow gave an example of a $650-per-month apartment: The voucher may cover $600 of the rent, with the tenant responsible for the remaining $50.

“It’s harder to collect that $50 than it is to collect the $650 from another tenant,” he said. “They think they don’t have to pay the $50.”

Money is money

To Stutler, protecting prospective renters from being discriminated against because of their source of income is a needed solution to a problem that shouldn’t exist. Money is money, he said.

At a recent Marion city council meeting, Stutler said he took two dollar bills out of his wallet. Holding them up, he asked if there was an inherent difference between those dollars.

The difference, he said, was the first dollar came from the bank account of his wife, a W2 wage earner. The second came from his bank account, from his VA disability check.

“There are people in Marion that don’t want to take the second dollar, they’d rather take the first dollar,” he said. “I don’t understand that because they look the same to me. How I got my dollar, if I did it legally, why is that a problem?”

Eric Burmeister, executive director of the Polk County Housing Trust Fund, an affordable housing agency, said housing voucher recipients often have trouble finding willing landlords. He said he has lamented with other housing advocates about the need locally for source-of-income protection, although no such effort has formally materialized.

He said that without such protections, landlords are, in essence, entitled to discriminate against the poor. That also has implications for racial minorities and refugees who use the voucher program, he said.

“It’s a way to weed out folks that are perceived to be potentially problem tenants,” Burmeister said. “I don’t know how else you would justify it because frankly, the rent itself is guaranteed. And the check doesn’t come from the tenant.”

Nationwide trend against local control

The civil rights rollback in Rep. Highfill’s initial bill was even greater.

As originally authored, the bill would have barred any city and county civil and human rights protections greater than spelled out in the Iowa Civil Rights Act of 1965.

“In a colloquial sense, the Iowa Civil Rights Act had been viewed by the state legislature as a floor, as a bare minimum,” Keenan Crow, deputy director of One Iowa, said about the bill’s original wording. “Iowa communities could look at that and add what they needed to in order to protect those citizens. With this bill, it would (have) become the ceiling.”

The pending legislation mirrors a nationwide trend of lawmakers scaling back local control through pre-emption bills.

In all, 24 states have pre-empted local minimum wage ordinances, 17 states pre-empted local paid leave ordinances and 3 states pre-empted local anti-discrimination ordinances, according to the National League of Cities.

Highfill’s bill would leave Iowa’s minimum wage capped at $7.25 an hour, where it has been for years.

Iowa Republicans pushing the bill have said it doesn’t seek to scale back local authority, but rather define it more clearly: They believe the regulation of employment and rental issues never belonged to cities and county — only to state government.

Stutler disagrees.

He said the people of Marion felt it was important to protect renters like him, and the will of the community should be honored.He summed up his argument by referring to the text on the Iowa state flag: “Our liberties we prize and our rights we will maintain.”

“I was willing to die to preserve these rights, so legislators should ask themselves if they are willing to die to take them away,” Stutler said. “I don’t mean that as a threat, but that’s how valuable those rights are to me.”


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3 Ways to Use Facebook Groups for Real Estate Marketing

Thu, 03/02/2017 - 10:04pm

Facebook started as a college networking site over a decade ago and has since evolved into one of the most crucial business marketing tools for the real estate professional. But one key feature harnesses a wealth of networking potential not offered by any other social media platform, and surprisingly it’s also one of the most overlooked: Facebook Groups.

Using Facebook as a general marketing tool provides real estate agents a feature-rich, easy-to-use, mostly-free digital platform to build their brand, connect with prospects, showcase properties, and provide valuable information to their audience. The platform offers several ways to execute these actions, including business pages, paid ads, events, and personal profiles.

But Facebook Groups, one of the channel’s oldest yet underutilized features, offers its own unique set of benefits to help businesses connect with their audience. Here’s how you can put them to work in your real estate marketing:

3 Real Estate Marketing Strategies Using Facebook Groups Take an informative approach

Your Facebook business page serves as the social hub of your brand. Your Facebook groups, however, should act as the exact opposite.

Instead of creating a carbon copy of your business persona, center your group on a particular topic. Users are more likely to show interest and engagement with a topic they can relate to, which will attract more members and spur community conversations. The goal here is to build trust by positioning yourself as the industry expert, the go-to when people need answers.

The self-promotion within a group should be a subtle one, as you should focus more on providing information people care about rather than marketing your services. If you can be successful with the former, the latter should happen naturally.

Mine for leads in local real estate groups

Using Facebook groups doesn’t mean you have to create them. Chances are, there are multiple local real estate Facebook groups that someone else has already created that you can join. And it’s an excellent way to find new leads.

From your main Facebook news feed, click the Groups link in the left panel, then click the Discover option. Scroll through the top menu of groups until you find Neighborhood and Community. From there, you can click the Local link in the left panel and search for local real estate forums.

Connect with leads by replying to their comments, answering questions, or sharing helpful information. Once you can start a conversation, use your networking prowess to move your leads through the sales funnel.

Learn from other real estate professionals.

It never hurts to take a look at other industry leaders to learn what exactly they are doing to earn their success. With nearly every industry imaginable already staking a presence on Facebook, it’s no surprise that there are already plenty of well established real estate groups that are worthy of your membership, like these:

Raise the Bar

This public group provides an outlet for its 10,000+ members to share ideas on better ways to market their business.

Agent War Room

You’ll have to gain special access to this Closed group, but once you do the only way you can go is up. This group was created by agents for agents, and members share advice and industry tips to help you grow as a real estate professional.

What should I spend my money on?

This is the group where technology and real estate marketing meet. If you struggle to keep up with the latest in tech. or simply need to know what’s going to give you the best bang for your marketing bucks, go join the conversation.

Implementing Facebook Groups into your social media strategy does require a little more hands-on involvement, but the networking and educational rewards can make it worthwhile many times over.



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Apartment Investing Still Strong in 2017

Wed, 03/01/2017 - 10:13pm

Although the economy and the rental market has been robust over the past few years, there is legitimate concern over an anticipated slowing in rental rates.  Many see the aggressive increases in rents as slowing to a crawl in the upcoming year.  Under the Trump administration, immigration restrictions, uncertainty in the Affordable Care Act and an anticipation of higher interest rates are contributing to concerns over possible slowing of the rental market.  

If the new administration is successful in limiting new immigrants and deporting undocumented workers, the impact on the apartment industry could be an increase in vacancies.  More vacancies will slow the pace of rent increases and, in some cities, drive rental rates lower.  If the supply of empty units increase, the price will decrease, thus reducing overall investment value.   Adding to the concern is the pending repeal of the Affordable Care Act and the unknown costs for its  replacement.  Residents in low to mid- rent range units are more susceptible to economic variations in medical coverage, as well as all other expenses.  Those living on a tight budget need to anticipate expenses closely and the uncertainty of medical coverage and its costs may force many tenants to pair up and share housing.  As tenants pair up to save on rental expense, the result will increase vacancies.  

Investors are still bullish on the rental housing industry.  Occupancy is at a near all time high of more than 95% and unemployment is holding below 5%.  From an investor standpoint, apartments are strong but as interest rates increase, as anticipated in 2017 and 2018, values typically decrease.  Rent increases are expected to continue at a modest 3% with variance throughout the country.  All in all the apartment market is still highly regarded as a strong long term investment vehicle.

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When the landlord wants to remodel but the tenant doesn’t want to leave, who wins?

Mon, 02/27/2017 - 10:59pm

Question: My landlord told me in a letter that they were planning to remodel my kitchen and bath and that I would have to vacate for two weeks while the work is done. My family can’t afford a hotel, and we don’t have family in the area that can put us up for two weeks. Can my landlord force us to move out while the remodeling work is done?

Answer: The landlord’s right to enter once the unit has been turned over to you is very limited, under California Civil Code section 1954.

The landlord can enter to (1) do repairs that are necessary or requested by you, (2) in emergencies, (3) if they believe that the unit is abandoned, (4) to show the property to prospective buyers and (5) with a court order. In every other circumstance, you control access to the unit. It follows that the landlord may not tell you to vacate simply to accommodate his or her remodeling plans.

The landlord can ask, however, and you may agree if you can negotiate terms and conditions that make the inconvenience worthwhile. At the very least the landlord should offer to refund the rent for the days you have to vacate the apartment.

If the landlord cannot persuade you to cooperate, the landlord would have to wait until the end of your tenancy under a lease before doing this work.

But if you are a month-to-month tenant and live in a unit not covered by a rent-control law, the landlord may simply terminate your tenancy with a 30- or 60-day termination notice to proceed with the work. So if you like the apartment and want to stay, it is probably in your interest to try to work something out with the landlord.

In Los Angeles, rent-control ordinances apply to most multi-unit living quarters built by Oct. 1, 1978, including apartments, condos, residential hotels, mobile homes and lots containing more than one single-family home.

For tenants of those rental units, landlords must pay temporary relocation costs if a major repair or remodel is planned. The tenants must continue paying rent and can be evicted for refusing to allow access for repairs or improvements.

Under all of these circumstances, the best path forward would be to ask to sit down with the landlord to understand his or her wishes, to discuss the impact on you and your family, and to agree on a plan that honors everyone’s needs. If the notice you received was in written form, make a written response indicating that the landlord’s request is problematic for you, but that you are willing to sit down with the landlord and discuss the situation.

If your conversation with your landlord doesn’t go well, you may check to see if there are community mediation services in your area and ask for their help with this conversation. Many programs are free or very low cost and provide an excellent alternative to escalating in court.


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Dealing with Creepy Crawlies: Cockroach Management in Multifamily

Mon, 02/27/2017 - 10:53pm
Advances in roach treatment offer conveniences for properties, residents

Before finishing his doctorate in entomology, Dr. Mike Merchant worked in the 1980s as a pest control specialist in Seattle. He keeps a blog – “Insects in the City” (say it out loud and you’ll get the pun) – specifically dedicated to the topic of urban pest control. Recently, he wrote a post recounting his frustrating time toting a sprayer full of toxic chemicals to treat a “well-entrenched German cockroach population” that infested a large public housing complex.

At the time, his arsenal consisted of powerful sprays and dusts that he applied directly to cockroach hiding places, requiring residents to prepare in advance by emptying cabinets and clearing spaces. However, these chemicals proved tantamount to a large-scale game of cockroach whack-a-mole as their repellant properties sent the insects scurrying between units in the complex.

Aside from bed bugs, cockroaches serve as one of biggest deal breakers for any apartment resident or prospect. No matter how fastidious the general upkeep of your units or grounds, the insects persist as a penetrating symbol of filth and negligence. Cockroaches also present real health risks, especially for children for whom the pests contribute to higher asthma rates and asthma-related morbidity according to “The New England Journal of Medicine.”

Now serving as the urban entomology specialist for the Texas A&M AgriLife Extension, Merchant writes that we luckily “have much better tools for cockroach control today” as compared to his time battling the bugs in Seattle.

Cockroaches take the bait

Headed by Tulane University, a team of researchers recently published findings in “The Journal of Allergy and Clinical Immunology” on the efficacy of containerized and gel baits for eliminating cockroach infestations in an inner-city New Orleans apartment community. In addition to the effects of baiting in a multifamily environment, the study, funded by the Department of Housing and Urban Development and Healthy Homes Technical Studies, also focused on 102 children diagnosed with asthma who were known to live in apartments with cockroaches.

Of the affected homes, researchers treated half with baits, and the rest were either left untreated or the owners managed their own treatments. Researchers placed either Maxforce® FC Magnum or Advion® gel baits – all available through do-it-yourself pest control retailers – behind kitchen appliances, the back corners of kitchen cabinets and inside bathroom vanities. As cockroaches took the baits, sites were re-treated, and progress was monitored for 12 months.

Within three months of the study, cockroaches began to disappear. In his own breakdown of the results, Merchant wrote, “By the end of the study, none of the baited homes had evidence of cockroach activity, compared to a 20 percent infestation rate of the untreated homes.”

Overall, intermittent low-toxic insecticidal baiting resulted in greater pest control compared with routine spraying of potentially harmful insecticides.

Residents can breathe a sigh of relief

More importantly, children residing in homes that received the insecticide bait had significantly reduced asthma morbidity, fewer asthma-symptom days, improved lung function and less health care need.

Additionally, the researchers suggested in their conclusion, due to the wide availability of cockroach baiting solutions, that communities may be able to skip costly professional intervention in favor of having maintenance personnel place cockroach baiting systems themselves.

“Study staff had no experience in insecticidal baiting; therefore, it is our belief that with minimal instruction, targeted placement can be performed by homeowners.” But they did note that this hypothesis would require additional research.

However, Merchant cautioned that multifamily regulations in some states, his home state of Texas included, require licensed pest control professionals to administer baiting for cockroaches. Thus, unlicensed property management staff should leave treatment to a professional.

An ounce of prevention

One part of the Tulane study drew increased attention from both the researchers as well as Merchant in his interpretation of the data. Even the untreated, “control” apartments saw a nearly 80 percent reduction in cockroach activity in what these professionals attributed – at least in part – to “study effects.” With researchers coming in to monitor cockroach activity, many of these residents began keeping tidier homes, not leaving dirty dishes out overnight, etc.

Along with serving as the single best preventative measure for cockroaches, Merchant also explained that cleanliness around communities further assists with the effectiveness of baits.

“Research shows that cockroaches that do not have ready access to food and water become stressed and are more susceptible to baits and our other control measures,” he said.


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Social scientist discusses the realities of eviction

Mon, 02/27/2017 - 10:47pm

“Eviction” is a term that has become increasingly familiar to Americans over the past decade as one of the most visible symbols of poverty and economic misfortune. But research by social scientist and ethnographer Matthew Desmond shows that the reality of eviction is more complicated than traditional narratives might indicate.

Notably, Desmond says, eviction can actually serve as a cause of poverty, rather than an effect.

“One of our studies shows eviction can cause higher rates of job loss,” said Desmond, a professor at Harvard University, whose work received support from the National Science Foundation’s (NSF) Social, Behavioral and Economic Sciences Directorate. “Prior to that, I thought it was the other way around—that job loss causes eviction. It certainly does in some cases, but we have stronger evidence showing that eviction leads to job loss.”

Desmond said eviction can destabilize people who were already in economically vulnerable positions. “It causes folks who didn’t have great jobs in the first place to lose those jobs,” he said.

Work by Desmond and his team of researchers has proven influential in the social science world, as have his methods for gathering and analyzing data on a topic where reliable information can be difficult to find. His research team draws on state-level data, court records, police reports and personal interactions. Desmond spent months living in a trailer park and inner-city apartments to meet families experiencing poverty and affected by eviction.

The team’s work in Wisconsin led to the creation of the Milwaukee Area Renters Study, a synthesis of data that sheds light on the causes and consequences of eviction.

The researchers are currently expanding their work to other areas of the country, and the MacArthur Foundation recognized Desmond’s efforts by naming him a 2015 fellow.

Evictions were once rare enough in the United States that they could draw protests from neighbors trying to prevent them, Desmond said. Today, he says, “low-income families are used to the rumble of the moving truck,” making evictions more important to study now than ever.

Q: Could you describe the focus of your research on evictions?

A: We’ve reached the point in America where most poor families spend most of their incomes on housing costs, and evictions have become commonplace for low-income families. One of the most surprising things that I learned through my research was just how prevalent eviction is. One in every eight renters in Milwaukee is evicted every two years—that was shocking to me.

A big part of our research has been cataloguing the consequences of eviction. We’ve established findings that link evictions to job loss, to higher rates of depression, to much higher rates of material hardship, and to relocation into worse housing and neighborhoods. It seems to affect folks in a lot of different dimensions, which supports the case that eviction isn’t just a condition of poverty—it’s actually a cause. To really understand poverty, we have to understand that a lack of affordable housing is a big part of the story.

Q: Could you expand on the idea that often when you’re evicted you wind up living in a much worse place?

A: This is one thing I saw by following families over time. After their evictions, they’d move into places with no water, with stopped-up plumbing, with cockroach infestations, with no locks on the doors. We know from public health research that those kinds of housing conditions are linked to asthma and depression. I think one of the reasons we find eviction is related to depression in mothers, even two years after it happened, is because it’s an incredibly traumatic process that gets under your skin.

Q: What are some of the other effects of eviction? Can it harm your work or education status?

A: When you go through an eviction, it really takes over your life. A lot of the families that I spend time with, their kids would miss school for long periods for the same reason farm kids 100 years ago would have: their homes have more pressing problems than them getting to school. So eviction does have consequences for school stability and absenteeism.

Q: You’ve talked about how one of the toughest challenges for on-the-ground research in this area is asking people whether they have been evicted. How did that affect the ways in which you conducted your research?

A: Part of the issue was just realizing that there was a problem. We’ve had material hardship studies since the ’80s that have asked the eviction question, and they always came back with really low numbers—1 percent or 2 percent. Then you look at the court records and you see much higher numbers and you think “What’s going on? Where’s the disconnect?”

Spending time on the ground, living in communities affected and alongside families affected by eviction and talking about what they’re going through led me to realize we’d been asking the question the wrong way. That led to the creation of a new survey instrument, where we’d start off by saying “This is what an eviction looks like. Have you been evicted?” Then we asked things like “Did you move because your landlord told you to?” or “Did you move because you thought you were going to get evicted?” These really broadened the question and we got much higher numbers.

Q: For a sociologist or ethnographer studying poverty, is there a big database with helpful data available?

A: No. You really have to hustle for the data. There’s no national database that has solid numbers on eviction. The American Housing Survey is incorporating the work we did in Milwaukee into its next iteration, which is great because in a few years we will have solid survey data on eviction. One thing we’re doing is collecting eviction records from all over the country, but I’ve got to tell you—it’s tough. Some states store those data at the state level, so we now have records going back to the mid-’90s for Nebraska and Hawaii, for example. In other states, it’s not even stored at the county level; judges keep those data.

Q: Has your view of eviction changed throughout your research?

A: There’s kind of a baseline assumption about eviction—that someone loses a job or gets addicted, then they get evicted. The reality is that there is a non-trivial number of families that are just at risk of eviction every day. They’re paying 70 to 80 percent of their income on housing and just a little thing can lead to eviction. There’s evidence that shows that a lot of folks get evicted over relatively small sums of money. I think that the inevitability of eviction in the lives of the poor is something that I’ve come to accept as a reality for people below the poverty line.

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How Do You Buy Your First Investment Property?

Mon, 02/27/2017 - 10:22pm

Purchasing your first rental property is a big step for any investor. It’s one of the largest assets you can buy, and with a little bit of time and effort, it can be a great way to generate passive income. But before you become a real estate mogul and start building an empire, you should start with the basics. Knowing how to find a house, get a mortgage and fill it with good tenants are all essential aspects of purchasing your first rental property.

Let’s take a look at the steps you’ll need to take to purchase your first investment property, as well as the challenges you may face along the way. While purchasing a rental property is similar to buying a primary residence, there are some unique differences that you’ll need to consider. With these tips and tricks, you’ll have the information you need to make the process as smooth as possible.

Is an Investment Property Right for You?

Buying a rental property isn’t for the faint of heart. Not only do you have to consider the mortgage and the operating costs, but you also have to think about the tenants, who can either make or break your investment. There’s usually more risk involved with owning a rental property than investing in the stock market. After all, if you managed to get stuck with bad tenants who don’t pay rent on time, your returns aren’t just reduced – they’re nonexistent. Sure, the stock market may only be pulling in 4% to 5% annually, but you can count on that with some level of confidence. You’re taking a bigger gamble with an investment property.

But with a bigger gamble also comes the opportunity for a bigger reward, and this is especially true for investment properties. In 2016, the average gross yield for rental investors was 9.4%, which is slightly down from previous years but still significant. For some context, the average annual return on the Dow Jones over the last 10 years has been 4.8%. That’s nothing to write home about.

In addition, you have more influence over your investment property than you would the stock market. For example, even if you bought every bottle of Diet Coke in your local grocery store, you probably wouldn’t be able to affect Coca-Cola’s stock price (at least not noticeably). There are so many factors at play. When it comes to the stock market, you’re riding a wave that’s already in place.

With an investment property, though, small changes – such as a new door or some minor improvements to the kitchen – can improve the likelihood of wooing good tenants at higher monthly rents. With investment properties, not only are you riding the wave, but you own the wave. It’s a great choice for that investor who wants a more hands-on opportunity.

How to Get a Mortgage for an Investment Property

A big question for people buying a property, whether it’s an investment property or a primary residence, is “How much house can I afford?” Start by looking at a mortgage calculator to get an idea of rates and monthly payments, and then you can get preapproved to see how much money you qualify for. Make sure that you tell your home loan expert that you’re interested in buying an investment property, which has different rules than a primary residence.

Get Preapproved First

One of the biggest pitfalls that home buyers of any kind make is searching for a property before securing financing. Let’s say, after months of searching, you find the perfect rental property. But by the time you get preapproved for a mortgage, the house is already under contract with another buyer. Get preapproved now and have the ability to jump on a good deal at a moment’s notice.

Another problem with searching before being preapproved is that you don’t actually know how much money you qualify for. It would be heartbreaking to be looking at houses at one price range, only to find out that you qualify for less. Getting preapproved allows you to make an educated decision about the investment property you plan to buy.

Agency Loans for Investment Properties

For an investment property, you’ll likely use an agency loan, which means the loan would be backed by Fannie Mae or Freddie Mac. In most cases, you won’t be able to get an FHA or VA loan for an investment property. The exception to this would be if you purchase a multiple-unit property and plan to live in one of the units and rent out the others. If you’re planning to go this route, you should start by talking to a Home Loan Expert.

Requirements for Purchasing an Investment Property

The agency loans available to you will either be a fixed-rate mortgage or an adjustable rate mortgage (ARM). Both of these options have specific requirements when it comes to the down payment and credit score.

What Credit Score and Down Payment Do You Need to Buy an Investment Property?

For a fixed-rate mortgage, the minimum credit score requirement on a single-unit investment property is 620, and it will require a 20% down payment. If you have a credit score of 720 or above, however, you are only required to put down 15% on a single-unit investment property.

For an adjustable rate mortgage, the minimum credit score is 620 and will require at least 15% down on a single-family investment property.

If you’re interested in purchasing a multi-unit property, reach out to a Home Loan Expert to discuss the requirements and options.

Other Requirements to Qualify

Other than the down payment, the requirements for a rental property are somewhat similar to that of a mortgage for a primary residence. You’ll still need to follow the 2/2/2 rule: provide two years of tax returns, two years of W-2s and two months of bank statements to your mortgage company, as well as have your assets verified.

Your mortgage company will also want you to have six months of mortgage payments in reserve in order to give yourself some buffer room in the event that you go through an unexpected financial challenge.

Why Should I Get a Mortgage for My Investment Property?

If you have the means to pay for an investment property in cash, getting a mortgage could still make sense for your situation, especially if you’re planning on getting multiple investment properties. For instance, let’s say that you have $100,000 sitting in the bank. Your first option is to buy a house in cash for $100,000. While you will get a larger cash flow on that investment, it ties up all of your cash in a single place.

If, however, you get a loan with 20% down, you could potentially purchase another house or two at the same price with the remaining $80,000. While your immediate cash flow is lower, these returns will grow in the long-term, especially as rents increase and the mortgages get paid off. You’re building assets at a quicker pace when you go with a mortgage instead of cash.

In the event that you purchase an investment property in cash, there may still be beneficial loan opportunities for your situation. James Milne, a product manager at Quicken Loans, explains that “a large percentage of investment properties in the U.S. are owned without a mortgage, so there is plenty of opportunity to free up cash or take out equity to improve a property. A cash-out refinance is a great option for these clients.” This option can help your investment work for you.

How Do I Determine the Potential ROI for My Rental Property?

When looking for a great investment property, the first question you need to ask is “Can I actually make money?” If the answer is no, it’s obviously not a great investment. To see how much money your property could potentially make, you’ll need to consider the return on investment (ROI). The ROI can be calculated by first finding the property’s net annual income. This is the rent money that’s left over after you’ve paid the taxes, insurance, property management fees, expected repairs (plan to spend 1% of the property value on this), potential vacancy periods, HOA fees (if applicable) and any utilities that aren’t going to be covered by the tenant. To find the ROI, take the annual income and divide it by the amount you spent on the property. For example, if the net annual income is $7,500 and you spent $100,000 for the property, your ROI is 7.5%.

Use this calculation to see if each rental property is a good potential investment.

What Makes a Good Investment Property?

When scanning neighborhoods for your first rental, there are a few specific requirements you should be looking for. In a nutshell, you want a house that requires low maintenance, has limited vacancies and allows you to have a good rent-to-value ratio.

No Fixer-Uppers

One of the biggest mistakes that new real estate investors make is buying a fixer-upper. If the ad says the property “needs a lot of TLC,” just move on to the next house. I’ve fallen for this one myself once and managed to get an “amazing deal” on a house that was missing interior walls, required new plumbing throughout and had a basement that flooded on a semi-monthly basis. There are few worse feelings than realizing that your cash cow is actually a money pit.

The exception to this rule is, of course, if you’re knowledgeable about home repairs. If you have extensive handyman skills (or know someone who does), you may be able to deal with these extensive repairs better than I did. But as a general rule, it’s going to be less of a headache to just purchase a house that’s already in workable condition. And they’re out there. So in the meantime, do your best to resist the allure of a fixer-upper.

No Vacancy

If you don’t have paying tenants, your investment property’s not good for much. You want to make sure that your property is attractive not just to any tenant – but to good tenants who pay on time and don’t shove their Cosmo magazines down the toilet (speaking from experience).

Depending on your location, some places just tend to have lower vacancy rates, such as San Jose, Calif., and Fort Collins, Colo., which were both rocking a 0.2% vacancy rate in 2016. You can do some research on the neighborhood you’re looking at, but when it comes right down to it, spend time driving around the streets near your potential property. Simply looking at the level of care given to the houses in the surrounding area can give you a good idea of which houses are vacant and which are not.

The 1% Rule

A big question from new investors is “How much should I rent a property for?” Seasoned investors sometimes use the 1% rule, which states that the rent each month should be at least 1% of the purchase price. For instance, if you purchased a house for $100,000, you would need to charge – at the very least – $1,000 for rent. This, of course, isn’t always true for investors, and some will settle for a slightly lower return.

In order to make sure that a potential property can receive that kind of return, check out Zillow, which offers an estimated monthly rental price – called a Rent Zestimate – that will allow you to get a good idea of the rent amounts in the area. It’s not a perfect measurement, and in my own experience, you can usually get a higher amount of rent than what’s listed, but it does give you a ballpark number.

Are You a Landlord?

When you start buying investment properties, you need to take some time to think seriously about your ability to manage your properties. It’s a tough job being a landlord – tougher than most people think – and I’ve seen many an investor become overwhelmed by the time it takes to be a good landlord.

Fun fact: Be on the lookout out for this kind of investor. They sometimes burn out under the weight of their landlording duties and just sell their whole portfolio at once. It’s usually a good time to swoop in and buy.

But the point is that not everyone is cut out to be a landlord. It’s an intense and time-consuming line of work, especially if you already have a day job. For this reason, I highly recommend getting a management company to do this work for you. Sure, you’re probably spending 9% to 11% of the rent on this service, but they will take care of the tenants’ needs and collect the rent. And in the unfortunate event that a tenant needs to be evicted, they’ll help handle that process, too. Time is often more important than money, and letting go of this stress gives you the freedom to pursue additional investments.

Keeping Track of Repairs

Since you’re making income from this investment property, you’ll be expected to pay income taxes, but the good news is that rental properties offer some great tax benefits. Whether you’re hiring someone to make a repair, paying interest on the mortgage or simply driving to your property, there’s a wide range of potential deductions. Words of wisdom: You’ll need to make sure you keep track of these expenses – which means receipts – on the off-chance that the IRS comes knocking. To get the full value of your investment property, you should be making the most of your tax deduction opportunities.

This is another perk of using a management company. They’ll keep track of all of your rental expenses and send them to you in a nice document during tax season. Once again, the amount of time this saves you is worth the money.

Getting Started

While there are many variables to consider when purchasing your first investment property, you should start by doing your research. Look at housing prices and neighborhoods and begin saving for a down payment. And when you’re ready to dive head first into the real estate game, you can start by getting preapproved for a mortgage.

Do you have more questions about buying your first investment property? Let us know in the comments below!


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Home Sales Hit 10-Year High Despite Price, Inventory Problems

Mon, 02/27/2017 - 10:19pm

Existing home sales in the U.S. soared to a 10-year high in January to kick off the real estate market’s new year on a strong note, according to a report published Wednesday by the National Association of Realtors.

Sales last month – encompassing single-family houses as well as condos, town homes and co-ops – jumped 3.3 percent over the month to a seasonally adjusted annual rate of nearly 5.7 million. That’s the highest level the economy has seen since February 2007 and is up a healthy 3.8 percent over the year.

“Much of the country saw robust sales activity last month, as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” Lawrence Yun, the association’s chief economist, said in a statement Wednesday.

January’s sales broadly exceeded the expectations of analysts, many of whom expected a slight pullback after strong real estate performance in November and December. Samuel Coffin, an economist at UBS Investment Bank, described housing transactions in the fourth quarter of 2016 as having exhibited “exaggerated strength” that was unlikely to be sustained in January.

But sound economic fundamentals – such as low unemployment, rising wages and consistent job gains – and unseasonably warm weather, particularly in the Northeast, are believed to have helped bolster the housing market’s momentum last month.

“Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions,” Yun said.

Indeed, housing activity throughout the U.S. has been plagued by an inventory shortage that has driven up prices and is believed to have priced certain lower-income homebuyers out of the market. The National Association of Realtors estimated housing inventory ticked up slightly last month but was ultimately down 7.1 percent from the number of available homes on the market a year ago.

The group also said available properties that sold in January only stayed on the market for about 50 days, down from 52 for those sold in December and from the 64 days the median existing home was on the market in January 2016.

And with limited options and a competitive sales environment, prices have soared. The association estimates the median sale price for an existing home last month clocked in at $228,900, up 7.1 percent over the year.

“While strong price gains are positive for owners of homes and help to reduce the number of homeowners who owe more on their mortgage than the market value of their home, it is negative for affordability,” David Berson, senior vice president and chief economist at Nationwide Mutual Insurance Co., wrote in a research note Wednesday. “We have concerns that continued supply constraints in the housing market will allow outsized house price gains again in 2017, especially hurting potential first-time homebuyers.”


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Landlords Are Taking Over the U.S. Housing Market

Mon, 02/27/2017 - 10:15pm

As rising home prices, slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of renters—and landlords.

Last year, 37 percent of homes sold were acquired by buyers who didn’t live in them, according to tax-assessment data compiled in a new report published by Attom Data Solutions and Inc.

That number may include second homes, or properties acquired by investors who seek to fix up old homes and resell them at a profit. But it’s also a strong indication that landlords are playing a larger role in the U.S. housing market.

In the years following the foreclosure crisis, Wall Street drove a rise in the share of homes purchased by landlords, as private equity firms bought thousands of cheap homes. In 2012, institutional investors accounted for 7.8 percent of home sales, according to the report.

Rising home prices led big investors to curtail their purchases, and the share of homes acquired by institutional investors fell to 2.9 percent last year. But as Wall Street backed off, smaller investors picked up the slack, aided by tools developed to help big investors find, finance, and manage rental properties.

Smaller investors—particularly those who have already paid off their mortgages on the homes they live in—see rental properties as an attractive way to save for retirement.

To some extent, they’re focusing their resources on cheaper markets, because the profit margins are better at lower price points, said Daren Blomquist, senior vice president at Attom Data Solutions.

In Seattle, where the median home price was $414,000 at the end of last year, the annual share of sales to non-occupiers peaked in 2013, at 23 percent. But in cheaper Dallas, where the median home price was $201,000, the share of homes sold to people who don’t live in them nearly doubled over the last 12 years.

Whether the rise of the rental landlord is a positive development is an open question, said Blomquist. “On one hand, landlords are filling a need that exists because of the low homeownership rates. They may also be crowding out folks that want to be homeowners but can’t compete with investors.”



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What To Do If A Tenant Destroys Your Property

Mon, 02/27/2017 - 7:41am

What would you do if you discovered your property had been damaged by renters, through accident or ill will? If you own a property, the odds suggest that you will have to handle a property damage claim over the lifetime of the rental unit. Learn what to do to protect yourself, your investment and your property from damage by tenants.

Preventing Tenant Property Damage Through Education

Tenants are not responsible for normal wear and tear in the apartment, but they are responsible for damage that occurs on purpose or by accident.

You can protect yourself by inserting a clause in your lease that informs tenants of this fact. Renters who know they’ll be held liable if they accidentally cause water damage on the wood floor may be more likely to wipe up a spill in short order.

If you’re really concerned about property damage, you may invite renters to go on a move-in inspection with you. Draw their attention to existing areas of wear and tear. Clearly explain what constitutes “normal wear and tear” and what constitutes accidental damage. Outline your policy for property damage. If you have a policy of tenant eviction for destruction of property, such as vandalism, let tenants know.

Handling Property Destruction Incidents

What should you do if the tenant destroys your property, despite your best efforts at education and prevention? While you could go about evicting a tenant, you may wish to settle the issue, if possible. If the problem requires a skilled repairperson, refer the tenant to a handyman, plumber or other service person. Then, set a deadline for repair and inspect the work after. Your renter can hire someone to repair a damaged door or patch drywall and pay out-of-pocket for the work.

If the renter does not complete the work on time, you can either bill him or her, or let the renter know you will be deducting the repair amount from his or her security deposit.

Throughout the process, document any communication with the renter to protect your interests. Take pictures of damage, in case you need to pursue the matter in court.

If a renter damages property more than once, you may decide that eviction makes sense. Repeated property damage (even accidental) hinders trust between you and your renter.

In a worst-case scenario, a tenant could rack up more in property damage than you have in security deposit, leaving you liable for the difference unless you can collect in court. When the repairs for damaged property exceed the amount you’ve collected for the security deposit, you may be able to sue to reclaim the difference.

However, you’ll need to hire an attorney and spend time on the matter. If the difference is small, you may decide it’s best to pocket the loss and move on quickly.

Most problems can be avoided by setting clear expectations at the outset and using clear and professional landlord forms to communicate with renters. If you need an eviction letter, security deposit form or other landlord tenant paperwork, consider becoming an American Apartment Owners Association member. Perks of membership include access to a library of landlord forms that cover tenant eviction, leasing and much more.

 Disclaimer:The information provided herein is for advisory purposes only and AAOA takes no responsibility for its accuracy. AAOA recommends you consult with an attorney familiar with current federal, state and local laws.

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Mortgage applications fall 2% as buyers are slow to start spring shopping season

Thu, 02/23/2017 - 10:59pm

Demand is high for housing today, but that strength is not yet showing up in the mortgage market. Seasonally adjusted mortgage application volume fell 2 percent for the week ending Feb. 17, compared to the previous week. Total volume is now down almost 21 percent compared to a year ago, according to the Mortgage Bankers Association.

Lackluster refinancing largely drove the weakness in applications. That part of the mortgage business began dropping off a cliff when interest rates jumped, right after the presidential election. Refinance volume fell 1 percent last week to its lowest level of 2017 and is now down 40 percent compared to the same week one year ago. The refinance share of mortgage activity fell to 46 percent of total applications, the lowest level since November 2008.

“Purchase applications are not increasing as fast as is typically expected at this time of the year,” said Joel Kan, MBA’s associate vice president of industry surveys and forecasting.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $424,100 or less, increased to 4.36 percent from 4.32 percent, with points increasing to 0.35 from 0.34, including the origination fee, for 80 percent loan-to-value-ratio loans.

“Rates were up last week as markets assessed that the Fed might increase rates sooner than expected on the strength of a recent pick-up in inflation readings,” Kan said.

Purchase applications are likely responding less to higher rates and more to lack of supply of homes for sale. Mortgage rates have moved very little since the big November jump, but local markets across the nation are showing far fewer listings now compared to a year ago. While new supply will surely hit the market along with warmer temperatures, it will not be enough, by far, to meet the demand.


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Are REITs Right for Your Retirement Portfolio?

Thu, 02/23/2017 - 10:39pm

Real estate is often viewed as an effective way to hedge against market volatility. In a 2016 Bankrate survey, 25 percent of U.S. investors chose real estate over stocks as their preferred long-term investment target.

While owning real estate can be lucrative, it’s not necessarily the most feasible option for every investor. Acting as a landlord, for instance, can be both costly and time-consuming. A real estate investment trust, by comparison, offers many of the same benefits associated with direct property ownership without the hands-on management responsibilities.

REITs are designed to generate income for investors and they also offer an opportunity for long-term growth. As you’re planning your retirement investment strategy for 2017 and beyond, it’s important to ask yourself whether a real estate investment trust belongs in your portfolio.

Check the diversification of your investments. Diversification is an insurance policy of sorts for investors, creating a degree of insulation against the possibility of a market decline. This becomes more important as you get closer to retirement and begin to transition your portfolio from saving to spending.

Scott Crowe, chief investment strategist at CenterSquare Investment Management in Plymouth Meeting, Pennsylvania, says investors who desire greater diversification should look to real estate.

“REITs offer significant advantages to investors who are seeking access to real estate relative to direct property ownership, including much lower asset management costs, improved liquidity in terms of geographic and property sector exposure and greater transparency,” Crowe says.

For individual investors, one of the primary challenges associated with investing in specific properties is limited choice. When you have a finite amount of money to invest, it becomes more difficult to diversify across different property types. REITs remove those barriers.

“REITs are diversified across many different property types and geographies across the country,” says John Snowden, portfolio manager at Resource Real Estate Diversified Income Fund in New York.

Snowden says the primary benefit REITs offer to individual investors is access to real estate investments that would normally be the exclusive domain of institutional investors. That includes residential real estate, as well as large-scale commercial properties.

Evaluate your liquidity needs. Certain investments offer more liquidity than others, which becomes more important as you approach retirement. Vince Vitale, a portfolio manager and chartered financial analyst with Advance Capital Management in Southfield, Michigan, says REITs outstrip other real estate investing avenues in that sense.

“Publicly traded equity REITs offer the greatest liquidity and availability to turn your investment back into cash,” Vitale says.

Vitale acknowledges that while direct ownership offers greater control over the property, it can be costly, slow and difficult to sell. Real estate crowdfunding can increase diversification but it doesn’t offer the same liquidity as a REIT and the fees may be higher.

As you’re looking at your larger retirement picture, it’s important to think about how easily you’re able to access your various assets. If you’ve invested heavily in bonds, for example, and liquidity within the bond market begins to shrink, REITs could help to create more balance.

“[A REIT] position can be liquidated very quickly, often in minutes if necessary; the only cost involved is the broker’s commission,” Snowden says.

That may be reassuring if you’re concerned about having assets readily available once you reach retirement.

Calculate the dividend factor. REITs are required to pay out 90 percent of their earnings as dividends to investors. Leveraging these dividends can prove valuable to your retirement outlook, says Steve Hovland, director of research at Irvine, California-based HomeUnion.

“Dividends provide investors with an additional income stream to invest into another investment vehicle, or reinvest into REIT stock, while building their retirement portfolio,” Hovland says.

Jay Hatfield, co-founder and president of New York-based InfraCap, says investors should focus almost exclusively on dividend and interest income when planning for retirement.

“The fundamental value of investments is the cash flow produced by the underlying assets,” Hatfield says, since the income an investment generates allows an investor to make withdrawals from their accounts without making sales, reducing risk and increasing flexibility.

Hatfield says that older investors who are preparing to begin drawing down assets can focus on lower-growth, higher-income investments like REITs to minimize or eliminate the need to sell securities to fund their retirement.

John LaForge, head of real asset strategy for Wells Fargo Investment Institute in Sarasota, Florida, says investors should consider the tax implications of dividend investments if they’re investing in them outside of a tax-advantaged account, such as a 401(k) or IRA.

“When REIT investors receive dividends, they’re generally taxed as ordinary income,” LaForge says, and unlike stocks, REIT dividends don’t qualify for lower common stock dividend rates.

LaForge says that roughly two-thirds of total REIT returns over time come from the dividend component so investors should be aware of how those dividends could impact their tax liability. They also need to factor in capital gains triggered by the sale of REIT assets, as well as taxation of any return of capital.

Don’t forget about inflation. According to a 2016 LIMRA study, rising inflation can rob retirees of more than $117,000 in spending power over a 20-year period. REITs may provide an effective shield against that threat.

“REITs offer an inflation hedge in that their cash flows and the dividends paid to investors are derived from economic rents and grow with inflation,” Crowe says.

Since real estate rents and values tend to increase as prices do, REITs can create a natural protection against inflation. These investments can provide a reliable source of income even during periods of higher inflation.

With the potential for interest rates to rise along with inflation, REITs may be a more attractive option than bonds or equities for investors who have an eye on retirement. When the Federal Reserve initiated a series of rate hikes between 2004 and 2006, listed equity REITs yielded a cumulative total return of nearly 80 percent, outperforming the Standard & Poor’s 500 index over that same period, according to the National Association of Real Estate Investment Trusts.

If history were to repeat itself and the Federal Reserve follows through on proposed plans to increase the federal funds rate in the future, REIT investors could reap the benefits. Snowden says investors should stay focused on the positive implications of an upward trend in prices and rates in the meantime.

“Modest increases in interest rates and inflation are often signs of economic growth,” Snowden says. “REITs are able to participate in this growth by growing their rent rolls, as well as benefiting from appreciation of the underlying real estate values.”


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Supply of affordable housing expected to shrink

Thu, 02/23/2017 - 10:33pm

The American Dream may be in shorter supply.

A growing number of Americans now find it increasingly difficult to achieve the dream of owning a home. Simply put, they can’t afford the price or save enough money for the down payment.

A new housing affordability model created by the National Association of Realtors (NAR) and finds that homebuyers at many income levels could find “an inadequate amount of listings on the market within their price range” in the coming months.

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“Affordability is becoming much more challenging,” said Lawrence Yun, NAR chief economist. “Home prices over the past five years have risen by 40 percent while income has only gone up half that rate, so on just the price and growth differential, there are affordability challenges.”

Buyers with lower household incomes can expect heavy competition for the listings they can afford and rising mortgage rates will hamper their ability to afford these homes, Yun told NBC News. With interest rates rising “some people on the margins” may no longer be able to qualify for a mortgage, he said.

Nela Richardson, chief economist at Redfin, an online discount real estate broker, believes the lack of available credit is more of a problem than higher interest rates right now, especially for first-time buyers. Richardson told NBC News there are currently two separate housing markets: One market for high-income buyers that’s doing very well and another for affordable homes that’s struggling.

“We haven’t seen any increases in affordable inventory in at least nine months,” Richardson said. “Starter homes are just in short supply and that’s bad for first-time home buyers and millennials. It’s hard for people with middle class incomes to buy a home, so in most American cities the middle class is losing ground in terms of home ownership.”

Coming up with that down payment

And before you can buy a house, you need to save enough to make the down payment. Cobbling together enough cash for that has become a major barrier for many, especially in places where 20 percent down can be almost $200,000.

A 20 percent deposit on the median priced home in the U.S. right now — selling for $192,500 — is $38,500, according to a recent Zillow report.

“Home values are increasing at such a pace that in order to save up for a down payment it takes almost two-thirds of your annual income at the national level. In a hot market like Seattle, it can take more than a full year’s earnings,” said Zillow’s Skylar Olsen

Buyers in Los Angeles, San Jose and San Francisco, must come up with 182 percent of their average annual income to make that down payment, Zillow found. In San Jose, where the annual median annual income is $105,455, the down payment on the median $961,600 home is $192,320.

First-time buyers with no equity to rely on — about half of those in the market — need to get creative to scrape together that massive down payment.

“A lot of people have tapped into their 401(k) and a lot have sold stock,” said Jon Hunter, vice president at John L. Scott Real Estate, with agents in Washington, Oregon and Idaho. “They’re also borrowing from their parents. I’ve seen a lot of gifts from parents to children, especially for that first home.”

Of course, there are loans with less than 20 percent down — as little as 3.5 percent down — but the interest rates are higher and buyers are required to pay costly private mortgage insurance (PMI).

In very competitive markets, like Seattleand Portland, potential buyers often have to offer significantly more than 20 percent down to win the bidding. So what about renting? That used to be a common strategy for saving up enough to buy. But with rents so high and increasing so rapidly, even some renters find it hard to save enough. Zillow reports that the median monthly rent in the U.S. is now $1,402. It’s $3,470 in San Jose, $2,625 in Los Angeles, $2,443 in San Diego and $2,239 in Boston.


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Renting Out Your Home? 9 Expenses You Can Write Off

Thu, 02/23/2017 - 10:30pm

Home sharing through sites like Airbnb, VRBO and HomeAway are becoming more and more popular. My family jumped on the Airbnb hosting train recently, and we made a tidy little side income in January renting out our spare room. I won’t have to pay taxes on that income until next tax season, but I’m already wondering what expenses I can write off.

It turns out that lots of Airbnb host expenses are deductible, and those deductions work for other home-sharing services as well. (If you’re wondering about other ways to save on your taxes, check out’s tax learning center.)

The Basics of Taxes & Home Sharing

Renting out a part of your home is similar to becoming a landlord for an entire property, and it’s a lot like running a small business. The general IRS rule is that you can deduct expenses that are “both ordinary and necessary” for your business. But you’ll pay taxes on any income that you earn over and above those deductions.

There’s one caveat: the 14-day rule. If you rent part or all of your primary residence to others for less than 15 days out of the year, you don’t have to report that rental income, but you can’t deduct any expenses.

If you really like being a host, though, and rent all or part of your home for 15 days or more, you’ll have to report the income. So you’ll want to take all the deductions you possibly can. When it comes to deductions for rentals, you need to be careful, though. You can only deduct expenses that were spent on your business.

So if you buy new bath towels that your renters just happen to use in your shared bathroom, you can’t deduct the full cost of the bath towels. But if you buy linens just for your Airbnb renters, you can deduct the full cost.

With that in mind, below are some expenses you might deduct.

9 Expenses You Could Deduct

1. Service Fees: Most short-term rental services charge hosts a fee that comes off the top of the rent paid by the guest. Even if this fee comes out of the guest payment before it hits your bank account, you can deduct it as a business expense.

2. Advertising Fees: If you pay for any advertising outside of that offered by the rental company (and, therefore, covered with your service fees), deduct those expenses.

3. Cleaning & Maintenance Fees: If you buy cleaning supplies for your rental room, deduct those. If you pay a professional for cleaning, deduct that expense, too. Any maintenance costs related to the rental property are also deductible. If you pay for whole-house maintenance, such as a furnace tune-up or a roof replacement, a part of that cost will be deductible.

4. Utilities: If you’re only renting part of your home part of the time, you’ll split the utilities — part as a personal expense and part as a business expense that can be deducted.

5. Property Insurance: If you need to pay more insurance on your home because of having renters present, you can deduct the extra cost. Even if your property insurance fees haven’t increased, you can write off part of the expense as a business expense.

6. Property Taxes: The same goes for property taxes: You can write off the portion of your property taxes equal to the portion of your home being rented.

7. Trash Removal Services: Services that you pay the municipality for can be deducted, because they’re both reasonable and necessary.

8. Property Improvements: You can deduct the cost — or the interest paid on a loan, if you don’t pay cash — of improvements made to the property if those apply to the rented area.

9. Furniture, Linens & Food: You presumably provide guests with at least a couch, if not a bed. If you buy new furniture for your guest room, you can deduct that. You can also deduct the cost of linens, curtains, shower supplies, or food that you provide to your guests.

Splitting the Expenses

Unless you’re renting your whole home for the full year, you’ll need to prorate these deductions. In short, you can only deduct these expenses when they actually apply to the rental space while it’s being rented.

As you can see, things can get hairy! If you decide to host through Airbnb or another similar service this year, here’s what you need to do:

  • Keep detailed records. Know exactly when you had renters and for how much. Keep all your receipts related to expenses for the rental, or for improvements or utilities for your whole house.
  • Know your local laws. In some cases, you may have to pay additional local taxes when you do a short-term rental. Get familiar with those laws, which vary by state and locality.
  • Get a professional to help. Because these issues are so complex, it’s best to consult with a tax professional about your rental income, especially if you made a decent amount of money through the year. You want to take all the deductions you can to lower your tax bill. But you also want to make sure you’re doing it legally.


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Nearly Half of Minority Homebuyers in a 2016 Housing Market Survey Felt They May Have Been Discriminated Against When Trying to Buy a Home

Thu, 02/23/2017 - 10:05pm

Among 2,000 people who bought or tried to buy a home last year, 569 identified themselves as Latina/Latino, East or South Asian American, African American, Arab American or Native American. Of those minority buyers, nearly half (48.8%) felt that home sellers or sellers’ real estate agents were less eager to work with them because of their race. Twenty-eight percent of white people felt the same. These results come from a Redfin-commissioned survey conducted by SurveyGizmo in December 2016.  It reached more than 3,000 people–of which 94 were Redfin customers–who tried or succeeded to buy or sell a home in 2016, or plan to this year. Respondents spanned 11 major metro areas.

The findings weren’t isolated to just one race or even to certain parts of the country. To better understand this data, we spoke with Redfin real estate agents nationwide about what they’ve seen and heard, and about what their customers experienced specifically in 2016. The agents we spoke to about this survey rarely observed blatant acts of discrimination. The clearest example of racism was a buyer’s agent’s account of an appraiser making a derogatory comment about an ethnic group “taking over the neighborhood.” The rest described situations in which the customer or the agent herself had a feeling or suspicion that the seller or seller’s agent was driven by bias when rejecting an offer or backing out of a deal. In each of these cases, however, the seller or seller’s agent had a reasonable and fair explanation for their decision.

According to the survey, 67 percent of Arab-American homebuyers felt that sellers or their agents were less eager to work with them because of their race or ethnicity. The sample size for this group was too small to be statistically significant; only 18 respondents indicated they were Arab American. But we feel this is worth highlighting in part because our agents also cited instances of Arab-American discrimination.

Despite misgivings, U.S. neighborhoods are getting more diverse

This is the first time we’ve asked these questions, so we can’t report a trend, but the results come at a time when neighborhoods across the U.S. are becoming more integrated. Redfin measured neighborhood diversity across the U.S., using the most recent Census data, from 2015, and found that 32 percent of Americans lived in diverse neighborhoods in 2015, up from 23 percent  in 2000.

How technology helps make the real estate industry more equal

Just as neighborhoods evolve over time, so does the real estate industry. The internet has already begun to act as an equalizer. It enables a person of any color to find out about homes for sale in every neighborhood, rather than relying exclusively on a real estate agent to show them available homes. We believe that when homebuyers and sellers find an agent online instead of through a family or friend’s referral, they are more likely to hire one based on her experience and expertise than on a shared background. This also gives everyone, regardless of race or socioeconomic background, a better shot to build a successful career in real estate, leading to greater diversity in the profession.

Redfin recently wrote about the diversity of its employees and its efforts to recruit a more diverse workforce. Overall, Redfin’s field organization is more diverse than the industry average, but still not reflective of the general population. The company’s field organization is 77 percent white, compared to the National Association of Realtors, which is 85 percent white. Only 1 percent of U.S. Realtors are black, compared to 6 percent of Redfin agents. As we stated in this report, in an industry that’s always recruiting new agents, the pool of untapped talent is massive.

Of course, discrimination is not a new problem in the real estate industry. As a small start toward modern solutions, we hope to use the information in this report to foster conversations within Redfin and with our colleagues in the industry. We are exploring ways to better advocate for our customers in these situations and strategies to eliminate the potential for bias in the home-buying and selling processes. It is our hope that together, and with the help of technology, we can become an industry in which discrimination and racism have no place.

Method and data

In December, Redfin commissioned SurveyGizmo to survey 3,300 people who bought or sold in the past year, tried to buy or sell in the past year or planned to buy or sell in the next year. The respondents spanned the following 11 metro areas: Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, Portland, OR, San Diego, San Francisco, Seattle and Washington, D.C.

Table: Count of survey respondents who identified their race

White/Caucasian 1350 Latino/Latina 170 African American 139 East Asian American 112 South Asian American 80 Arab American 18 Native American 50

1,919 people who identified their race responded to the question, “During your homebuying process, did you ever feel that sellers or their agents were less eager to work with you because of your ethnicity or race?”

Block group data came from the 2015 5-year American Community Survey and the 2000 U.S. Census. Each block group defines its own “neighborhood” in this study.

To measure neighborhood diversity, Redfin used the Gini-Simpson index, representing the chance someone’s neighbor will be a different race than themselves:

Races came from the U.S. Census, and they were exhaustive, adding up to 100% of the population of each block group. Races included: other, white, black, asian and hispanic or latino.

Areas were defined as “diverse” if a block group’s Gini-Simpson index was at least 50.


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URGENT UPDATE: New Bed Bug Laws Apply to ALL Landlords

Thu, 02/23/2017 - 9:38am

I have litigated breach of implied warranty of habitability cases before, and they aren’t fun – ugly photos, grainy videos, angry tenants, frustrated landlords, pricey expert witnesses, bored judges, and the list goes on. Here is a summary of some of the new bed bug laws that went into effect in California in January 2017. The subject of “bed bugs” sure isn’t pleasant, but I think being in full compliance with these laws will help you in the long run stay out of court and keep the rent money flowing.  

Due to an upsurge in tenant filed “bed bug” litigation, the legislature has responded with the following new statutory amendments to bed bug laws:

Civil Code §1942.5 was amended in AB 2281

  • Prohibits a landlord from retaliating against a tenant who gives notice of a suspected bed bug infestation. In practice, this means that if a tenant as much as complains, even of suspected infestation, a landlord may not file for eviction for any reason (including nonpayment of rent), until the matter is fully cleared up.

Civil Code §1954.602

  • Prohibits a landlord from showing, renting or leasing a unit that the landlord knows has bed bugs. It does not require a landlord to inspect for bed bugs, but if a bed bug infestation is apparent, the landlord is considered to have knowledge of bed bugs in the unit.
  • To protect themselves from future bed bug lawsuits emanating from such units landlords should have infested vacant units treated and have an approved pest control company issued bed bug clearance on file for all such units.

Civil Code §1954.603

  • Requires that a specific bed bug notice be given to new tenants on and after July 1, 2017 (with specific language listed under “Information about Bed Bug Laws” and in at least 10 point font) and to existing tenants by January 1, 2018.
  • Landlords must notify tenants about the procedure for reporting suspected infestations to the landlord. This part contains no suggested language in the bill.
    • In practice it should be crafted carefully so as not only to spell out the landlord obligations for reporting, but also the tenant obligations for reporting.
    • So, for example, such a notice should state that all occupants of a unit, whether or not identified on the lease, are obligated to report suspected infestation. It should further instruct that seeing oneor more bedbugs is an infestation. Seeing one or more blood spots on bedding is potential infestation, tenants please report it.
    • Further, the person on management side responsible for receiving, documenting, and taking action on notices should be stipulated in the notice.

The following is what the legislature requires and landlords are advised to notify tenants of the entire passage, and can (and should) copy the entire passage verbatim from the civil code section. However, as is shown below, there is more than meets the eye in this bed bug laws passage and landlords should take additions precautions over and above this.

Here is the initial passage:

“Information about Bed Bugs

Bed bug appearance: Bed bugs have six legs. Adult bed bugs have flat bodies about 1/4 of an inch in length. Their color can vary from red and brown to copper colored. Young bed bugs are very small. Their bodies are about 1/16 of an inch in length. They have almost no color. When a bed bug feeds, its body swells, may lengthen, and becomes bright red, sometimes making it appear to be a different insect. Bed bugs do not fly. They can either crawl or be carried from place to place on objects, people, or animals. Bed bugs can be hard to find and identify because they are tiny and try to stay hidden.

Life Cycle and Reproduction: An average bed bug lives for about 10 months. Female bed bugs lay one to five eggs per day. Bed bugs grow to full adulthood in about 21 days. Bed bugs can survive for months without feeding.

Bed bug bites: Because bed bugs usually feed at night, most people are bitten in their sleep and do not realize they were bitten. A person’s reaction to insect bites is an immune response and so varies from person to person. Sometimes the red welts caused by the bites will not be noticed until many days after a person was bitten, if at all.

Common signs and symptoms of a possible bed bug infestation:

    • Small red to reddish brown fecal spots on mattresses, box springs, bed frames, mattresses, linens, upholstery, or walls.
    • Molted bed bug skins, white, sticky eggs, or empty eggshells.
    • Very heavily infested areas may have a characteristically sweet odor.
    • Red, itchy bite marks, especially on the legs, arms, and other body parts exposed while sleeping. However, some people do not show bed bug lesions on their bodies even though bed bugs may have fed on them.

For more information, see the Internet Web sites of the United States Environmental Protection Agency and the National Pest Management Association.”

Include these websites in the bed bug notice: The key here are the two websites the passage indicates should be referred to in the last sentence of the passage. The websites should be included in landlord notices, and landlords should also be aware that the dense amount of information about bedbugs in these websites are now assumed to be familiar to the landlord under the best practices approach to pest control treatment, and landlords are expected to handle all bed bug pest control matters with full knowledge of all aspects of information entailed in these websites.

The websites are:

Bed Bug Laws: Required Practices for Bed Bug Treatment

Landlords should be aware that within the National Pest Management Association website there is a best practices approach to bed bug treatment which outlines everything a landlord must do in order to undertake an Integrated Pest Management approach. This effectively puts landlords on notice and instructs tenants on exactly what landlords should be doing to fully comply with bed bug laws (and what landlords are liable for if they do not do so):  

Civil Code §1954.604

  • Requires landlords to conduct follow up treatment not only of infected units, but all surroundings until bed bugs are eliminated. This underscores the new standard of care, away from complaint based to comprehensive in nature.
  • This section also states that landlords are required to give notice of intent to enter, and very importantly, that tenants are required to cooperate with inspections and requests for information to facilitate bed bug detection and treatment. This is the only part of the law which has changed somewhat in landlords’ favor, insofar as tenants are statutorily obligated to cooperate with landlords and provide landlords access for treatment.
  • Landlords therefore now have legal recourse to fight against tenants who refuse entry for pest control treatment (uncooperative tenants being the ones who most often turn around and sue landlords, as experience shows).

Civil Code §1954.605

  • Bed bug laws require landlords to notify tenants within two business days of receiving the pest control operator’s findings after an inspection. When infestations are found in common areas, the landlord must provide the notice to all tenants. This means that if a landlord finds bedbugs in a common area, then all residents in the building must be notified of such a finding.
  • In practice it is suggested that actual reports provided by pest control operators be provided to residents rather than putting the management company in the position of interpreting such reports. If reports covering more than one unit have to be redacted to show information only about units being reported on to specific residents, this is would be the preferred way of handling such notifications.
  • Also, any proposed pest control treatment must identify details about chemicals to be used for treatment. Managers will have to coordinate with pest control operators to handle tenant allergies to certain chemicals.

The full text for these new laws as published by the California legislature can be read here: 

Once again, sorry to bug you about these new bed bug laws. I wish I had better news, but now you are in the loop!

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  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, 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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Writing Descriptive Listings: A How-To Guide For Property Owners

Wed, 02/22/2017 - 6:28am

You have an amazing apartment available. Or maybe you’re psyched to sell a home or condo. Listing a property online or in the classifieds is sure to draw some level of interest from the pool of tenants or buyers you are seeking, but experts say you have only 3 seconds to earn the attention of an ad reader — and the typical listing description is utterly uninspiring.

Does the following sound all too familiar? Property listing: Facts only. In black/white, often literally. Basic info included. No imagination, please. Call today if still awake. Yawn.

The best listing description in a competitive market is one that instead seizes the attention of potential buyers or tenants, enticing them with dazzling descriptions. Swiftly whisk their imaginations into a picture that portrays the enjoyable experiences that will come with living in that particular space. If families are your target tenants, for instance, play up particulars about the fantastic family room, plus the proximity of parks and schools. And do it without exaggeration — many prospective buyers or tenants can see right through hyperbole, and it will send them looking elsewhere.

The accompanying property listing description guide provides an outline for writing an effective property description. An example is included, along with 10 words that experts say add value to a listing.

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Managing Property Management

Tue, 02/21/2017 - 10:04pm

Property management is broken down into three main categories; facility management, investment management and tenant management.  If you own and manage your own income properties, you are forever juggling and prioritizing all three.  

Facility management pertains primarily to maintaining, repairing and possibly remodeling the physical property.  Even if your investment portfolio is only one rental house, there are days when dealing with leaky roofs, broken appliances or stuffed toilets can be consuming.  Everything from preparing a vacant unit for rental, getting bids to repaint the exterior of the property or revitalizing the landscaping can feel as though your property is a money pit that eats up time and cash.

Investment management is focusing on the market, determining when is a good time to sell or buy, to exchange or refinance your property. Investment management requires an ongoing knowledge of the resell market, rental market, interest rates and trends in your community as well as the country.  Developing a long term strategy based upon your personal needs and market changes means being open to adjusting plans as conditions dictate.

Tenant management, in its simplest terms, means creating and maintaining a cohesive and cooperative plan for dealing with all tenant issues.  From finding the right tenant, collecting rent, responding to maintenance requests and, if necessary, evicting a bad tenant are all part of a successful tenant management philosophy.  Arguably, of the three responsibilities of property management, how you handle tenants and their needs is the most important. If you are managing multiple properties you may want to consider using a property management software such as ManageZoom to organize tenant files and communicate with tenants. Sign up for a free trial here: 

Good tenant management starts with selecting and screening for the best tenant.  If you are diligent in the screening process and find caring and conscientious tenants, facility management becomes easier and your investment strategy becomes clearer.  If you maintain a policy toward tenants that is respectful and responsive they are more likely to treat you and your property in like kind.  Although there has been a perception of landlord/tenant relationships being adversarial, it does not and should not be that way.  Remember, tenants are your customers and you need customers to maintain your investment.  

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Winter Property Maintenance Tips

Tue, 02/21/2017 - 5:42am

Winter home maintenance protects your investment property from the season’s harsh demands. A little preventative maintenance each year goes a long way toward safeguarding the building, protecting renters and warding off major repairs.

Here are the top tasks to add to a winter home maintenance schedule:

    • Winter landscaping. As winter approaches, trim trees and shrubs away from the home. Weighed down with snow and ice, shrubs can damage your home. As you put the lawn and garden to bed for the winter, disconnect garden hoses. Apply a winter fertilizer to your lawn to nourish it through winter and decrease spring lawn maintenance. During winter, shovel snow promptly. If left in place, the snow can melt and turn to ice. If a tenant slips and falls, you could be held legally liable.
    • HVAC servicing. Your heating and air-conditioning system should be serviced annually. During servicing, a technician will check all parts of the system, make repairs for efficiency, and replace the filter so air circulating in the home is clean.
    • Chimney servicing. If your home has a chimney, it requires annual servicing. Birds, bats and squirrels can make a home in the chimney. Chimney sweeps can fit your chimney with a secure cap that keeps animals out. They can also clean the chimney and make structural repairs.
    • Gutter cleaning. Cleaning leaves and debris from gutters ensures that snowmelt can drain. If you forget to clean the gutters, ice dams may develop. These can ruin your gutters and cause water damage if melted snow leaks into your home. Wait until late fall, when all the leaves have fallen, to undertake this task.
    • Check the water heater. Every two years, a water heater should be flushed of mineral deposits. This is also a good time to check your water heater’s remaining life span. Since newer water heaters are more efficient, replacing an old water heater will save money.
    • Prevent pipes from freezing. Pipes may freeze and burst if interior home temperatures fall under 55 degrees Fahrenheit. Keep the heat set above 55 degrees throughout winter. Educate your renters on this important safety consideration, so they do not accidentally cause pipes to burst.
The Benefits of Winter Maintenance

Winter property maintenance represents money well spent, because it saves you money down the road. There is no question that paying a small amount of money to service equipment, like a chimney or HVAC system, keeps the unit in good working order. Without regular maintenance, you may wind up with a winter heating emergency that’s expensive to fix. Meanwhile, your renters may become unhappy. In a worst-case scenario, they could decide to terminate the lease, leaving you searching for new tenants.

Home maintenance tasks also keep your property looking its best cosmetically. This curb appeal will help you command the best selling price if you go to sell the home, while also ensuring you always get high-quality renters who can afford to pay top dollar to rent your property.

To get more actionable tips on maintaining your rental property and keeping tenants safe, become an American Apartment Owners Association member today. Members receive access to free and reduced landlord forms, discounts at nationwide retailers, and much more.

 Disclaimer: The information provided herein is for advisory purposes only and AAOA takes no responsibility for its accuracy. AAOA recommends you consult with an attorney familiar with current federal, state and local laws.

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