How To Change Tenant Behavior

Some would say that part of property management training that involves dealing with tenants is more art than science, and with that I’d have to agree.

I’ve been actively managing people and managing property for almost 30 years and, knock on wood, probably 99% of the time things go very smoothly.

But that 1% is what really makes you sit down and think hard about what’s going wrong with your management training.

How To Learn From The 1%

Maybe I’m lucky, but when I manage people things go pretty well.  The group is cohesive, there’s not too much drama or politics, and everybody is moving toward the same goal.  Same thing is true about our property management training classes.


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But there’s the occasional employee that no matter what you do simply won’t cooperate.

And the weird thing is, these people tend to be the smartest ones in the bunch.

So what gives?

When we’d get together for the employee review I’d actually ask this question point blank and the employee would tell me exactly what they were doing wrong.

Which would baffle me.  I mean, if you know what you’re supposed to do and if you know what you’re doing wrong, how hard is it to change your behavior?

That’s Your Job Not Mine

The answer I’d always receive from this 1% is that while they know all of this, that it was my job as a manager to change their behavior, not theirs.

Managing tenants isn’t quite the same thing as managing employees, but they’re both people, and like they say, people will be people.

One of the most effective property management training tools I’ve found to change tenant behavior is to set the right expectations.

Tenant-Friendly Leases

Often we’ll be managing a multi-tenant real estate investment with leases already in place that bind the new owner to promises made by the previous owner.  Many times, for whatever reason, these leases are overly tenant-friendly, to the point that the previous landlord has actually given up rights that she’d normally be entitled to.


=> Lease Tips For Tenants

I see this with the rent due date a lot of times.  For example, if by law and by a standard lease contract the rent is due on the 1st and delinquent on the 5th, I’ll see the delinquent date stated as the 10th in the lease.

Clearly this can wreak havoc with your cash flow, particularly in the case of tenants that push the envelope, and the 10th can quickly become the 15th.  If you’ve got a mortgage on the property, odds are your payment is due before the 15th.

Would You Rather Be Paid Now Or On The 15th?

Assuming you can’t amend your existing leases, the easiest way to improve your cash flow and get more of your rents coming in by the first is to send out monthly billing statements at lease a week before the due date of the 1st of the month with a note on the statement that rent is due on the 1st.

If needed, send a follow-up statement on the 5th as a reminder that rent is due on the 1st, or make a follow-up phone call or visit to the tenant, to make sure that the tenant received the statement.

Don’t say anything about the due date of the 1st.

You’d be surprised at how effective this simple property management training tool can be.

We’ve taken over the management of many properties that have leases like this, and usually within two months of using this technique almost all of the tenants are paying by the 1st or even sooner.

Sugar Is Better Than Spice

The nice thing is, we didn’t have to coerce, didn’t have to threaten, and didn’t have to charge late fees.

For the price of a first class stamp, a piece of paper for the statement and some printer ink, we were able to move the majority of our cash receipts up by 10 days.


Jeffrey Roark
Easy Real Estate Training 101
Basic Property Management Training

Tenants Charges – What’s Normal And What’s Not

My recent trip to the mechanic for some work on my car started me thinking about what tenant charges are normal and which are not.

What do tenant charges have to do with fixing a car?

Here’s how my mind started wandering about what’s normal to charge a tenant and what might be a little too creative.

Good News And Bad News

My repair tab at the garage ran about 3X more than what I’d anticipated, although fortunately I’m able to spread the needed repairs out over a couple of.

The good news was that the garage did a few simple repairs for me for free.

=> Property Management Leasing Tips

Granted, what they did do at no charge wasn’t all that expensive, but they could easily have nickel-and-dimed me or factored the freebies into the cost of the repairs I did pay for.

But they didn’t. 

And that’s the whole point in having a list of reliable suppliers, something that good investment property management will teach you how to do.

Creative Tenant Charges

If you’ve invested in any type of investment rental property management courses you already know that it’s always a good idea to do periodic market research on the rents that you’re charging.

A reality check, if you will.

If you don’t do it, your tenants will, and who wants to be caught off guard by a tenant?

Over the weekend I was doing just that, some on-line research, and there was one house for rent listing that caught my eye, offered by a property management company.

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What got my attention was that in addition to the monthly rent the tenant was required to pay the monthly management fee was well.

I don’t mean the HOA, or utilities, but the monthly fee customarily paid in this market by the owner of the house for rent.

This extra fee to the tenant was kind of disclosed in the ad.  It was called the ‘monthly administrative fee paid to XYZ Management Company’.

Surprising Charges To The Tenant

Now I’m not sure how many prospects that want to rent that house would catch the fee mentioned in the ad, and I’m also sure the fee is going to be itemized in the lease.

The problem is that it’s not a customary fee charged to a tenant – yet – so after the prospects get all excited about the house for rent, have had their rental application approved, and sit down to sign the lease, they’ll see this fee.

Some may question this administrative fee, but most probably will not.  After all, finding a house to rent, just like buying a house, has a lot of emotion attached to it.

If you’re the owner of this property you might say, “Bravo, I just improved my cash flow by 8% a month!”

True, in the short term.

But when the tenant discovers they’re paying an above-market rent, and trust me they always do, you’ll likely have to go through the time, trouble and expense of finding another tenant to rent your house.

Unusual Tenant Fees With An International Twist

In London the market demand for rentals is extremely strong which allows owner of rental property to charge some pretty unique fees to tenants.

Among them:

• Administration fees
• Deposit administration fees
• Credit reference fees
• Check in fees
• Check out fees
• Lease renewal fees

Apparently tenants are starting to push back but with the amazingly low vacancy rate that London has it remains to be seen how successful the tenant complaints will be.

Tenant And Landlord Beware

If the charges to the tenant are customary in the market, or if there’s enough demand where as an owner of investment real estate you can get away with charging the fees and passing through to the tenant, I say fantastic!

If on the other hand you’re pushing the envelope on tenant charges and doing a little too much thinking outside of the box, a short-term gain of a few dollars a month will likely lead to a higher turnover rate and higher re-leasing costs a year down the road.

Jeffrey Roark

Learn Investment Property Management

Easy Real Estate Marketing

How To Analyze Investment Real Estate

Use Property Management Training To Analyze Real Estate Investments


A good property management training manual will show you how to analyze investment real estate before you actually invest.

=> Property Management Training Tips

Common sense, you might say, but it’s surprising how many real estate investors who are pretty astute when it comes to investment property management overlook this point.

Buyers of real estate for rent will always look at the comparable sales of similar property, what the market rents are in their chosen market area, and what the general condition of the trade area is like for the property they’re thinking about investing in.

Without a doubt these are important criteria to consider.

But solid property management experience shows that it is important to think outside of the box and look at other factors that might not be so obvious, but that could have a huge impact on the success of your investment real estate.


=> How To Manage Rental Property

 

Good Property Management Training And Hidden Investment Selectors

Here are some of the other top items we cover in our property management training book to consider when you’re thinking about investing in a rental property:

Foreclosures
I don’t mean the ones that you see, but rather the ones that aren’t on the market yet.
Ask your self what’s in the pipeline.  What’s the percentage of underwater homes in the market you’re thinking about investing in?

In some markets the pipeline of foreclosed homes that aren’t yet on the market runs close to 20 years.

That’s years, not months.

Interest Rates
If you’re a big fan of leverage and OPM (other people’s money) this is critical for you to think about.

With interest rates as low as they are now you could be sitting pretty if rates start popping up, provided the rate on your loan doesn’t adjust.

Your rental property leveraged with a low rate will be competing with properties financed at higher rates, giving you more discretion in your rents.

Expenses
Thinking that expenses will have a gradual, straight line increase is a rookie mistake to make, and something we cover in our property management training.

If you think interest rates are going to go up, then it’s likely expenses will too.

Tenant Quality
In our property management training program we spend time talking about what property type is best of your individual investing personality.

Make no mistake, the type of property you choose to invest in will attract certain tenant types.  One type isn’t inherently better or worse than another, but make sure that you’re attracting a tenant type you like dealing with.

Even if you outsource your property management responsibilities to a private company, one way or another you will end up dealing with the inherent characteristics of your investment property.

Markets and Neighborhoods
During the housing boom many markets saw new development way out in the fringe areas.

In ‘the boonies’, if you will.

Now prices in the fringe areas are really cheap.  And for good reason.

It’s because housing has become more affordable closer to the employment centers and tenants can now find affordable rents closer to where they work.

Can you blame them?

Jeffrey Roark
Property Management Training Guide
How To Make Real Estate Flyers

Creative Ways To Find Tenants With Good Property Management Training

How To Creatively Lease Space Using Good Property Management Training

A lot of property management training was developed when the markets were strong and space was easy to fill.

How to manage property ‘by the book’ was the name of the game and this is what most property management training focused on.

If you’ve been a subscriber to this property management training newsletter site for any length of time, you know that those good old days are long gone.

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Creative Property Management Training = Finding Tenants

Among the three main commercial real estate categories of office, retail, and industrial, industrial space is often the hardest to fill.

That’s because industrial space is at the bottom of the food chain, so to speak.

The classic industrial tenants covered in property management training depend on a strong economy and are dependent on a solid demand for office and retail businesses for success.  With office and retail vacancies the way they are now, industrial parks suffer even more.

Unusual Tenants In Industrial Space

Some of the recent creative uses for industrial space we’ve seen include:

Churches

Schools

Fitness Trainers

Artists

Food Manufacturers

Sports and Events

Thrift Stores

My recent property management training article on linkage analysis talked about how to understand where the customers for your space are coming from.

=> How To Market Real Estate

Note that all of the above are what I’d call destination locations, in that they don’t require a classic store front or retail location to attract customers.  That’s because the tenant’s customers already know where they’re going.

Friction With Non-Traditional Uses

Keep in mind while reading this article that most municipalities will require special use permits for non-traditional tenants in industrial space, while others might simply reject any creative uses for your empty space.

Why a municipality would prefer to see space sit vacant and lose tax revenue is beyond me, but I’ve seen it happen time and time again.

Some towns and cities may prohibit creative uses all together, so be sure to do your research first before accepting a lease.

Often you’ll see a clash between the planning and zoning department, which might stand firm on the current allowable use for a space and not want to mix cement trucks with cars.

On the other side you might find the economic development department striving to attract small business and entrepreneurs to the town, to stimulate growth and increase tax revenues.  So they’ll welcome landlords and tenants who try to think outside of the box.

Creative Ways To Find Tenants For Industrial Space

In our property management training we go through a step-by-step process of how to identify the most likely tenants for your space, how to market to those tenants with a laser focus, and how to set yourself ahead of the competition.

Here are 5 of the reasons why I think some tenants might be attracted to renting industrial space:

Rents are usually half of what a typical retail location might be

The spaces are large and open, often with high ceiling heights as well

There’s usually some office space already built in, good to use for an admin or sales office while the majority of the floor space is still open

The fact that industrial space is off the beaten path may be attractive

For tenants with a high volume of weekend use, the industrial park won’t be busy

With a little property management training brainstorming you’ll find it’s easy to build on this list.

After that, think about the best ways to market to those tenants and go after them!

Jeffrey Roark

Property Management Training Guide

Real Estate Training

Linkage Analysis and Property Management Training

Learning linkage analysis as part of property management training is the first step to take in analyzing a property that you're thinking about buying as an investment, or putting on the market for sale or lease.

I've witnessed during many property management training sessions that, more often than not, real estate investors will take a property use as a given.

For example, if a small multi-tenant office property is on the market for sale, many buyers will assume that there is the demand in the area for office use, contrary what they may have learned in property management training classes.

Otherwise, why would the property have been built?

 

The First Step in Linkage Analysis

You may already know this from some recent property management training, but just in case:
Instead of assuming that there's a need for the office property just because it's there, ask yourself whether the office building property should be there in the first place.

The population characteristics around the property that are identified during the linkage analysis should suggest that there are the customer and employee bases to support an office use and help to identify the type of office uses most likely supported.

 

Office Property Linkages

Property management training courses show that there are three basic linkages to look at during your linkage analysis of the office building:

1.  Proximity to Customers:  We don’t know specifically who the customers will be, but we can look at the population characteristics to determine if a general office use would be supported.

2.  Proximity to Employees:  We don’t know specifically who the employees will be, but we can look at the population characteristics, specifically the education levels, age groups and existing travel times to work.

3.  Neighboring Uses/Competing Uses:  The property is in a growing, redeveloping area that is transitioning from a mixed-use industrial area in a county island to a more professional mixed-use office/retail area. 

Because of this activity, competing uses such as more office or retail space is anticipated and encouraged since it will have a positive affect on the redevelopment of the area.

 

Demographics and Linkage Analysis

After taking a look at the basic linkages of our office building, the next step is to take a look at the demographics.

The following is an excerpt from an actual office building linkage analysis we recently worked on.

The first step was to determine the likely service area radius in miles or drive times.  Once the radius was identified the specific population characteristics could be analyzed.

The following steps take a look at various demographic measurements we had at our disposal:

A.  1990 Census Employment Report

1.  75% of the employed travel less than 29 minutes to work.  This equates to a 5-mile radius around the property.  Within that radius,

2.  60% are employed in occupations that suggest an office use – Clerical, executive, professional and sales.

This data identifies the service area of the property and the likely professional office uses for the property.

B.  Business Summary Report

3.  55% are employed in white-collar occupations.

4.  75% of the establishments employ nine or fewer people.  This is also the employee occupancy range that the building could accommodate.

C.  Office Report

5.  The population and employment levels are expected to grow, and the growth in office employment can be extrapolated from this.

D.  Demographic Trend Report

6.  The 35-64 age groups are expected to increase by 6% - 18% over the next five years.

7.  The $50,000 - $150,000 household income categories are expected to increase by 7% - 55%.

8.  The average and median household incomes are expected to continue to increase.

The data from the above Reports demonstrates continued population growth in ‘employable’ and ‘entrepreneurial’ age groups.

E.  Population Summary Report

9.  The holders of associates, bachelors and graduate degrees should continue to increase, which demonstrates the existence and growth of an educated workforce.

F.  Income Summary Report

10.  This report shows a continued increase in disposable household incomes above $40,000.  This increase in disposable income mirrors the demographic, age, and household income growth patterns previously noted.

 

Using Property Management Training To Think Through Linkage Analysis

Going through these linkage analysis steps, even if you only sketch things out on paper, will help you determine if the office building you're thinking about buying should have really been built in the first place.

If you're the current owner putting the office building on the market, developing a linkage analysis will help keep your marketing laser focused and allow you to foresee questions or objections before they ever come up.

Jeffrey Roark
Common Sense Property Management
How To Rent My House Training Guide

Property Management Training In Las Vegas

The majority of what I cover in our residential property management training focuses on what to do once you actually have your house – or condo, townhome, apartment, or any other residential property - to rent.

So to switch things up a little, in this property management training story I wanted to step back and take a look at some of the factors that can affect the cash flow and the possible appreciation, or heaven forbid deprecation, of your real estate investment.

Before I talk about that, though, let me share a story about one of my favorite questionable rental housing markets.

Las Vegas, Nevada.

Property Management Training In Vegas

I’m picking on Vegas because lately I’ve been hearing a lot of otherwise intelligent people suggest that now is a good time to invest there.  Maybe yes, maybe no.

Here’s my story.

Years ago, before the house rental market really took off I had the opportunity to travel to Las Vegas once every month or so, for the better part of a year.

What eventually struck be about the place was how absolutely artificial it was, and what a huge – and I mean huge – impact the casino industry had on the city.

Bigger Than Some Small Towns

Most if the casinos have infrastructures larger than some small towns.  And the number of people they employ is huge. 

There are schools devoted strictly on training people how to work in various jobs in the casinos. 

And I don’t mean casino or hospitality management.  I mean blackjack dealers, waiters, car hops, jobs of that nature. 

There are actually schools devoted strictly to this.  One morning on the way to an appointment I drove by one, and the parking lot was jam packed.

Now you may be reading this and thinking to yourself, “No kidding Jeffrey, Vegas is all about gambling.”

And you would be right.  Except I would say, it’s ALL about gambling.

How Economic Drivers Influence Real Estate Investing and Property Management

Which means if you’re investing in a rental property in Las Vegas you’re really investing in the casino industry, and how well the casino industry is doing will have a 100% impact on the success of your investment and property management efforts.

The casino industry in Vegas is what we’d call the economic driver.

If they’re driving the economy forward, if they’re employing people, paying a decent wage, and managing to keep them happy, your how to rent my house efforts will be positively impacted because there will be plenty of people who can afford to rent your house.

=> Get More Tips On How To Rent A House Here

On the other hand, if the casino isn’t doing well, then you’d better make sure you’re applying all of the methods from the property management training you’ve received if you want your rental property to be a success.

For sure Vegas is an extreme example, but it illustrates my point well.

I’m always surprised that 9 out of 10 of the real estate investors I see focus only on price and spend little if no time thinking about the economic drivers for the area they’re investing in.

It’s Not All About Price

Naturally, if you’ve invested in some basic property management training you’re in the top 10% and understand economic drivers and the big picture.

=> Check Out The Basic Property Management eBook

Here are some of the top items I consider when thinking about economic drivers, real estate investments, and managing real estate:

Is the market ever going to come back?   

This is true of certain neighborhoods within a city as well as certain cities or even parts of the country.  If your market is dependent on politics, its probably already booming.  On the other hand, if you’re hoping that the auto industry in Detroit will come back, that I’m not so sure about.

How stable are the rents?   

In the future we’ll talk about shadow inventory and foreclosures in the pipeline.  But for now, consider whether more rental homes will come onto the market at prices lower than what you paid.  If so, your competition will have more flexibility in adjusting rental rates that you will.

Will the demand for your rental property soften?   

Right now there’s a lot of activity in the apartment and multi-family market.  In our common sense property management training we discuss the pros and cons of different property types.  

 If you’re investing in multi-family property, spend some time thinking about how your rents and tenant quality might be affected if more and more single family homes come on the market at rents close to what your apartment rents are.  Will your tenants end up making the switch from apartment living back to renting their own home?

As always, I hope you've found this article on property management training useful.  When you have a moment, why not check out our other free property management training newsletters?

Jeffrey Roark
Common Sense Property Management Training
Tips On How To Rent A House 

Are Rental Homes Still Good For Real Estate Investment?

Homes For Rent Still Make Good Investment Real Estate

A big part of our property management training involves marketing, finding and keeping good tenants – which is a big part of investment real estate.

If you’re just getting started in investment real estate, you may not have read any property management guides, and may not even be sure that residential rental property will make a good investment going forward.

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A main reason for buying investment real estate is the positive cash flow, and secondly is the appreciation.  But having positive cash flow depends on there being a strong ongoing demand for rental houses.

When Investment Real Estate Was The Norm

Historically, even during serious recessions or depressions, the adage was that owning real estate was always better than not owning real estate.

Buying investment real estate for the long term has almost always been a formula for success, and much family wealth has been accumulated by buying investment real estate and keeping it in the family for generation after generation.

Real estate plus time usually equals wealth creation.

=> Learn To Manage Residential Investment Real Estate

Renting Is Now The New Normal

But the times have changed.

Over the past several years nearly 6,000,000 people went from being real estate owners to real estate renters. 

Translation?  It’s an excellent time to own investment real estate.

New Rental Property Investors

Most of the people buying investment real estate are beginning investors.  Recent surveys have show that:

59% are new to real estate investing

33.5% are considering their first investment real estate purchase

8.5% in the process of buying and selling their first investment real estate property

17% have recently made their first deal and are ready for more

36.5% have experience in more than one property transaction

It’s hard to argue with these kinds of numbers.  Investment real estate rents have increased compared to the prior year.  Combine this with record low interest rates and plenty of bargain priced properties on the market, and the outlook for buyers of investment real estate looks pretty good indeed.

More Renters Are On The Way

Freddie Mac recently released its U.S. Economic and Housing Market Outlook for October showing that, with rental demand rising and apartment economics improving, the multifamily sector is a strong positive signal for the U.S. housing industry.

According to the mid-2011 Census Bureau report:

An additional 1.4 million households have moved into rental housing

This represents a 4% rise in the number of tenant households in just one year

U.S. homeownership rates have fallen about 1.5% over the past year

Homeownership rates have fallen by 4.4% (to 21.9%) for those under 25 years of age and by 7% (to 34.7%) for those aged 25 to 29 years

Apartment rents, which had been flat to falling during the 2008-2009 recession, have begun to rise

This is huge opportunity for buyers of investment real estate.

5 Step House Rental eBook

Our how to rent my house guide is the perfect training tool for the beginning investment real estate buyer. 

You’ll learn plenty of proven, real world tips and tricks to get your property rented fast, how to find and keep tenants that will want to keep renting from you year after year, and how to beat the competition hands down each and every time.

I hope you’ve found this article on investment real estate useful – feel free to comment or send me a note if you’ve got any questions.

Jeffrey Roark

Property Management Training Newsletter

How To Rent My House Articles

Do Short Sales Make Good Real Estate Investments?

Short Sales And Real Estate Investments

A question that often comes up during our property management training courses is whether or not short sales make good real estate investments.

Many of our subscribers are just getting started with their real estate investments so today I wanted to share my views on short sales vs. traditional sales, and which might be the better real estate investment.

=> Property Management Training Courses

Short Sales As Real Estate Investments

Whenever I drive to or from an appointment or my office, I always try to take a different route.  Doing this helps me with my own real estate investments.

When I look at the ‘for sale’ signs on various real estate investments and properties, I sometimes see a sign rider that proudly proclaims that the house for sale is a ‘traditional sale’, and not an REO or short sale.

That tells me a couple of things about real estate investments in today’s market place:

1. Short sales are the norm
2. Traditional sales sellers feel they are disadvantaged by having a traditional sale

Otherwise, why go through the extra effort of touting that you have a traditional sale?

Why Not Buy A Short Sale?

In my mind the focus of your real estate investments should be on short sales, not on traditional sales.

=> Tips To Rent A House

Traditional sales by private parties are still going to be overpriced compared to what you could get by buying a short sale.  Remember, the real estate investments you’re buying are going to be used as rental properties, so some of the problems that will certainly arise when you’re trying to purchase a short sale shouldn’t be a concern.

The Problems With Short Sales As Real Estate Investments

My advice to anybody buying short sales as real estate investments is to have several properties identified to purchase, so if the lender on your first choice isn’t moving fast enough, you can quickly move onto your second choice.

I’m not suggesting that you mislead people in any way.  Actually, just the opposite.  Be up front with the listing agent and lender, let them know you’re an investor looking at multiple choices for rental use and that theirs is your first – but not only – choice.

Probably the biggest problem I’ve seen with short sales is the length of time it takes to close.  I don’t think there’s any malice or ulterior motives involved, but that a couple of factors do come into play:

• The asset manager at the bank is probably overwhelmed by the amount of work she’s expected to do
• Some banks are more motivated than others, depending on the disposition of the total portfolio they have
• There are simply more people involved in a short sale than a traditional sale, which means more potential complications

Cash Flow And The Short Sale

In deciding whether or not short sales or traditional sales make good real estate investments for you personally, I’ll share a quick and easy cash flow analysis that works well for me.

Do the following, step by step:

1. Identify a short sale property and a comparable traditional sale property
2. Calculate how much cheaper the short sale property is to buy
3. Budget the needed rehab expenses to get the property rental ready
4. Estimate the potential lost rental income due to the short sale taking longer to close

If you’re still cash flow positive on the short sale property compared to the traditional sale, you’re reader to go under contract and you’ll also have a better idea of what the month by month opportunity cost is of having the short sale as part of your real estate investments.

Feel free to post a comment or drop me a line if you have questions about this property management training article on real estate investments.

Jeffrey Roark

Basic Property Management Training

Tips To Rent A House Courses

Realty Management | How The Approach Differs By Property Type

In a property management training article on realty management a couple of weeks ago we discussed whether single family or mutli family properties make the better investment.

Much of the answer to this is really a question of realty management, your specific real estate investment objectives, and whether or not the individual tasked with managing your rentals has the necessary property management training.

Single and Multi Tenant Properties Realty Management Review

As a review, my first article on this topic covered these points:

Consider whether or not the market has really bottomed out.  Are there too many properties on the market for the available buyers, or are unsophisticated investors bidding up property values while the smart money stays on the sidelines?

=> Get Property Management Training

 

Think through the exit strategies available with each investment. 

With single family properties you can:

• Sell to your tenant
• Sell to an owner-user who is not your tenant
• Sell your portfolio to another single family investor, although this is the toughest of the three to do and often times easier said than done

With multi tenant properties the exit strategy is more limited, but also more clear cut:

• Sell to another multi tenant investor
• Go condo, split up your multi tenant property into individual units for sale, and sell to either the current tenant, another owner-occupant, or a beginning residential investor

=> Learn How To Rent Your House Out

Realty Management Differences

Let’s pick up where we left off last time.

There are big differences in the type of realty management required for each of these product types.

Here’s what I see the top three being in each:

Single Family Realty Management

The realty management of a group of single family homes becomes much more difficult if they aren’t close to each other.

On the other hand, the amount of ongoing repairs required is probably going to be less, since tenants in single family homes tend to have more of a “pride of ownership” in their property, even though they’re renting.

But when repairs are needed, they are probably going to run on the high side, in particular when the property needs to be turned over to another renter.  There’s simply more of everything that needs to be spruced up or replaced, compared to a small sized multi tenant rental.

Multi Family Realty Management

The realty management of multiple units is almost always easier, since each grouping of units is right next to each other.  Even if you have a real estate investment portfolio that’s spread across town you’ve still got multiple units right next to each other.

You may have a higher level of on-going repairs, since tenants in multi family property may take a lower “pride of ownership” view than those in single family properties.

When repairs are needed, the costs are probably going to be lower due to the smaller sized units, when compared to a single family home.

The Impact Of Appreciation

I’ve seen a lot of real estate investors purchase property with the idea of building a legacy that they can pass onto their kids.  Their intent is to never sell.

Sometimes this happens, sometimes it doesn’t happen, for various reasons.

My point is that buyers of investment real estate should always think through the potential selling exit strategies of each and every investment they buy, in addition to the ease of realty management.

Here’s where to start when you think about selling before buying.

Multi Tenant Investors

With multi tenant properties, you’ll most likely be selling to another investor who is driven by financial performance, CAP rates, or cash-on-cash return.  There won’t be a lot of emotion involved with this type of sale. 

So, your type of realty management should be developed with this in mind.

Single Family Buyers

Here you’re most likely selling to an owner-occupant, either the existing tenant who wants to own, or an end-user who wants to buy. 

With single family, other than the ability to finance the property, emotion is probably the number one driver for most buyers.  The color of paint, carpet or flooring, the type of appliances, and much more all come into play.

Your realty management of the property should be done with this emotional twist in mind.

Depending on whether you choose to invest in single family or multi tenant real estate, your level of property management training and realty management will go a long way toward a successful and profitable exit strategy.

Jeffrey Roark

Property Management Training Book

How To Rent My House Real Estate Guide

Property Management Training - When Tenants Hold The Last Card

Today I took a break from property management training, and had an almost three hour lunch with one of my best investment property management clients. 

Not the Mad Men type of lunch that may have jumped to mind, but a good casual meeting where we talked about a variety of topics, none of which involved property management training.

My client/friend travels internationally quite a bit, so we only have the chance to catch up and talk about his properties and tenants, and our individual investments, and the related investment property management issues every few months.

One topic of conversation was a problem tenant in a single-tenant property he had purchased a little over a year ago.  

=>  Property Management Training Manual

Every three months, almost like clockwork, the tenant pleads poverty and approaches us for aren’t concession of one type or another, nowadays an all-to-often occurrence with investment property management.

Our last meeting with the tenant was surprisingly adversarial, with the tenant, who is almost two months behind in its rent, basically giving us an ultimatum that if we didn’t reduce their went, then they would break their lease and go elsewhere.

The investment real estate property is owned free and clear, and the owner has substantial capital reserves, so if the tenant ends up leaving this won’t be a financial hardship on the owner.

But cash flow is still cash flow, and the odds of getting the building rented quickly aren’t that great, given the area of the market that it’s in.  So we decided our best investment property management approach is to continue with the strong, firm, reasonable hand we’d taken with the tenant from day one.

The problem is that in this case, the tenant really does have the upper hand if the negotiations get tough.

=>  How To Rent My House Real Estate Program

Here’s the investment property management problem.

The building is leased to a private social club with national exposure.  While at first glance that might sound good, the problem with the lease is that the party on the hook as the tenant is only that specific location entity, not the national group.

Nor are there any personal guarantors.

Which gives us a weak hand to play in this specific game of investment property management.

The situation we have is similar to leasing a free standing building to Walgreens or CVS, and not having a corporate guaranty but instead only the guaranty of that individual store location being around. 

If that store goes, you’re out of luck.

I don’t think my client quite understood this until our lunch meeting.

Most problems that arise with investment property management and real estate are foreseeable and can be determined with even some very basic due diligence or research, but for various reasons are often overlooked.

Sometimes:

The buying real estate investor is motivated by a hot market

Currency exchange rates plays a factor

People buy into the ‘market hype’ going on at the time

Bad advice is given, or the investors will second guess themselves and not go with their first instincts.

Let’s face it, it’s easy to over analyze anything and find data to rationalize the decision you’d like to see.

In the case of our problem tenant, there are a few simple things that my client/friend could have done prior to buying the property that would have made his investment property management go much smoother:

Have a trusted independent advisor review the lease. 

This can be an attorney, a friend in the business, or a real estate consultant.  But for sure somebody who does not have a vested financial interest in whether or not the property sale closes.

Determine what the tenant actually does and who the management really is. 

It’s very easy to assume that because a tenant has been paying their rent, they will continue to do so. 

The problem is, things always change.  There can be a new competitor, a change in the market demand, a family situation with the tenant, or a management change in the staff.

In our case, with one short pre-purchase meeting with the tenant, my client could have discovered that not a single member of the management group had any prior experience running a business, let alone the one they were currently involved in.

Figure out who is actually liable on the lease. 

This is the easiest thing to do, but also the area that is often overlooked or erroneous assumptions made.  It’s easy to assume that the tenant wants to stay in the lease, or values their business.  To an extent, they probably do. 

But if you’re operating in a market environment where increasingly people blame other for their problems and bankruptcy becomes more and more common place, understand that your tenant is likely going to be influenced by whatever the prevailing attitude is at the time.

In the case of our tenant, essentially nobody or thing is on the hook.  There were no personal guarantees, and if the entity on the lease decided to become insolvent, my client would have very little to go after.

Yes, you can always get the attorneys involved, but then nobody wins, except the attorneys.

Doing a little basic investment property management due diligence on an existing lease can go a long ways to keeping your hard earned investment money in real estate that generates cash flow.

Jeffrey Roark

Property Management Training Guide

How To Rent My House Real Estate Program

Is It Better To Buy Single-Family or Multi-Family Rental Property?

Most property management training and property management consultants start with a real estate property that’s already owned by the investor.

In today’s article I wanted to take a step back, ignore what you already own, and think about potential future purchases.

As a property management consultant I’m often asked if single-family or multi-family investments are the better choice.

There’s not a right or wrong answer to this question and I think a lot of this answer comes down to what your personal preferences are regarding residential rental property investments.

=> Property Management Training Manual

Is This The Time To Buy?

Either way, as I advise my property management consultant clients, there will certainly be strong opportunities coming up in the residential investment market, on both the single-family and multi-family investment side.

I don’t have a crystal ball, and I’m not ready to advise my property management clients to move just yet.  Instead, I think it’s time to keep an eye on the market, do some on-going investment analysis, so that when the time is right you’re ready to pull the trigger and make decisions you’re comfortable with.

My personal view as a property management consultant is that the market hasn’t bottomed out yet.

The way I define a bottomed out market is When there are 10 properties for every one buyer.

Don’t get me wrong, I never suggest trying to time the top or bottom of the market.  I’ve personally tried to do this – maybe it’s human nature – and the results are never good.

The definition I like to use of a bottomed market is, "When there are 10 properties for every one buyer."

So while we're not at the bottom yet I think we soon will be, and there will soon be excellent investment opportunities for rentals, short-term buy-rent up-flip, and long-term hold positions.

Back To Our Original Property Management Consultant Question

Is it better to invest in single-family or multi-family residential property?

=> How To Rent My House

A good property management consultant will go through the investment process step-by-step.

To try and answer this question, let's start from the end first and take a look at potential exit strategies:

Single-Family Investments

With single-family rental investments there are three main exit strategies:

1. Sell to an owner-occupant, with the first step being to sell to the tenant renting your home
2. Sell to an owner-occupant who’s not your tenant, which means you’re probably going to need to do a lot of updating and some improvements before you put the single-family rental back on the market.
3. Sell your single-family portfolio to another investor, and let them go through the first steps above.  This exit strategy is easiest to do if you own your rental homes free and clear, since you won’t have to deal with each of the lenders involved on the individual properties.

Multi-Family Investments

With multi-family investments your exit strategies are a little more limited, but also require a little less work.

1. Sell to another multi-family investor
2. Try to “go condo”, assuming planning and zoning allows this and you’ve got sufficient upside to through the time and expense in doing this.
3. After you go condo, sell the individual units using the methods I covered in single-family exit strategies.

Property Management Differences and Investment Appreciation

Two other factors to consider in single-family vs. multi-family investments are the differences in property management and the appreciation between the two property categories.

I’ll cover these topics in future articles.

I hope you’ve found this property management training article useful on determining whether single-family or multi-family residential investments are the better choice for you, and have gotten some good information to discuss with your property management consultant.

Jeffrey Roark

Property Management Training eBook

Tips To Rent A House

The IRS and Property Management Training

What That IRS Taught Me About Property Management Training

The recent mail contained a letter from the Internal Revenue Service regarding a 1099 individual that we had filed on last year, and the conversation that followed ended up providing an excellent lesson on property management training and how not to rent your house.

The gist of the complaint correspondence was that the individual’s last name didn’t match the tax payer identification number we’d supplied on the IRS return form.  That’s because the IRS had combined the vendor’s middle initial with his last name, creating a unique new last name that of course didn’t match the tax payer ID.

I figured this out in less than a minute after accessing the PDF reports on my computer.

Scanning documents, by the way, is something that’s incredibly helpful and time saving if you ever decide to rent your house.

=> Property Management Training eBook

Telephone Call To The IRS

Granted, anyone can make mistakes.  When you rent your house there are going to be errors, and it’s best focus on problem solving instead of worrying about the cause of the mistake.

The problem was that the IRS letter only said what to do if I’d made a mistake, not what to do if the IRS made a mistake.

So to cover my basis I made the IRS phone call seeking clarification, pressed my extension and held for not too long of a time.

My talk with the IRS representative was pleasant enough, but she wasn’t really focused on solving the problem – the combination of the middle initial with the last name – but instead cited various tax publications, rules and regulations.

After a few minutes on the phone the representative determined that I really didn’t have to do anything since it was an IRS error, but suggested I retain the notice for a few years.

How To Rent Your House – What I Learned From The IRS

This exchange got me thinking about how we interact with tenants when they call with a general issue or question, a task that frequently comes up when we discuss how to rent a house.

For instance, when a tenant calls with a repair request or question, it’s tempting to refer to the lease and use the terms and conditions as guidance, and cite those to the tenant.

Doing this is sort of like following the letter of the law and not the spirit of the law, which is not a good way to rent your house.

After much experience in working with renters, property owners and many property management issues, and training real estate investors that want to now how to you’re your house, I can tell you that it’s the little things that rub tenants the wrong way, not the big things. 

Charging tenants for little things, or asking them to do the work themselves, usually ends up creating bad will and can lead to a good tenant not renewing its lease.

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How To Rent Your House

Here are a few actual ‘how to rent your house’ situations I've had recently and how they were handled.

Replace air conditioning filters

Pay for a door lock replacement

Replace lights and ballasts

Repair toilets and faucets

Re-plant the landscaping

Replace cracked or broken glass in the doors and windows

Cover or split the costs of important air conditioning, heating, plumbing or electrical work that would normally be paid for by the tenant

Clear clogged toilets, sinks and drains

All of these tenants had clauses in their rental agreements that placed the cost of repair on the tenants.

Surely we could have asked the tenant to read the lease, pointing out to the tenant the terms and conditions, and rules and regulations? 

Yes, but our goal is to keep renters satisfied and keep their rent money coming in on time, every time.  But unless there's any abuse of property, we will take care of any repairs as they arise.

Jeffrey Roark
Property Management Training Newsletter
How To Rent My House Articles

Strategies For Tenants On How To Renew A Lease

Tenants Tips For Renewing A Lease

The majority of my topics to date have been addressed to real estate investors or asset managers with the idea of precisely how to actually qualify tenants, the way to renew a lease, or other real estate investments property concerns.

In The Basic Property Management eBook, my first book on property asset management, as well as in The 5 Step House Rental eBook, in which I talk about what to do to rent your investment rental home, you will find chapters on the way to market, to locate excellent tenants, and the way to qualify and continue to keep those tenants.

My article today is produced for our tenant readers who would like to strategize on meeting with their landlord to renegotiate a lease or one that’s about to expire and needs to be renewed.

=> Books On Property Management Training

Before I get into the specifics of how to renew a lease, let me suggest that you as a tenant should seriously consider hiring a real estate broker to represent you in a lease negotiation with the landlord.

Why Hire a Broker to Represent You to Renew a Lease?

 

Here are four reasons why:

1. It normally costs you nothing to do this since the broker will be paid a renewal fee from the landlord.
2. Usually this fee is less than what it would cost a landlord to procure a brand new tenant.
3. The broker has a better feel for what spaces are actually leasing for, what concessions are being made, and what the viable space alternatives really are.
4. Using a broker to represent you may also add some credibility to your cause.

But in order for this approach to work, in order for a broker to effectively represent you and expect to get paid something from the landlord to renew a lease, you as the tenant need to negotiate from a position of strength.

A position of strength means that you are a tenant that the landlord wants to renew a lease with.

 

We deal with a lot of tenants and here are some common misconceptions that tenants have about landlords:

1. It's a tenant's market, therefore the landlord is lucky to have me as a tenant
2. It's better for the landlord to get some rent, even if it is reduced, than no rent at all
3. The last thing a landlord wants is vacant space

Having the right mindset and frame of reference are important in any negotiation.  Here are the correct perceptions to have when dealing with a landlord:

1. The landlord may be lucky to have you as a tenant, but only up to a certain point.  The more value a tenant adds to a property the "luckier" the landlord is going to feel.  If you're a tenant that brings traffic into a shopping center, adds some prestige to an office building, doesn't require a lot of extra management from the landlord and who is otherwise "low maintenance", then your luck ratio will increase.
2. Many times landlords will opt for no rent over some rent.  One reason is that having a tenant costs the landlord money.  It might be in additional overhead, or NNN, expenses.  Or it might be in rent or improvement concessions.  Investors buy rental property for the cash flow.  If a tenant isn't contributing to that cash flow, the landlord may very well start looking around for a replacement tenant, or decide the the time and effort invested in the short-paying tenant isn't worth the return.
3. Vacant space, some vacant space, is not always a bad thing.  If a tenant is high maintenance, sucks up a lot of property management time, doesn't add value to the property, if the landlord starts to think that she might be better off having the space vacant and rolling the dice on finding a replacement tenant, then she probably isn't going to renew a lease.

=> Learn How To Write A Lease with Property Management Training

Now that we've cleared up some of these tenant misconceptions, let's talk about you as a tenant negotiating from a position of strength and how to renew a lease.

 

How solid you might be as a lessee or tenant will undoubtedly vary a bit according to the property you happen to be in, as well as the market place circumstances, however in general here are just a few points that will likely make a landlord view you as a solid lessee:

• Rent is paid promptly, or in case a payment arrangement is created, you attempt to do the things you assured the landlord you would do
• You are a lessee that doesn’t take up a great deal of additional property administration time
• You create site visitors and traffic into the shopping mall or increase the attraction of an office building
• You recognize just what the competition is providing, you understand everything about your particular alternatives, and may present those involved with a strong, non-threatening method to the landlord.  This is when allowing a broker to fully handle your case may well be very helpful.

Think About The Alternatives To This

Time after time we’ll have tenants who wish to renew a lease, yet they are in arrears with their own rent, haven’t kept promises made about payment plans, or have impossibly unrealistic thoughts of the items other landlords will provide.

Those are the tenants that do not get their leases renewed or in the event that they do, do not get the conditions they may be seeking.

As with my other articles on this site, I sincerely hope you’ve found the tips on how to renew a lease useful.

Jeffrey Roark

Property Management Training

How To Rent My House

 

Home Inspections

Six Reasons To Always Do A Home Inspection

Today's market is driven by foreclosure and short sales.

Most buyers believe they're getting a good deal because they're buying "below market" and most sellers, in particular the lender or receiver if the home is bank owned, insist on selling the home "as is".

Because of this "good deal" perception a lot of home rental investors are tempted to skip doing a home property inspection, thinking that since the price is low enough, there will be enough money left over to do what ever repairs are necessary.

Not doing a home inspection on any real estate investment home is one of the more foolish decisions an investor can make.

=> Property Management Training Guide

Just because a seller says the property is "as is" and just because you may think you're getting a good deal on the price, and focusing more on how to lease your home, please, please, please do a home inspection so that - at the very least - you know what you're getting into.

When you’re buying a property it’s easy to get caught up in the excitement of soon-to-be ownership and skip dong a home inspection.

 

No doubt there are great marketing ideas in the works, leasing & management plans, and some ideas for increasing cash flow that you’ve been dying to try out.

It’s all too easy to forget about some of the boring nuts-and-bolts documents that will help your property management and leasing go much smoother once you own the property.

Let’s look at some of the recent issues we faced with property under management:

• A parking lot driveway shared with the property next door using a hand-shake access agreement
• A winter-time water leak from old copper line run on top of a roof that nobody knew existed, with the leak first attributed to melting ice
• Roof tiles falling from a two-story building during mild wind and rain
• Decorative artwork on a three-year-old building popping off and falling to the sidewalk
• Assuming that a “grand fathered” or non-confirming use of a space by the former owner would be allowed for a new owner
• A new owner believing that it’s superior property management skills would be able to bring past due tenants current on their rents

All of these above examples – and we could list many more – share one thing in common.

That is, the new owner’s failure to do a home inspection and gather all due diligence documents before closing the deal.

 

When a new owner believes it is getting a good deal on a property, that belief often manifests itself with the owner thinking that he’s a good negotiator and that all problems can be solved with that skill.

So, the details of the deal get over looked.

A home inspection that covers electrical, plumbing, lighting, ventilation, and landscaping – verification of existing zoning & uses with the governing municipality, architectural blueprints, certificates of occupancy, construction permits, original leases & the tenant background checks to back them up - are some of the documents that should be gathered prior to closing the deal.

In all of the above cases, having these documents would help to allow a property sell faster, reduce the monthly water bill, determine whether a construction defect was at fault, save a tenant’s business, and help to determine a fair price for the property being purchased.

Always do a Home Inspection

 

Many savvy investors in homes for rent have actually told me in conversation that they thought that because a lender was selling the home and that it was sold "as is", that they didn't have the right to do a home inspection.

Granted, a seller doesn't have to agree to do any needed repairs.  But normally a buyer of rental homes, or any other type of real estate investment, has the right to walk away from the deal at this point, if that's the path they choose.

No party involved in the transaction wants to see a deal fall apart, but that's not a reason not to do a home inspection.  Even if you decide to proceed with the closing, at a minimum you've been advised of any issues the investment home may have.

Jeffrey Roark
Property Management Training
How To Rent My House Newsletter

How To Better Manage Rental Property by Making Daily Rent Deposits

A residential property owner knows what it takes to manage rental property

Managing rental property can be the easiest thing in the world - if you do it right.

One of the common mistakes I see property managers and real estate owners make is to make things more complicated than they need to be.  

With an easy-to-follow check list system, listing daily, weekly, and monthly activities for each property under management, property management becomes a breeze and the odds of something slipping through the cracks is greatly reduced.

What's the single most important item needed to manage rental property?

From my personal experience the top two challenges are managing the tenants, and managing the cash flow and finances of the rental property. 

Today we'll focus on how to manage rental property from the financial side.

I personally know a pretty savvy investor who receives monthly rent payments from about 30 tenants, and obviously not all come in on the due date, so running to the bank every day to make a deposit could become a bit of a hassle.

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While it's tempting to make batch deposits every few days this landlord refuses to do so and sticks with a daily visit to the bank.

She told me she learned how to manage rental property by learning from her mistakes:

• Most tenants, residential or commercial, will look at the float time between when a rent payment is made and when the check clears their account.  The longer it takes for the payment to clear the more tempted the tenant will be to write a check for funds not actually in their account.  By taking several days to make a deposit you're training the tenant to expect this and it will become a little more difficult to manage the rental property and the cash flow.
• If you're dealing with a new tenant or have to manage rental property with existing tenants, making daily deposits sets the right expectations with the tenant right out of the box.
• If the rent payment is going to bounce, the sooner you know this the better.  We've seen banks take as long as a week, sometimes more, before returning a check as NSF.  Unless you monitor your bank account online daily, by the time you get the NSF notice from the bank you could be two weeks into the month.
• Many municipalities are tenant friendly when it comes to residential rentals.  The longer it takes to start the eviction process, the more free rent a tenant gets and the greater the odds that the property will be damaged when they finally do move out.  We've seen some markets where over the Christmas season the sheriff will publicly state they no evictions will be done.  If you manage rental property like this, then watch out!

=> Rental Property Management Training

Another benefit of going to the same bank frequently is that the bank employees get to know you.  This was actually advice that I received from my accountant years ago.

Why should you care if the people at the bank know you?

When I manage rental property I've personally benefited by going to the same bank branch in these ways:

• When I'm recognized I often will get faster service from the teller.
• Large deposit amounts are not questioned or put on hold because the bank knows who I am.
• My company maintains several property management trust accounts in addition to our business accounts.  Whenever I have a question on one of them I'm not asked to prove who I am each time.
• It's nice to be recognized, especially knowing that a bank branch deals with potentially hundreds of people each day.  A little egotistical, but true!

Exceptions to the Rule

While writing this post I received a call from one of the tenants in a property that we manage, apologizing for paying her rent late.  I'd actually planned on giving her a call after the weekend to see where her rent was, because normally her business is good and she pays the rent on time.

She was very apologetic, and her excuse was that she'd forgotten to include our complete address on the envelope that the rent check was mailed in.

I didn't say this, but 'highly unlikely' was my first reaction.  Instead I mentioned that I'd planned on giving her a call since she usually pays her rent on time.

This is true, but this also lets the tenant know that when we manage rental property we keep a close eye on cash receipts and tenant performance.

If tenants know what to expect, and what they can't get away with, then you've set the right expectations and hopefully won't have the same problems with any given tenant going forward.

I hope you've found this article on how to manage rental property useful.  

Jeffrey Roark
Property Management Training
How To Rent My House