Even as consumer affairs agencies at the state, local and federal levels crack down on fake online reviews, potential renters are using these evaluations more and more often to make their choices.
That’s one of the numerous key findings in the latest study of renters’ habits by ApartmentRatings and SatisFacts Research. The 2023 Biennial Online Renter Study, now in its 12th year, includes the feedback of more than 28,000 renters nationwide to determine their behaviors and preferences when it comes to apartment living.
That apartment hunters are tuning to online reviews is a notable shift, the study reported, particularly among those ages 18 to 34. Recognizing this “top of tunnel” behavior, where renters look at reviews at the start of their apartment hunt as well as during the decision making process, is “crucial” for landlords – especially those charging higher rents.
Renters are paying attention
Renters who plan to pay at least $1,750 a month are doing the most research when compared to other renters before ever contacting a potential place to live. More than four in five looked at both a property’s website and its online reviews before moving forward, the study found.
Importantly, the study also notes that 70 percent of renters look for negative reviews, an indication, it said, of the “desire for balanced and unbiased information.” Renters, it added, “value a comprehensive view that considers both positive and negative aspects” and are unwilling to trust a review site featuring just positive evaluations.
Renters aren’t naïve, though. They realize that no place is flawless. While they take the time to read the critiques, they also look to see how the property responds “as an example of your commitment to customer service,” according to the renter study.
The SatisFacts and ApartmentRatings study found that people look to see how a property responds to a review, good or bad. Roughly seven in ten respondents think a response is an indication of great customer service and about the same number say a project likely does not have great service if it fails to respond.
Still, there is a healthy skepticism among renters, who are concerned about being manipulated, the study also found. “As deceptive tactics used to create reviews become more sophisticated,” it says, renters are finding it more difficult to distinguish between fake comments and the real thing.
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Transparency matters
To protect renters and other consumers from being duped, the Federal Trade Commission has proposed regulations that would outright ban fake reviews and testimonials. The rule would also prevent anyone from suppressing honest negative reviews and from paying for positive reviews, which deceives consumers looking for real feedback and undercuts honest businesses.
In another key finding, renters want landlords to be more transparent about their mandatory fees. Approximately one in five respondents reported not being informed about all the charges associated with their current lease and four in five said that property managers need to come clean up front rather than hide extra fees.
This finding “cannot be overstated, especially in light of the regulatory focus on junk fees in the rental housing market,” said the report, which calls for more clarity in fee structures.
“The study results indicate that renters appreciate transparency and may be more inclined to consider communities that are clear and open about their pricing structures,” the report says.
Whether it is on a community’s website or its newsletter to residents, potential renters want to see what life would be like should they choose to lease there, the study found. At the same time, save for higher-end renters, the management company’s brand is not usually a primary factor in the rental decision.
In another finding, approximately nine out of ten renters in almost all age groups – from 18 to 65-plus – said they would frown on any company that treats its employees poorly.
Finally, the report said the renters who responded to the online survey indicate they’d do things a bit differently the next time around. More than half said they would visit their next place in person and almost half said they’d do more research into the property management company before pulling the trigger.
Source: Multi-Housing News
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By Meghan Wentland
Because your primary expense on rental properties will be maintenance and repairs, a home warranty can save a lot of time and money—as long as you read the policy thoroughly.
Q: I have both homeowners insurance and a home warranty on my primary residence and require that my tenants carry renters insurance for my rental properties. Does a home warranty for rental property make sense, or is it an unnecessary expense?
A: The security deposit you collected from your tenants and the renters insurance they carry will protect you financially from damage caused to the unit while the tenants are in residence, but just like in your primary home, a home warranty for landlords covers different expenses than homeowners insurance does. Think about why you carry both on your primary home: The homeowners insurance covers damage and loss that result from weather, water, fire, theft, and other covered events, while a home warranty is essentially a service contract that covers repair and replacement of major home systems and appliances that fail due to age or normal wear and tear. Together, they form a kind of security system for your investment and your business. As a landlord, you know that one of the bigger expenses involved in rental properties is maintenance—unless you’re very knowledgeable and managing your rental properties is your only job, the near-constant need for plumbers and electricians for blown circuits, leaky water pipes, and bigger problems such as broken washing machines and HVAC issues can be crushing both financially and in terms of the time it takes to choose and hire qualified technicians. As long as you’re on top of regular maintenance and read your contract carefully, choosing to home warranty rental property you own might save you quite a lot of money, especially if you find yourself wondering “Does renters insurance cover appliances?” and realizing that the answer is no.
A home warranty covers appliance and system repairs or replacements—to a certain extent.
Home warranties come in several different packages. Normally home warranty companies offer one package that covers whole-house services, such as electrical, plumbing, heating, and cooling; one package that covers major laundry and kitchen appliances; and one that covers both. If you own a number of rental units that are all about the same age, the ovens, refrigerators, dishwashers, water heaters, clothes washers, and dryers in those units—all of which are your responsibility to keep in good working order—may begin to fail around the same time, from basic hard use. Financially, this could mean that you’ll experience a disastrous sequence of expenses as one appliance after another needs repair and/or replacement, and that in some cases you might pay for a repair and then a replacement of the same appliance. A home warranty purchased for each unit you rent can cover the majority of those repairs and replacements for roughly the cost of one or two repairs or replacements.
The landlord has to purchase the rental home warranty for renters; because they aren’t responsible for the upkeep of the property and don’t own it, the renters can’t opt to purchase a warranty on their own. You’ll pay the cost of the warranty contract, usually for a period of 1 year. Written into that contract will be the appliances and systems covered, the maximum payouts, and the cost of each service call. A plus here is that the service call, while an added expense, will cover the entire cost of the assessment, attempted repair, and if necessary, the replacement of the item. You won’t have to pay a plumber to try to repair the water heater, only to find out the problem is electrical, then pay an electrician to check it out and tell you that the unit needs to be replaced. The service charge will cover the repair or replacement to the extent the contract allows.
One reason some homeowners balk at buying a home warranty is that they’re concerned that they won’t be able to choose the style or quality of the appliance that they prefer and have it covered by the warranty. As a landlord, you’ll certainly want to keep the units modern and up to date, but you might not be as worried about the style or color as you would be in your own home, so the warranty is an even more sensible idea.
If you have a rental unit in the same place as your primary residence that is less than 750 square feet, you can cover it with a Guest Unit add-on to your own home’s warranty.
This can be a great savings for the landlord renting out a part of their home or a small apartment in a separate unit on their home property. If the unit is small (especially if it’s the only one you have), paying full price for a home warranty contract might not be cost-effective. Luckily, if the unit is less than 750 square feet, you can add it to the home warranty policy you carry on your own dwelling as a Guest Unit line item for significantly less cost than purchasing a separate policy just for the unit.
Cost considerations will depend on a number of factors, including the age of the property and its systems.
If the rental unit is older and the mechanics and appliances haven’t been updated recently, a home warranty is a straightforward protection of your investment; these units are more likely to have age-related issues that a an insurance policy won’t cover. But don’t discount the benefits of a home warranty for newer homes as well. While a newer home with more recently installed systems and appliances is less likely to suffer from age-related wear and tear, newer units are often built with computerized control panels, automated systems, and smart-home integration, all of which can fail if a single component fails. These technologically advanced units offer convenience and efficiency, but they can also be extremely expensive to repair and are less likely than older appliances and systems to stand the test of time. You’ll want to weigh the cost of the warranty and service calls against the repair and replacement costs of the units you currently have in place to see what financial benefit the warranty would provide.
A home warranty for a rental unit is tax deductible.
Depending on how you’re registered as a landlord, your entire premium and service charges may be considered an operating expense. These expenses can be claimed on a tax return as a deduction from your total income, thus reducing your tax burden. Especially if you have a large number of rental properties, this total can add up quickly and add to the money you save on repairs and replacement by reducing how much tax you owe. State tax deductions will vary based on where you are registered as a landlord, but it’s likely that you’ll be able to save some extra money through federal and local deductions.
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A home warranty on a rental unit can save you a lot of money on repairs and maintenance.
By covering repairs, maintenance appointments, and replacement, a home warranty prevents you from having to shell out cash on demand whenever something goes wrong at a property you’re renting out. If you make one or two claims against the warranty, it will have come close to paying for itself (one significant system replacement might more than cover the tab), and when the tax benefit is added to that, you’ll start saving real money.
In addition, though, the warranty will save you time. A landlord is always on call when a tenant’s toilet clogs or bathtub backs up, the AC goes out on a hot summer day, or the dishwasher won’t drain. The tenants might feel bad about calling and potentially disrupting a family birthday party or vacation, but they’ll call, and it’s your responsibility to make the necessary arrangements for a service call and repair, or to go check out the problem yourself before you incur a charge from a professional. The best home warranty companies take care of that for you; either you or the tenant make an initial call, and then the home warranty company takes it from there, arranging for the professional repair person to contact your tenant for scheduling and handling the rest of the repair in exchange for a service fee. If you live far away from your rental properties, this service is even more valuable, potentially saving hours on the phone and making it less likely that you’ll end up hiring a contractor who takes advantage of your distance by doing shoddy work. That peace of mind is provided to you, not to mention the return of potentially full days of coordination and shopping for replacement parts or appliances (or even whole systems). And, you’ll save money.
When choosing a home warranty for a rental property, be sure to read the fine print.
This is a critical point, because failing to read the contract carefully can result in unpleasant surprises at the worst moments—surprises that are often the reason people are suspicious of home warranties in the first place. They don’t cover everything. First, the warranty only covers the systems and appliances listed in the contract, and nothing else. Second, the cost of the service visit is also set in the contract, along with how many individual visits (or what length of time) is included in each visit. Third, every warranty has coverage limits. There are two kinds of limit: a maximum payout per event, usually specific to the system or appliance, and a maximum payout per policy annually. This can cause distress if you haven’t read the policy carefully and are expecting that an entire failed HVAC system will be replaced free of charge, only to discover that the replacement will cost $10,000 and the policy states a maximum payout of $7,000. That’s still $7,000 you don’t have to come up with and very much worth the cost of the home warranty, but the remaining $3,000 due can be upsetting if you’re surprised that it’s not covered. Similarly, some policies will cover insect infestations—but only for certain kinds of insects. It will be a rude awakening when you file a claim for a huge termite infestation and find out that termites are excluded from your warranty—and that it was right there in black and white for you to see.
In addition, most home warranties have requirements that must be met in order to remain valid. If you’re a landlord, you’re probably accustomed to making quick fixes yourself to save the cost of a professional, especially for easy things. Or perhaps you trust that your tenants will take care of common maintenance tasks and cleaning. Unfortunately, those DIY fixes or potentially delayed maintenance can invalidate your warranty and allow the company to deny claims. And perhaps the home you purchased to rent out had been in disrepair for some time; while some home warranty companies have an amnesty program that doesn’t penalize new owners for maintenance failings of previous ones, not all do, so you could find that the years of no maintenance or upkeep before you even owned the property render your claims invalid. Again, these conditions will be clearly spelled out in the contract (and if they are not, you should ask about them to make sure you haven’t missed something).
If, however, you’ve carefully read the contract and are aware of the conditions and limitations, a home warranty can offer financial savings and peace of mind to what many see as the most onerous part of being a landlord: the time and expense of maintenance and repairs.
Provided by bobvila.com
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Should you aim for diversification in your real estate investments? What about your stock investments?
Oddly enough, many real estate investors never bother to ask that question. They just assume that all real estate investments require a lot of money and that each niche requires so much skill that you can only master one.
They’re wrong on both counts, and it adds risk to their investment portfolio.
Warren Buffett’s Take
Berkshire Hathaway CEO Warren Buffett famously said, “We think diversification is—as practiced generally—makes very little sense for anyone that knows what they’re doing…it is a protection against ignorance.”
I disagree.
Don’t get me wrong: I have nothing but respect for the Oracle of Omaha. He’s built an incredible career out of choosing stocks and other investments.
But guess what? You’re not the near-prescient investment analyst that Warren Buffett is, and neither am I. Most of us can’t pick winners with the consistency that he can.
That goes for professional investment managers, too, not just part-time or retail investors. It’s why actively managed mutual funds historically perform worse than passively managed ETFs.
And don’t tell me about how different real estate investing is from stock investing or how the same principles don’t apply to you. Most novice real estate investors lose thousands of dollars on their first few deals. It’s tuition to learn the ropes. Even after getting some expertise under your belt, real estate investors still end up making costly mistakes sometimes, or have market conditions fall out beneath their feet.
Real Estate Lends Itself to Narrow and Deep
Real estate is expensive. If you buy a property by yourself, you’ll likely need $50,000 to $100,000 between the down payment, closing costs, cash reserves, and possibly the initial repair costs. And if you invest passively in real estate syndications, you usually need a similar amount for the minimum investment. That makes it hard to diversify when each individual asset requires so much capital.
Likewise, active real estate investing requires niche expertise. If you invest in Section 8 properties, mobile home parks, self-storage facilities, or in any other niche for that matter, you need to master the skills and knowledge required to succeed in that niche. That, too, makes it hard to diversify—you can’t just learn a new niche overnight and expect success buying up luxury retail properties in primary markets.
Andrew Helling of Helling Homebuyers sums up the consensus argument:
“Diversification limits your ability to understand specific market niches and often causes you to miss out on opportunities that come with a concentrated investment strategy. While it’s riskier, I prefer to go all-in on local deals that I really understand. These are easier to manage, quicker to visit, and require less work, since I know the local market very well.”
You can see why real estate investors typically opt for a handful of similar properties in a few markets. In other words: narrow and deep, as opposed to wide and shallow.
Contrarian Take: Why I Go Wide and Shallow
Markets are unpredictable, and my crystal ball is no clearer than anyone else’s. In fact, every time I’ve tried to get clever with investments, the universe has served me up a big slice of humble pie.
I’ve seen real estate deals go south after all the numbers on paper looked great. I’ve seen syndicators fall apart after many people I respect recommended I invest with them. And I’ve seen white-hot housing markets collapse in value after nothing but positive buzz from pundits and investors alike.
So, I invest $5,000 in a new passive real estate investment every month as one of hundreds of members of SparkRental’s Co-Investing Club. In the last year, I’ve invested in multifamily properties, mobile home parks, retail, storage, industrial, and more—all with different syndicators and investors in different markets across the U.S. Most of the deals we review each month are real estate syndications, but some are funds or notes.
“Spreading investments amongst various property types can protect your return when certain sectors retract or underperform,” explains Ryan Martinson of WhatsMyPayment.com. “When a particular segment booms, diverse investors participate in the upside.”
Risk Mitigation Strategies
Specifically, my diversification strategy protects me from risk in the following ways.
Markets
You might scoff now, but in 2006, big real estate players from New York and Washington, D.C., were plowing huge amounts of money into Baltimore real estate. The city had a renewed sense of optimism at the time, with crime rates slowly but steadily decreasing and lots of money pouring into low-income neighborhoods.
As a Baltimore native and a naïve young real estate investor, I, too, jumped on the bandwagon. Then I got my butt handed to me in 2008.
All that outside money disappeared virtually overnight. Up-and-coming neighborhoods slipped back into decay. And a few years later, in the wake of riots, crime rates increased again.
The details differ as you look at other real estate markets around the country, but the lesson is the same: Sometimes, markets reverse course unexpectedly. I lived in San Francisco briefly in 2009 and loved it (even if it already flashed warning signs for sociopolitical issues by then). Everyone speculated on San Francisco properties for two decades—only to see values crumble over the last few years.
Austin, Texas, and Boise, Idaho, were white-hot a few years ago and then had a terrible 2023. In the ‘90s and ‘00s, people had written off Rust Belt cities in the Midwest, only to have them resurge later.
The bottom line: You can’t always predict where a market will turn next. So don’t put all your eggs in one basket.
Property types
After the Great Recession, everyone said self-storage was the ultimate risk-free real estate investment. In a recession, people downsize and need storage, right?
Until you overbuild them and the fundamentals of supply and demand catch up with you.
As an aside, it actually turns out that while self-storage isn’t very correlated with home prices or unemployment, it is heavily correlated with home sale volume. People rent storage units when they move, and in the near-record-low transaction volume of the last year, storage has suffered.
Again, I can’t predict what will happen in a specific industry or for a specific property type. To be frank, I actually just recently learned about how dependent storage is on home sale volume. But it goes to show you that even the big Wall Street institutional funds, which have poured money into storage over the past few years, often get it wrong.
And if they often get it wrong, you better believe you will sometimes, too, and probably more often.
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They want you to succeed so they give you one hour of training to help you navigate their site and migrate your properties from any other software.
Pricing is $29 per month for the basic which is fine for most self-managing landlords. If you want to integrate QuickBooks, upgrade to the pro membership at $59 a month with the 20% off annual billing. Prices do not increase until you exceed 21 units, which is a really nice feature!
General partners/syndicators
When we first launched our Co-Investing Club, I asked a lot of experienced real estate investors, both active and passive, about the sponsors (syndicators) they recommended. I heard a lot of names, but two names kept coming up again and again. These two big names had an immaculate reputation and plenty of experience and deal volume.
Guess what? They’ve been by far the two worst-performing syndicators we invested with in our investment club. In fact, they’re the only two that have given me any cause for concern.
You can look at an investor’s track record and ask others in the industry about them. But you just can’t predict how a general partner will perform when market conditions change. And spoiler alert: They always change sooner or later.
Today, the rule of thumb we try to follow in the Co-Investing Club is a one-year “probation period” after our first investment with a sponsor. We want to see how well they communicate, how they handle hiccups, whether they start distributions on time, and so on. We don’t mind investing again with a sponsor we know, like, and trust, but we try to space them out because diversification spreads out risk.
The wisdom of crowds
I’m no longer so arrogant as to think that I can spot winners every time or even most times. This means I rely on the wisdom of thousands of other investors.
Before investing with a new sponsor, I ask about other passive investors’ experiences with them on the Left Field Investors or BiggerPockets forums. Then my cofounder from SparkRental and I get on a “pre-screening” call with them. If we still feel good about them, we invite them in front of our Co-Investing Club so we can all grill them together.
Every time we vet a deal from a sponsor, we collectively ask better questions. We focus more on risk and how many ways the sponsor is mitigating it than on the potential returns.
In one deal, a member happened to live five minutes away from the apartment complex in question. She gave us a local perspective on the neighborhood and the demand for this type of housing there.
In another deal, a member who works in the insurance industry pointed out just how badly the sponsor had underestimated insurance costs.
Lean on others as you diversify. Through group investments with others, I get to benefit from their expertise, not just my own.
Dollar-Cost Averaging vs. Timing the Market
I practice dollar-cost averaging in both my stock investments and my real estate investments. Every week, my roboadvisor pulls money out of my checking account to invest in a broad portfolio of ETFs. And every month, I invest $5,000 in a new passive real estate deal.
I don’t have to worry about timing the market. When other investors ask me if now is a good time to invest, I basically reply that they’re asking the wrong question.
I can’t predict the stock market or the real estate market. Either could collapse tomorrow or shoot for the stars. But by continuing to invest month in and month out, I make sure I maximize my time in the market rather than timing the market.
Plus, I enjoy cash flow in the meantime, rather than sitting with a ton of cash on the sidelines waiting around for a dip that may take years to appear.
A Numbers Game and The Law of Averages
Last year, our investment club invested in 13 deals, in line with our goal of around one a month. One or two of these investments will likely underperform or lose money. Others will overperform and exceed expectations (some already are). Most will fall in a bell curve in between and average out to strong annualized returns in the long term.
At the end of the year, I didn’t wring my hands and worry about how this or that deal was doing. They just added up to numbers on a page, all averaging each other out.
But if I had invested all of my funds in a single property or deal, you better believe I’d be thinking about that one deal all the time—especially if it was losing money or underperforming.
“By abiding by the law of averages, investors are typically able to lower the risk of downturns in fluctuating markets,” explains Nate Johnson of NeighborWho. “Instead of an ‘all or nothing’ approach, diversifying helps give investors a financial safety net while helping to ensure a consistent trajectory towards financial growth.”
And hey, even Warren Buffett can’t pick winners every time. For all his talk about how diversification is for investors who don’t know any better, Berkshire Hathaway owns stakes in over 60 businesses.
By spreading smaller amounts across many property types, in many markets, with many syndicators, I can sleep at night knowing that the law of averages will protect me. Call me an ignorant investor if you like, but I feel pretty good about a bell curve of returns on my many investments.
Provided by Bigger Pockets
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Listen On:
We know this sounds crazy, but if you really pay attention to how often you pick up your phone, you’d be amazed.
They are called smart phones for a reason. They are compact and easy to carry for a reason. They have amazing cameras and video and apps to use for a reason.
So, are you using your phone for all its capabilities? In this episode we break down all the tasks we use our mobile phones for when operating our rental property business.
We know we should not be as dependent on this little electronic device as we are, but it sure does make managing our rental properties so much more efficient!
LINKS
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👉 Photography Tools: Smart Phone Tripod, Gimbal (Stabilizer for Videos),
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By LAUREN LIEB
Landlords and investors across the country are encountering extreme increases in insurance premiums. Renewal premiums are increasing anywhere from 20% (at the low end) to 200%+ of the previous year’s premiums, which is putting landlords in a precarious situation when looking at how to afford such astronomical increases.
WHY ARE INSURANCE PREMIUMS GOING UP SO MUCH FOR LANDLORDS?
Various factors are causing the steep increase in insurance premiums in the multifamily industry, and according to insurance companies, those increases aren’t likely to go away this year – or next.
Climate Change
The primary reason for heightened rates is tied to the increase of both the severity and the frequency of catastrophic weather-related events. The GulfCoast states all the way up the Atlantic have faced a large increase in claims and payouts due to hurricanes. The West Coast has been inundated with large wildfire claims, since the wildfire season is no longer being contained to the hotter months, but instead are occurring year-round.
Increase in Tenant Lawsuits
Higher claims due to tenant-caused damage and liability lawsuits are also directly impacting the industry’s premium trends, especially for properties that don’t require or track their tenants’ renter’s insurance. That gap leaves the landlord’s policy to be primary on a claim they may not be responsible for.
Inflation
Properties are also facing higher replacement costs, which are directly tied to insurance premiums, which are in turn due to inflation, labor costs, supply chain issues, and increased timeframe of construction.
Insurance Providers Exiting the Market
Due to an historically high claims payout history for the multifamily industry, some insurance carriers, who had previously specialized in multifamily, have also pulled out of the industry all together, causing less competition in the market. Most of the standard carriers remaining have put a cap on the age of the building they deem as allowable risks, which has put properties older than 30 years at a severe disadvantage when approaching the standard market.
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HOW CAN YOU PREPARE FOR INSURANCE INCREASES
For investors, it’s important to underwrite deals with an insurance agent who is knowledgeable about the industry trends. Assuming a cost-perdoor that last year would have been $500, is now going to likely be double that today. Underwriting without the input of an expert will cause certain strife when budgeting.
It’s also important to take insurance costs listed in Offering Memorandums with a very large grain of salt. Rarely are those figures on the mark, and without the specific details of what the seller was insured for, it is essentially comparing apples to oranges.
Those with or preparing to work with lenders also need to pay specific attention to what the lenders are requiring regarding insurance requirements. Those with government-backed loans will need to budget for the additional coverage that must be carried when working with those lenders.
Lastly, be sure to shop for insurance if you haven’t received a quote in the last 2 years. An insurance broker can help you determine if you are in fact getting the best insurance rate possible and what improvements you can make to your property to reduce your premium.
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By Glenda Taylor
If your most recent property tax assessment caught you by surprise, you have options beyond simply paying it. With a little research and a lot of determination, you can get your property taxes lowered. Here’s how.
1 Lower Your Tax Bills
Property tax rates are decided at the county level, and the money collected is used to pay for schools, streets, and public safety. If you want to own a house, you already know that you’re probably going to have to pay property taxes. What you may not know is that you might be able to decrease the amount of taxes you owe. So, don’t just fume about a high tax bill—do something. Scroll through to discover ways to lower your property taxes and keep more of your hard-earned money for yourself.
2 Review Your Property Tax Card for Errors
Your home’s tax card is the official record of your property. It contains information such as your home’s assessed value, square footage, the year it was built, and the number of bedrooms and bathrooms it has, but tax cards often contain errors. Obtain a copy of your tax card from your local county assessor’s office and go over it carefully. If you find errors—if, for instance, it lists more bedrooms than you actually have—point that out to the assessor and ask for a reevaluation of your tax.
3 Appeal Your Tax Valuation—Promptly
Most county assessors limit the amount of time you have to appeal your tax valuation after they mail out notices; in some jurisdictions, the period is as little as 30 days. If you fail to appeal within that time frame, the window of opportunity closes, and you’ll have to pay the higher tax. The appeal process typically involves filling out a form detailing why you believe the assessor’s valuation is too high—for example, perhaps the house has sustained structural damage.
4 Get Rid of Outbuildings
Structures on your property, including storage sheds, she-sheds, and greenhouses, may also be assessed for taxes. That said, some counties and towns tax only permanent structures with foundations, or only those above a certain size. But if your property tax bill includes a couple of storage sheds that you don’t really need, consider getting rid of them. If you decide to remove them, notify your county assessor’s office so it can update your property tax card.
5 Check to See If You Qualify for Property Tax Relief
Not all states offer property tax relief, but many do offer reductions for homeowners who are seniors, veterans, or disabled. In addition, certain types of property, such as property used for agricultural purposes, may qualify for tax breaks. These reductions are decided at the state level, but you won’t automatically get them—you need to apply. Call your county assessor’s office to find out if you qualify for any tax relief programs.
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6 Move to a Less Expensive Area
Property tax rates vary widely from state to state and from county to county. If you live in a county with high property taxes, you may be able to buy a house in a neighboring county and pay much less in property taxes. You may end up with a longer commute, but you’ll save on taxes.
7 Compare Tax Cards of Similar Homes
If you’re sure you’re paying more than you should in property taxes, you stand a better chance of having your tax lowered if you can demonstrate that houses similar to yours are being assessed at a lower value. Tax cards are public information, so go through the ones of homes like yours (same square footage, age, style, and number of bedrooms and baths). If you can show that your property is valued higher than other similar properties, the assessor’s office may reduce your valuation.
8 Have Your Property Independently Appraised
County assessors and real estate appraisers value properties in different manners, but if a real estate appraiser values your home at less than the county assessor does, you can often get your valuation reduced. You’ll pay $250 to $400 for an independent appraisal, but if it substantially reduces your home’s assessed valuation, you could save thousands every year.
9 File for a Homestead Exemption
A homestead exemption provides tax relief for a primary residence in the wake of a bankruptcy or death of a homeowner. Many, but not all states, offer homestead exemptions, but requirements vary. You typically have to have lived in the house for more than a year and must meet certain income requirements. If you qualify, the county assessor will be able to tax only a portion of the value of your property.
10 Invite the Assessor Over
Sometimes the best way to show the assessors that your house is not worth as much as they claim is to ask them to come see for themselves. The key here is to accompany the assessor and point out all the problems she may not notice, such as cracks in the foundation, structural problems, water damage, and other significant defects.
11 Hire an Expert
Navigating the appeal process can be complex and time-consuming. Fortunately, if you’re not up to it, there are experts who can help. Both tax attorneys and property tax consultants can challenge your property valuation to get your taxes reduced. You’ll have to pay a tax attorney up front for the time spent on your case, while a property tax consultant takes a cut of your tax savings, usually 50 percent of the first year’s savings.
Pay Less
Who doesn’t want to pay less in property taxes? With this advice in hand, you can begin the process of lowering your property taxes.
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As a landlord or property manager, understanding the intricacies of smoking policies in rental properties is crucial. This comprehensive guide dives into the multifaceted aspects of managing smoking tenants, including legal considerations, tenant rights, and practical enforcement strategies.
Legal Landscape: Smoking and Protected Classes
Understanding the legal aspects of how smoking is treated in the context of rental properties is crucial for landlords and property managers. Here’s a more detailed look:
Fair Housing Rules and Smokers: The Fair Housing Act, a pivotal piece of legislation in the United States, aims to prevent discrimination in housing. It enumerates specific protected classes, such as race, religion, national origin, sex, disability, and familial status. Smokers do not fall within these categories. Courts across various jurisdictions have upheld this view, clearly indicating that landlords are within their rights to impose no-smoking policies without fear of violating fair housing laws.
State-Specific Smoker Protection Laws: While federal law does not protect smokers, there is a patchwork of state-level laws that offer varying degrees of protection to smoking tenants. In 29 states and the District of Columbia, laws have been enacted that classify smokers as a protected class, to some extent. These laws vary significantly in their scope and application. They may, for instance, prevent employers from discriminating against smokers but do not necessarily apply to housing. Therefore, it’s important for landlords to be aware of the specific laws in their state and how they might affect their ability to enforce no-smoking policies.
Differences in Enforcement: The application and enforcement of these state laws can significantly differ. In some states, these protections are robust, while in others, they are more symbolic. Knowing the nuances of state law is essential for landlords to navigate this landscape effectively.
Tenant Rights and Smoking Regulations
The rights of tenants regarding smoking in rental properties are also a complex issue:
Absence of Federally Protected Smoking Rights: At a national level, no law explicitly grants tenants the right to smoke in rental properties. This absence of federal protection means that, generally, landlords have considerable leeway to restrict or prohibit smoking on their properties without infringing on tenants’ legal rights.
Fair Housing Act Considerations: It’s critical to understand that the Fair Housing Act’s primary goal is to prevent discrimination against protected classes. Since smokers are not a protected class under this act, landlords are not discriminating based on this law when they prohibit smoking. This distinction is important because it allows landlords to implement no-smoking policies as a part of their property management strategy without the risk of legal challenges based on federal discrimination laws.
Impact on Tenants’ Health and Safety: The decision to prohibit smoking is often rooted in concerns about health and safety. Secondhand smoke can pose significant health risks to non-smoking tenants. Similar to noise complaints, smoking can be a source of disputes and discomfort in multi-tenant properties. By restricting smoking, landlords are often seen as taking steps to ensure the health and well-being of all their tenants.
Local and State Regulations: Besides federal law, local and state regulations can have a substantial impact on smoking policies in rental properties. Some cities and states have more stringent regulations that may restrict smoking in certain types of housing or areas. Landlords need to be aware of these local ordinances as they can further define what is permissible regarding smoking in rental properties.
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Implementing and Enforcing No-Smoking Policies
Incorporating No-Smoking Clauses in Leases: Clearly defined no-smoking clauses in lease agreements are pivotal. These should explicitly state the restrictions and consequences of violating the no-smoking policy.
Uniform Application and Enforcement: To avoid discrimination claims, it’s imperative that no-smoking policies are applied uniformly to all tenants. Consistent enforcement is also key to maintaining the policy’s integrity and effectiveness.
Managing Existing Tenants Who Smoke
Approaches to Monitoring and Compliance: Employing smoke detectors specifically designed to detect cigarette smoke can aid in monitoring compliance. However, privacy concerns must be taken into account, especially when using security cameras in common areas.
Addressing Violations and Potential Eviction: When a tenant breaches a no-smoking clause, landlords typically begin with a formal warning. Continued violations can lead to eviction processes, contingent on the terms outlined in the lease agreement.
The Case of E-Cigarettes and Vaping
Extending Policies to Include Vaping: As e-cigarettes and vaping become more prevalent, landlords should consider updating lease agreements to encompass these forms of smoking. The effects of vaping on property and other residents can be similar to traditional smoking.
Practical Tips for Landlords
Clear Communication: From the onset, landlords should communicate their smoking policies clearly to prospective and current tenants. This ensures that all parties are aware of the rules and their implications.
Legal Consultation: It’s advisable for landlords to consult legal professionals, particularly when drafting no-smoking clauses and policies, to ensure compliance with local and state laws.
Handling Exceptions and Accommodations: While enforcing no-smoking policies, landlords should also be prepared to handle exceptions or requests for accommodations in a fair and legal manner.
Conclusion
In summary, tenants who smoke are generally not considered a protected class under federal law, specifically the Fair Housing Act. This means landlords have the legal right to impose no-smoking policies in their rental properties without violating federal discrimination laws. However, it’s important to note that in 29 states and the District of Columbia, there are smoker protection laws that may offer some level of protection to smoking tenants, although these laws vary in their scope and application, and often do not directly impact housing policies. Therefore, while federal law largely supports landlords in restricting smoking in their properties, it’s crucial to be aware of and understand any specific state laws that might affect this issue by sourcing a legal professional.
Source: Multifamily Insiders
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There is nothing worse than showing up to one of your units and seeing damage. Well, the only thing that might be worse is a tenant who believes they are not responsible for that damage and is calling it standard wear and tear.
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Give this episode a listen and learn how you can avoid this potential problem with your rental properties.
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With the college sports season’s thrilling climax, this is also an exciting time for real estate investors who own rentals in college towns that are being given a high profile. These landlords have likely long known that student rentals are one of the most lucrative places to make ongoing high yields.
Having the national spotlight focus on a college town where you invest is like having huge ads placed outside your property to attract future tenants. Colleges in the South and Midwest generally mirror real estate in those areas, which have provided some of the strongest cap rates for investors in recent years.
Here’s a closer look at the towns and cities where great sports teams pair with great investments. We ranked the college towns based on their rent-to-price (RTP) ratio. An RTP is calculated by dividing the gross monthly rent by the purchase price (or, in subsequent years, by the market value). A standard RTP that investors use is around 1%, often called the 1% rule, although an RTP above 0.6% is also considered good. Thus, if a property rents for $2,000/month and has a market value of $2,000, the RTP would be $2,000/$200,000, which is 1%.
It’s important to note that every market will have its fair share of ZIP codes with high and low RTPs. There’s cash flow to be made in every market—you just need to find it.
The Rent-to-Price Ratio of Each College Market
1. The University of Alabama (Tuscaloosa, Alabama): 0.76%
2. University of Dayton (Dayton, Ohio): 0.67%
3. Texas Tech (Lubbock, Texas): 0.66%
4. Northwestern (Chicago): 0.64%
5. University of South Carolina (Columbia, South Carolina): 0.64%
6. Indiana State (Terre Haute, Indiana): 0.63%
7. Texas A&M (College Station, Texas): 0.63%
8. Mississippi State (Starkville, Mississippi): 0.62%
9. University of Illinois (Champaign, Illinois): 0.62%
10. High Point University (Greensboro, North Carolina): 0.60%
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A Closer Look at the Top College Towns
Tuscaloosa, Alabama
The University of Alabama is a big draw for real estate investors. However, the Alabama Crimson Tide isn’t the only reason to invest here.
Like other more northerly Alabama cities of Birmingham and Huntsville, Tuscaloosa County ticks the boxes for good investment criteria. It has low unemployment (2%), a population growing by 2% each year, a decent median income of $58,620, and a generally affordable median rent of $1,549 with a robust rental growth of 7%, which means investors can increase their cash flow each year. With a median home price of $205,030 and year-over-year price growth of 2%, Tuscaloosa is affordable, stable, and profitable.
According to the Tuscaloosa County Economic Development Authority, the main employers in the small city of 266,638 are the University of Alabama (6,839), Mercedes-Benz (4,500), and the DCH Regional Medical Center (3,444). Each long-established company is a stable source of employment.
Dayton, Ohio
Known as the birthplace of aviation, Dayton, Ohio’s real estate business takes flight thanks to its affordable median home price of $185,000, its 3% annual appreciation, reasonably affordable rent of $1,234, and main employer, the Wright-Patterson Air Force Base, with its workforce of 30,000 people. Other big employers in the area are Premier Health Partners (14,135) and Kettering Health Network (5,029). However, it ranks just below Tuscaloosa due to its 3% unemployment and stagnant population growth.
Lubbock, Texas
The 11th largest city in Texas, Lubbock enjoyed a stellar ranking in a 2023 survey of 500 college towns for Best Real Estate Investment Potential. That survey was echoed in BiggerPockets data, with a low 3% unemployment rate, a modest population increase (1%), a healthy median income of $59,228, an affordable median rent of $1,342, and an annual rent growth of 1%. Homes are also affordable, with a median price of $202,763, though price growth is stagnant.
Texas Tech is the biggest employer in the city. Various other employers contribute to diverse business infrastructure in manufacturing, agriculture, wholesale retail, and healthcare, including Covenant Health, United Supermarkets, Convergys, and Tyco Fire Protection Products.
However, Lubbock is more than a place to invest in real estate, which could be part of its charm. It was ranked No. 8 in 2022 for U.S. cities with the best work-life balance, No. 1 in 2023 for the best cities overall for recent college graduates, No. 6 (2022) for the best mid-size city business climate, and No. 10 (2022) for the best city for raising families.
Chicago, Illinois
Located 40 minutes outside Chicago in Evanston, Northwestern both benefits and suffers from being located in the metro area of a major city. Unemployment is at 4%. However, home appreciation is at 6%.
For investors, it’s interesting to note that the median income is $82,914, yet the median cost of a home is around $300,000—generally affordable by today’s standards. However, as major corporations move out of big Northeast cities to warmer states and remote work takes hold, Chicago has felt the hit with a few big defectors.
The Windy City has as experienced a small (-1%) population loss over the past year. Still, with established universities, hospitals, finance sectors, new tech businesses, and other attractions and businesses of a major city, along with relatively modest real estate prices compared to other major cities, Chicago remains a worthwhile real estate investment.
Final Thoughts
Successful college sports teams often come from successful universities, well embedded into the economic fabric of the vibrant city in which they reside, so it should come as no surprise that many of these cities also make for good real estate investments. It’s unsurprising to learn that many successful real estate investors started their journey as students, renting out rooms in a home they owned and building their empires from there. Whether you are an investor or want to kick-start your kids’ investing career, looking at cities with a successful college sports team will steer you in the right direction.
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The media tends to side with tenants and take a negative view of landlords overall. One notable exception was an episode of HBO’s Silicon Valley, where the hapless Jared has tried for over a year to evict a nonpaying “professional tenant” who is currently subleasing Jared’s unit through Airbnb because California’s landlord/tenant laws are so biased in favor of the tenant that an eviction can take close to an eternity.
At the same time, Erlich (who rents the rooms in his home to Jared and the other characters trying to build the fictional tech company Pied Piper) is demanding one of his tenants and soon-to-be-supervillain Jian Yang leave his house (video contains NSFW language) and unfortunately lets Jared’s situation slip. This inspires Jian Yang to decide that instead of leaving, as Erlich requested, he would instead stay and simply stop paying rent.
While that episode was quite amusing, some municipalities seem to be trying to transcend parody into something beyond satire. New York, for example, just arrested a woman for changing the locks on a squatter in the $1 million home she inherited.
According to a New York Post story about the incident:
“[Adele] Andaloro claims the ordeal erupted when she started the process of trying to sell the home last month but realized squatters had moved in—and brazenly replaced the entire front door and locks.
“She said she got fed up and went to her family’s home on 160th Street—with the local TV outlet in tow—on Feb. 29 and called a locksmith to change the locks for her.”
Understandable, but not a wise course of action. The two got into a heated argument, and the police were eventually called. As the New York Post article notes, “Under the law, it is illegal for the homeowner to change the locks, turn off the utilities, or remove the belongings of the ‘tenants’ from the property.” The word “tenant” is an extraordinarily generous euphemism in this case.
What complicates matters more is that in New York City, someone can claim “squatters rights” after being in a home for just 30 days. But “’[b]y the time someone does their investigation, their work, and their job, it will be over 30 days and this man will still be in my home,’ Andaloro said.” So, that left Andaloro between a rock and a hard place:
“Andaloro was ultimately given an unlawful eviction charge because she had changed the locks and hadn’t provided a new key to the person staying there, the NYPD confirmed to The Post. She was slapped with a criminal court summons, cops added.”
This case may be exceptional, but it is by no means unique. Also, in New York, a couple bought a $2 million “dream home” to care for their son with disabilities but couldn’t move in because a squatter had beat them to it. In another home, a squatter completely destroyed a property in the Rockaways, where dozens of emaciated dogs and cats were trapped inside on the verge of death.
The New York Post quotes one attorney saying such cases have increased “40% to 50% in similar cases in the wake of COVID.”
This is made all the more frustrating by New York’s apparent lack of interest in prosecuting normal crimes. In 2022 and 2023, over half of felonies were downgraded to misdemeanors and misdemeanor cases resulting in a conviction plummeted from 53% in 2019 to 29% in 2022.
Meanwhile, New York’s crime rate skyrocketed in 2022.
Fortunately, crime has ebbed a bit in New York City (and the rest of the country in 2023 and so far into 2024). But I feel pretty confident in saying it’s not because people like Adele Andaloro are being arrested.
I should also note that this isn’t just a problem in New York. On the other side of the country, in Oregon, an investor posting as a squatter explained on X (formerly Twitter) how he could “steal a property” due to Portland’s laws on the subject.
Indeed, I would have thought such problems would be more acute in California, which has the second-highest homeless rate in the country. Unfortunately, California chose a “housing first” policy instead of a “shelter first” policy to help homeless people get off the street. Providing housing for each homeless person is, not surprisingly, extremely expensive, especially in high-priced places such as Los Angeles and San Francisco.
Getting back to New York: Despite this absurd story, the city has done a mostly good job with its homeless population and has been able to shelter 96% of its homeless population, whereas California shelters a paltry 38%. While some of this may be due to the more temperate weather in most of California as compared to New York, the fact that three times as many homeless people died in Los Angeles as in New York City in 2020-2021 (1,988 to 640) shows that it’s not all that.
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The Erosion of Property Rights
The story of Adele Andaloro really shows less about how municipalities choose to help their homeless population and more about the erosion of property rights in many places throughout the United States. We’ve seen this in the deluge of passed and proposed legislation targeting property owners throughout the country.
Now, I should note that Andaloro made a huge mistake. As indefensible as her situation was, she should not have taken the law into her own hands, especially in a state as unfriendly to landlords as New York.
I should also note that landlords have more leverage in economic transactions than tenants do, and so the law does need to protect tenants. Landlords, after all, are the ones who write the leases. So, it’s incumbent upon the government to make sure the landlord cannot put any overly arduous or unfair clauses in that lease.
Laws that require properties to be maintained or 24-hour notice to be given to a resident before entry or mandating evictions go through the court system and not be done with hired muscle are all legitimate and necessary in any functional and just society. But these “rights” have clearly gone way too far in many municipalities. For example, Denver just passed a law preventing landlords from demanding a tenant leave for any reason other than “just cause,” i.e., “nonpayment of rent, violation of lease terms, nuisance, and engaging in illegal activities.”
This means if a property owner ever intends to sell their house, move into it, or give it to their kids, they are simply out of luck. (Other states and cities have passed laws requiring landlords to offer extended notice and pay moving costs in such cases, which I actually think is reasonable.)
Regarding so-called squatters rights, legally speaking, they are supposed to simply be that “[a]n individual may claim rights as a squatter if they are roommates, tenants, or occupying property that is abandoned or not used.” This is just adverse possession, a somewhat odd law that transfers property from the owner to its occupant if the occupant has continuously occupied the property for a certain length of time without refraining from the owner. States vary from three years (Arizona) to 30 (New Jersey) on just how long that needs to be.
But in many cases, squatting has become synonymous with trespassing. And instead of punishing the perpetrator, the victim is the one who must stomach the cost.
In Missouri, where we do most of our investing, “just like most other states, [Missouri] doesn’t have special laws regarding squatters’ removal. Therefore, to evict a squatter, you’ll need to go through the state’s eviction process.” This means for the offense of having someone break into our property, we have to pay to evict them and lose out on the opportunity cost of any rental income that could come in during that time.
This is the case in most states, so the big question to investors is, how friendly are the landlord/tenant laws where you invest? Because if you do get a squatter, the question becomes how hard it will be to evict them. Indeed, I had gotten several, and while the courts here are rather slow, they are thankfully much faster than in New York.
(In some areas, it is also sometimes worth boarding the windows and doors, at least during renovation, to prevent a squatter from getting in.)
SparkRental.com did a study and came up with a list of the most renter-friendly and landlord-friendly states. It looked like this:
Back in 2020, BiggerPockets also did an analysis with similar results. It found the five most landlord-friendly states to be:
- West Virginia
- Arkansas
- Louisiana
- North Carolina
- Alabama
And the five most tenant-friendly (or perhaps most antagonistic to landlords) were:
- Vermont
- Delaware
- Rhode Island
- Maine
- South Dakota
Moving Forward
While cases like Adele Andaloro make the headlines, overall, they are still rather rare. You don’t want to become paranoid.
Still, in a time when such farcical cases are becoming more commonplace, and property owners are under continued legislative attack, it’s important to know which places are the most amenable to property ownership. This is especially true for buy-and-hold investors.
Indeed, in the least landlord-friendly places (New York being one of them), I would probably lean away from investing in buy-and-hold residential real estate there. (Commercial, fortunately, doesn’t have these problems.)
In other cities and states that are still tough on landlords but below the farce, I would still recommend caution. Budget for higher administrative and legal costs and a higher economic vacancy factor. And make sure any potential acquisition still works with such restraints.
Finally, make sure to understand your local laws, and no matter how ridiculous they may be, don’t take the law into your own hands.
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