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

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

Rental history: More important in getting a mortgage

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

          

          At Sarasota Management & Leasing, we are occasionally asked by our landlords, "Whose side are you on?" The answer is, "Yours!"  Everything we do is focused on maximizing our owners' cash flow. However, part of that process entails 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 tenants are comfortable with their rent payment and not receiving pressure from their landlord or property management company, not only are they more willing to make their payment on time, but they often cause less damage. They also tend to stay in the property for longer periods of time.

          However, if a landlord causes friction and 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. In response, they may not want to pay their rent on time, and may begin to look for another place to rent. If they move out, they are less inclined to leave the property in good condition.

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

 will be vacant for a time, adding up to a significant loss of revenue.

          This is not to say that you should let your tenant continue to send in late rent payments, or fail to keep your property tidy and in good repair. At Sarasota Management and Leasing, we have years of experience in finessing these situations. We have learned how to preserve relationships with our tenants by treating them with respect, while educating them on what is reasonable and expected. It is often the difference between a happy resident-and a confrontation. It is also the difference between maintaining your property as a profitable investment, and taking a loss.

A Worthwhile Investment or...Just Blowing Hot Air

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.

“You Never Call, You Don’t Write…”

One of the most common complaints we hear when a new landlord finds us is that their previous Property Manager never communicated with them. They didn’t return their phone calls or emails and the only time they heard anything at all is when there was a costly problem. Many times I hear that the owner is not consulted even when there is a big expense. How frustrating that must be for them. After all, owning a rental property is usually the largest single investment that a Landlord owns. This is the kind of experience that makes many want to throw their hands in the air and walk away while taking their financial lumps.

After 20 years in the property management business, I have a pretty good idea what is going on. The vast majority of Property Managers are stressed 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 Hand Holder, New Business Development Person, After Hours Operator, Listing Agent and Bookkeeper. No wonder they’re stressed!

This is an inefficient model for doing business in property management.

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

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

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

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

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: 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.   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?   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

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.