Atlanta Property Manager Discusses Property Management Fee Structure

Mark and I celebrated my birthday in New York in the middle of February and it was an enlightening trip. We selected an airline for the cheap fare and got a great deal on a hotel room and off we went to the Westminster Dog show. Things started to get off to a rocky start when 2 days before the flight, I had to select seats for the flights. Turns out the airline charged us $20.00 additional per seat. Can you believe that assigned seats were not included?

This happened to be the day of the infamous Atlanta snowstorm, but we still made it to New York. When we arrived at the airport, we waited in a nice long line and then went to check a bag. Another $15.00. We finally got on the plane. They had wireless internet – pretty awesome – $9.95. We did get a free soda each, but were not offered any headphones for the XM radio. By the time we arrived at our destination, I felt like I had been nickled and dimed to death. When I added up all the additional costs for the services that I would have thought to be standard, I actually ended up spending more than I would have if I would have chosen the next level priced option.

So what does this have to do with you or property management? We are getting ready to celebrate 5 years in April. I am blessed to have clients that have been with me since the beginning. When we started we made a decision that we would provide full service property management all inclusive for a fair price. I am so glad that we did that.

I certainly don’t want our clients to feel like the have to pay extra for the basic services and yet a lot of  property management companies are going to a deconstructed pricing structure – charging low monthly fees and then adding additional costs for things that we believe should be included. They charge more for sending a check or for direct deposit. They don’t mail invoices to the tenants nor provide monthly reports via e-mail never-the-less have a 24/7 web portal. They charge for advertising on the best sites like rentals.com and others. So in the end, the owner ends up paying more for the basics just like we did on our trip.

So when you are comparing property management companies, make sure that you get all the facts. Understand the charges and what they include. Ask how many times they visit the property while vacant. Make sure that they are actually managing the property even when it is not occupied.

If you are looking for a new management company, we would love the opportunity to speak with you. Call us at 770-416-1444 x 310. Also, you can watch this short video that we prepared to educate owners about selecting a property management company.

Metro Atlanta Property Manager Discusses Using a Tenant Screening Service

If your own rental properties as real estate investments, you may know that you should always screen tenants before allowing them to move into your rental units. A comprehensive screening takes quite a bit of work, and can be rather costly. Also, if you do most of the work yourself, it can take away many hours you could be spending on more profitable tasks as well as you may not have all the tools available to you to do a through screening.

One effective alternative to handling all of the tenant selection tasks yourself is to use a tenant screening service. These services offer several advantages that will benefit you as a landlord and a real estate investor.

Using a tenant screening service can save you time. Provide that you have the proper information on your application which includes the property authorizations, all you do is supply the service with the prospective tenant’s application that includes all the pertinent personal information, and they will go to work collecting information about the applicant’s credit report, rental history, employment, criminal record, and other relevant items. You won’t have to spend time making phone calls to previous landlords or ordering credit reports.

Another concern is with the increase in identity theft, credit reports are harder to come by. At SSPM, we had to have an audit so that we could see the actual credit report. While the tenant screening service is compiling data, you can be planning your next lucrative real estate investment.

A tenant screening service can save you money. Because these services purchase data in bulk, they can often obtain information more cheaply than an individual who only orders a few reports per month. Using this economy of scale, a tenant screening service can pass these savings on to you, providing you with prospective tenant profiles at a lower cost. In the Atlanta area, the cost ranges between $35 – $60.

Finally, you can obtain consistent, accurate data through a tenant screening service. Working alone, it can be difficult to obtain information that is of a consistent quality. Because tenant screening companies employ professionals who are experts at gathering data, they can often give you better, more accurate results to help you select good tenants.

One thing that we have noticed however, is there is a great deal of difference between an on-line screening service and those services that actually call to verify the data. In the past couple of weeks, we did a comparison between a new on-line service that a lot of other property managers used and our current screening service that we know makes the calls and double checks the data.  We found that the data from our current service was much more accurate and detailed than that of the on-line variety. While it costs more, the cost is passed along to the tenant and provides us with much better data for us to make a decision.

No matter what you decide to do in regards to screening, I encourage you to be consistent with all of your applicants. Consistency is the key.

Atlanta Property Manager Discusses What It Means for Tenants Right to Quiet Enjoyment

Often owners ask me “how often do you inspect the interior of the home?” To which I reply – never. At first this disturbs the owner until I explain about the law of quiet enjoyment. Most often this question comes from someone who has lived in the home as a personal resident and not an investor who purchased it as a rental. 

So, let me explain the tenant’s right to quiet enjoyment. When you receive compensation for someone living in a property, Georgia Law clearly states: 

OCG 44-7-1.
(a) The relationship of landlord and tenant is created when the owner of real estate grants to another person, who accepts such grant, the right simply to possess and enjoy the use of such real estate either for a fixed time or at the will of the grantor. In such a case, no estate passes out of the landlord and the tenant has only a usufruct which may not be conveyed except by the landlord’s consent and which is not subject to levy and sale.
(b) All renting or leasing of real estate for a period of time less than five years shall be held to convey only the right to possess and enjoy such real estate, to pass no estate out of the landlord, and to give only the usufruct unless the contrary is agreed upon by the parties to the contract and is so stated in the contract.  

So what is quiet enjoyment? It is the right of the tenant to possess and enjoy as the tenant deems fit. They have the right to be undisturbed. The Department of Community Affairs (DCA) clearly states in their Georgia Landlord Handbook when discussing right of entry into a property that the law has been interpreted as “If the lease does not state that the landlord can enter the apartment, a tenant could legally refuse the landlord access except in case of an emergency.” Now at Solid Source Property Management as well as most leases does state a provision for entry for reasonable timeframes Monday through Saturday with 24 hour written notice. 

But here is the bigger issue. What happens if we get inside and find that they aren’t maintaining the inside? Maybe they have not cleaned, or maybe they have broken something. What can we legally do? The answer is nothing. They have the right to live in any manner that they seem appropriate. 

What I feel is appropriate and what you feel is appropriate is subjective. As long as at the end of the lease term, they return the home in the same condition that it was when they were given possession – less normal wear and tear, they will receive their security deposit back. If they don’t leave in a clean rent ready condition, then we by law can deduct the amount to repair from their deposit as compensation to the owner for the damage. If damages exceed the security deposit, then we can pursue them in collections. But really until they move out, we can’t do anything.

We have had instances where a tenant lived in a manner that I wouldn’t live in, but when they moved out, the property was returned in immaculate condition and received their full security deposit back. This is why it is so important to establish the proper condition of the property at move in with detailed notes and pictures. Then it is really easy to compare the move in and out check sheets and determine the deductions. 

So in reality, unless we have cause to believe that there is an unlawful activity or a known lease violation (unauthorized pet for example) in the property, we allow the tenant to have full use of the property without intrusion. 

We do perform a quarterly drive by of the property and will notate anything that is not being handled properly which is the lawn maintenance or any infraction of the HOA rules & regulations. Remember however, that owners are responsible for the exterior structure of the house which includes – gutter cleaning, yearly shrubbery maintenance, pine straw/mulch refreshing, pressure washing, etc. These items are not the tenant’s responsibility. Tenants only have to maintain the mowing of the lawn and keep the beds free from weeds. Weeds in the lawn are also the owner’s responsibility so some owner’s elect to pay a weed treatment company to assist in the weed control. 

Since the tenant is paying rent, they have rights to the property and these rights must be respected. At Solid Source Property Management, we take great care to act in the best interest of our owners while abiding by the law set forth. We do believe strongly that proper screening typically saves us from a lot of problems in the future.

Atlanta Property Manager Discusses Gwinnett County Eviction Procedure Change

It is no surprise that waiting for an eviction has always seemed like a very long time. The tenant is not paying, sheriff service to issue the pay or quit paperwork takes weeks, then to wait for the tenant to respond is another week, to set a court appearance and finally get on the schedule for the sheriff to show up to keep the peace while the tenant’s belongings are removed takes another 2-4 weeks. This process used to take 30-45 days and now over the past year, we have seen that time expand to an average of 60 days.

Last week, we received some very disturbing information that translates into even longer time frames for evictions. With all the budget constraints, the county has shared that they are no longer allowing eviction companies to reserve a sheriff for a day per week to handle their clients’ eviction. This was significantly decreasing the already lengthy process as we were able to take advantage of the eviction company planning the most effective route for their clients to get the job done.

With this new development, we will be in line with everyone else meaning that there will be less efficient routes and a first come first serve basis which will result in longer eviction timeframes. We are supporting the eviction company’s stance that this is not a good thing and will only hurt more than help.

In the past year and a half, evictions have increased dramatically. The foreclosure evictions are lumped in with our non-paying tenant evictions. With foreclosures rising to astronomical numbers, this is only crowding an already stretched sheriff service. With Gwinnett County running out of budget, we have been told that there will be no overtime that can be spent. So what does that mean for us as landlords? We are stuck waiting for the process.

At Solid Source Property Management, we are considering a wide variety of options to shorten this process. We are guiding our clients through the eviction process with the best information possible available at the time. While we statistically have very few evictions due to proactive screening, there is little we can do to foresee the loss of a job, a medical issue, or death. We work very hard to maintain a professional working relationship with the tenant throughout the whole process.   

To read some good news – read Mark’s remarks about New Construction sited in Forsyth County.

Atlanta Real Estate Investor Shares About Working with Contractors

If you are buying properties for renovation and resale, or a homeowner who is getting a home ready to put your home on the market, you will likely have to deal with contractors during your home’s renovation. While hiring contractors can save you quite a bit of time and help you get your home on the market more quickly, there are a few steps you should take to make sure your contract work goes smoothly.

First, develop a written work plan with your contractor. The work plan should state, in detail, the work that is to be done, the timeframe for completion, and the price that is to be paid for the work. This helps ensure that you and your contractor know exactly what you expect. It’s also a valuable document to have in case the contractor does not complete the work correctly.

Second, pay only for progress. Some contractors will ask for some or all of the fees up front. It’s important get clarity of what you are paying for if you agree to an up-front fee, because it will be difficult to get this money back if the contractor does not complete the work to your satisfaction. Often, you can negotiate a series of smaller payments as portions of the work are completed – this benefits both you and the contractor, because you are more likely to see progress, and the contractor can recoup expenses as the work is being done. We will pay for the materials directly and then do progress payments for the labor.

Finally, make sure that any changes are made in writing. If your contractor needs to extend a deadline, substitute building materials or fixtures, or make any other changes, it’s not enough to rely on a verbal agreement. Your contractor must be willing to commit to all changes in writing.

Other items to consider is making sure that the contractor has the proper credentials as well as insurance – liability and worker compensation. When working with contractors that don’t have the proper credentials and insurance, you put yourself and your home and assets at risk.

Solid Source Property Management Reviews 2009 and Looks Ahead to 2010

Some of you who know us personally, know that 2009 was a very challenging year altogether. My husband and I lost several family members and close friends/associates along the way. The rental market was by far the most difficult market I have seen in all my years in the business. We personally had high vacancies and thousands of dollars in rental repairs. Renters have demanded rent reductions and everyone is feeling the pain of a slow economy.  We have lost several owners to foreclosure and this has significantly impacted our revenue. To say it has been challenging is an understatement. 

On a positive note:  On the real estate sales side, we have more than doubled our sales transactions. We have gotten creative and provided value to our customers.  On the property management side, we have been able to provide additional value added services like inexpensive gutter cleaning as we forge additional relationships with various vendors. We have increased our marketing to include cutting edge internet advertising sites like Zillow and others to attract clients and tenants alike. 

In spite of all the challenges, we have still been able to grow by adding new customers and referrals from our clients. 

We have been recognized for our outstanding achievements by being asked to speak at Agent Appreciation Day at the Fox Theater, Ilyce Glinks’ “Profit from Foreclosures” seminar as well as several smaller venues around the city. 

So, what have we learned from 2009 so that we can make 2010 a better year? 

1. Focus on what you want, not on what you don’t want.
2. Be open to any possibility. You never know when a great idea will present itself.
3. Surround yourself with people you like and trust. They will help you through the tougher times.
4. Be flexible. In today’s market, you have to be able to give a little to get a little.
5. Think beyond today to what tomorrow may bring. Looking forward will help you make better decisions than just looking at today.
6. Work smarter, not harder.
7. Put in more effort than your competitor. It will benefit you threefold.
8. Be all in and live with no regrets.

Mark and I gave the book – The Traveler’s Gift to all our team members and asked that they read it before midnight tonight. We believe the 7 Decisions for Success that is discussed in that book will make 2010 a great year for us. We can’t change the economy, but we can change how it affects us. You may want to read it yourself. 

May 2010 be your best year ever! 

Mark & Anne Lackey

Atlanta Housing Source & Solid Source Property Management, Inc.

Atlanta Property Manager Discusses Pet Policy

A lot of owners are concerned about having pets in their property. So I wanted to discuss the pros and cons of accepting pets in an effort to help owners make educated choices. The biggest concern with pets is of course pet damage. 

This month, we are transitioning to new property management software. This transition has allowed us to examine our base of business and to help us better serve our clients and tenants. What I found as part of our analysis was that 30% of our tenant base has at least one pet. Some actually have multiple pets. 

So what does that mean to you? First, if you are an owner of investment property and don’t want to accept pets, you are significantly reducing the number of tenants that will want to rent your place which will result in longer vacancies. 

So what is a landlord to do? We encourage all of our owners to accept pets with conditions. It has been our experience that if you do not allow pets, the responsible pet owners will go elsewhere and you will still end up with unauthorized pets for those tenants who are dishonest. Unauthorized pets create more damage and are a bigger liability. 

There are certain pets that due to insurance requirements, we cannot accept. Those are the vicious breeds – Alaskan Malamutes, Akitas, Chow Chows, Doberman Pinschers, German Shepherds, Pit Bulls, Rottweilers, Staffordshire Bull Terrier, or Siberian Huskies. The interesting thing is that people who have these breeds are appalled that we don’t accept them. While we are sure that there are many dogs in those breeds that are fine, there are a greater number that have caused problems and our insurance would not cover us should a problem arise. 

Responsible pet owners are happy to pay a pet deposit. We recommend charging a non-refundable portion for the privilege of having a pet and returning the rest provided that the lease was honored and there were no damages. 

We have all our residents sign a pet policy even if they don’t have a pet, so that everyone knows exactly what our pet terms are. It also shares with them the consequences of having an unauthorized pet. We find this comes in handy from time to time. 

We charge based on the weight of the animal the heavier the breed, the more the deposit. Also, we take into consideration the type of dog as some dogs are notorious chewers while others are just helping keep their owner’s lap warm. 

We love our pets and understand that others do too. I hope that this has helped take the fear out of accepting pets in your rental property. 

Merry Christmas from SSPM

Atlanta Property Manager Talks About Investing Strategies

I always love this time of year. It is a great opportunity to reflect on your life to see if you are headed toward your goals or need to adjust your actions to reflect the kind of life you want. 

Often times after being with loved ones, we are reminded of the real meaning of life. Which really isn’t about the money you make, the status you have achieved, or the house or car your own. It is about making a difference in the world. Impacting the world in a positive way leaves a legacy for you that can make life much more meaningful. 

So what does this have to do with landlording and investing? Well, when Mark and I got started in the business, we had a mission to provide affordable quality housing. At that time in the market, the places that were renting in the price point that we wanted to serve were all dilapidated dumps. There was no pride; there was no quality; only poor people living in rundown shacks with neglectful landlords. Mark and I wanted to change the reality of that. Consequently, we had an investing model that provided for small houses that anyone could afford that were the nicest in town. 

We treated the tenants respectfully and provided flexibility on deposits to assist the tenants in the transition to our properties. We provided them with a little more than they were expecting. We had and still have a significant impact on the community. 

It was the basis of our investing strategy that has provided for our children’s education, a retirement plan for Mark and I, and impacted our community. So, as you think about your investment goals for the next year, I would encourage you to think about not only what you are doing in terms of helping yourself, but how your investing strategy can serve the community as well. What kind of impact do you want to have?

Atlanta Property Manager Discussed Lease Options and Rent to Own

A lot of owners are anxious in today’s economy to find ways to attract tenants in their rental property. Historically, tenants wanted and expected to rent homes with an option to purchase. I have fielded a lot of calls recently from owners who want to implement that strategy. However, I have to share with them that the market has significantly changed in 2009 and the strategies that worked in earlier years are not viable in today’s market.

It is no surprise that there are a lot of homes that are upside down with the mortgage being more than the house is worth. Underwater mortgages as they are called are becoming increasingly more common.

Real estate research firm Zillow says that 23% of mortgages are now underwater. This number could easily increase to 30% a year from now. One of the major reasons for the trouble is that home values fell 12.1% Nationally year-over-year in Q2, resulting in a total 22.3% drop in value since the market peaked in mid-2006. Of course regional figures will very quite a bit, but in Atlanta, I would say those numbers are fairly accurate. Twenty-two percent of all transactions in June were foreclosures. This is an indication that people are not willing to fight to save their houses.

So what does this have to do with renting my house via lease option? Well, a lot. The whole premise of the rent to own or lease option strategy was to get top dollar for your home because you were taking advantage of someone with less than perfect credit and providing them a guarantee to purchase the home with set price of the home. This allowed for market appreciation to provide some built in equity for the tenant and worked well for all parties.

Since the market today is not appreciating, but rather depreciating, there is no built in equity for the tenant. Tenants are afraid to get locked into buying a home when in fact the home may be worth less in the future and not more. They are also more concerned about their employment stability as well as paying a fee with no guarantee that the owner won’t go into foreclosure and walk away with their option money and then they can’t recover the loss.

Another issue is credit requirements are changing rapidly. As of January 2010, FHA credit requirements will be raised to a minimum 693 FICO score. This will eliminate a lot of the potential borrower’s ability to qualify. So even if you could find a willing tenant, their odds of qualifying will be significantly reduced.

From the owner’s perspective, unless you have had the house more than 8 years, more than likely, the house value may be less than the mortgage currently on the house. So how can the lease with option strategy work unless the owner wants to take a significant loss? Taking a loss really doesn’t make sense if it can be in rental service which should be covering the payment at least and hopefully providing some cash flow.

To further complicate the matters, currently it is near impossible to determine the future value of a home. The market is way too volatile. If you had a tenant who was willing to proceed and pay for the option to purchase, determining the future price of the home would be a challenge. There would need to be some additional language that stated that the owner would sell for 5% below appraised value in order to provide enough incentive for the tenant to move forward.

So at this time, Solid Source Property Management, is not recommending to proceed with this type of arrangement as it isn’t serving either party. We are sharing with both that once there has been a successful lease term, we believe that the owner would consider an incentive for buying the property, but we would have to evaluate payment history, credit, and the market at that time. We feel that this is the better solution for this volatile market.

Atlanta Rental Market Update – How is the Rental Market

Mark and I have been speaking at various real estate clubs lately and the hot topic that everyone wants to talk about is how to fill vacancies. 

People wanted to know about the vacancy rates so we shared with them based on the data collected across the top property management firms in Atlanta for September. There were a total of 4900 units on the market. We saw that the vacancy rate for single family residences (SFR) was averaging 11.62% while condos were 33.63% and townhomes were 23.04% 

We talked about the new competition in the market place and what the tenants are looking for in their new home. The competition – Sellers who can’t sell, but need to relocate are putting their properties up for rental. Banks becoming landlords because they either foreclosed on tenant occupied homes or can’t sell in today’s market. Investors who are having a hard time making ends meet reducing their rents just to compete. Foreign investors that are taking advantage of the great deals here. 

Tenants are looking for larger homes and consolidating families. Kids are moving back home with their children and we are seeing many more multi-generational families applying for homes. People are also downsizing. They are doing more with less.

So what can be done if you own rental property that is vacant? We provided tips to them most of which you can read more about by going to a previous post – http://sspmblog.solidsourcepm.com/2009/06/atlanta-rental-market-update/ 

The good news is that our move-ins have been steady even this time of the year. When I reviewed the numbers for this year compared to last year, we are renting at a rate of 6.8 move ins per month for the year versus 5.6 last year. We are also seeing an increase in renewals almost twice as many as last year. I have heard from other managers that this is holding true for them as well. So what this means is there are less people coming into the rental pool. So with more competition and less viable renters coming into the market the effect is depressed the rental rates. 

Not that all of this is doom and gloom. There are some great deals out there and we will be talking on Saturday as panelists for the Ilyce Glink – Profit from Foreclosures Event to share with investors about how to change with the market and still make money in real estate. 

Happy Investing!