First, you will be responsible for marketing your properties to locate tenants for your properties. While this might seem like an easy task, the challenge is to find tenants who are qualified to rent from you – that is, who have sufficient credit and incomes as well as have a positive rental history. By adequately screening tenants up front, you will help minimize the time you spend collecting rent and making repairs to units damaged by irresponsible renters.

In addition to finding tenants, you will be responsible for managing your renters. You will need to collect deposits and rental payments, respond to service requests, and deal with tenants who cause disruption in your properties. These disruptions can come in many forms, from domestic arguments, to all night parties, to HOA violations, not caring for the lawn, etc.

You will also need to manage repairs and upgrades to your rental properties. Your property management duties may include interior repairs, building upgrades, and maintenance of lawns and landscaping, among many others.

It is easy for real estate investors to spend the majority of their time on property management tasks, rather than on activities that are direct money makers. You might find that hiring a property management company to handle these tasks will allow you to be more productive, and to make more money with your real estate investing ventures. When you are looking for investment properties, it is a good idea to consult with an experienced REALTOR who owns and manages their own rental properties. Then that can help you navigate the process of either assisting you or can provide assistance in locating and hiring a reputable property management company.

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.

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.

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

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?

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.

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!

Now for the bad news. We are still seeing tremendous competition for rentals. People are looking for newer properties in great condition. They want single family homes as opposed to townhouses. They are looking for 4+ bedrooms. 

Currently of our available properties, 2 bedrooms make up 41% of the current vacancies. If you add in the 3 Bedrooms you will see that makes up 77% of our current vacancies. 

Below you will find my general analysis for the various cities around Atlanta where we have vacant properties. You will see that we share what is currently on the market, the price ranges, and the average. 

While not meant to be a comprehensive analysis as there are other factors like amenities and square footage, age, & condition of the home, it should serve to give you an idea of how things are. 

Enjoy! 

Lawrenceville, GA 

3 Bedroom Homes

Currently on the market there are 102 properties being marketed. The rental prices range from $2,300 to $700 per month. The average rental price for 3 bedroom homes is $880.00 

4 Bedroom homes

Currently on the market there are 71 properties being marketed. The rental prices range from $2500 to $925 per month.  The average rental price for a 4 bedroom homes $1307.00 

Lawrenceville still seems to be a strong rental area. While we have a fair amount of inventory, most are in the 2 & 3 bedroom situation. We actually have pending move ins for this area.

Smyrna, GA  

2 Bedroom Homes/Condos

Currently on the market there are 57 properties being marketed. The rental prices range from $1,650 to $595 per month. The average rental price for a 2 bedroom single family residence is $923.00. There are only 6 on the market currently. 

If you add townhomes to the houses, the average rent would be $883.27. 

There are a lot of apartment style condos and duplexes on the market that are skewing the averages, which was why I performed the analysis without them. 

3 Bedroom Homes

Currently there are 25 single family homes on the market. The rental range is $1,800 to $699 per month with the average being $1,118.00. 

3 Bedroom Townhomes

Currently there are 26 townhomes on the market. The rental range is $3,000 to $1,000 per month with the average being $1,480.00 after we excluded the 3 high end luxury rentals which really aren’t comparable to anything we manage. 

The challenge that we are having with Smyrna is that there is unusually low demand for that area at this time. In the past, we have had great demand, but at this time, the demand has been much lower than other parts of the city.

Snellville, GA  

4 Bedroom Homes 

Currently there are 33 single family homes on the market. The rental range is $2,295 to $980 per month with the average being $1,306.00 

In Snellville. we have had mixed success. The properties that are renting are in the $1295 range and are less than 10 years old and in great condition.  Properties that are older than 10 years really need to be priced adjusted. 

Powder Springs, GA 

3 Bedroom Homes 

Currently there are 29 single family homes on the market. The rental range is $2,000 to $800 per month with the average being $1,061.00 

4 Bedroom Homes 

Currently there are 20 single family homes on the market. The rental range is $2,750 to $1,100 per month with the average being $1,500.00 

Norcross, GA 

2 Bedroom Townhomes

Currently there are 17 townhomes on the market. The rental range is $1,500 to $599 per month with the average being $837.00. 

These numbers do not take into account all the FRBOs that I see in and around Norcross all the time. Parts of Norcross area have a high concentration of duplexes and townhomes. I would probably guess that the competition for this home type is much higher than actually what I found advertised. 

Loganville, GA 

4 Bedroom Homes 

Currently there are 19 single family homes on the market. The rental range is $1,695 to $800 per month with the average being $1,353.00. Most of the homes are newer and in great condition. 

Duluth, GA 

3 Bedroom Homes 

Currently there are 26 single family homes on the market. The rental range is $1,500 to $775 per month with the average being $1,105.00. 

In Duluth, like Norcross, there is a wide range of homes and a fair amount of multi-family homes. When we add in condos, townhomes, & multi-family, you will see the available rentals increase to 57 available properties. 

Cumming, GA 

4 Bedroom Homes 

Currently there are 58 single family homes on the market. The rental range is $2,600 to $1,100 per month with the average being $1,896.00. 

Most of the more expensive properties that are on the market are newer and have  more than 2 bathrooms, When we reduce the bathroom to 2 full baths, we see the total properties on market go down to 41 and the range from $2,150 to $1,100. The average also drops to around $1,700. 

Alpharetta, GA  

2 Bedroom Townhomes 

Currently there are 15 townhomes on the market. The rental range is $1,295 to $750 per month with the average being $995.00. 

As with other areas that traditionally have not been strong rental cities, we are finding as more and more owner’s can’t sell, they are coming into the rental market. Traditionally finding a rental property in Alpharetta was tough. Now however, there are over 120 properties available for 2 & 3 bedrooms. If we look at all number of bedrooms, it swells to 230 properties.  Of those 73 are luxury rentals over $2,000 per month.

What the letter basically stated was due to lack of funding for the program they had to cut back their portion of the rental proceeds by 15%. So that left 2 options – one to have the tenant make up the additional 15% or to forgive the amount to the tenant.

 Once again the DCA puts the landlord in a very difficult position. For the average rental, this makes about a $135 to $150 deficient per month total. If the tenant could have paid the additional money, they probably wouldn’t be on government assistance in the first place. So collecting it from them I believe will be challenging. 

So what is a landlord to do? It’s not worth it in today’s market for a landlord to terminate the lease or to evict a tenant for $1,500.00 deficient. The vacancy period, turn key, and marketing expenses for a new tenant are much more than that. However, should we just accept that? 

In Gwinnett county, we were told that after the first 12 month’s the lease renewal didn’t matter to DCA, that they would authorize a tenant to be relocated at anytime during the term and we could nor charge for early termination. This happened to put the owner in a huge disadvantage and cost the owner a much longer vacancy than has they not renewed. 

All this to say is that the government assisted programs are quickly changing and for this reason, we are not taking on any new Section 8 properties. They don’t seem to care about the contracts that they sign or that the tenant’s sign either. This is very disturbing to me. 

At a meeting of NARPM (National Association of Residential Property Managers) last week, we brought up the question about how other professional property managers were handling these issues and they also stated that they had stopped serving the DCA programs. So what is going to happen when professional property manager’s quit servicing this segment of the market? I think the DCA will find that there will be fewer homes available to serve their needs. 

It was already a difficult process for a landlord to serve this segment of the market place and I believe that we will find fewer and fewer reputable managers willing to go through the hoops necessary. This will become true especially after we see more and more landlords becoming burned by the arbitrary changes in contracts. 

Please feel free to leave your thoughts…

Clark Howard, popular radio show host and consumer advocate shared in his July 27^th show how to discuss with your landlord a rent reduction, you can read more about his comments by going to http://clarkhoward.com/liveweb/shownotes/2009/07/27/16296/.

About 15% of our owners have been approached for a rent reduction from their current tenant. Not every request was approved, but most requests were. In a lot of cases, once we did the analysis for the owner, we found that their tenant could easily move down the street and pay less.

The cost of the vacancy would cost more than the rental reduction in all cases, so our recommendation was to agree, but put some parameters, like $100 off if paid before the first. This seemed to be a win for all parties. It allowed a good paying tenant to reap the rewards of on-time payment, while keeping the base rent high. It will be much easier to reverse the discount when rental rates climb back up.

Should an owner not be willing to accept a rent reduction, we share with them some ways a longer vacancies impact them. When a property is vacant more than 30 days, the traditional landlord insurance policy may be cancelled. We are seeing this happen more and more. When it does happen, owners then need to purchase a builder’s risk policy which is 4 times more than a normal policy for adequate coverage.

In addition, vacant homes are more susceptible to vandalism and theft. This is one reason we regularly send property managers to our properties so that we can evaluate the condition. Expenses such as mowing, cleaning, and paying the mortgage while no income is coming in, increases the overall financial burden to the owner.

So when we will see improvement? I wish I had an answer. My experience tells me that based on what I have read; it will be another 18 to 24 months. Most people are perplexed by this rental anomaly. With the increase in foreclosures, you would expect that more people would need rentals since they can no longer purchase.

What we are finding is that people are moving in together – multi-generations are living together. This is why 4 bedrooms and above are renting faster than 3 and less. My inventory for 2 bedrooms is not being shown near as much as in previous years. 38% of our current inventory is 2 Bedrooms and that is the highest it has ever been. When I include 2 and 3 Bedrooms it increases to 65% of overall inventory.

So my advice is if you have a tenant, let’s do whatever we can within reason to keep them in the property.