Sarasota Management Newsletter

FHFA: Investors pre-qualify for REO-to-rent program

2012-02-09T16:08:00.000-05:00

FHFA: Investors pre-qualify for REO-to-rent program

Tenants, Not Price, Key to Successful Real Estate Investments, Says MACK Companies | Page 2 of 2

2012-01-25T08:31:00.000-05:00

This is a great article about looking for A rated Tenants and offering A rated properties in A rated areas. The success formula for owning rental properties.

Tenants, Not Price, Key to Successful Real Estate Investments, Says MACK Companies | Page 2 of 2

Rental history: More important in getting a mortgage

2012-01-11T16:39:00.000-05:00

Rental history: More important in getting a mortgage

Who's Side Are We On? ; Taking Care of the Revenue Side of the Equation

2011-12-08T16:02:00.001-05:00

At SarasotaManagement & Leasing, we are occasionally asked by ourlandlords, "Whose side are you on?" The answer is, "Yours!" Everything we do is focused onmaximizing our owners' cash flow. However, part of that processentails keeping costs down , your property rented, and staying out of court.

What many landlords don't realize is that a happy tenant is usually a low-cost tenant. If tenantsare comfortable with their rent payment and not receiving pressure from their landlord or property managementcompany, not only are they more willing to make their payment on time, but theyoften cause less damage. They also tend to stay in the property for longerperiods of time.

However, if a landlord causes frictionand hard feelings with their tenant, it is often to their detriment.When the tenant is mad at the landlord, their outlook on their home is changed,and they no longer view it as a peaceful, welcoming, comfortable place. Inresponse, they may not want to pay their rent on time, and may begin to lookfor another place to rent. If they move out, they are less inclined to leavethe property in good condition.

Once they have vacated, the landlord will face higher turning costs includingnew paint, carpet cleaning, and miscellaneous repairs. Things may even bemissing. In addition to those costs, the property

will be vacantfor a time, adding up to a significantloss of revenue.

This is not to say that you should let your tenant continue to send in laterent payments, or fail to keep your property tidy and in good repair. At SarasotaManagement and Leasing, we have years of experience in finessing thesesituations. We have learned how to preserve relationships withour tenants by treating them with respect, while educating them on what isreasonable and expected. It is often the difference between a happy resident-and aconfrontation. It is also the difference between maintaining your property as aprofitable investment, and taking a loss.

A Worthwhile Investment or...Just Blowing Hot Air

2011-11-23T12:00:00.001-05:00

The following article was written by Sam Coulter, President of Sam Coulter Service, Inc in Little Rock AR and appeared in the Residential Resource Magazine published by the National Association of Residential Property Managers. Reprinted by permission.

( In this article Mr Coulter makes a point that professional Landlords need to heed in dealing with the air conditioners at their rental properties. This is particularly true in Florida where they run for 6 months straight out of the year. This is a huge profitability issue and effects overall return on investment. )

"What is the single most expensive item in your rental property that at some point will need to be replaced? Hot water tank? Nope. Roof? Nope. Main sewer line? Not even close. The air conditioning system is, by far, the most expensive replacement item in your rental property. The average cost for even a builder's model system today is around $4,500.00.

Perhaps the first question should be "why" should you spend your owner's money on cleaning and servicing the air conditioning systems? I'm going to explain why you should, and then you can be the judge as to whether or not I'm just blowing hot air.

There's nothing like a $300.00+ electric bill to drive a tenant to look for a new home, right? How often have you had a tenant call and complain about high utility bills? How often do you lose a good tenant over high utility bills?

An air conditioner converts electricity into a mechanical force that drives a compressor that compresses Freon gas into a liquid. That liquid is then pumped inside to the indoor evaporator coil where it evaporates back into a gas as air is circulated across the coil. Heat is then absorbed by this process and returned to the condenser outside. The condenser coil is then responsible for shedding the heat that is absorbed in the home.

Dirt is the enemy of both of these coils. Over time, the indoor evaporator coil can become clogged. This dramatically reduces airflow, making the system work harder and longer to cool the home. The same is true with the outdoor condenser coil. This coil becomes dirty from the dust in the air, grass clippings, dog hair, ete. Both of these coils are absolutely essential to the process of efficiently cooling a home, and if either or both of these coils are dirty, airflow will be reduced; therefore, performance will suffer greatly, and the life expectancy of the system will be reduced dramatically.

"So what" you say? Why should you as a property manager care if the air conditioner in your rental property has to run longer than it should, or not last as long as it should? Because it will directly affect the two groups of people who are most important to you, the property manager: your owners and your tenants!

Let's start with the tenant. You want to keep your property rented, your owner wants to keep the property rented, and the tenant loves the house and wants to stay. But what if, in addition to the rent, the tenant has to pay an excessively high utility bill? There's nothing like a $300.00+ electric bill to drive a tenant to look for a new home, right? How often have you had a tenant call and complain about high utility bills? How often do you lose a good tenant over high utility bills? What if you do not even know you are losing tenants for this reason? How much more attractive would your property be if you could ensure the tenant affordable utility costs? But let's look at the more important issue ... what is this going to cost your owner if the units are NOT properly maintained?

Air conditioning systems don't last forever-the average life expectancy is 15-20 years. It's just a matter of time before they all will have to be replaced. So here is where the argument for regular maintenance really makes dollars and "cents."

Let's assume we have two identical properties with new systems installed at the same time. We will assume that a new system will cost $4,500.00 and also assume the system will last 15 years. One property manager decides to have the unit serviced every year at an annual maintenance cost of $100.00 per year. So that's a total cost of $6,000.00 over 15 years.

The other property manager chooses NOT to service the system regularly so we have a system that will last roughly ten years instead of 15 (since it has to work harder and run longer) and will probably require at least two or three expensive repairs during that time. Now just ten years later, factoring in the cost of inflation, we have to spend $5,500.00 on a new system (or more) ten years into our projected timeline, plus we have spent perhaps $1,000.00 in repairs over that same ten years, bringing the grand total to $11,000.00 in just ten years!

And if the second property manager AGAIN makes the decision to forgo regular service, we are now five years into the life expectancy of our "new" $5,500.00 system, vs. only $6,600.00 spent for the system that WAS regularly maintained when we reach the 15 year mark. And remember, for 15 years the first property manager enjoyed happy tenants with the low utility bills while the second property manager has tenants who have paid higher utility bills than was necessary!

The above is just an example - it is hard to predict how long a system will last. But it is not hard to predict that dirty coils and lack of maintenance will very quickly shorten the life of a heating and cooling system. I can guarantee you it will cost a lot more to cool your tenant's home and it will cost your owner a lot more in the long run. So property managers-am I blowing hot air or is that your tenant on the

phone?~ "

(SML Note: during our property inspections we always check air filters to make sure they are being changed frequently to reduce the amount of dirt that can clog the coils.)

Sam Coulter is President of Sam Coulter Service, Inc. has been in the HVAC business for the past 18 years. An affiliate member of the Central AR chapter of NARPM, Sam specializes in solving the varied HVAC challenges faced by proiessionet property managers. Sam and his beautiful wife Lisa have 4 wonderful children.

2011-10-11T11:05:00.002-04:00

“You Never Call, You Don’t Write…”

One of the most common complaints we hear when a newlandlord finds us is that their previous Property Manager never communicatedwith them. They didn’t return their phone calls or emails and the only timethey heard anything at all is when there was a costly problem. Many times Ihear that the owner is not consulted even when there is a big expense. Howfrustrating that must be for them. After all, owning a rental property isusually the largest single investment that a Landlord owns. This is the kind ofexperience that makes many want to throw their hands in the air and walk awaywhile taking their financial lumps.

After 20 years in the property management business, I have apretty good idea what is going on. The vast majority of Property Managers arestressed out of their minds. They do not have time for proactive communication.The Property Manager is also the Leasing Agent, Maintenance Director,Collections Agent, Receptionist, Lease Enforcement officer, Resident HandHolder, New Business Development Person, After Hours Operator, Listing Agentand Bookkeeper. No wonder they’re stressed!

This is an inefficient model for doing business in propertymanagement.

Consider this model instead: What about having a teamwhose job is to keep you in the loop about what is going on at you property?

Consider the different types of communication that SarasotaManagement & Leasing provides: Owners Handbook, regular marketing updates,notifications when your property is leased or when the rent is not paid ontime. Maintenance request notifications (before the work is completed),property inspection reports, move in condition videos, end of leasenotifications.

How can one person do all this you might ask? After all wemanage a lot of properties. The answer is one person can’t. However, anorganized team can. Just check out a few of the comments posted by our manysatisfied owners on the internet or on our web site (Click here)

These are just a few of the differences that come with doingbusiness with Sarasota Management & Leasing. You will discover thateffective communication is one of the “Keys to Our Success”.

2011-09-26T13:08:00.003-04:00

5 Steps To Pricing Your Rental Property For Maximum Profit

Everyone wants top dollar for their rental property. After all, don't you want to maximize your annual profit?

After 20 years renting properties in Sarasota involving thousands of leases, I've often seen owners demand unattainable rates and I have come up with 5 simple rules to pricing your property for maximum gain:

Research the market:
1. Evaluate the prices of recently leased properties - Call local landlords, they are usually happy to share that information. Make sure you get actual lease price as opposed to asking price. Most property managers have access to MLS data which is very helpful here.
2. Understand the Competition - Check the internet (or the landlord down the street or MLS) to see how your property compares with other properties which are being advertised. How does your property stack up to others with similar asking prices?
3. Absorption Rate - This is where it gets a little tricky. You want to know how hungry the market is for your product. Research the amount of competition currently on the market verses the number of properties leased over a specific period of time i.e. the previous 6 months. Here again a professional property manager can help by accessing the MLS data.
Get broad market exposure - CraigList.com isn't enough and often attracts the wrong prospects. You want to blanket the market by getting on as many rental web sites as possible (and MLS if you have access). There are several paid rental advertising sites which also network your property out to other partner sites - at SML we use over 50 different sites. If you do not have broad exposure, then you are missing large chunks of the market.
Read the market tea leaves - Just as a fortune teller looks into her bowl of alphabet soup waiting for the letters to spell out a message, you too can read what the market is telling you. Most paid advertising sites provide you with statistics on your ad such as the number of search results that reveal your property, the number of detailed viewings, calls, emails etc. Now add to this your own data regarding the number of showings and comments from prospects and you have valuable information.
Analyze the market data - Now let it begin to paint a picture. If you received 1,000 page viewings and 100 detailed viewings in a week's time, however, only 5 inquiries and 1 showing that amounted to nothing, then the market is speaking to you. It is saying: "people do not see your value." In this case your pricing is too high compared with your perceived value. (This is assuming that your ad is well done with good pictures and accurately represents your property).
Adjust quickly - You now have two choices; increase the perceived value of your property or reduce the price. Keep in mind that by extending your vacancy period by 1 month, you would have been better off reducing your asking price earlier and getting it rented sooner. For example, if your property leases for $1,000 per month and it takes 1 month longer to get it rented, you just cost yourself $83 in lost rent (per month) and would have been better off by reducing the asking price by $50 and getting it leased 1 month earlier. Also, chances are good that you would have eventually had to reduce the price to get it leased anyway.

Another risk of pricing too high for too long: you may eventually lease to a less qualified tenant. Since these prospects usually can't compete for more fairly priced homes, they have fewer options. This makes them more interested in your property. Eventually, your desperation will rise and the temptation to rent to a less qualified tenant may win out. On the contrary, if you are priced competitively, you should have multiple applicants and can select the most qualified tenant. This is the recipe for success.

Finally, keep your eye on the goal of maximizing your annual revenue while minimizing expenses. If you do your marketing correctly you can reduce vacancy cost while reducing your expenses by selecting more qualified residents. Consider hiring a professional property manager who is skilled and knowledgeable in marketing your property.

At Sarasota Management & Leasing we can show you how our results help you ensure your financial success as a property investor.

Some Like it Hot

2011-08-04T13:29:00.001-04:00

Are you tired of watching $200-$400 electric bills roll in this time of year because your ac is running constantly? I may have come up with a novel solution. In addition to changing your filters regularly (I hope we all are doing this), there is a more basic solution to consider.

I learned this after spending a week in Haiti last month where there was no air conditioning. Sleeping under a mosquito net with only a fan blowing on you gives you a different perspective. (actually the fan was an improvement over my previous trip). While there I rediscovered an interesting phenomenon. After about 2 days of sweltering I began getting used to the heat. Sure it still felt hot, but it did not bother me as much. Many times, when the breeze kicked up it was actually pleasant (in the shade).

When I got back to Miami Airport (and into air conditioning) we felt like we were walking into a freezer. Several of us felt that this was such a waste of electricity. We were actually cold. When I got home I resolved to raise the thermostat a couple of degrees. We usually keep it at 78 in our house during the summer, but I bumped it up to 80 knowing that you get used to what you are exposed to.

To my surprise when the most recent electric bill came in it was $100 less in July than it was in June! I hadn’t realized that just a small change could make such a big difference in energy consumption.

Did my kids complain a little at bed time? Yes at first they did, but I just turned the ceiling fan on a little higher and offered to let them pay the FPL bill. They actually did get to sleep. (My wife is always cold so no problem there.)

I am often amazed when a resident in one of our properties complains that their A/C is not working well because it struggles to maintain 74 degrees in summer. What a waste of money. Dial it up and save.

DISASTER PLANNING FOR THE LANDLORD

2011-07-29T10:29:00.000-04:00

Are you as ready as possible for the next hurricane?

What will you do if you learn that a hurricane is bearing down on your rental property?

With a disaster plan in place, you can know how to respond when a hurricane hits, and save lives and even livelihoods if you act with a level head.

Prepare…prepare…prepare

When Hurricane Charley swept through the southwest coast of Florida in 2004, property management offices were put out of business in a matter of hours because the hurricane wiped out their entire inventory of rental properties. Hundreds of properties were damaged beyond habitability in neighboring Port Charlotte and Punta Gorda and Arcadia. This also left many hundreds of tenants without homes.

At Sarasota Management and Leasing, we know the hazards our landlords are faced with, and we’re committed to making you and your properties as prepared as possible for any eventuality. This is what sets us apart from other management and leasing companies —

when disaster strikes, we want you to be prepared and to know that we’re with you all the way. In fact, we’ve created a detailed disaster plan that you will be receiving very soon. In the meantime, here are some practical ways to protect your property investment and finances:

Prepare Your Property Manager

· Establish a way of communicating with your property manager or tenant in the event that power and phones are down. This could be through your manager’s web site or cell phone if phone service and/or power are out. Be sure there’s a “Plan B” in case “Plan A” is unreachable.

· Make sure your manager has back-up generators to power the property’s office if the electricity is off and phones are out.

· Make sure your property manager backs up critical data on a regular basis. If they do not have reliable off-site backups of critical documents, a hurricane could put ~~you~~ them (and you) out of business.

· Create a communication plan that enables your property manager to get messages to you regarding your property. If you are remote and phones are down, it may require the property manager sending an overnight letter to you via FedEx or a similar carrier.

· Make sure your management agreement covers contingencies such as what your manager will or won’t do if a disaster strikes. Get written assurance from them that they will survey the damage, take action to protect your property from further damage and report back to you. If not, consider Sarasota Management and Leasing, because we promise to take action.

Have Your Proof of Insurance Handy

· Gather copies of your appliance manuals as proof of what you owned.

· Get a hard copy of your insurance policy and put it somewhere safe and dry. In the event of a hurricane, your insurance agent may have no access to your policy. If you can present them your hard copy, then they can go to work helping you.

· Make sure your insurance policy covers you for lost income. This requires that your insurance company knows that your property is a rental property and that you have rental property insurance.

Prepare Your Property

· Consider getting storm shutters at your property now and make a plan to have them installed. If you wait until a disaster, everyone else will be in line for the shutters and installers will quickly get overwhelmed. Plywood will quickly sell out as well. Pre-purchasing and fitting your shutters, then storing them until you need them will ensure protection.

Prepare Your Tenant

· Advise your tenant to carry renters insurance and inform them that you are not responsible for loss of their property.

· Prior to the storm, make sure your property manager to will contact the tenant and tell them to batten down all loose yard equipment and toys so they don’t become deadly missiles.

· Make sure that your Property Manager has prepared a disaster plan for your tenant so they know what to do to protect themselves and the property, and how and where to get help.

Prepare Your Lease

· Ensure that your lease has language that releases you from the contract if your property is damaged to the point of becoming uninhabitable. This will require a clause in your lease that allows contract termination in this case.

· Include wording in your lease that stipulates that you or your manager can and will determine whether the property is uninhabitable. This will settle all arguments between you and your tenants as to what must be repaired and how fast it must be done.

If you are a property owner with Sarasota Management & Leasing, you will be receiving our detailed Disaster Plan for Landlords very soon. In it, we will spell out what precautions and preparations we are taking in order to assist you in riding out the storms.

It’s easy to let your guard down because a few years have passed since hurricanes have done any major damage. However, you can be assured that we will get hit again, and an ounce of prevention now is worth hundreds of thousands of dollars of loss when disaster strikes.

Background Checks

2011-05-02T09:54:00.001-04:00

Why your new tenant was a nightmare

You had the vacancy, and you needed a renter, so you posted an advertisement. After receiving a few phone calls, you set up an appointment with a prospective tenant, show him the place, and he likes it. At the office, he fills out the application, consents to a credit report, and pays the fee. Everything checks out on the credit report, so you collect the security deposit and first month’s rent, hand him the keys, and breathe a sigh of relief, while patting yourself on the back for finding a good tenant.

Less than three months later, you’re issuing an eviction notice.

What went wrong? The new tenant gave a good first impression, they seemed gainfully employed, and their credit history checked out. So why are you dealing with this nightmare, and what can you do about it to avoid a similar headache with your next tenant?

The complete picture

The answer is in your research process. Sure, a credit report is an important part of the screening process, and today’s credit reports contain more information than ever before under the Fair Credit Reporting Act (FCRA). However, there are other pieces to the puzzle that must be answered before you hand over the keys, such as:

• Does the prospective tenant have reliable and steady income?
• Did they properly vacate the properties they resided in?
• Does (s)he have personal references that can vouch for their character?
• Did the prospective tenant provide false information (i.e. the credit report is from somebody else)?
• Do they have a criminal record?

No matter how comprehensive current credit reporting procedures might be, a credit report does not provide the answers to these questions. This is why you need to have several sources of information that can be cross-referenced, offering clues as to whether you have a shady candidate.

Cross-referencing involves obtaining multiple sources of information and then comparing that information, looking for clues. Some of these sources may include:

• Comprehensive tenant application – this should include such information as complete identity information (driver’s license, SSN, and so on), detailed employment history, income status, references and personal details (such as whether they smoke, have pets, children, or other occupants, and owned vehicles). The application must contain written consent to obtain a credit report.
• Credit report
• Criminal history –national and statewide
• Sexual Predator List
• Eviction records – these may not show up in a credit report
• National Terrorist Database - better to be safe than sorry

Once you’ve obtained all of the information, compare the application with the information you received, looking for the following discrepancies:

• Does the application reflect the same residency history as the information you collected? An applicant might be trying to hide a bad reference or eviction.
• Are there any discrepancies on employment or income? A discrepancy may not be anything malicious, but further written documentation regarding income, job status and future employment status will be necessary.
• Does the vital information (birth date, SSN, etc) match the reports you obtained? Some applicants will deliberately list a family member with the same name, attempting to fool you with their credit history.

In addition, credit reports do not verify property ownership or provide details on rental history. Verbal or written inquiries are necessary for property maintenance issues, bounced checks, leases violations, law enforcement problems and whether they actually paid the rent on time.

The bottom line is that credit reports ARE important but simply do not reflect enough to qualify or deny an applicant. Sarasota Management & Leasing has the experience to assist your investors in screening applicants and placing qualified tenants in their investment property.

Boots on the Ground;

2011-03-24T09:31:00.001-04:00

One of the Keys to Effective Property Management

If everyone did what they were supposed to do, there would be no need for my profession. Tenants and Landlords would get along, and watch out for each others interests. Unfortunately (or fortunately for me) human nature has not changed much over time, nor is it likely to in the near future.

How does this relate to rental management? Most people need supervision to insure that they are doing what they promised to do. When renters move into a property, they promise that they will pay their rent on time, keep the place clean and in good condition. They promise that they are trustworthy and will never cause the Landlord any problems. (For the record; I have had many residents whom I would trust with my checkbook. Unfortunately, they are not the majority.)

Therefore, you need to be onsite and looking over the shoulder of your tenant. If you hand over the keys to the property and then come back 1 year later (or 2 -3 years), you are likely to be in for a surprise. Your “out of sight out of mind” investment now needs thousands of dollars worth of repairs and cleaning. Your investment just became highly unprofitable and requires an infusion of cash.

We recommend a well documented move in inspection, then an inspection 3 months after move in, and 3 months prior to lease end. (and more often if the need requires). You should be checking for lease violations, air conditioning filter condition, grout in showers, leaks under sinks and overall general TLC.

This does more than correct problems that have developed in your absence. It also sets a high standard of expectation. If a resident knows you are coming, they will make sure that the property is kept up.

This one habit can make the difference between a successful endeavor and a nightmare.

Double Digit Rent Increases

2011-03-21T13:29:00.002-04:00

Check out this Article link regarding higher rents expected:

http://money.cnn.com/2011/03/15/real_estate/rent_rise_housing/

Staying Out of Court in Security Deposits Disputes

2011-03-18T16:29:00.001-04:00

What documentation do you need regarding property condition?

There is one very simple thing you can do to reduce the stress of arguing (or going to court) over security deposit claims – Document!

If you ever get before a judge in a security deposit claim fight, you had better be prepared. Why? Because you will feel like the one who is on trial if you don’t. Judges are going to look to you to provide the burden of proof to make their job easier. If you don’t have it, they are not going to be happy with you, and chances are they are going to award the case to the tenant.

Better yet, how great would it be to avoid this mess altogether? How much is your time worth? How about your peace of mind as a result of avoiding conflict? (I know some people just like to fight. Especially angry tenants).

It is amazing how few Landlords (even Property Managers) actually take the time to properly document the condition of a property. Many depend on their memory for remembering how the property looked prior to the tenant moving in. This is a recipe for trouble. If it comes down to your word against the tenants, you will lose.

However, if you have a detailed check list, a multitude of pictures, or one 5 minute video you can usually avoid all of these hassles. Just invite the tenant to come and review your photos and/or video. It's irrefutable and usually just mentioning that you have these will make the problem go away.

Besides, It's fun when you are holding all the Aces.

Increased Rents Coming

2011-01-19T07:50:00.003-05:00

Landlords have been starved for good news lately. With abundant supply and reduced demand over the past several years causing declining rents (not to mention increased taxes and insurance), its about time for a turn around in fortunes for these investors.

An article at RISMedia.com spells out the case for double digit rent increases over the next several years. The article points to the fact that household formation is way below what it should be. Young people have been living with parents, sharing with roommates or staying in college dormitories, and this pent up demand is expected to hit a new construction market that has dropped well below what will be needed to keep up with this demand.

In our market, we have seen a definite tightening of the rental market for the past year. Where we were seeing rent declines and longer vacancy periods, we have once again begun increasing rental rates on renewals and new vacancies. Our average Days on Market has dropped to under 25 days!

This is great news for landlords who have been holding on by the skin of their teeth over the past 5 years. And with property values still at significant retraction, and interest rates hovering below 5%, could there be a better time to add to your portfolio?

Link to Article at RISMedia.com: http://rismedia.com/2011-01-16/rent-increases-on-the-way-say-analysts/

Balance Tilts from Owning to Renting

2010-12-08T08:25:00.002-05:00

A recent article in USA Today points out that "Since the real estate bubble burst, the American dream of home ownership has fizzled"

In that article it is reported that more and more people are renting rather than buying a home and that this "New Class of Renters" is doing so by choice.

A recent survey discovered that 72 percent of people said they feel that home ownership is part of their American dream, down from 77 percent in January of this year according to a survey by Trulia.com. Despite the fact that interest rates are at historical lows and home prices are down considerably in many cities, people are wary of further price declines. A slow economy as well as the "hidden costs" of home ownership including repairs and decorating also factors in. Its just easier to pay your rent and let someone else take care of the repairs.

Also, it points out that in the past most renting options were more limited to apartment communities. However, more single family homes are now available due to difficulties in selling homes. This brings the affordability down in many areas. Credit score remains a challenge since securing a mortgage is more difficult than ever, and we are seeing far fewer people with good credit applying for rentals.

All this is good for the Landlord, and as the sales market slowly shows signs of recovery, rents will eventually go up. In fact we have already seen this occurring in our office. For the first time in 3 years, we are once again building rent increases into our lease renewals.

New Reporting Requirements for Landlords

2010-11-15T07:57:00.003-05:00

According to the Journal of Accountancy, owning rental property has become more like owning a small business according to new reporting requirements contained in the recently enacted Small Business Jobs Act. Beginning in January, landlords must begin keeping good records of all expenditures to anyone who has provided service to their rental property. The reason for this is that they will now have to start sending out IRS form 1099's to all partys who have provided these services. This new reporting will begin in January 2012, but will be based upon services provided starting January 2011.

For example, if you hire a plumber, painter or cleaning person to provide services at your property, or replace flooring or just have handyman work done, you will need to fill out a 1099 at the end of the year for each vendor including totals of payments to the vendor for the year. This will then need to be sent to the vendor with a copy going to the IRS as well. You should not be surprised to also learn that penalty's for failure to correctly follow these reporting requirements has also increased.

If you are utilizing a professional property management service such as ours, then this should already be in place. For instance, we have been doing this since we started in business in 1991. Best not to take this for granted though. If you are using another company, check with them to make sure this is being done.

How Long on the Market is Too Long?

2010-09-07T13:37:00.005-04:00

Here is a chart from RentalHomeProfessionals.com which shows the average time on the market for properties. As you can see both nationally and regionally, the average time on the market is about 80 days. This is a phenomenon that we have seen over and over. Actually, the rental market is quite flooded with properties that are unlikely to rent.

What is the difference between a home that rents in 30 days vs. one that rents in 90 days? Often they will end up renting at close to the same price (it they rent at all). However, in addition to a lack of marketing reach, the 90 day listings start out by asking too much. The landlords thinking is usually along the lines of "this is how much I need to break even", or "This is how much we used to get". They start off by assuming they can dictate to the market how much their property is worth. However, the market doesn't care how much a landlord wants.

It is only after getting to the point of desperation (and foreclosure) that the landlord will finally get real on asking price. Whats more, by that time, they are ready to use the breath on a mirror application processing approach and end up getting stuck with a bad renter. This is one of the primary reasons why we see people getting out of the rental business at a time when more people should be getting in.

How much better to know the correct rental price before hitting the market (better yet, before purchasing the property), then renting to good, qualified applicants who will get the cash flow coming in and remain consistent?

Sarasota - Best Place to Buy in Western World!

2010-08-26T16:59:00.002-04:00

This was the headline in International Property Journal, an independent, authoritative source of news and information for agents, investors, and industry executives working in global property markets.
The story which appeared on June 17th 2010, cited a report published by Global Edge, ranking popular resort and second home locations around the world.

IPJ reported that Sarasota was the cheapest western holiday home destination, crediting the fact that the market has fallen over the past two years and the number of distressed properties available for sale to foreigners.
What does this mean to our clients? Now is a great time to buy another rental investment!

US Census Statistics on Renting

2010-08-26T11:06:00.003-04:00

US Census Bureau Statistics on Housing Regarding Renters

According to the 2009 American Housing Survey the median amount of rent is $808 vs the medial housing cost for property owners is $1000. This means it is still cheaper to rent than it is to own which is good for our industry. However, the bad news is that the renters devote 31% of household income to housing costs vs 20 % for property owners.

Are Your Available Rentals Reaching the Masses?

2010-08-18T10:31:00.002-04:00

Here are a couple of important statistics in regards to how prospective renters find available properties:

90% of people researching rental information use the Internet as a resource.

84% use more than one site.

Here's why renters prefer the Internet:
78% say it is the most useful source for information regarding the property
77% say it is the easiest to use
74% say it offers information not available elsewhere
63% say it has the most up-to-date listings.

In our market I feel we have pioneered the use of Internet for available rentals. We were the first to use it extensively and currently have the widest marketing distribution across many sites. The last time I checked we were advertising on over 30 different rental web sites. And also the last time I checked we leased about 20% of all rentals on the MLS.

The key to getting properties rented in a timely fashion to quality residents is to price according to the market (This takes constant research), and then to get it out to the widest distribution possible so that anyone who is searching for rentals will come across your property listing. Usually we can get over 100 detailed clicks per week. You would be surprised to know how many available rentals languish vacant on the market month after month. It is actually a majority of available properties. It is always our goal to have a property rented in 30 days.

What is OPD?

2010-08-16T09:25:00.002-04:00

I was just reminded over the weekend (my wife and I were cleaning one of our properties) of the concept of OPD. I first coined this phrase early on in my property management career and having a good understanding of this concept is key to starting out a new residency on a good footing.

OPD - Other Peoples Dirt. It goes like this: No one is more picky about cleanliness than someone moving into a new home. At first I was puzzled after experiencing extra picky tenants at move in who I later discovered were not the greatest house keepers themselves. It comes down to who's dirt it is. At first I thought they were just hypocritical and difficult people. However, the more I thought about it, I think this is a natural characteristic of all of us. If its other peoples dirt we don't know what it is and our minds go to the worst extreme. We are often repulsed. Even people who are immaculate housekeepers have an even higher disdain for OPD.

That helps explain why one speaker I heard who's topic was "The Top 10 Rules of Property Management" stated that one of the worst things you can do is turn over a property to a tenant at move in which is not well cleaned (professionally). The reason for this is we now have an angry new tenant. Not a good way to start out a relationship. Worse yet, we have now established in the mind of the resident that we do not have very high standards and our credibility is shot. Now try to lecture them on anything having to do with the maintenance of the property and it will always get thrown back in your face.

Many homes can look clean at first glance, but once a dirty corner in the floor is discovered by a new resident (or a potential new resident), now the white gloves and magnifying glass come out and you are busted. On the contrary, if someone views a property and it smells clean and genuinely is clean you have earned their respect and often times this will be the main reason why you have just found a good clean renter.

This may seem obvious to a landlord from afar, but in practice it brings up a few challenges: If we turn over a property to a tenant which is professionally clean, do we have a right to the same expectation of cleanliness when they move out? Of course landlords do not want to pay to have a property cleaned if the tenant is responsible. Also, if a property was clean, but has sat for 3 weeks waiting for a move in (enough time for some bugs to accumulate, or have workers in and out), should they expect to pay for a second cleaning?

Our lease requires residents to surrender the property in "Good, clean condition. Normal wear and tear excepted." In all likelihood it will not be clean enough. We frequently make claims against security deposit for cleaning. This can cause arguments if the tenant felt it was cleaned, and often they will feel insulted that we would consider their level of cleanliness sub par. Angry tenants mean potential legal challenges. (At this point we had better hope it was clean when they moved in). If in the rare chance it is left in professionally clean condition, then it will probably need at least a wipe down prior to the next move in.

The point of all this: As a landlord, you can expect to pay for at least some minor cleaning between tenants even if you have the best property manager in town (like us).

What is Normal Wear and Tear

2010-08-06T10:03:00.002-04:00

This question is bound to come up at the end of most rentals. How much should the tenant be held responsible for and how much should the owner accept as a cost of doing business?

Is it reasonable to expect a tenant to leave the property in rentable condition? The law says no. Florida law allows the tenant the leeway of "Normal Wear & Tear". Any damage which is considered Beyond normal wear and tear can be charged against the tenants security deposit (hopefully there is one) (and presuming you know the law well enough to follow it to the letter in claiming a deposit).

Sounds pretty cut and dried, huh? (Right). So this leaves us a lot of arguing room (the bane of a property managers existence). The owner wants tenants to take responsibility for something they caused and the tenant wants their deposit back. That is the reality so how can we address it?

Well, lets begin by trying to put a definition to Normal Wear & Tear. It has to be reasonable in case we get before a judge and it we define it at the beginning of a tenancy, then no one can claim surprise at the end. Here is a definition which comes not from statutes, but case law seems to support:

Definition of Normal Wear & Tear:

Anything that can be covered with one coat of paint is normal wear & tear

Any carpet stains that come out with a standard steam cleaning are normal wear & tear

Any dirt that can be removed with a standard maid service cleaning is normal wear & tear

So there we go. Pretty simple actually, but by applying this definition and laying out expectations at the beginning can go a long way towards eliminating aggravation at the end.

New Lead Paint Requirements

2010-07-28T10:55:00.004-04:00

I hope by now everyone is aware of the new EPA Certification requirements regarding Lead Paint. Boring? Yes, but heavy fines are more excitement than I can handle. Since I have been managing rental properties (20 years now) lead paint disclosures had to be used to warn tenants in houses built prior to 1978 not to let their kids eat the paint.

Apparently, that warning has not been enough to satisfy the govt. Now they have created a whole new burocracy to protect paint eating children. (Despite my obvious sarcasm, please don't think that I am insensative to lead poisoning in children. I have 5 of my own). However, I am not aware that this is a huge problem requiring a bunch of new laws, expensive requirements and heavy fines, training and certification of painters, hiring new inspectors to enforce etc. Sounds a lot like federal job creation and revenue enhancement at our expense.

In case you are not familier with the new requirements, here is a summary:

"The Lead-Based Paint Renovation, Repair and Painting Program" (RRP) is a federal regulatory program affecting contractors, property managers and construction trades who disturb painted surfaces. Failure to comply could cost you up to $37,500 in fines per day.
The EPA requires that anyone who performs renovations, repairs & painting on child-occupied homes, child care facilities, and schools built prior to 1978 that disturb lead-based paint shall be Certified by EPA and that they are or used certified renovators who are trained by EPA-approved training profiders to follow lead-safe work practices, YOU MUST be certified by October 1, 2010"

So if you own a rental property built prior to 1978 you had better hope that your Property Manager complies with this requirement by makeing sure all painters and repair persons have are certified. (Yes, ours is).

2010-07-19T11:48:00.003-04:00

Awesome! We made it. Boy, creating a new web site can be a very involved undertaking, but 6 months later we are here. Some of the advantages of the new site include better results in organic search engine results which will help prospective tenants locate our available property listings better and faster. We are already the most intensive vacancy marketing property management company in Southwest FL, but this will help us even more.

Currently, our vacancy marketing reach involves more than 20 different web sites including Rentals.com, Rentalhomesplus.com, Yahoo, Google, Hotpads, local.com, Rentalhomepros, rentalhouses.com,twitter,lycos, Craigslist and many more! If someone is looking for rentals in Southwest FL, we want them to find our houses.

How important is internet marketing of vacancys? According to recent research, 90% of people looking for rental information use the internet. This only makes sense. How many people enjoy circling the classifieds and waiting for call backs on properties they may have an interest in, verses sitting in comfort at their computer while checking map locations, pictures of the home and seeing how updated it is. There's no comparrison. Futher more, 84% of web searchers use more than one online source. We want to be there front and center no matter where they are looking. This leads to shorter vacancies and better selection of renters to choose from.

I hope you like the new look and feel of our new site, Please let us know your comments!

Welcome to our new Web Site!

2010-05-21T16:21:00.002-04:00

We are getting ready to go live with our new web site for Sarasota Management & Leasing. This new site is an exciting upgrade to our old site in many ways. In addition to a new fresh look we will have easier access to online documents for our owners, regular market updates with charts and graphs which will reveal the current state of the rental market for Southwest Florida as well as average days on market, average rents etc.

New search engine tools will help draw more tenants to our site to increase exposure to our listings as well as offer tenants new tools to request maintenance, view their statements and communicate with our property managers.

Stay tuned for the new upgrade!

Governments Latest Assault on Landlords

2010-03-09T11:52:00.006-05:00

Landlords have been taking it on the chin in recent years with skyrocketing property taxes (don’t even get me started), rising insurance due to a bad run of luck with hurricanes and falling rents due to rising inventory from owners who cannot sell and are looking to the rental market for relief. Now the government is looking for the most convenient ways to boost their budgets.

The local and state governments are in crisis mode looking for ways to balance the budget and with the slower economy causing a decrease in tax revenues, the push is on to find ways to increase revenues.

Last week Florida lawmakers passed SB 1790 and it was signed by Governor Crist wherein the state is mandating increased “fees” for many different services. These are not considered tax increases since there would be little political support for that, but increasing Fees is a convenient way to stay under the radar and avoid political fall out.

Most of the fees were relatively small so as not to gain much attention, but they really socked it to landlords by increasing the cost to file evictions by 400% The cost for filing evictions has been $75 for the past twenty years, but now as a result of this bill, the cost for eviction filing will become $265.

I am a member of the Florida Association of Residential Property Managers who joins with the Florida Apartment Association to lobby the state in regards to issues that effect leasing of residential properties. In fact, they just met with legislators last month and were completely in the dark about this bill. By the time we found out about it and started contacting legislators it was already a done deal.

When will times get better for landlords? I believe that when the sales market begins to stabilize and property values find support, many of the owners who never intended to be landlords, but were stuck with properties they could not sell will begin to unload their properties. Then, with a reduction of supply and hopefully an increase in demand as the local economy rebounds, we will finally begin to see rising rent rates. But in the mean time watch out for government carnivores seeking new food sources.

What Does It Take to Get a Property Rented These Days?

That’s a great question and getting the answer is like nailing Jello to the wall. It is allusive at best and constantly moving. That’s the short answer. The more reliable answer is strong marketing and offering a superior value.

Strong Marketing: Fish where the fish are.

I read a column in the Sarasota newspaper about the fishing here. In it a local fishing guide said the key to successful fishing is to fish where the fish are and give them what they want to eat. Brilliant! Sounds blindingly obvious right? Well, I can’t begin to tell you how many times I have sat in my boat for hours at a time thinking that if I just wait long enough, some big fish will swim by and grab my bait.

According to the fishing guide, if you have not gotten a hit after 30 minutes, move on. Well to bring this back around to property management terms, if you are still placing ads in the weekend paper thinking that people are circling your ad and making calls to get info, you will just drown a lot of expensive bait. Tenants these days are sitting in the comfort of their home any evening of the week looking at pictures and map locators on their computers. They can see if the kitchen is updated or whether there is tile or carpeting. They can conduct a Virtual Drive By and weed out the 80% of properties that will not work for them. That is why we have increased our marketing allocation to internet sites significantly over the last few years. At last count we were using 7 or 8 different sites and looking into adding more.

In addition to choosing the right advertising vehicle, another aspect of strong marketing is pricing and condition. Since the market is constantly in flux and is whipped around by the real estate market in general, we have to be light on our feet and ready to change direction quickly. If in two weeks we are showing that 300 people have viewed a listing online, but we have had few contacts and little action as far as showing the home, we have to have our good listening ears on. The market is speaking to us. Its time to reduce the price by 5%. It is critical to make this evaluation every two weeks. The second worst thing to have happen to a rental property (1^st by far is a bad tenant) is having a property sit empty and costing the owner money every month.

You would be surprised to know how many properties are sitting vacant on the market for month after month. Some owners and Agents have an attitude that says “I have gotten X amount in the past or My Realtor told me it was worth Y so I am not going to give it away. If I price it too low, then I will only get tenants who can’t afford it. (Wrong – the tenants who budget their money and intend to pay their bills are know where the best values are).

Its like the fisherman who stays in the same place on the shore using the same bait he has used for 20 years and belives the fishing is terrible.

We will cover Property Condition in a future article.

IS IT A GOOD TIME TO BUY?

Are we in a free fall, or is this a great opportunity to add another property to your real estate portfolio? That is a good question. Noted financial advisor Dave Ramsey (nationally syndicated radio talk show host and Fox News contributor) recently said in Tampa that Florida real estate was at the best buying opportunity in 10 years. (By the way he is best known for his conservative approach to personal debt and investing.)

In addition, last week I was at the national convention for the National Association of Residential Property Managers (NARPM), and heard a talk given by Paul Brewbaker, Ph.D., Chief Economist for the Bank of Hawaii. He stated that despite the current financial upheaval, it appears that we have seen the low in the real estate market and he sees considerable improvement by 2012.

Interest rates are near historic levels and prices have fallen to 2003 levels or lower. Most properties on the MLS are still priced too high, but I am seeing investors moving back into the market if they can find the right deal. Whether foreclosure, short sale, forced sale or if the seller has owned the property long enough to have sufficient equity that they can afford to price it at the current market, there are some great deals to be had. The key is to find the values out there and conservatively estimate your rental income. I can’t tell you how many investors have come to us in the past few years having purchased a property with unrealistic assumptions about rental values Usually they were assured that they could get an unrealistic amount for rent by uninformed Realtors. These people are hurting.

An example of a recent transaction we were part of was a small 3/2 with pool which sold for $140k. This property could conservatively rent for $1100/month. With 20% down, your mortgage payment for a 30 year note at 5.75 would be $655. P&I.. If taxes and insurance were $1800 & $1200 your total expense per month would be $905. Not a bad return even before appreciation. This is my style of investing. Low risk and good upside potential on a property which will pay for itself. I do not like having to add additional funds for repairs or taxes. Another investor I know paid 365k in 2005 for a 3/2. That same home is now on the market at 225k. (Can you say “On Sale”?)

No one can say for certain that prices couldn’t fall further, but with the consistent appeal of Florida sunshine and with Baby Boomers nearing retirement, most experts believe that we are just in a deep correction from an over heated market of the early 2000’s. Warren Buffet said in a recent interview “I believe you should be greedy when everyone else is fearful, and fearful when everyone else is greedy”. Five years from now, I believe we will look back and wish we had added more to our real estate portfolio in 2008-2009.

If you would like to look into the possibility of acquiring additional properties, let us know. We are compiling a list of good properties that we would be happy to help you purchase.