American Apartment Owners Association

Fannie, Freddie will stop backing single-family rentals

Thu, 08/23/2018 - 10:18am

Fannie Mae and Freddie Mac, the government-sponsored enterprises that help lubricate the U.S. mortgage market, will stop backing loans for single-family investment homes in a nod to the growing controversies surrounding that marketplace.

The Federal Housing Finance Agency, regulator of Fannie  and Freddie, announced Tuesday that both companies would end pilot programs which were intended to “test and learn” best practices in a market that’s exploded in the aftermath of the financial crisis.

“What we learned as a result of the pilots is that the larger single-family rental investor market continues to perform successfully without the liquidity provided by the Enterprises,” FHFA Director Melvin Watt said in a statement.

“I was glad to see this decision, I think it was a responsible decision and I’m looking forward to continued engagement with (Fannie and Freddie) over ways in which they might modernize traditional investor financing,” said Julia Gordon, executive director of the National Community Stabilization Trust.

Gordon and other housing observers have criticized the enterprises’ decision to get involved in a market in which investors don’t seem to have much trouble raising funds from traditional capital markets sources. The first such step was in 2017, when Fannie guaranteed a $1 billion deal for Invitation Homes , which was then controlled by Blackstone, even as the giant asset manager was preparing an initial public offering.

“I am perplexed to see Fannie Mae place a taxpayer guarantee behind the same private interests whose risky practices led to the millions of foreclosed homes they are now buying up,” Gordon’s organization said in a statement at the time. “These investors so far have had no trouble financing the purchase of tens of thousands of homes without government support.”

But advocates have also increasingly become concerned about the business practices of the institutional investors who’ve decided to become landlords. A recent Reuters report documented extensive, chronic issues for Invitation Homes tenants.

“I think it’s becoming increasingly evident that many of the actors in the single-family rental market pose risks to anyone who’s involved with them,” Gordon told MarketWatch. “We’ve seen a number of newspaper articles and investigative reports that indicate we may need to do some hard thinking about how these landlords are operating in the marketplace. When you have that kind of reputational risk, there’s downside.”

Whether Fannie and Freddie are involved or not, the single-family rental space is likely to continue growing as a part of the housing market. Institutional investors became interested after the housing crisis, when homeowner distress left plenty of homes to be scooped up on the cheap, and when many Americans’ bruised credit or job histories kept homeownership out of reach.

But since then, other, smaller investors have followed the big players. That phenomenon was documented by MarketWatch last month.

And on Tuesday, the National Association of Home Builders noted that the market share of single-family homes built as rentals increased over the past four quarters, to 42,000 from 29,000 over the prior four quarters.

But as the builder group noted, “the primary source of single-family rental homes is not construction but the existing housing stock. In fact, from 2005 to 2015, 56% of the gains in the rental housing stock were due to increases of for-rent single-family homes.”

The National Association of Realtors on Tuesday issued a statement commending the FHFA’s decision. “By financing the purchase of thousands of single-family homes for institutional investors to use as rentals, Fannie Mae and Freddie Mac compounded on inventory shortages and affordability concerns, which are holding back prospective homebuyers across the country,” the industry group said. “NAR applauds today’s FHFA decision, and we look forward to continue working with Fannie Mae and Freddie Mac to help more Americans achieve homeownership going forward.”



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The West Coast Housing Market Over a Decade

Thu, 08/23/2018 - 10:15am

The housing market on the West Coast has seen the biggest price swings over the past decade. This, according to a study by, which looked at the top 2o markets to have rebounded the most with the 10 years following the 2008 housing crash.

For the study, built a monthly housing price index using median historical sale values for single-family homes by metropolitan statistical area (MSA), accounting for changes in housing stock and seasonality. Utilizing this index, it analyzed total gains from the post-crash minimum after January 2009 to the post-crash peak (any moment in time up to February 2018). The comparison was based on the average price per square foot in metropolitan statistical areas (MSAs).

The study found that markets on the West Coast had seen the biggest rebound over the past decade, led by California cities that have seen the maximum swings from a post-crisis trough to a post-crisis peak. “This is likely due to market desirability and increased competition for a limited supply in recent years,” the study indicated.

“Since the housing crisis, most cities around the country, and especially those on the West Coast, are seeing increased competition for a limited supply, which has created a favorable situation for sellers and a competitive market for homebuyers,” said Kevin Karty, VP, Enterprise Data for

Topping the list were the Golden State cities of Modesto and Merced, where prices rose from $85 and $73 per square foot in November 2011 and April 2012 to $182 and $156 per square foot respectively by February 2018. Coming in third was Reno, Nevada, which saw a rise from $97 per square foot in January 2012 to $204 by October 2017. Vallejo-Fairfield and Stockton-Lodi in California rounded off the top five cities to have rebounded since the crisis.

The study indicated that on average, home prices in the top 10 markets increased 103 percent from their lowest price since January 2009 to their post-crash peak price; in the top 20 markets, home prices increased 93.9 percent.

Florida and Michigan were the only two east coast states to make it to the top 20 markets.



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To Cater To Millennial Renters, Offer Co-Living, Co-Working Spaces

Thu, 08/23/2018 - 10:12am

Some believe Millennial renters don’t view their homes the way earlier generations did. Trend spotters say many consider their apartment their bedroom, the restaurant on the first floor their kitchen, the bar a block away their recreation room and the park a quarter mile distant their backyard. They are willing to sacrifice space in their individual units as long as these options are available, and their apartment buildings also offer appealing co-working and co-living spaces ideally designed for socialization.

To cater to that kind of renting philosophy, buildings in highly coveted rental markets are being redesigned, repositioned and rebranded with Millennials in mind. Example: Philadelphia’s 1 Brown, an almost 100-year-old industrial structure transformed into a luxury apartment building emphasizing fitness, healthy living and a sense of community.

Financier, real estate developer and commercial real estate investor Eli Verschleiser of Multi Capital LLC  has witnessed the phenomenon up close as he repositions 1 Brown.

“One of the driving forces behind an increased interest in co-living and using communal spaces is younger renters who move to a new city and are looking to meet people and connect,” he says. “To be able to live in the cities most attractive to them for culture, job opportunities and more, many Millennials will have to be willing to sacrifice in order to make an economical rental decision.  For many, co-living is a matter of necessity as much as it is a personal preference.”

Communal feel

Another reason the trend continues growing is that many Millennial renters experience the communal feel of co-working spaces in their workplaces, Verschleiser says.

He notes the number of enterprise companies using WeWork’s co-working spaces grew by 90% from June 2016 to June 2017. Startups and smaller companies have been the leading users of this kind of work environment. But open offices that spur collaboration are becoming the norm for many of corporate America’s larger companies.

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“For young renters communal amenities like a fitness center or office space are also attractive because of the time-saving component,” Verschleiser says. “Being able to run errands and pursue hobbies all within the comfort of your building helps Millennials save time and money. For example, a professional studying for an MBA or another form of higher education may not feel as comfortable working within [his or her] apartment, as this is somewhere they go to relax. Having an office or communal work space in their building gives them an outlet to get work done in peace.”

Millennials and Generation Z

Whether Millennials will continue being agreeable to sacrificing private in favor of public space is up for debate.

Verschleiser notes the 2018 Deloitte Millennial Survey found 43% of Millennials envision leaving their jobs within two years, and only 28% plan to stay beyond five years. This finding seems in line with a tendency toward quick shifts in commitments, he says.

“With that in mind, I think with maturity, marriage and family commitments, private space will once again become their preference,” he adds.

Verschleiser believes the cohort behind Millennials, Generation Z, could also be drawn to co-living spaces out of necessity, given the need to pay off student loans while they seek employment in high-cost cities.

But another factor may leave them less inclined to follow their older brethren.

“Most Millennials grew up with some form of technology, whether it was a computer or later in their adolescence a smart phone,” Verschleiser says. “Still, there was a time when they were not attached to a screen. Generation Z has been digitally literate from a very young age. They very well may be entertained by their technology and connections online, and less interested in socializing and working together in person.”

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“For young renters communal amenities like a fitness center or office space are also attractive because of the time-saving component,” Verschleiser says. “Being able to run errands and pursue hobbies all within the comfort of your building helps Millennials save time and money. For example, a professional studying for an MBA or another form of higher education may not feel as comfortable working within [his or her] apartment, as this is somewhere they go to relax. Having an office or communal work space in their building gives them an outlet to get work done in peace.”

Millennials and Generation Z

Whether Millennials will continue being agreeable to sacrificing private in favor of public space is up for debate.

Verschleiser notes the 2018 Deloitte Millennial Survey found 43% of Millennials envision leaving their jobs within two years, and only 28% plan to stay beyond five years. This finding seems in line with a tendency toward quick shifts in commitments, he says.

“With that in mind, I think with maturity, marriage and family commitments, private space will once again become their preference,” he adds.

Verschleiser believes the cohort behind Millennials, Generation Z, could also be drawn to co-living spaces out of necessity, given the need to pay off student loans while they seek employment in high-cost cities.

But another factor may leave them less inclined to follow their older brethren.

“Most Millennials grew up with some form of technology, whether it was a computer or later in their adolescence a smart phone,” Verschleiser says. “Still, there was a time when they were not attached to a screen. Generation Z has been digitally literate from a very young age. They very well may be entertained by their technology and connections online, and less interested in socializing and working together in person.”



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San Fernando Valley condo prices reach a record high

Thu, 08/23/2018 - 10:08am

The median price of condominiums in the San Fernando Valley has climbed to a new record, rising 9.5 percent in July to $449,000, according to the Southland Regional Assn. of Realtors.

That number surpassed the prior record of $438,000 set in June, the association’s report said.

Real estate experts say low inventory and inadequate housing production are pushing prices up.

“Our soaring prices and limited inventory points to an irrefutable fact,” said Gary Washburn, the association’s president, in a statement. “There will be no price relief until more housing is built to satisfy pent-up demand.”

Meanwhile, the median price of single-family homes sold in July in the Valley came in at $690,500, which is a 3.8 increase from a year ago, according to the report.

Some house hunters are under pressure to purchase before the interest rates go up later this year.

“My home buyers, especially millennials, find homeownership very important, but home prices are very high,” said Bandele Oguntomilade, the owner and Realtor at Woodland Hills-based Bogun Realty and Luxury Homes. “Sometime they have their parents join them just to increase their chances of winning an offer.”

The association said it assisted the sale of 518 single-family homes and 159 condominiums thought the Valley in July, a 6.6 percent raise from a year ago for home sales.

In the Valley, there were 1,388 active listings at the end of last month, a 2.7 percent decline from a year ago.

“For comparison, the 7,730 active listings total reported in October 2007 was the highest last decade, yet still well short of the record high 14,976 active listings of July 1992,” according to the report.

In the Santa Clarita Valley, a median price of condominiums that changed owners in July was $379,000, a 5.9 increase from 2017.

Meanwhile, the median price of homes that closed escrow last month was $600,000. That was a 2.6 percent rise from a year ago, the report said. The record high home price of $643,000 was reported in April 2006.

The association said it closed escrow in July on 215 single-family home sales and 90 condominiums in the Santa Clarita Valley.



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4 Tips for Investing in Property in Another Area

Thu, 08/23/2018 - 9:53am

Most real estate investors start by investing in local property, but what if buildings in the area are overvalued, or if there are good deals in another city or state?

Investing outside your local area takes a different mindset than buying property in your hometown. Here are some tips to help.

Study the new region. To get a sense of an area’s well-being, look into area statistics like crime, schools, population growth, median income and the municipality’s finances.

Growth demographics are key, says Mathieu Rosinsky, principal of Belmont Associates in Delray Beach, Florida. He looks at growth demographics going back 15 years to get a sense of trends. Some of the fastest-growing areas are Boise, Idaho; Denver; North Carolina and parts of Florida and Texas.

When looking at demographic growth, review the trend of income per capita growth, says Eduardo Gruener, co-founder and chief executive officer of Momentum Real Estate Partners in Miami. Rising income per capita means an investor’s net operating income will likely rise as residents’ income increases.

Think about taxes. When looking at residents’ income, keep an eye on taxes. States with high income taxes or high property taxes (or both) eat into a real estate investor’s profits, Rosinsky says. Changes in the federal tax code last year limit how much people can deduct from both income and property taxes, he says. That makes investing in states like New York and California more expensive compared to a place like Texas, which has low taxes.

Follow the jobs. If you want to invest outside of your area, look to regions that are seeing strong job growth, says Los Angeles-based Kathy Fettke, co-chief executive officer of Real Wealth Network and author of Retire Rich with Rentals. That will draw people and stir housing demand. However, she says investors need to consider affordability, too.

“San Francisco has job and population growth, but it’s not affordable,” she says.

Look for a diverse employment base, and watch for new businesses opening, Gruener says. Good signs include news stories about office complexes breaking ground or companies moving headquarters to an area.

“Look for things that are going to happen,” he says.

When Gruener’s firm bought a property in Dallas, they narrowed their search to an area with good schools and a good employment base. Then they learned Toyota Motor Corp. planned to open a major office complex close to their property.

“We knew Toyota was going to open a new office complex, but they still needed to buy the land and build,” he says. Eventually “they would move employees there. You always want to look at areas of new opportunities and new employment.”

Areas that are experiencing revitalization can be good places to invest, but buyers need to be cautious. Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan, says investors who bought into parts of Detroit five or 10 years ago have seen a sizable return on their investment. However, not everyone did well, he says.

“If you bought in the wrong side of town, you lost all your money,” he says. “But if you bought in an up-and-coming area, you quadrupled your money.”

Parts of Detroit near the sports stadiums and other parts of downtown where some companies recently moved headquarters or established a significant presence have allowed these areas to flourish, Foguth says. The properties that are seeing the biggest gains in value are new construction, rather than remodeled homes, he says.

Look to see where banks are more likely to lend investors money, Rosinsky says. “That’s always a telltale sign because you have various people who are investing in the project or [area],” he says.

Get professional help. You’re going to need some help finding and managing property that’s outside your area. Fettke says if you use a real estate agent, be sure the person understands you’re looking for investment property and not a primary residence.

“The person helping you should be a professional in investment property,” she says. “Ideally they will own some themselves and lots of it.”

You’ll also need a property management company, and ideally a local one. Foguth says distant property owners can’t be hands-on like they might be with a local property. This is one of the biggest considerations when it comes to day-to-day operations.

“If something goes wrong, you can’t drive down the street to fix it,” he says.

Fettke says before you purchase property find a management company to help you vet units.

“Before you close, run this property by the property manager to see if they will take it,” she says. “They’ll be the first to tell you, ‘Oh no, I can’t ever rent anything there,’ or ‘I won’t go there.’ The property manager is your greatest asset in finding what they are willing to manage.”

Property management company fees are around 8 to 10 percent of the collected rent, she says. You can negotiate the fee, but Fettke says going lower than 8 percent makes it difficult for property managers to do their jobs.

“They have to hire people and have systems in place,” she says.

She learned the hard way about trying too hard to cut management property fees.

“I had a really good employee who negotiated the property management down to 5 [percent],” Fettke says. “That was great until it wasn’t because then the [property management company] couldn’t really do their job, and it didn’t turn out well.”


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Why Buying Turnkey Investment Property With Cash Is Better Than Financing

Mon, 08/20/2018 - 11:40am

As the cliché goes, “cash is king.” It’s true in almost every financial investment and business endeavor. For a turnkey real estate investor, there are some large benefits to using cash for purchases rather than financing. The biggest pro of turnkey real estate investing is cash flow; the single biggest drain on your bottom line with a turnkey property very well could be a mortgage. But cash purchases offer other big advantages as well in terms of security, flexibility and more.

No Risk Of Foreclosure

When you purchase in cash, the property is yours free and clear. No banks, no lenders, no mortgage. If your investment were to hit a rut at any point in ownership, you would avoid the risk of foreclosure that you most certainly would endure with a loan. If the property happened to be in your personal name, along with the mortgage, this could impact your personal credit long-term.

Not Paying Any Interest

Ideally, the amount of incoming rent covers your mortgage and other expenses. However, the amount of interest you can pay on a loan is astounding. Over the course of a 30-year loan on a $100,000 purchase, with a 4.25% interest rate, you’re going to pay over $77,000 in interest alone. Some may argue that you aren’t likely to keep a rental property for the full 30 years — a fair statement. But if you plan to sell in 10 years, you will still owe about 80% of the principal because many payments in the beginning go mainly toward interest.

Own The Property Free And Clear Immediately

Beyond the pride of owning a piece of property, there are a few other advantages here. One, if you needed to sell the property soon after your purchase, you will likely be able to recoup most of (if not more than) what you originally invested. You also don’t have any mortgage payments to worry about. Second is the ability to do a cash-out refinance. Yes, this would mean you have a mortgage now. However, with cash, you have the ability to take up to 75% of the value of your property out in cash.

Vacancies Won’t Hurt As Much (And Can Even Be Positive)

The dreaded vacancy is a pain for almost any rental property owner. However, if you bought your property with cash, it won’t hurt your wallet quite as hard. Why? No mortgage payment. If you have a mortgage and the property is vacant, the bank doesn’t care — they still want their payment. But if you don’t owe the bank, you won’t notice that much of a pain, just the lack of cash flow for a month. Plus, if you need to make upgrades to the property, you can take the time you need and not be rushed trying to get a new tenant in to cover your mortgage payment. In addition to that, you are able to spend a bit more time finding the perfect tenant and not just any tenant who may or may not pay their rent on time every month.

Qualifying For Loan As An Investor Isn’t Always Easy

To qualify for a loan, an investor needs an excellent credit score, reserves for mortgage payments, possibly thousands of dollars in tangible assets and more qualifiers. Investors are held to a higher standard than any conventional buyer and it may prove to be too strict for certain individuals. Requirements for a cash purchase? Just have the cash, no credit check required.

Appreciation Is Appreciated

If you own a property free and clear, any appreciation the property receives is yours. If you have a mortgage, the appreciation is yours as well — sort of. As discussed earlier, the interest eats away at the actual value you’re seeing in your property. If you decided to sell in 10 years, remember, you likely still owe 80% of the principal balance. With a cash purchase, all appreciation is yours to pocket.

You Get First Pick At Turnkey Properties

Many turnkey providers will offer up their properties to cash buyers before finance buyers. Why? Cash buyers don’t require an appraisal like finance buyers do. With a financed purchase, turnkey providers have to be sure the property has been completely rehabbed before an appraiser steps foot in the door. With cash, you can buy the property while it is still in rehab. The pro here is that cash buyers get first pick at the properties. Often, properties that have really great returns go to cash buyers first because they’re too awesome to pass up.

There are many pros to buying with cash. But how do you get that much cash to purchase a property outright? Great question. Two options for those who don’t have coffers of cash sitting around are a self-directed IRA (SDIRA) and a home equity line of credit (HELOC). A SDIRA allows you to invest your funds in many things, one being real estate. You can purchase a property completely through your SDIRA. With a HELOC, you’re taking out a line of credit on your personal home. Yes, this is somewhat using financing. However, many HELOCs offer flexible terms and can get you the cash quickly to purchase a turnkey investment property. Plus, don’t forget, you can do a cash-out refinance on your investment property (after you see some appreciation) and pay off the HELOC.

Financing certainly has its place in turnkey investing. For those who don’t have cash readily available, it’s a good resource, but the power of cash is undeniable. From getting the best properties before anyone else to long-term wealth through owning tangible real estate outright, you simply cannot deny that cash is truly king.



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What to Do When Your Rental Is Vacant

Mon, 08/20/2018 - 11:35am

Many would-be landlords love the idea of bringing in “mailbox money” – income generated from the rent they receive from tenants with only simple upkeep required.

If you’re a landlord, at some point, your property will be vacant, and that mailbox of yours will be empty. What will you do then?

Vacancy rates for rental properties in the U.S. have been below 10 percent since 2010, and as of the second quarter of 2018, they were just 6.8 percent, near the lowest levels in the last eight years, according to the U.S. Census Bureau. Low vacancy rates are in large part due to a nationwide housing shortage that has persisted in recent years and is due to the halt in new construction that occurred during the Great Recession and the slow pickup since.

But low vacancy rates nationwide – or even lower vacancy rates in your city – aren’t a guarantee that you’ll find a tenant for your investment property immediately upon purchase or after another tenant gives notice that she’ll be moving out.

The first thing to know about having an empty rental is how long you can sustain a property without tenants. Then it’s a matter of leveraging the tenantless period to reduce your chances of frequent or lengthy vacancies in the future. Here’s what you need to know.

You may already own the rental property, or you may still be shopping for the right one, but it’s not too late to do the math on how long you can afford to have this valuable source of income sitting without tenants.

The vacancy rate references the amount of time throughout the year you could expect your property to be unoccupied and not collecting rent. With a 5 percent vacancy rate, for example, your property would be vacant just over 18 days out of the year.

“You’re basically losing a month’s worth of rent a year on vacancy,” explains Daren Blomquist, senior vice president of communications for real estate information company ATTOM data solutions.

Considering a 14 percent vacancy rate, that’s just over 51 days without rent, which you would likely round up to two months. You need to be sure you have enough financial cushion to cover the cost of utilities, necessary repairs, possible renovations and marketing for two months without income from a tenant. Spread out over a year with different, short-term tenants, you could be looking at closer to three months’ rent lost.

As long as you have the financial ability to handle those vacant months, you can handle the higher risk. If not, this may not be a good investment for you to take on. Or maybe the monthly asking rent you’ve envisioned is too high, and you need to lower the rate to help ensure there are more renters who can afford to live there.

Reducing Your Chances of an Empty Rental

If you find yourself without tenants, you can do a few things to help shorten that time and reduce the chances of enduring a lengthy vacancy period.

Hire a property manager. If you’re a small-time investor with just one or two rentals and a full-time day job, your income property can’t be your first priority. A good option may be turning over daily management to a professional who’s dedicated to getting the space occupied and taking care of regular maintenance issues a tenant might have. A property manager also likely has access to more marketing outlets, platforms and renter networks to find potential tenants quicker than a Craigslist ad might.

Seek tenants with long-term needs. Reduce the chances of having to deal with multiple tenants moving out of the same place inside a year by noting in marketing or rental ads that you seek tenants willing to sign at least a yearlong lease. Once the tenant has signed the lease, you can rest easy knowing you won’t have vacancy for another year, barring problems with rent payment or eviction for any other reason.

Mary Gwyn, owner and chief innovator of Apartment Dynamics, a property management firm that also trains other companies on property management practices, notes that a month-to-month lease often asks for higher rent because of that greater risk for vacancy in the future.

“You can give notice and I incur lost rent while it’s vacant and [additional] costs to turn it for the next person,” Gwyn said in an email.

Make it a vacation rental. You could also go the opposite end of the spectrum and market your property on vacation rental sites like Airbnb, VRBO or To do so, however, the property needs to be fully furnished and cleaned between guests like a hotel. Unless your investment property is in the heart of a destination downtown, you likely won’t have guests every night. Consider this an option to help supplement some costs, but you’ll likely see high vacancy compared to a long-term lease situation.

Strategize for lease expiration dates. Reduce your chances of having your rental sit vacant for a month or more at a time by being clever about when you rent it out. Gwyn says Apartment Dynamics aims to make the largest number of lease expirations occur during the busiest time of year for renters to seek a new home. To get on the right pattern, you may have to keep your rental vacant on purpose for a month or two extra, but it could help reduce vacancy time for years going forward.

July and August are the most heavily trafficked for would-be renters, Gwyn says, particularly in Southern markets and for people trying to move without interrupting the school year. With eager new tenants looking for a place to live, “if people don’t renew, at least we reduce our risk of long vacancy and reduced rates,” she explains.

Lower the rent. If that cushion is depleted and the clock is really ticking for your finances, lowering the rent may be the best option to get a tenant in the place and paying rent. You may not be making as much of a profit as you originally hoped, but if breaking even on the monthly expenses is all you need, it may have to be what you settle for right now.

How to Take Advantage of Vacancy

The No. 1 goal of owning a rental property is to have it occupied, and aiming for 100 percent occupancy is, of course, ideal. “All things being equal, you’d want to keep that property occupied as much as possible,” Blomquist says, although he does note there can be a silver lining for those landlords who see a long-term tenant move out.

“If you have a tenant who’s in the property for a very long time, a lot of times you’re not raising the rent as quickly as you would if there’s a higher turnover,” he says. When a tenant who’s rented from you for five years moves out, you’re able to adjust the rental rate to match the current market more so than an annual increase of $100, for example.

Especially with long-term tenant move-outs, you also have the opportunity to take care of deferred maintenance and updatesthat otherwise went unnoticed by the tenant. A refrigerator on its last legs can be replaced with a new one, and you have the time to repair the scratches on the walls and damage to the floor from the previous tenants. While you hopefully won’t be enduring multiple months of vacancy, you can take advantage of a couple weeks without a tenant ready to move in to help make the space as new and fresh-looking as possible, which will hopefully help bring in higher rent.


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Rent control fuels costliest fight on California 2018 ballot

Mon, 08/20/2018 - 11:23am
  • The AIDS Healthcare Foundation has poured more than $12 million into a November initiative it’s let cities and counties regulate rental control.
  • Started in 1987 to provide hospice care to AIDS patients, the AIDS Healthcare Foundation has grown into a global health care organization similar in size to Planned Parenthood.
  • Opponents of rent control say it decreases housing supply in a state facing a severe shortage.

A Los Angeles-based health care nonprofit known for funding controversial ballot measures is waging an expensive battle with the real estate industry over rent control in California.

The AIDS Healthcare Foundation has poured more than $12 million into a November initiative it’s spearheading to let cities and counties regulate rental fees in buildings that state law currently shields from such control.

A $10 million contribution the foundation reported Wednesday made the initiative the most expensive on the 2018 ballot so far.

Started in 1987 to provide hospice care to AIDS patients, the AIDS Healthcare Foundation has grown into a global health care organization similar in size to Planned Parenthood. The group also has waded into politics, bankrolling measures ranging from prescription drug pricing to housing policy, as well as lobbying at the state and federal level.

Supporters say the rent control measure will protect low-income people from being priced out of their homes, while opponents argue it will decrease housing supply in a state facing a severe shortage.

Opponents have raised $22 million, mostly from rental companies and the California Association of Realtors.

The measure would repeal the Costa Hawkins Rental Housing Act, a law that banned rent control on single-family homes and all housing built after Feb. 1, 1995. Costa-Hawkins also prohibits cities and counties from telling landlords what they can charge new renters. Legislative efforts since to expand rent control, including one this legislative session, have failed.

Real estate industry groups and other rent control opponents spent more than $10 million lobbying California officials last year on a Costa-Hawkins repeal bill and other issues.

Tenant groups can’t afford to challenge the industry alone, so they teamed up with the AIDS Healthcare Foundation to put the rent control measure, Proposition 10, on the ballot, said Christina Livingston, executive director of the Alliance of Californians for Community Empowerment Action.

“No matter how much we are able to raise, we are going to be outspent,” Livingston said. “We know that without significant funding that we don’t have much of a fighting chance.”

AIDS Healthcare, which reported nearly $270 million in net assets at the end of 2016, operates clinics and pharmacies around the world. It also brings in money from thrift stores it runs. Nonprofits like the foundation can spend money on political causes related to their mission.

‘We’re in an emergency crisis situation’

The housing shortage in the nation’s most populous state directly affects people’s health, said Michael Weinstein, the foundation’s president. A lack of shelter can make people sick and prevent them from accessing care.

“We’re in an emergency crisis situation,” Weinstein said. “We have to do something to stop the displacement.”

The rent control campaign is part of a larger move by the nonprofit health care provider into housing issues.

Last year, it spearheaded an unsuccessful Los Angeles ballot measure to restrict large developments. Weinstein said the goal was to kneecap efforts to build only luxury high-rises.

Opponents said the measure would have decreased LA’s housing supply. They also point to the foundation’s attempts to block a high-rise development that will overshadow the organization’s downtown headquarters, suggesting a personal motivation.

Weinstein said the organization’s effort was prompted in part by development in the foundation’s Hollywood neighborhood where they could see gentrification firsthand. But he said he has nothing to gain personally from the housing policies the foundation supports.

The foundation was also a driving force behind Proposition 61, the most expensive initiative on the California 2016 ballot. It spent $19 million on the unsuccessful bid to lower prescription drug prices, which drew fierce opposition from pharmaceutical companies and others. The foundation also mounted a similar unsuccessful initiative in Ohio in 2017.

The foundation operates three Los Angeles buildings that house more than 400 low-income people. Most of the units are rented for less than $400 per person per month, Weinstein said. The foundation also plans to expand its affordable housing efforts to other states.

California has a disproportionately high rate of homelessness, and nearly a third of California renters spend more than half their income on rent, according to the state’s housing agency. In recent years, California has produced fewer than half the new units it needs to house its growing population.

“It’s a problem that everybody should be attempting to resolve,” said Tom Bannon, CEO of the California Apartment Association, which represents rental housing owners and managers and is leading the opposition to Proposition 10. “Instead we have a focus on a policy that we believe does nothing to address the affordable housing shortage that exists in California and is actually counterproductive to building new affordable housing.”

The nonpartisan Legislative Analyst’s Office says Proposition 10 will lower the value of rental properties.

This will discourage developers from building new homes the state desperately needs and drive small landlords out of business, Bannon said. Reducing developers’ profits would slow the building of already scarce affordable housing for low-income people, he said.


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HUD launching push to get more landlords to accept housing vouchers

Mon, 08/20/2018 - 11:19am
HUD says studies show voucher acceptance is far too low

It’s apparently far too difficult for low-income households to use the Department of Housing and Urban Development’s housing voucher program to gain access to affordable housing and HUD is planning to do something about it.

HUD announced Monday that it is launching a push to get more landlords to accept housing vouchers, citing two studies that claim that the housing voucher program is not functioning as it should be.

According to HUD, the studies show that “most” landlords to accept housing vouchers and therefore deny affordable housing opportunities to those who need it most. Additionally, the studies show that the landlords that accept housing vouchers often complain about the difficulty of administering the program.

As a result of the studies, HUD Secretary Ben Carson is establishing a new “Landlord Task Force” that will aim to increase participation in the Housing Choice Voucher Program, which is the nation’s largest rental subsidy program and helps more than two million low-income households afford housing each year.

As part of the push, HUD said that it will be conducting listening forums in select markets around the country to hear directly from landlords and others on how to increase participation in the voucher program.

“These studies tell us that we have a lot of work to do to engage more landlords, so our Housing Choice Voucher Program can offer real choice to the families we serve,” Carson said. “We will be traveling the country to hear directly from landlords about how we can make this critical program more user friendly.”

According to HUD, the listening forums are “intended to reveal how HUD might make its primary rent subsidy program more accessible and acceptable, specifically in higher opportunity neighborhoods where landlord participation is lowest.”

There are two studies that are the basis of this effort. The first, which was sponsored by HUD and conducted by the Urban Institute, looked at landlord voucher acceptance in five cities: Philadelphia; Los Angeles; Fort Worth, Texas; Newark, New Jersey; and Washington, DC.

According to HUD, the study used paired testing methods at multiple sites to examine how landlords treated voucher recipients.

“While landlord participation varies across the five study sites, the researchers found voucher recipients are hard pressed to find a landlord who will accept their vouchers, especially in higher opportunity neighborhoods,” HUD said of the study. “In addition, landlords often ‘stand up’ testers posing as voucher recipients and even deny rental requests once testers reveal their source of income.”

The study, which is set to be released in full next month, shows that making the voucher program work is “extremely difficult” for all parties involved.

“We learned that the process of finding an available unit, reaching landlords, finding a landlord to accept vouchers, and then meeting with them to view the available housing was extremely difficult,” the Urban Institute researchers said in an executive summary published Monday by HUD. “It takes a lot of work to find housing with a voucher.”

The UI study showed that voucher recipients who want to live in an “opportunity area,” one with access to high-quality schools, jobs, and transportation, have an even harder time finding housing.

“We learned that even if landlords said they accepted vouchers, they may treat voucher holders differently during apartment showings—standing them up at higher rates than control testers,” the UI researchers said. “Our findings should remind policymakers that landlords are not passive actors in the HCV program. Landlords play a critical role in narrowing or widening the choices available to voucher holders in their search for safe, affordable, quality housing.”

The other study, which is from Johns Hopkins University, looked at the urban rental markets in Baltimore, Cleveland, and Dallas, and examined how these local markets impact a landlord’s decision whether or not to participate in the voucher program.

According to HUD, the researchers found that many landlords like the voucher program’s reliable rent payments, but the main reasons for not participating in the program were frustrations with required inspections and disappointment with how local housing authorities handle disputes with tenants.

HUD said that it will officially launch its landlord engagement campaign on September 20 in Washington, D.C.

From there, individual landlord forums are planned for Philadelphia, Atlanta, Dallas, Los Angeles, Salt Lake City and Salem, Oregon.

Then, after completing these listening sessions, the Landlord Task Force will give Carson a series of policy recommendations on potential changes to the voucher program.



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Why Would You Choose ZipcodeXpress Package Smart Lockers?

Thu, 08/16/2018 - 3:00pm

People always ask the same question: among all these smart locker providers, which company should I go with? What advantages and disadvantages does each brand have?

In a nutshell, ZipcodeXpress provides a total locker solution for the best affordable prices.

Key Advantages

Totally Customizable

As the manufacturer, we are capable of working with clients to customize any size, configuration, finish etc. Tell us your thoughts. We will make it happen for you!

Various Programs

Not only do we offer purchase and lease programs, but we also came up with the resident participation program. It’s a great option to enjoy our amazing smart locker for no charge to you. Sounds great, right? Contact us for more information.

100% Satisfaction Guarantee or Money Back

First and only to offer this “100% Satisfaction Guarantee or Money Back”. We are driven to keep our clients satisfied. You can either enjoy the system free of charge for a certain period or get your money back if you decide to cancel the service.

30%-50% Lower Than Competing Brands

As the manufacturer, we are able to cut the production cost drastically; plus, we are also the distributor, so no middle-man or sales markup involved. Therefore, our price is usually 30%-50% lower than competing brands.

Cloud Backstage Management and Reporting

  • General/Income Report Generation
  • Real Time System Status Remote Monitoring
  • User/Membership Management
  • Courier/Package Management
  • Built-in Payment System

Total Solution for Any Locker Demand

From small up to oversized package lockers, refrigerated and frozen lockers, full-service laundry lockers, we provide the whole locker product line, offering you total locker solutions!

Best in Market Mobile App

  • Both iOS and Android operating system
  • Patent protected QR code scanner to retrieve packages
  • Package management
  • Wallet management
Total ComparisonCOMPETITIVE DIFFERENTIATORSOTHER BUSINESSESZIPCODEXPRESSManufacturerNoYesDirect DistributorNoYesLocker CustomizationNoYes, both hardware and softwarePricing$$$$Mobile AppMost noYesApp Advertising/MessagingNoYesVoice InstructionNoYesIC Card ScannerNoYesLocker Opening Size3 to 5 size choices6 sizes including S, M, L, XL, XXL, OversizePackage PickupInput pickup codeUse App to scan QR code or input pickup codeNotificationEmail, some support text message3-way notification via App, text, and emailCustomer ServiceRemote24/7Backstage Management SystemMost noYesProgramsPurchasePurchase, lease, tenant pay participationMail-out OptionMost noYesShipment Charge$$$Actual 3rd party shipment invoiceAll Weather CapabilityMost noYesCustom WrapMost noYesRefrigerated lockersMost noYes


Creative and Experienced Management Team

ZipcodeXpress was founded by a team of creative entrepreneurs. They’ve been very successful in their previous businesses. Their goal is to provide customers with faster, more secure and lower cost logistics service to make everyone’s life easier with great happiness. Along with new investment no matter in finance and intelligence from new partners, we are about to move to the next level.

Visit us at or call 1.800.883.9662

Scan this QR code to download our amazing App

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HUD Backs Off on Rule It Says Stifles Affordability

Thu, 08/16/2018 - 9:49am

The U.S. Department of Housing and Urban Development is taking steps to scale back a fair housing rule that had sought to combat housing segregation. HUD Secretary Ben Carson says the 2015 rule is standing in the way of efforts to add more affordable housing.

The Affirmatively Furthering Fair Housing rule required cities and towns to examine historic patterns of segregation, and then create plans to combat them. Those who didn’t comply risked losing federal funding. “It’s ironic that the current AFFH rule, which was designed to expand affordable housing choices, is actually suffocating investment in some of our most distressed neighborhoods that need our investment the most,” Carson said in a statement. “HUD’s 2015 rule often dictated unworkable requirements and actually impeded the development and rehabilitation of affordable housing.

Rep. Paul Gosar, R-Ariz. criticized the 2015 rule as a way to “extort communities into giving up control of local zoning decisions” and added that he looks “forward to seeing HUD completely rescind the utopian Obama regulation.” Carson told The Wall Street Journal that he wants to spur development of mixed-income multifamily dwellings and make HUD money contingent on looser zoning rules instead.

But some critics are concerned about HUD’s efforts to rollback AFFH. “You’re going back to communities willfully blinding themselves to patterns of segregation,” Sara Pratt, a former President Obama official who helped develop the rule, told NBC News. “Without this rule, communities will not do the work to eliminate discrimination and segregation.” Pratt’s law firm is representing a coalition suing the Trump administration for the attempted rule suspension.

HUD offers a look at the proposed amendments to the AFFH at its website and will accept public comments through the Federal eRulemaking Portal.



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Take a Crash Course in Student Housing Investments

Thu, 08/16/2018 - 8:59am

As the back-to-school season gets under way, you may be shopping around for new investments for your portfolio. Real estate is a solid diversification tool and student housing is an under-the-radar sector to consider this fall.

“The student housing real estate investment market is virtually untapped,” says Jay Morrison, CEO of the Tulsa Real Estate Fund. An aura of exclusivity surrounds student housing investments but it’s a sector that’s far from fully realized, “which means there’s plenty of room for opportunity for new investors in this market.”

As a smaller niche within the commercial real estate market, student housing has long been the domain of institutional investors and people with a high net worth.

“On the private side, we’re seeing a tremendous amount of investment in that asset class,” says Randy Hubschmidt, manager partner at Fortis Wealth, while it’s traditionally been more difficult for investors to get access via the public markets.

The barriers to entry for the everyday investor are beginning to crumble, however. If you’re ready to expand your real estate investment horizons, it’s time to get schooled on the benefits of student housing.

It earns good marks for consistency. Student housing offers a degree of stability that isn’t always present in other real estate sectors, particularly during periods of market volatility.

“One of the main advantages is consistency,” Morrison says. “Demand for student housing is always going to be there, which means year after year, there will always be viable tenants for your investment.”

That tends to hold true even when the economy stutters.

“Student housing tends to be less economically sensitive, relative to other sectors, due to the nature of the industry,” says Beth Mallette, real estate series fund manager at Manning & Napier Advisors. “During economic downturns, enrollment tends to remain steady or may even rise due to fewer employment opportunities, which typically leads to growth in college and university enrollment.”

That’s reassuring if you’re worried about turbulence in the market or the possibility of a recession. Student housing can offer predictability that other sectors may lack.

“One of the advantages is that students sign one-year leases,” Hubschmidt says. “Think of it as analogous to buying a one-year CD; those rates will reset annually, which can work to your advantage in a rising-rate environment, or in this case, a rising rental market environment.”

Lease renewals may also be easier to obtain, since students usually know well in advance if and when they’ll be returning to school for the next year. But, there is risk involved.

“The sector is exposed to more seasonal volatility given the need to fully lease facilities every year for the school year over a relatively shorter window,” Mallette says. “This degree of seasonality is more unique to student housing versus other sectors.”

Student housing can also be threatened by large exposure to new development, Mallette says. “This can provide investors with a growth engine however, it also brings with it the potential for periods of oversupply at specific universities, which can put stress on leasing progress as new supply is digested.”

Profit potential is high. Consistent demand for student housing can lead to a strong return on rental investment.

“Generally, a landlord can charge more money per square foot in a student rental, than say a single-family home in the suburbs because there are roommates involved,” says Seth Stephens, director of sales with Renters Warehouse Seattle in Tukwila, Washington.

Stephens says student housing offers more security for investors when it comes to collecting rents as students often receive a helping hand from parents. “Whether they’re paying for the rent or co-signing the lease, the parents’ involvement generally means rent is paid and paid on time.”

Location can also influence profitability for student housing. Depending on what’s nearby, student rental rates may be higher than the standard residential rates.

“Neighborhoods near college campuses tend to be more expensive than surrounding areas because of their proximity to campus,” Stephens says.

Profits can, however, be offset by maintenance and management costs if you’re not overseeing a rental property yourself, so it’s important to factor those in. And be prepared for some of the unique headaches that sometimes go along with renting to a younger crowd.

Morrison, who sponsors 28 student housing units in Atlanta, says the biggest risks are the volatility and maturity of having teenagers and young adults as tenants. Whether you’re managing a property yourself or hiring a team to do it for you, patience and understanding are critical.

“You’re dealing with the personalities and quirks of dozens of maturing adults who are very different to most other tenants,” Morrison says. And if your tenants rely on financial aid for part of their income, “you may have to get used to quarterly or semesterly payments instead of your usual monthly rental cash flow.”

Indirect investments can avoid student housing hassles. If owning a residential property and renting it out to students is too much to handle, you may want to look to real estate investment trusts, exchange-traded funds or real estate crowdfunding instead.

Mallette says public student housing REITs provide an attractive way to gain exposure to the sector since they have large, diversified portfolios that have been increasingly focused on campus, with strong university relationships to provide growth pipelines. Liquidity is an added perk.

“Public student housing REITs also reduce economic sensitivity by partnering with some of the highest quality universities that see less fluctuation in enrollment,” she says. Through the end of June, student housing REITs delivered an average return of 14.34 percent year to date.

In general, REITs also yield many of the same benefits you’d get with direct ownership. That includes dividend-based income, liquidity, appreciation, an inflationary hedge, diversification and favorable tax treatment.

Real estate crowdfunding affords similar benefits, along with increased accessibility. There are real estate crowdfunding platforms that allow you to invest with as little as $500 to $1,000, which is a steep discount from the five- and six-figure minimums often associated with private student housing investments.

Whether you go the direct or indirect route with student housing depends largely on what type of investor you want to be, Stephens says.

“If you want to be very involved and a hands-on landlord, it’s best to purchase real property. If you want to be more of a passive investor, someone who simply wants a return, then a REIT or an ETF can be good,” he says. Just remember to look at “cash flow, appreciation benefits and tax benefits of a real property when trying to make this decision.”



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5 Pitfalls You May Encounter If You Renovate Without a Permit

Thu, 08/16/2018 - 8:47am

If you’re thinking of renovating, you’ve probably already realized that it’s a long road from “brilliant vision” to “completed new addition.” Once you’ve found the architect or contractor who’ll bring your ideas to fruition, it’s time to think about permits.

We know, we know: Who wants to deal with one more time-consuming and costly step? And what if your local building department rejects your plans and you have to start over again?

“Over the last several years, the process has become time-consuming and somewhat costly,” explains Joanne Intieri, a real estate agent with Douglas Elliman. As such, “Many homeowners want to move ahead on interior renovations without permits because they feel the local municipalities will never catch wind of it.”

While it might be tempting to skip this part of the process, you can find yourself encountering more headaches should you ignore it. While the legal requirements for permits depends on your jurisdiction and the nature of the renovation, here are five pitfalls you may encounter if you try renovating without a permit. In other words: Don’t renovate without one!

1. You may be fined or issued a stop-work order

While it’s easy to think you’ll slide under the radar or face nothing more than a slap on the wrist if you’re caught, it’s actually much more serious than that. 

“Your municipality could issue a stop-work order,” Intieri explains. “This may also result in a substantial fine for the homeowner and contractor. Unfortunately, more times than we wish to talk about, the renovation completed by a contractor comes to the attention of the building department when an individual decides to sell their home.”  

This brings us to the next stumbling block homeowners can experience…

2. You may blow a potential sale

“Not getting permits for home renovations can get particularly dicey once you attempt to sell your home,” says Leigh McAlpin of Dwelling. For one, “Nonpermitted additions, particularly those that are not up to code, cannot be included in the square footage listed when you put your home on the market.”

In other words: Even if you made a huge addition to your house, the smaller square footage is what you’ll have to list, which means your home will appear to be much smaller in your listing than it really is.

Then, of course, there’s how potential buyers will react when they hear your house has had unpermitted work done.

“First, it causes prospective buyers to become uncertain about the quality of the work throughout the home, unpermitted and permitted alike,” says Antoine Dean with Living Room Realty. “It can create a red flag in the buyer’s mind, causing them to look at everything through a magnifying glass. This can cause uncertainty and the buyer could lose confidence to move forward with the purchase.”

3. Your home may plummet in value

Even if buyers turn a blind eye to unpermitted renovations, that doesn’t mean other pros in the home-buying process will, too.

“It can cause appraisers to drop the value of your home and depreciate the value of the work that has been done,” Dean continues. “The appraiser can simply require that the work be completely removed and redone, with permits. The appraiser’s job is to protect the interest of the bank, so if the appraiser’s requests aren’t met, the bank could choose not to fund the loan, which could kill the deal.”

4. Your home insurance policy may not apply

Furthermore, unpermitted renovations might violate your home insurance policy. Let’s say the work was done incorrectly and, as a result, faulty electric work sparks a house fire. The damage caused may not be covered, leaving you with a costly nightmare.

5. You might get lower quality workmanship

Permits are also a simple way to keep your contractors in line and doing their best work.

“When your contractor knows that permits are required, along with the detailed inspections that follow, they are more likely to complete the job in a more thorough, professional manner,” explains McAlpin. “Their work will be completed with the knowledge that—in addition to making the client happy—their work has to be up to code and pass all inspections.”

Skip the permits, and who knows what a contractor might let slide?




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5 things homebuyers must know about flood insurance

Thu, 08/16/2018 - 8:42am

From beachfront condos to landlocked subdivisions, flood zones are everywhere. In fact, almost 41 million Americans live in flood zones, according to a study published in the journal Environmental Research Letter.

Just a couple months into the official start of hurricane season, which runs from June 1 to November 30, many people in storm-prone areas are mindful of the destruction flooding can cause.

Last year served as a major wake-up call in disaster preparedness. Three Category 4 hurricanes made landfall in one season, and Hurricane Harvey broke records for the most rainfall from a U.S. cyclone, measuring 50 inches in some areas. The National Flood Insurance Program, or NFIP, paid more than $8 billion to flood insurance policyholders in 2017 alone.

Here’s five important things homebuyers should know before they buy in a flood zone.

1. You might be required to get flood insurance

Those who live in high-risk flood zones, designated with the letters A or V on a flood insurance rate map or FIRM, are usually required by their mortgage lenders to purchase flood insurance. Flood coverage is separate from standard homeowners insurance.

If you don’t have flood insurance and damage to your home is caused by precipitation, then you’ll likely not be covered by your homeowners insurance policy. Most homeowners insurance will cover water damage from a burst pipe, but not heavy rain, rising rivers or a natural disaster.

Homes located in high-risk zones require an elevation certificate, or EC. The EC shows what your home’s elevation is in relation to how high floodwaters will reach in the event of a major storm. This gives insurance companies an idea of how much risk is involved, which will help determine your premium.

Sellers usually pick up the cost for the EC, which entails a surveyor coming to the property to measure the elevation, says Louise Rocco with Exit Bayshore Realty in Tampa.

2. The NIFP may be on soggy ground

The issue of flood insurance stood out in stark relief in July 2018 when the NFIP was set to expire. The federal program enacted in 1968 helps offset insurance costs for homeowners who are required to purchase flood insurance. Congress passed legislation which was signed by the president, in the eleventh hour, for a four-month extension to the NFIP.

The coverage can be expensive for people in high-risk zones, especially since insurance costs rose 8 percent this year. Premiums through the National Flood Insurance Policy started rising in April, bringing the average annual amount, including surcharges, to $1,062.

In Fremont, Nebraska, where the ground is pancake-flat, many neighborhoods are susceptible to flooding because of extremely slow stormwater runoff. Jennifer Bixby, president of Don Peterson & Associates in Fremont, says residents depend on the NFIP.

“The federal subsidy program is what helps keep flood insurance rates affordable. In Fremont, our citizens pay $1 million alone in flood insurance premiums. If the flood insurance program went away, those premiums would go up. That would impact people’s quality of life,” says Bixby.

For some, the extra money spent on insurance is not worth it.

“A lot of buyers don’t want to spend the money on extra insurance. I know one woman who was paying $5,000 per year on flood insurance. You have to make sure you can afford it and you’re willing to pay it,” says Bixby.

3. If you’re not in a flood zone, you’ll pay less for insurance

Even if you’re not required to get flood insurance by your lender, you still might want to consider it. For homes that are near high-risk areas, insurance could be a lifesaver.

“Flood insurance is a bargain when you consider the potential loss. One foot of water in an average home can cause $72,000 worth of damage,” says Chris Orrock, public information officer with the California Department of Water Resources.

Pro Tip: Don’t wait for an approaching storm to get insurance. Most flood insurance policies have a 30-day waiting period before coverage is activated.

NFIP claims by residents who lived outside of those high-risk zones accounted for more than 20 percent of all NFIP claims filed. These folks received one-third of federal disaster assistance for flooding.

For people not in high-risk flood zones, the cost of insurance is more affordable.

The NFIP’s Preferred Risk Policy program offers low-cost policies for homes that have a low to moderate flood risk. These are designated by B, C, or X zones on a FIRM.

For example, $250,000 worth of coverage, on a house with a basement, costs $386 per year. For a little more than a dollar a day, this could be the best investment you make all year, says Orrock.

Flood insurance rates are based on several factors, according to the NFIP, including:

  • Year of building construction
  • Building occupancy
  • Number of floors
  • Location of its contents
  • Flood zone type
  • Location of the lowest floor in relation to the base flood elevation on FEMA flood map
  • Deductible and amount of building and contents coverage
4. To understand the flood risk, ask before you buy

Experts agree that if it rains, it can flood. In fact, 98 percent of U.S. counties have been impacted by a flooding event. Even one of the driest spots in America, Death Valley, has had dangerous flash floods.

Before buying a home in a flood zone, it’s important to understand how much risk you’ll be assuming.

“One of the reasons people buy in Florida is because they want waterfront property and that waterfront property is always going to be in a flood zone. And even things that they say aren’t in a flood zone still could be. The best course of action is to research the property yourself and ask lots of questions,” says Rocco.

Flood zone information is usually in the MLS listing. Issues like drainage or flooding problems must be disclosed.

“Sellers are obligated to disclose information related to flooding, such as whether or not the property flooded before,” says Bixby.

People who are in the highest-risk areas will pay more for insurance, so this is something to consider when you’re house hunting. Buyers should talk to their lenders about any contingencies associated with buying in a flood zone.

“Some lenders might require you to pay a year’s worth of flood insurance upfront,” says Rocco.

Find out your flood zone designation

Low-risk zones are X and C. Sometimes X zones will be shaded, which indicates that a barrier, like a levy or dam, has been built to reduce the flood risk. Of course, these structures are not a guarantee that flooding won’t occur.

“If you’re protected by a levy, even if it meets FEMA standards, there’s a 25 percent chance during the life of your mortgage, about 30 years, that it will fail,” says Orrock.

A and V = High risk

D = Undetermined risk

B and X (shaded) = Moderate flood hazard

C and X (unshaded) = Minimal flood hazard

5. Investigate flood-proofing retrofitting costs and repairs

If you fall in love with a property, but want to mitigate flood hazards, you can always make changes that will help reduce flood damage. These modifications can be major structural changes or small tweaks, from putting the structure on stilts to adding concrete blocks under your water heater.

Talk to your agent about negotiating the costs of these flood-mitigating updates with the seller.

“You can elevate the building to make sure water isn’t coming in. You can even raise it so that the lowest floor is above flood level,” says Nick Ratliff, associate broker with Better Homes and Gardens Real Estate Cypress in Lexington, Kentucky. “These are things you can talk to your agent about if you’re in a flood zone.”

Depending on your prospective home’s level of risk, small changes can make a big difference. A rule of thumb is to make sure water is flowing away from the home, not gathering in pools.

For example, make sure downspouts are facing away from the structure. Gutter runoff should’t collect near the house, which could eventually cause leaks in your basement. If you see this, address it with your agent or the seller.

“Check the pipes and gutters. Make sure they’re clean. Place air conditioner units on concrete blocks, above flood level. This will help protect your home and appliances,” says Rocco.


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How to buy and finance apartment buildings

Tue, 08/14/2018 - 8:59am

Apartment building loans are a lot like other residential real estate financing. It all starts with a property, borrower and lender, and it all ends, if all goes well, with a closed loan and newly purchased or refinanced property.

Here’s a guide to what borrowers need to know about how to buy and finance apartment buildings:

What constitutes an apartment building?

Detached homes, condominiums, duplexes, triplexes and fourplexes typically are classified as one-to-four-unit properties, or one-to-fours. Properties that have five or more dwellings are categorized as apartment buildings or multifamily housing.

A loan for a duplex, triplex or fourplex doesn’t differ much (if at all) from a loan for a detached house, but loans for larger properties involve “a little different underwriting, a little higher qualification,” says Dan Borland, office manager for commercial real estate at Wells Fargo in Orange County, California.

How to qualify

One difference is that before an apartment loan is approved the lender might consider more qualitative information to try to understand the borrower’s experience as a rental property owner or manager.

“We’ll look at the candidate and say, ‘What has that person owned and what has been their management experience collecting rent, managing properties and handling a project of that size?” Borland says.

The borrower’s credit score, income and personal and business tax returns will be considered along with two years’ operating statements and a current rent roll for the property.

The most important property metrics are:

  • Net operating income: The annual income, minus expenses that a property generates from its operations
  • Debt service coverage: Measure of cash flow relative to debt payment obligations
  • Loan-to-value (LTV) ratio: A measure of the loan amount relative to the value of the property

“The property has to service its debt at a comfortable margin,” Borland says.

Borrowers who need more flexibility might want to turn to a small bank, says Blake Kreutz, commercial loan officer at County Commerce Bank in Ventura, California.

“We typically look for a 30 percent down payment and credit score is important, but it’s not a deal-breaker,” Kreutz says. “If someone is stronger in one area and weaker in another, we can work around that.”

Mixed-use and partially-occupied properties

Mixed-use properties might be classified as commercial or residential, depending in part on the proportions of each use. A typical configuration of many apartments over a few stores is treated as an apartment loan.

“If it’s 50-50 or there’s a lot more commercial, the underwriting changes and it becomes a little more conservative structure,” Borland says.

Apartment buildings that are vacant or only partially occupied can be financed; however, the loan might be short-term and have a variable rate with the expectation that it would be replaced with long-term financing once the property has been stabilized.

If the rents don’t support the debt, the borrower’s cash flow could help; however, “it would take a pretty strong borrower to support a whole building with a mortgage on it,” Kreutz says.

Conforming or portfolio?

Like one-to-four loans, apartment loans come in standardized types that lenders can sell to Fannie Mae or Freddie Mac and customized types, known as portfolio loans, that lenders keep on their own books.

Standardized or conforming loans typically have a slightly lower interest rate, but the guidelines are more rigid.

Loan terms and types

Apartment loans can be long term (25 or 30 years) or short term (five, seven or 10 years).

Interest rates can be fixed, variable or hybrid, which start out fixed and then reset or become variable after a specified time period.

Shorter-term loans can be renewed or refinanced at the end of the initial term, though the interest rate likely will adjust and some fees could be involved.

“When the loan matures, the rate is probably going to change,” Kreutz says. “It could be fixed for three or five years and then adjust at some point. You’re probably going to be dealing with at least one rate change throughout that time period.”

Loan amount

Most lenders offer apartment loans from $1 million or $2 million up to many millions. LTVs top out at 70 or 75 percent, which means the borrower needs a 25 or 30 percent down payment to buy (or that much equity to refinance). A lower LTV usually gets a lower rate.


Borrowers typically pay a loan origination fee and customary closing costs, including appraisal, title and escrow costs, plus expenses for any inspection, environmental or other due diligence reports. Property insurance is a must. Flood insurance will be required if the property is located in a government-designated flood zone.


Most buyers purchase an apartment building through a limited liability corporation, or LLC.

“It is very rare that an individual has the title in their name,” Borland says. “Usually it’s an LLC.”

LLCs do what their name implies: limit liability.

“Most borrowers own their separate properties all in their own special purpose entity, or SPE,” Borland says. “They do that so if one property has an issue, (such as) a slip-and-fall accident, it can’t bleed into (the owner’s) other assets.”

Another level of complexity that might be required for a very large apartment loan is the single-asset bankruptcy-remote entity, which protects the property from the borrower’s personal bankruptcy and bankruptcies of his or her other properties.

“The asset is protected for us,” Borland explains, “so in case it stops paying interest on our loan, we can pursue foreclosure on our building and we don’t care that you and your other entities have filed bankruptcy.”

Prepayment penalties

Some apartment loans have a prepayment penalty known as yield maintenance. If the borrower pays off all or a large portion of the loan, the lender applies a formula to determine how much the borrower must pay to make up the forgone interest.

Other apartment loans have a prepayment scheme known as a step down. The 3-2-1 format is an example.

Borland explains, “If you pay the loan off in year one, you owe 3 percent of the amount you prepaid. Year two, it’s 2 percent. Year three, it’s 1 percent. Starting in year four, at month 37 or after, you get to pay it off with zero prepayment.”

The same scheme could be applied with a 5-4-3-2-1 format.

“It’s definitely a good thing to ask about and try to negotiate,” Kreutz says.


Some apartment loans are assumable, which means a new borrower can take over the original borrower’s loan. An assumption can be used to sell a property and avoid a prepayment penalty.

“The same credit guidelines imposed on the original borrower would be imposed on the incoming borrower,” Borland says. “If so approved, that borrower would enjoy the remainder of the terms and conditions of the loan that’s being assumed.”

Not all loans are assumable, so borrowers should ask whether a loan has this feature.

Recourse, non-recourse loans

If the loan is “full recourse,” the lender can seize the borrower’s (or guarantor’s) personal assets if the loan isn’t repaid. If it’s nonrecourse, the lender’s only option to satisfy the loan in default is to foreclose and take the property.

“A nonrecourse loan would price a little higher because the bank is taking a little more risk, so the rates are higher,” Borland says.


Once the decision to apply for a loan has been made, the borrower needs to give the lender all the information he or she needs to make a decision, says Frank Barefield, Jr., president of Abbey Residential, a Birmingham, Alabama, company that owns 8,500 apartment units in Alabama, Texas and Florida.

Rather than force the lender to extract the information piece by piece, Barefield prepares a 30- or 40-page package that is designed to provide the lender with all the information they need about the property. The package includes:

  • Pictures of the property
  • Property description: lot size, year of construction, number of units and existing amenities
  • Plans for upgrades such as a dog park, children’s playground, new appliances, countertops, plumbing or lighting fixtures, and how much those improvements will cost
  • Map showing the location of the property and nearby competing properties
  • Explanation of how competing properties compare with the property to be acquired
  • Rents and how much they will be raised or lowered
  • Copies of floor plans
  • Summary of sources and uses of funds for the transaction
  • Purchase price and closing costs
  • Loan amount and cash equity amount
  • Contingency fund amount
  • Names of real estate brokers, title companies, attorneys and other professionals involved in the transaction

“I want to provide exactly the information that somebody needs,” Barefield says. “Not too much and not too little.”



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How Landlords Can Manage Security for Multiple Properties

Mon, 08/13/2018 - 2:31pm

By Christy Matte

You’ve got contractors showing up at one property in half an hour, tenants locked out of another across town, and complaints of a suspicious person lurking outside the door of a third. This could be a landlord’s worst nightmare, or it could be just another day at the office. But with smart security technology, you could solve all these problems at once—provide a temporary door code for contractors, unlock the door for your forgetful tenants, and take a peek at your security camera to see that … uh oh, the contractors are at the wrong building!

Smart security technology—devices which you can control remotely—can help you manage locations from afar, saving you time and money while also increasing a sense of security for you and your residents. Here’s how to make it work for your properties.

Getting Started with Smart Home Technology

Unless you feel confident in installing cameras and sensors, you’ll want to consult with a professional to get your system set up. While there is plenty of security technology available that is easy to install and manage, tackling it all for multiple properties is challenging. Work with a home security provider or your internet service provider to ensure that your systems play nicely together and can easily be managed from one central device.

Choosing Devices for Your Properties

The following devices are components you might consider for your properties.

Emergency alarms – Get immediate alerts via text message if smoke and CO2 alarms are triggered so you can follow up with tenants or emergency services.

Locks – Smart locks use touchpads rather than keys for entry, making locked-out tenants and lost-key woes a thing of the past. In addition, codes can be added or deleted remotely, as tenants come and go. You can issue temporary codes to contractors or simply unlock doors from afar.

Doorbells – Smart doorbells are typically tied to small security cameras, allowing residents (or you, in the case of an empty apartment) to know who is at a door. They can even send text messages when pressed. Your contractors can alert you to their presence just by ringing the doorbell and a quick glance will allow you to confirm it’s them.

Security cameras – While on-property security cameras are nothing new, being able to control and monitor them from afar is a major benefit. Better still, they can send text messages for unexpected motion, such as in the hallway of an unoccupied residence. Just be sure cameras are only positioned at exterior or common areas, and inform tenants that they’re on the premises.

Lights – It’s unlikely that you’ll want to manage your lights manually, but there may be occasions where it comes in handy. Perhaps you’ve got a new tenant arriving late at night, or you’ll be stopping by yourself and don’t want to fumble around a dark hallway. Alternatively, if a contractor leaves a light on unnecessarily, you can switch it off without making the drive.

Sensors – A variety of sensors are available to protect your properties. There are the familiar window and door sensors, but there are also sensors for water leaks, as well as humidity, heat, and even air quality. All of these can alert you to threats to your property and your tenant’s health and safety.

Considering Your Tenants

As much as smart home technology can help make your job easier, it’s important to install it thoughtfully in residential settings. While remotely managing devices may save you time when your property is vacant, but some monitoring and controls may feel creepy for renters. Turn over controls of in-residence devices to the renters where possible and avoid devices that could explicitly “spy” on them within their homes, such as cameras and smart speakers. Leave those types of devices for tenants to choose – or not – in their own spaces.

Likewise, inform tenants of things like security cameras, smart doorbells, and other related devices in public areas. If they have the potential of being recorded via image or voice, they should know.

Smart security technology is a way to streamline management of your real estate properties, while also providing value and a feeling of enhanced safety for tenants. It allows you to virtually be in multiple places at the same time without going anywhere at all.

Christy Matte is a mom of two and a Boston-based writer who covers home security for Xfinity Home. She is also a die-hard techie who blogs at

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The rise of renter nation and why it’s here to stay

Mon, 08/13/2018 - 10:11am
High rents, home prices and interest rates should keep people renting for a while

The renter rate in the U.S. rose in 50 of the largest metros by 5% from 2006 to 2016, and it doesn’t look to be slowing down anytime soon.

According to Zillow, more than 36% of all U.S. households rent. The percentage has been growing for the last 10 years, and though homeownership has been making a small comeback lately, escalating rents and continually rising home prices are keeping many households on the lease life.

And it looks like it’s going to stay that way for a while.

“The homeownership rate is slowly rising – the most recent data show a sharp surge in young adult homeownership over the past two years – but it will likely take many years, if ever, for it to get back to its lofty pre-recession peaks,” Zillow Senior Economist Aaron Terrazas said in a statement.

In 50 of the largest metros in the country, the share of renters was higher in 2016 than in 2006. In 29 of those 50 metros, most people rent instead of own. This is as opposed to 2006 when only 16 of those cities were majority renters.

“The share of U.S. households that rent surged in the wake of the Great Recession, as millions of families were foreclosed upon and younger adults either chose to or had no choice but to rent for longer,” Terrazas said.

Take Memphis for instance. One of the more affordable markets in the U.S., Memphis posted the greatest increase of renters, with 56% of its households in the renter category in 2016, up 11 percentage points from 2006. This is despite having the lowest rent vs. own break-even point in the U.S.

Though some of the increase in renters in the nation can be chalked up to changing lifestyles and preference for the urban core, the real hand behind this trend is the unstoppable growth in home prices, which have been growing at about 8% annually.

“Renting remains more common years after the recession ended and after a historically long national economic expansion. Some of this shift is attributable to lifestyle choices, including young adults delaying marriage and starting families, and a strong preference for living in urban cores where renting is often more convenient and financially feasible,” Terrazas said. “Some is also driven by economic necessity – quickly rising home values can make it difficult for some to enter the market to begin with – and many previously foreclosed-upon families remain unable to purchase again, even years after foreclosure.”

In some markets, the situation is even more dire for want-to-be homebuyers. San Jose’s home prices have soared 27% over the last year, keeping 43% of its households in the multifamily fold, up about five percentage points since 2006.

Established rental hubs like New York, Boston and Miami have the greatest share of renters with numbers up near 70%. New York and Miami both are pushing the 70% mark, while Boston is sitting at 65%.

With the median rent nationwide up to $1,440, what was once a lifestyle conducive to saving for a down payment, renting is now a burden that often keeps renters from saving for down payments on homes that continue to climb in value.

For the time being, it looks like renter nation is here to stay.



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Flipping for profit: How pros choose a fix-and-flip property

Mon, 08/13/2018 - 10:05am
Key Points

How to flip homes for profit 

  • Shoot for 70 percent of the after-repair value (ARV) minus cost of repairs.
  • Look for homes with good bones (i.e., a solid structure).
  • Choose newer homes for faster, less thorough flips.
  • Get all proper permits for repairs or additions.
  • When starting out, get a mentor to teach you the ropes.

If you’re looking to invest in real estate, one way is with a rehab project, also known as a fix and flip. The process entails buying a fixer-upper, remodeling and/or renovating it and then selling it at a profit. With home prices rising across the country, however, flipping homes can be tricky. It’s important to know what you’re doing when taking on a fix-and-flip project. If you make a mistake, your profitable investment could turn into a costly money pit.

How do you separate the winning properties from the losers? Fix-and-flip investors look at a number of factors to help determine whether a property is a good investment.

After-repair value

One of the most important things that investors searching for properties to flip must consider is the property’s after-repair value, or ARV, according to Nancy Wallace-Laabs, of KBN Homes, LLC.

“Typically, if you’re investing, you want to buy a house that’s 70 percent of the ARV minus the cost of the repairs,” she said.

For example, if you determine a house’s value after you make repairs will be $200,000, and you estimate the repair costs to be $20,000, you shouldn’t pay more than 70 percent of $180,000 (the ARV minus cost of repairs), or $126,000 for the property.

Wallace-Laabs said she evaluates each property she comes across and asks herself whether it’s better suited as a rehab project or a buy-and-hold (that is, a rental property). “On flipping, you really need to analyze and know your formula to know how much money are you going to make on that property?” she said.

Lucas Machado, president of house-flipping company House Heroes LLC in Sunny Isles Beach, Florida, near Miami, agrees that the flipping game is all about the numbers.

“What do you think the thing is going to be worth once you’re done fixing it up?” he asked. “What are you paying for it right now? What are you paying to buy it, and how much is it going to cost to get it to being worth that? It’s really about nailing those numbers.”

It’s important to analyze comparable sales in the area to get a good idea how much the property could sell for, he said. You need to make sure you’re comparing “apples to apples,” he added: If a property in the area sold for $300,000, but it had a pool and your property doesn’t, for example, the two properties aren’t comparable and you can’t expect to sell yours for that much money.

“Good bones”

Doug DeShields, president of the National Real Estate Investors Association, and an active rehabber himself, said he typically looks for homes that were built between 1950 and 1975.

“They have good bones, good structure,” he said. “They’re typically brick and we can tend to do well in those houses.”

Part of knowing whether a house has “good bones” or not is having some familiarity with what it takes to make necessary repairs, according to DeShields.

“You do not have to be the world’s best carpenter,” he said. “You don’t have to swing the hammer one time. But what you need to do is have a good feel for the various aspects. You need to know a little bit about construction, whether you can physically do it or not. You need to know what makes a good property.”

Thorough inspections

On the other hand, if you’re looking to do a less extensive flip, you should look beyond a property’s “good bones,” according to Travis Moore, owner of Fargo Home Solutions.

Moore said he sometimes prefers less extensive flips — the carpet-and-paint-fix-ups, as he called them — that require less expensive remodeling. According to Moore, for that style of flip, the age of the house can make a huge difference.

“If I’m doing a project like that, I really like to stick to homes that are built in 2000 and after, because you’re not going to find as many surprises,” he said. “When you get into older homes, you may think it looks OK — it’s got good bones, it’s got good structure — so this is probably a good candidate for just kind of cleaning it up. (But) on older homes, expect to have a few surprises.”

To get it right on older homes, according to Moore, it’s important to do a thorough inspection.

“Before you purchase it, really do a deep dive inspection on it … really beyond just looking at what’s visible,” he said. “Any home that old that I’m considering a lighter renovation, I really dig deep into its condition for everything, (such as) plumbing and electrical.”

Proper permits

When you buy a property, know that not every addition or feature may be permitted — and if that’s the case, it could cost you. Flippers should be cognizant of the permitting requirements for their specific location, according to Wallace-Laabs.

“If you end up doing work on a property and then (are) trying to sell it on the retail market … you have to provide proof that you pulled permits on that work,” she said.

This is not a requirement that investors should try to skirt, because it could end up costing a lot of money, she said. Wallace-Laabs mentioned that she knows an investor who bought a house and didn’t do proper due diligence before finalizing the purchase. It turned out that a previous addition to the property had never been properly permitted.

“So now my investor friends have to tear out all the sheetrock so the city can inspect the plumbing, behind the walls, the electrical, and even (check) that they put in the right size of window to call it a bedroom,” she said. “So instead of them thinking it was going to cost them $30,000 to fix this house, now it’s going to cost them $60,000.”

Get a mentor

Then, there are the big things you should look for when evaluating a fix-and-flip property — avoid foundation issues or termites for example, according to DeShields — but there’s only so much a newbie can know. That’s why every fix-and-flip expert we spoke to recommended turning to an experienced mentor for help.

“I would ask all new investors to get with a seasoned mentor that will let them ride along and let them know how they figured out how much it would be to fix this or that,” Wallace-Laabs said. When she first started, she worked as a property manager for a real estate broker who showed her the ropes and helped her buy her first rental home before she expanded to fix-and-flips, she said.

DeShields also extolled the benefits of finding a good mentor.

“Find somebody to partner with, or find someone … (to) just bounce ideas off of, because there’s a lot of pitfalls,” he said. “There’s a lot that a mentor can help you with … because there’s just a lot of little things and nuances that you probably wouldn’t think of.”



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Seven Ways Landlords Can Improve Their Relationships With Tenants (And Why They Should)

Mon, 08/13/2018 - 9:43am

Landlords and tenants don’t always have good relationships. In fact, sometimes what is told about some landlord and tenant relationships is downright awful. But it doesn’t have to be that way. There is a lot that can be done to foster better relationships between the two.

We asked members of Forbes Real Estate Council for their best ideas on improving landlord-tenant relationships. The answers given suggest that just a little elbow grease can facilitate a good relationship between the individuals and not just a business transaction.

1. Offer Prompt Service 

Quickly replying and fixing repair requests is paramount to having a great tenant experience. One might think that waiting for a less expensive vendor will save money. In the long run, paying a little more for prompt service is going to cause less turnover and give you a better chance to increase rent, rather than lose ROI by having to replace a tenant who is upset over waiting a week for a repair. – Noel Christopher, Renters Warehouse

2. Facilitate Bridge-Building 

I believe the first step would be to open the lines of communication. Landlords must provide honest, up-to-date information, and in return, the tenants would be more receptive when there is a potential issue and possibly work as a team as opposed to in a combative manner. All of this can result in fewer legal notices to tenants, positive tenant reviews and less time going toward tenant negotiations. – Priscilla Porter, Dixon Advisory

3. Supply Tools For Success 

Demonstrate to your tenant that you value their money and want to help them to be a great renter. I find value in personally reviewing lease agreements and providing additional handouts on important lease terms to remember, that I always tie back to their security deposit — like how to take care of tenant required maintenance. It helps tenants understand that I care about them, not just the property. – Nathan Miller, Rentec Direct

4. Help Your Tenants Predict And Plan For The Future 

Imagine you’re the renter and create a unique and easy experience for them that addresses the hassles of finding and moving into a new place. Find vendors or resources to help them with moving, renter’s insurance or internet setup. Report monthly rent payments to the credit bureaus to help them build credit. Invest in the beginning of a renter’s experience to set the foundation for a positive relationship, fewer disputes and higher retention. – Chuck Hattemer, Onerent

5. Be Transparent With Pricing And Charges 

It starts with making sure online listings represent completely accurate pricing, photos, amenities and unit availabilities, and permeates every aspect of the relationship through the refunding of the security deposit. Any opportunity to provide more information to the tenant on price and charges should be taken. It will pay dividends in the future. – Marc Rutzen, Enodo Inc

6. Communicate Effectively 

We often see cheap landlord with lousy tenants. Prior to leasing the property, landlords inspect and make sure the property is ready for renting. Poor landlord-tenant relationships are often due to the property having multiple issues that could have fixed prior to move-in, such as A/C not properly maintained, water heater not heating or appliances not working. At the same time, there are tenants who call to have a light bulb changed. The solution? Have a detailed move-in inspection with pictures, tenant manual with explanations and signatures of all pages and initials by both parties, great communication between both parties and a policy to resolve maintenance issues in a timely manner. – Rodrigo Schiavo, Premier Capital Realty, LLC

7. Don’t Be Hands-Off 

Many landlords lease their properties but want to make minimal repairs to their homes. If you can’t afford to lease your home, don’t do it. Making the tenant feel important is huge and taking little, consistent steps to constantly be improving the property not only will keep your resale values high, but allow you a better long-term relationship with your tenant. – Kase Ellers, Mainframe Real Estate



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