Atlanta Metro County – Section 8 Program Fails to Serve Tenants & Landlords

Last week we received a letter from the Dekalb County DCA’s Housing Choice Program also known as Section 8. If you remember last year I posted about another issue/concern that I had with Dekalb DCA. 

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…

Atlanta Property Manager becomes a Tenant – Lessons Learned

I had the pleasure of being a renter recently. My family and I had rented a place at our traditional Labor Day vacation spot. This is the first year that my mom had chosen the house. She selected a property from VRBO.com and the reviews looked great. The place had a lot of bookings, was in a desirable location and most importantly, the owners allowed us to have our dogs which was a very important consideration. Having always travelled with our puppies, I was aware that the home would most likely be a little shabbier than other places as it is part of the deal. However, we didn’t expect what I had found for the price we were paying. 

So why am I sharing this with you? I learned (or was reminded of) some great lessons on this trip and thought you might benefit from them, but let me finish telling you the story. 

Check in was at 4:00. My parents arrived at 5:00, our son and his girlfriend had gotten here at 3:30, but failed to share with us the condition of the home and left to go get a drink as they had no idea what to do. They actually thought that the previous renters were still there. 

Little did I know what was in store for me when I arrived at 6:00… My mother was madder than a wet cat when I showed up. She didn’t even greet me as she was on the phone trying to find a new rental house. My dad took his dog to a nearby shopping area just to get out of her way. There is really nothing worse than my mother on a tear. 

Now I manage hundreds of rental property. You would think that nothing I could see would offend me or that I haven’t seen it before. Well, I have to say, I was absolutely disgusted. The place looked like a fraternity house after rush weekend and this was after a cleaning crew had been dispatched and had been there for over an hour. I can only image how my mother found it. The previous tenant obviously had a bird in the house as there were sunflower seeds & parrot food all over the house and the half empty bag of the food and lots of bird poop and feathers all over the place. Who lives like that in a high end vacation home? 

My mom had called the owner who was out of state, to share with her about the fact that the place was absolutely a mess and the home was in need of some repair and updating.  The owner stated that she would get a cleaner out there immediately. My mom put up even more of a fuss, so the owner agreed to provide a refund for a little over 1 night’s stay. While on the surface that seemed reasonable, in reality it was a really little consolation to our predicament. 

We had planned on having dinner for 6 at the house, one of the kids was sick and she couldn’t lay down to rest because the cleaners were still cleaning, we couldn’t unload the cars because we didn’t trust the items were safe, we didn’t want to leave our dogs for fear that they would get out, it was a real mess. 

The owner gave my mom 2 options. Half the money we paid and leave tonight or take the 1 night’s refund. Neither of these options really worked for us. So my mom asked me to call the owner when we went out to dinner at 8:30 leaving our son and his girlfriend at the home with the cleaners. 

What struck me the most when I call was the owner’s really un-sympathetic attitude. We knew that she didn’t control the cleaner’s not showing up earlier in the day. We really didn’t expect her to do anything more about that. What I would have expected was a sincerely apology and her asking what else can we do to make you feel better about this. Had she offered to refund our money less 1 night, we would have found another place and been all the happier not thinking ill of her or her rental. She would have had good karma in the world. We really couldn’t afford to pay for another place and lose half of the deposit. After all, none of this was our fault. So basically she had us in a no win position and she knew it. 

So what did I learn through this transaction to be a better property manager you ask? 

• Make sure that the marketing pictures accurately reflect the property. The property pictures on-line really didn’t accurately reflect the condition of the property.

• Always provide the tenant with a way to view the property in advance. Had we seen the property before our arrival, we could have made better choices. Needless to say we are viewing properties this week for next year.

• Be sympathetic & listen. Part of the issue we had with this owner is that they kept running over us when we were trying to vent our frustration. Had she just been quiet and listened, we would have been a little calmer. When a tenant is upset about an issue. Clearly articulate your understanding of the problem and ask if we understood the issue correctly. Then ask what do they feel would have been a reasonable request. Had the owner offered to buy our dinner in addition to what she offered, then we would have probably put it behind us and all been able to move on. As it stands, I am telling everyone I knew and thousands I don’t know about this experience. I am being kind by not divulging the owner, but part of me would like to…

• When you manage a property, evaluate your properties periodically and update the marketing material. We do this after every resident moves out. What was fine when a tenant moved in may require attention when they move out. This home has some serious differed maintenance. I don’t think they have been here in years.

• If you are renting a furnished place (which we don’t do at SSPM) then refresh the furnishings every so often. The beds here are embarrassingly tired and springs are poking out. If you refresh on a schedule, you will have more repeat business and spread out costs over time. The same applies for carpet and appliances in a yearly rental.

•  When you have complaints about the property – check to see if they are accurate. Not every person has realistic expectations about the property, but rather than say – “Well, I have never gotten a complaint…” What you should say is thank you for bringing that to my attention, I will look into it.

• Always collect a deposit. This owner had no deposit from us or the previous tenants. Had she collected one, she would have had funds to make us happy and still not be out of pocket. It also would have provided the tenants with an incentive to clean up the property before they left and not leave it in the condition it was in.

While I know this is a long post, I thought you would find it interesting since the landlord became the tenant and I hope you have enjoyed the story and learned or were reminded of some great lessons. Feel free to comment and share your own story as well.

 All my best!

Atlanta Rental Market – Lease Renewals

 Lately, we have had a couple of owner’s complain about why we renewed their tenants’ leases without an increase in the rental rates. To which I reply that we are happy to get a renewal at this time without having to provide a rental reduction.

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.

Atlanta Rental Market Update – Rental Rates

Lately I have been fielding calls from clients and prospective clients about rental rates in Atlanta, so I thought I would provide some commentary and insight into how rental rates are determined as well as discuss the current issue with vacancies.

The first thing to remember is that as with any product the law of supply and demand is in effect. The more rentals that are on the market, the more tenants have to choose from, which means that prices trend down. The reverse is also true.

So let’s talk Atlanta’s vacancy rate which is an indication of supply. Currently condos are running between 20—25% vacancy in Metro Atlanta for 2009 and houses are running at 10—15%. These numbers were compiled from over 4000 units from over 40 different local property managers.  As a member of the National Association of Residential Property Managers (NARPM), we get to share this type of information with each other to better serve our clients.

With vacancy rates higher than in previous years, the average time to fill a rental has increased from 30-45 days for competitively priced properties to 90- 160 days for competitively priced properties. This increase in the vacancy time has really put a strain on the market as more and more owners are forced to reduce their rates just to get them filled.

So that brings us to how do we set a rental rate? One thing to realize is the market doesn’t really care what an owner’s mortgage payment is. I find that owners often share with me, “I have to have $xxx in rent to cover my mortgage payment.” So I have to share with them that the market determines rental rates and prices – not how much your mortgage payment is.

In the past 12 month’s we have seen rental rates decrease by an average of $200 per month. For most, that is equivalent to 20% decrease. The rental market is much more volatile than the real estate sales market. We see shifts much faster as inventory comes and goes from the market.

This is why at Solid Source Property Management, every 2 weeks we perform rental analysis on all our vacant properties and make recommendations accordingly. We want to make sure that we are not priced out of the market, but still getting the most rental income we can.

5 Basic Rules to Marketing Your Property & Getting it Rented

As I was driving around Norcross earlier today, I thought I would take some pictures of rental properties to illustrate a few basic rules in getting your property rented. I protected the guilty as much as I could.

Unfortunately, there were more rental properties to choose from, I just selected the best of the worst.

Rule #1 – What impression are you giving your potential tenant?

Front Yard of Rental Property with Tree Down

If a landlord doesn’t take care of the exterior maintenance of the home, then how can a potential tenant feel comfortable that you will take care of repairs and other things that need to be done? Consequently this place is for sale as well as for lease. I wonder why the agent doesn’t make the recommendation that they do some landscaping or at least remove the fallen tree. Now you may be thinking that this just happened. Well I can tell you, I pass by this rental every couple of days. It has been like this for weeks. It was this property that actually inspired this post.

Mailboxes down

Here is another example of a property owner that will never be fully occupied since it has 4 units and only 2 mailboxes yet even those aren’t upright.

Rule #2 – Do people know you want to rent your property?

A Sign on the Ground Won't get Rented

It is very hard to rent your property if your sign keeps falling down. If you are going to rent your property, you need to periodically go by the home and make sure that it still looks appealing from the exterior as well as the interior must be clean and in great condition.

Rule #3 – Make sure that the sign can actually be read. 

Tacking your Rent Sign is Tacky. Who do you call? Too Many numbers that you can't read

Unreadable & Confusing Signage

You have to be able to read the sign

As you can see from the examples above, you really need to be able to read the sign’s phone number in able to get a property rented.  While I blocked out a few of the numbers to protect the guilty, you can still get the picture that the numbers are all jumbled and with 2 to choose from who knows which one to call. It makes it confusing for the potential tenant to determine how to proceed. Therefore, they will just move on to the next property down the street that has a sign that they can see and it is clear who to call.

Rule #4 – Mow your grass.

Mow your Grass

If you want a potential tenant to respect your property and also maintain the grass after it is rented, you should make arrangements to have the grass mowed. In addition to the fact you can’t see the numbers on the sign without being right on top of the sign.

Rule #5 – Clean Up your Trash

Garbage isn't Attractive

I don’t think this picture really needs much explanation, but I found it interesting that this is the impression a landlord believes will get his place rented the fastest.

So hopefully that will provide you with some food for thought about your rental properties. At Solid Source Property Management, we perform vacancy reports every couple of weeks to make sure that your property always looks its best!

Atlanta Property Management Company Discusses Owners Not Wanting to Make Repairs

As a professional property manager, we work with a wide variety of properties and owners. Some of our owners are local, but most are out of state or out of country. It seems to me the biggest complaints that we receive in our industry revolves around repairs. Owners don’t understand why they have to be responsible for maintaining their own property when someone else is living in the property.

So I wanted to take a minute to share with you why owners need to perform the repairs and some things to be aware of. The number one reason that an owner needs to repair the property is because it is the law here in Georgia and I would assume in other states as well. Section 44-7-13 of the State of Georgia Landlord Tenant Law Official Code clearly states “The landlord must keep the premises in repair. He shall be liable for all substantial improvements placed upon the premises by his consent.”

In Georgia, the only issues I have ever seen a tenant win a legal case for non-payment of rent was when the owner did not make repairs in a timely or professional manner. The law provides a provision for the tenant to withhold their rent in lieu of repairs if the repairs are not done. Other than repairs, there is not another reason a tenant has for not paying their rent. So why would an owner want to open themselves up for litigation and not perform the repair?

I suppose it comes down to cost. I find it funny when I speak with owners and ask them if they would want to pay to live in a property where the sink constantly drips, or the stove doesn’t work, or the HVAC isn’t cooling properly and they reply of course not, but some expect their tenants to. Most property management companies like ours buy in bulk, that means that we get better service and better pricing than a typical individual would get. We do charge a fee to perform the repair or coordinate the request if not done by the in house maintenance staff. Yet, even then we are significantly cheaper on most items and yet the owners still complain.

What they don’t understand is that we hire professionals who have their own insurance, liability coverage, workman’s compensation, and are screened. We do this to protect our owners as well as our company. We have seen issues where owner’s did not use licensed and insured workers thinking that they were saving money only to be sued later by that same contractor for being hurt on the property. I encourage every owner to think carefully about using legitimate companies with the proper credentials.

If you own rental property, this is a business, the repairs are the expenses are deductible and should be done professionally. Don’t be pennywise and pound foolish.

City of Buford Creates Issue for Tenant

The least favorite part of being a landlord is the late night emergency calls. Fortunately, it is rare that it is an emergency – but that was not the case a couple of days ago.  We got a call on the emegency line that a house was flooded and that the ceiling caved in. This particular home has the bedrooms downstairs and the leak was on the main floor.

It appears that the City of Buford went out to establish the utilties and turn on the water. Unfortunately, the tenant wasn’t home at the time they opened the water line and the washer wasn’t hooked up, but the water valve was open, so the result was a home with several inches of water. Below are some pictures of the damages:

Since there was little that we were able to do to assist at midnight, we asked them if they could stay with a family member until we could resolve the issue. First thing the next day, we dispatched our crews and found that it was a terrible mess. We had already notified the owner via text the night before so that he was prepared. He called the City of Buford and found that they were not going to take any responsibility for the issue.

The tenant’s personal items were also harmed. So we advised the tenant to also get involved. They called the City of Buford and was told that they were not responsible. So, if they cannot prove that the City of Buford was at fault, they will be out of pocket for their possessions as they did not have rental insurance. We ALWAYS recommend having rental insurance for these types of issues. If they did, the insurance company may be willing to pursue the City for them. As it stands, their only option would be to continue forward with their claim against the City.

The owner is also pursuing the City of Buford as his damages are very extensive. Historically water companies will turn the water off at the meter so that this problem doesn’t happen and leave a note for the resident. So stay tuned and we will update you on the progress.

Isn’t being a landlord great? Never a dull moment!

Atlanta Rental Market Update – State of the Union

The Atlanta Real Estate market is still very challenging. Here are some facts for you to ponder.

News of Georgia’s unemployment being over 10% is a very alarming. I have provided a link for you to view the historical data for your reference.  This means that 1 on every 10 households has someone who is unemployed. This is tremendous and will have a significant impact on the rental market as well as the foreclosure market.

Not surprisingly, over the past 2 months the number of foreclosures have also spiked up. If people are being laid off, they aren’t able to afford their homes. Currently, there are over 4,000 advertised foreclosures for August and that is only for 3 of the metro area counties. Now some of those will be able to be negotiated with the lender, but others will certainly go back to the bank. When that happens, it will put a strain on the eviction process which delays us in getting our evictions for non-paying tenants.

Clark Howard, popular local radio personality whose theme is “Save more, spend less and avoid rip-offs” dedicated a whole hour of his radio show this week to asking your landlord for rental concessions and lowering your rental amount due to the increase in vacancies. Click to read more about this show.

While we at Solid Source Property Management have seen an increase in the properties that are being rented, there are still a lot of vacancies over the metro area. We have been working hard to shorten the vacancy times and have gotten creative with our clients to do what we can to improve results.

In July, we have more than doubled the number of inquires over what was reported in June. Now we know some of that is seasonal, but part of it is also our aggressive advertising and specials.

We also found that those owners who did as we advised and either added staging items in the home or paid a higher referral fees did get their properties rented faster than those who didn’t. Only 10% of the owners who had a vacancy last month actually acted on these services, but each one that did is now occupied. So, my point is our recommendations are actually working.

I know that I have shared a lot of news with you today. The market is going to take a while to get better. Therefore, we will have to figure out how to best function with the situation as it is. While I am hopeful that it will get better sooner, we are bracing for the long term. Please know that if we can help you in any way – we are happy to do so. Contact us.

Atlanta Rental Market Update – Vacancy Rate

Mark and I read a lot about what is going on in the real estate business and in politics. We do this so that we can digest the information and figure out how we can use the trends to assist our clients. Earlier this month, we read that the vacancy rate is at an all time high for the past 20 years. We are at a national average of 7.5 percent and the highest recorded is 7.8 percent back in 1986.

While I have not received new vacancy rates for metro Atlanta, the rate was 6.3 in an article I read from April 2009. I would guess that number has increased. So what does this mean for you and me? It means that because the competition is at the highest rate we have seen in decades, we have to get smart and aggressive with our marketing efforts.

At this time, none of our 2 bedroom homes nor condos are getting rented. Why should they when people are giving away 3 bedrooms for what 2 bedrooms used to cost? If you have a 2 bedroom like I personally do, then I recommend that you lower the rate and have it in great condition. We personally will be renting a two bedroom house less than our cost just so that we don’t have to pay for a vacancy insurance policy, utilities, and risk damage due to vandalism. Some cash coming in is better than no cash coming in.

I have been saying for a while that if you currently have a vacancy, you need to consider what you can do to as far as concessions. Also, if you currently have a tenant in the property and the lease is coming due, be prepared to make rental concessions to keep them in the property. The reality is your neighbor who has a vacancy is probably willing to give them concessions if you aren’t. We are seeing a lot of move in specials, rent reductions, free rent and other incentives out there in the market.  

We have had success with offering discounts if paid before the first. We have not had as much success with offering incentives like free stuff (flat screen TV, etc) with rental.

Raising the co-op to another agent has worked some as well. We have some investors that agree to raise the co-op. The great part about that is you only pay that if the tenant was brought by another agent, but we have seen viewings increase when that happens. While it will not make someone rent your property if they don’t like it –the increase in showings means that you have more opportunity to rent your home faster. As more and more agents are not having as much success selling house, they are turning to rentals to keep their business going. Two years ago, agents would not have wasted their time showing a rental, but today a large majority of our calls are from agents looking to place someone for some fairly quick and easy income.

All this to say, if Solid Source PM manages your property and you have a vacancy, evaluate your bi-weekly activity report. If you are not receiving 3-5 showings, then the price needs to be corrected to increase the traffic. If you are getting showings, but we aren’t getting applications, we need to find out what we can do to increase the conversions to applications. Is there something that we can fix with the home? Are we getting applicants, but they aren’t qualifying. Some of these issues we can fix, others we can’t but lets work together to see what we can do to get these filled.

Atlanta Rental Market Update

At Solid Source Property Management, we are busy! Karen, Michelle & Marie have been working overtime the last 2 weeks as we have had a spike in activity. People are trying to get settled before the school starts again. We expect this to continue through to the end of the month and then taper off once school starts. So what does that mean for you if you have a vacant property?

The good news is that people are looking. The bad news is that they are pickier than ever. (If you missed my last update, read my June 17^th post for more about the market.) So make sure that you have your properties in order – clean, mowed, and in great shape!

I was looking over the reports of our advertising results for the last 2 month’s. As a comparison between the two months, it struck me that while the amount of potential tenant requests have remained fairly consistent between May & June, the number of viewings and actual rental contracts have dramatically increased. (Unfortunately this is a new report, so I wasn’t able to view May versus April, but I would expect that April would have shown less requests. I am looking forward to watching these trends over the next few months and will report trends as they develop.)

More interesting to me about this report was the time of day that information requests are made. In the 8:00 evening hour, there are more than 3 times the average number of requests- followed by a tie for 6 & 4 pm and then 10:00 pm. The 5, 7, & 9 evening hours see a significant drop in requests. I wonder why? In any event, this tells me that when our office is closed and we are not able to respond personally, our marketing presence is still working strong and we are capturing information that allows us to follow up with those people who are interested in our properties.

When you have rental property, having a marketing plan and system is extremely important, especially in today’s market. We need to maximize every lead and opportunity. So at Solid Source Property Management, we have several ways to get information about our properties to the public. In addition to the extensive on-line advertising that we do, we also provide 24 hour information messages for each vacant property through a sign in the yard. The prospective tenant can listen about the property and then patch through to Karen if they want to view it. We also answer our phones with a live person. A lot our competitors don’t, their calls just go to voicemail.

We call and follow up with people who have seen our properties and request feedback and information. This allows us to address any concerns quickly as well as provides us with an opportunity to try and find them another property that they might not have known about if the first property doesn’t fit their needs.

We also pay a high referral fee to other agents who show our properties which is about 2-3 times more than our competitors. Each of these steps means that we are positioned to get the most out of every request and in turn are able to fill our client’s properties as quickly as possible.