Responsibility of a Landlord – Repairs
I am amazed at the number of communications that I have from owners that don’t want to maintain their properties. This week there were 2 owners that were upset about having to replace a disposal that wasn’t working. We purchased and installed a new disposal as well as fixed other minor items for less than $200.00. What I wouldn’t do for such a small repair.
You see as landlords, it is our responsibility to provide a home in the same condition as it was when the property was leased. That means that if it had a disposal – it needs to be functioning. Also, we have to maintain the safety of the home.
This is one of the largest investments most of us will ever own. We are allowing another person to occupy it and in return, they pay our mortgage for us, plus provide us with some cash flow if we purchased it right. Yet, owners continually complain about the cost of repairs. It is a cost of doing business!
At SSPM have negotiated rates with companies due to the combined purchasing power of all our properties. Our rates are some of the lowest in the business. Because we are investors, we are very sensative to the cost of repairs and always ask ourselves, what would I do if this was my home and my repair.
Owners need to understand that repairs are the one claim a tenant can make against you in court not to pay their rent. In Georgia, it is the only way a tenant can legal occupy the property without paying rent. Now the burden of your not doing the repair will need to be proved, but why even provide that as an opening.
Sometimes owners want the tenants to do the repairs themselves. Let me ask you- would you want to hire a mechanic that doesn’t own a car to fix your car? I sure wouldn’t. I would want a professional who understands all the mechanics, who had the proper licenses, insurance, and education to do the work. I use that same mindset for my properties. I can’t trust that the tenant would do the job like i want it done. They might not have the skills, they could get hurt and then what?
As a property manager, I find that the number one complaint with owners is repairs. No matter how inexpensive they are. I can certainly understand that it comes at the wrong time – it does for everyone. So make sure that you have a small reserve to help during these time. It is also a good idea for when your tenant pays late.
Dekalb Section 8 Program Makes Landlords Cut Grass
I received a letter from the Housing Authority of Dekalb County last week that basically stated that due to pressure from HOA’s and the community- they were requiring landlords to become “responsible for ensuring that the grass and weeds on the premises of participating HCV Program properties do not exceed 12 inches in height and that any dead or hazardous trees, shrubs, ground cover, or weeds must be removed that are likely to harbor vermin, inspects, restrict or impede access to a public use of adjacent sidewalks or streets or pose a risk of physical injury ot the public.”
They will be citing the landlords for these offensives and give 10 days to get the issue corrected or abate the rent. Now if you know me, I fully agree that the landlord be responsible for weeds, trees, and maintaining the pinestraw yearly. After all- it is your investment and you want to maintain it. But grass cutting and trimming of the shrubs should be 100% the responsibility of the tenant.
I called the representative listed in the letter to discuss with him the concerns with this issue. To which I was told that even if our lease states that the tenant is responsible for the lawn maintenance, we could not charge the tenant back for cutting the grass on their behalf. My only recourse would be to terminate the lease relationship with the tenant which nets me the same thing – no rent.
I cannot treat them like I do every non-HCV partipant – charge them for the service of taking care of cutting the grass. Isn’t this reverse discrimination? The additional burden and costs associated with this new ruling could be tremendous. Not to mention that they will not be raising the rental rates to cover this additional expenses.
When I brought that to the attention of the official that this was going to have larger ramifications and I felt this was a mistake – he really didn’t think it was an issue.
Let me fully explain the ramifications of this action:
1 – The tenants will soon figure out that they are really not responsible for lawn maintenance regardless of what the lease states.
2- What other lease provisions with the Sec 8 program decide really doesn’t matter? How is it that they can change the rules in the middle of the lease – but we can not?
3- The increased cost to the landlords in an ever decreasing rental market will cause smart landlords to not accept Sec 8 in those areas as we will not be able to afford to maintain the homes and will get more money on the open market. Therefore, leaving landlords who really don’t maintain their houses in the program.
4 – It will reduce the number of rental homes that are purchased in Dekalb. Dekalb county already passed the water conservatory order which means that in order to sell, a seller must conform to the new water resitrctions of low-flow toilets and shower heads. (Read earlier post)
5- It is really is reverse discrimination in my opinion.
So if you have rental property. I encourage you to get involved. Once adopted in Dekalb – it could easily spread to your county.
Landlords Need to Know!
New Fannie Mae Guidelines
Starting August first there will be new guidelines for conversion of a primary residence to an Investment Property. This change will significantly impact the investing market as well as homeowners that need to relocate.
Under the new guidelines – while Fannie Mae will continue to permit up to 75% of rental income to offset the mortgage payment, owners will now have to have 30% equity in the existing property. Equity will be derived from an appraisal, AVM, or BPO less any outstanding liens. Rental income will need to be fully documented with an executed lease agreement & a deposit confirmation.
If the 30% equity in the property cannot be documented, then the rental income can not be used to offset the mortgage payment. Therefore, the borrow will need to have a high enough income to qualify for both homes. In addition the borrower will have to have 6 months of reserves for both properties.
You can read more of the specifcs about these changes at – https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf
All of this will have a significant impact of the investing community. It has already gotten more challenging with the removal of stated income loans – but this will have far reaching effects not only for investors, but for Middle America. As the home sales continue to lag- people that need to move for a job, or to be closer to a family member now will not be able to purchase a new home until their other home sells. This may end up crippling to our economy.
As a real estate professional. it is our duty to understand and advise our clients about options that are available to them. In the past putting a property in rental services was a viable option – now it is more limiting than just selling the property.
We encourage you to read through the new guidelines to become more educated.
Water Issues in GA will effect Housing Prices
This will have a major impact on housing. Once one county starts – others will follow. It will increase the cost to the sellers and therefore will raise the prices that the buyers will ultimately pay. While I certainly understand that there is a water issue here in Georgia, I think that mandating this is not the solution.
Anne Lackey
Solid Source Property Management
www.SolidSourcePM.com
Retrofit at Resale Ordinance Effective June 1
DeKalb County
On February 5, 2008, the DeKalb County Board of Commissioners adopted an ordinance that affects transactions of every property in unincorporated areas of the county on which there is a building constructed before January 1, 1993.
The purpose of the ordinance is to require that all plumbing fixtures on the property be certified as “low-flow” or water-conserving fixtures before the buyer of the property can receive water service. If a qualifying property does not contain low-flow fixtures, then the fixtures must be replaced or retrofitted to be low-flow (hence, the term “retrofit at resale”).
This ordinance becomes effective for residential properties on June 1, 2008, and for commercial properties, including apartments, on January 1, 2009.
1031 Exchange – What is that?
This past week on “The Real Estate Investing Hour” we had the privilege of having Robbie Hewitt with Vesta Strategies join us on the radio to explain about 1031 Exchanges, what they are, how they can benefit you, and what rules you need to follow.
Some of the benefits of a 1031 Exchange that we talked about were:
Tax Savings: A 1031 exchange allows you to exchange your property for another and defer the payment of federal and state capital gains taxes. This basically allows you to reinvest the taxes you owe as an interest-free, no-term loan from the government.
Income: If you exchange from a non-producing or low producing property into an income producing property.
Leverage: The 1031 exchange helps build wealth more rapidly by allowing you to use all of your equity rather than losing a portion through taxes.
Diversification: A 1031 exchange opens doors for diversification. One can achieve geographical diversity or diversification by acquiring a different property type such as exchanging a single family residential unit for a commercial property.
Management Relief: Many investors often start investing through purchasing single family residences. As a result, they accumulate several smaller properties and may find themselves in a management-intensive and time consuming situation. The 1031 exchange provides a solution to this by allowing you to exchange these smaller properties for one larger property.
It was a great show and provided a lot of insight for our listeners on how they may be able to leverage their existing inventory into bigger deals. As we shared, there has never been a better time to get involved in rental real estate.
Tune in next week to www.NewsTalkRadio1160.com Saturday 10-11AM.
Anne Lackey
This week on “The Real Estate Investing Hour” – Radio Show
With all different types of loans available on the market today, it is so important to make sure that you are matching your financing of the property so that it supports your desired outcome.
This Saturday, we will be discussing a ways to leverage other people’s money to maximize your return and make you the most money.
When should you use interest only loans? Is hard money bad? Fixed or variable rates? How much money should you put down on the property?
We will have Susan Pryor with Capital Funding & Mortgage Group joining us to discuss all the new developments in the lending market and how this will effect investing overall.
This is a show you won’t want to miss!
This week on “The Real Estate Investing Hour” Radio Show
SATURDAY
10:00 AM – 11:00 AM EST
Join us while we help you get focused and take your business to the next level. Learn ways to use other people’s money. we walk through the financing strategies and how you can use those strategies to increase your wealth.
Listen to “The Real Estate Investing Hour” every Saturday morning. Listen or watch live on-line at www.Love860.com or tune into 860AM on your radio dial in Atlanta.
Mark Lackey & Anne Lackey Co-Host every week to provide you the latest information on Real Estate Investing.
Below are our scheduled topics for discussion. Feel free to call in during the show with your questions & comments!
Upcoming Shows & Topics – Saturday Mornings 10-11 AM
August 11 – Financing Strategies for Investors
August 18 – How to have a Success Rehab
August 25 – Best way to Work with Contractors
A Guide to Real Estate Investing: Know Your Strategy
Investing in real estate can be scary and challenging. There are all kinds of questions – How do you know if and when it is the right time to purchase? What should you purchase? How should you finance it? What type of investment is right for your overall goals and strategy? As a real estate investor in Atlanta, I have found that although there are a lot of questions, the answers are fairly easy when you use common sense, evaluate your strengths, and know what you want.
The first question you should ask yourself is – why do you want to invest? For some it is to replace their income from a job. For others it is for retirement. Some just like to have a project and make a little money.
We have found that when helping other real estate investors, our first goal is to help them figure out the why and then help them determine the what. For example, if you need money today to replace the income you get from a job, then you need to produce income today through Quick Turning a property.
Quick Turning is purchasing a property at a depressed value, adding value to the property and then selling it at a profit. This is a great strategy and requires knowledge of the market to make sure that you are purchasing it correctly and then also some skill in determining how to maximize the return by strategically adding the value to your investment.
If having money for your future retirement is more what you are looking for – a Buy & Hold strategy might work best for you. With this type of investment, you are looking for results in the future, so you want to find an investment that you can rent out for more than the mortgage payment so that you have some cash flow. Over time, you will pay down the mortgage and the cash flow will increase giving you greater income in the future.
Both strategies have merit and typically we recommend that every investor have some of both types to round out their real estate portfolio. Once you determine what type of investment you need, then evaluating a property against your overall strategy will help you determine which property is a good purchase for you.
