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.
Wednesday, December 8, 2010
Monday, November 15, 2010
New Reporting Requirements for Landlords
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.
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.
Tuesday, September 7, 2010
How Long on the Market is Too Long?
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?
Thursday, August 26, 2010
Sarasota - Best Place to Buy in Western World!
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!
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
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.
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.
Wednesday, August 18, 2010
Are Your Available Rentals Reaching the Masses?
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.
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.
Monday, August 16, 2010
What is OPD?
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).
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).
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