Tenant screening is a crucial element of any rental property business. A detailed look into an applicant’s criminal, financial, and eviction history gives landlords insight into a potential tenant’s history before committing to a business relationship.
But there is another type of screening that goes beyond the routine: drug testing. With housing resources scarce and the consequences of an unfit tenant potentially disastrous, you may wonder if you can drug test tenants who apply to live in your rental property.
The answer is yes. You can drug test applicants as long as you test every prospective tenant who applies to your dwelling. Once tenants move in, however, you can’t randomly screen residents unless your process is specified in the lease and agreed to by the tenant. However, different housing arrangements, such as sober living facilities, may require drug testing as a condition of housing.
Of course, as with most things related to the legal system, there are a number of considerations you’ll need to be aware of before including drug testing in your screening processes.
Have Your Applicants Pay for In-Depth Screening
Did you know that instead of collecting a large application fee and having to issue a receipt showing what that fee was used for, you can just send a link to your tenant to pay for their own screening fees? At TurboTenant you can do this and so much more using the amenities of a FREE account!
Fair Housing Protections
As it relates to Fair Housing Act (FHA) protections, formerly addicted drug users are considered a protected class. You cannot simply deny an applicant due to past drug addiction as long as they’re deemed rehabilitated and can prove it via documentation.
It is important to state, however, that those FHA protections don’t apply to those in active addiction to illegal substances. In other words, if an applicant continues to use illicit drugs, they’re not considered a protected class.
The issue with drug testing prospective tenants arises when landlords seek to only drug test individual applicants on suspicion of drug use or revelations of past drug addiction. Suppose a renter suspects a landlord is singling them out and forcing them to drug test as a condition of renting a property while other prospective tenants aren’t facing the same scrutiny. Now, suppose they’re correct in their assumption.
In that case, the tenant could sue the landlord for violating fair housing laws. The bottom line: If you’re going to drug test your applicants, you must test every single one.
Alcohol Use
Of course, unlike illicit drugs, alcohol is not an illegal substance. As a result, different rules apply. Those experiencing alcohol abuse disorder can be considered disabled and are, therefore, a protected class. You cannot deny this protected class housing based on the fact that they have an alcohol addiction.
While these rules aren’t strictly related to drug testing, you should understand the difference between how the FHA regulates alcohol and illegal drug addiction.
Exceptions
Protected classes aren’t free to pose threats to property or other tenants and still be considered protected under the FHA.
No matter the disability, whether drug, alcohol, or another disability, nothing in the FHA requires housing providers to make a dwelling “available to an individual whose tenancy would constitute a direct threat to the health or safety of other individuals or whose tenancy would result in substantial physical damage to the property of others,” as noted by the Cornell Law School.
In other words, if you were to rent to an individual with an alcohol use disorder or another addiction (treated or not) who poses a threat to your property or others in the community, their tenancy would not be guaranteed based on the fact that they have an addiction. They still need to contribute to a safe living environment.
For a deeper dive into the rules and regulations, the National Housing Law Project breaks down the actions a landlord can take, and the evidence-based requirements landlords must meet to take further action.
Living Situation Exceptions
As mentioned briefly above, not all housing situations are the same. In these cases, drug testing may not constitute a breach of the FHA.
Designated Housing
Housing specifically designated for sober living or recovering people with an addiction might feature drug testing policies as a part of their residency requirements.
Employment-Linked Housing
Drug testing might be permissible under specific company policies when housing is directly tied to employment, like living on company property.
Lease Clauses with Tenant Consent
Some leases might outline drug testing with the tenant’s explicit consent. Even in these cases, however, landlords should tread carefully to avoid claims of coercion.
HUD and Public Housing Authority Considerations
If you’re a Section 8 housing provider, you must account for the federal rules set to enforce safe housing conditions and how individual public housing authorities apply those rules.
The 2013 Journal of Public Policy Development and Research article “Alcohol, Drug, and Criminal History Restrictions in Public Housing” reports that some housing authorities require drug testing to receive PHA funds.
“The Indianapolis Housing Agency (2010) imposed mandatory drug testing of applicant households, whereas the Charlotte Housing Authority (2012) required applicants to sign consent forms allowing the PHA to contact third parties involved in an applicant’s life (for example, social workers, police officers, and landlords).”
The critical takeaway is to contact your public housing authority for information regarding drug testing if you use these programs. Housing authorities can enforce federal regulations via the rules they deem appropriate, and there are significant differences between PHAs.
Legal Repercussions of Unlawful Drug Testing
Landlords who disregard Fair Housing Act protections and implement selective drug testing risk facing significant legal consequences.
Lawsuits
Tenants denied housing due to a drug test can file lawsuits against the landlord for violating the FHA, provided they have the evidence to back up their wrongful denial. For example, if a potential tenant takes opioid pain medication for a disability yet is denied housing based on the results of a drug test, they can sue.
In addition to applicant lawsuits, fair housing advocacy groups or the Department of Housing and Urban Development (HUD) may sue the landlord.
Monetary Damages
If the court finds the landlord in violation, they may be required to compensate the tenant for emotional distress, moving costs, and additional expenses.
Injunctions
The court could order the landlord to cease the discriminatory practice and offer the wrongfully denied tenant housing.
Civil Penalties
The HUD can impose civil penalties on landlords who violate the FHA.
Alternatives to Drug Testing
If you choose to drug test every tenant who applies to your rental, you’ll have an additional layer of cost and administrative work to manage. Drug tests aren’t free, and tenants aren’t likely to foot the bill.
Plus, tenants who must complete a drug screening to rent your place may choose to bring their money elsewhere. In competitive markets, a drug testing requirement may extend vacancy times and compel renters to look for properties that don’t have drug screening requirements.
Of course, every situation is different. If you’re subject to specific PHA rules, you may have no choice but to drug test prospective tenants.
However, if you’re not bound to PHA regulations, we think there are valuable alternatives you can utilize to ensure your tenant treats your property with care, maintains a safe environment for other tenants, and ensures the rent gets paid monthly.
Background Checks
While subject to legal limitations, background checks reveal information about criminal history or prior evictions. If an applicant has a criminal history related to drug use, manufacture, or distribution, you can choose another tenant.
But be careful; different states legislate the offenses you can deny. For example, in some states, if the tenant has a deferred sentence that wasn’t revoked, you can’t deny housing based on the charge.
Credit Checks
Credit checks provide insight into a would-be tenant’s financial responsibility and ability to pay rent. While a credit score won’t give you the best idea of whether or not a tenant will pay their rent on time, a history of on-time payments can provide peace of mind.
Reference Checks
Contacting previous landlords or employers for reference checks (with tenant permission) can offer valuable insight into a tenant’s rental history and behavior.
While background checks and credit checks can create a sketch of a potential tenant, conversations with those around the applicant will fill the sketch with color.
Employment Verification
Verifying employment (with tenant approval) enables landlords to confirm an applicant has the means to pay rent on time. It’s a good way to verify that what the applicant says is accurate and that they’re employed.
Income Insights
Now included with TurboTenant Premium, Income Insights provides landlords with an additional check; landlords can now use information from TransUnion to compare against renter-reported income.
Ask FHA Permitted Questions
You don’t have to drug test applicants to ask questions related to drug use. While we don’t expect people with something to hide to answer these questions truthfully, there are some questions that landlords can ask prospective tenants.
Just be sure to ask every applicant so as not to discriminate.
Here is a list of acceptable drug-testing-related questions from Cornell Law:
(4) Inquiring whether an applicant for a dwelling is a current illegal abuser or addict of a controlled substance;
(5) Inquiring whether an applicant has been convicted of the illegal manufacture or distribution of a controlled substance.
Simply asking these questions can help you let potential renters know that you’re serious about these factors, which may be enough for them to consider other properties to rent. If they bristle at the questions, you’ll have something to consider.
Next Steps and Conclusion
Depending on your circumstances and reasoning for drug testing tenants, the process could end up being more trouble than it’s worth. Between paying for drug tests, navigating FHA laws, and risking legal action, consider a thorough screening process from a trusted partner instead.
TurboTenant’s tenant screening service delivers industry-leading screening reports that cover:
- Credit Scores
- Lines of Credit
- Credit Inquiries
- Debt in Collections
- Criminal Records
- Past Evictions
- Income Verification (included with Premium)
When you pair a comprehensive report with thorough reference checks, you’ll give yourself the best opportunity to land quality tenants who’ll fulfill their end of the bargain.
And if you’re a landlord looking to simplify your property management process, TurboTenant is more than a great tenant screening service. When you sign up for a free account, you gain access to rent collection, maintenance management, property advertising, and other features to help you save time and money.
By Ryan Squires
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By Kenneth Gordon
Here are 5 easy upgrades for your rentals this summer as the weather is getting nicer, the sun is shining brighter, and the days are longer, so time for upgrades to attract tenants during the moving season.
For many rental property owners, this means it’s time to get started on summer projects, which can range from very small updates to the interior to major renovation projects, such as remodeling a bathroom or replacing siding all to help attract tenants.
Here are 5 easy upgrades for your rentals this summer
You can still make a huge impact by making minor changes that are simple and don’t cost a ton of money
No. 1 – Replace Your Windows
One of the most popular trends—especially in preparation for the summer—is replacing old, out-of-date, or damaged windows with new ones. Most people don’t realize this, but we lose 25 to 30 percent of the heated and cooled air our HVAC systems produce through our windows and doors.
In other words, that’s 30 percent of the energy we pay for that ends up completely wasted. You can prevent this from happening by installing windows that provide better insulation, helping keep cool air in during the warm summer months, preventing heat loss during the winter, and reducing the frequency at which your A/C unit runs. The less you have to depend on your HVAC system, the less you’ll have to pay in energy costs.
When shopping for new windows, look for high-quality, durable materials that are insulating and will help reduce heat transfer, such as vinyl and fiberglass. When selecting glass for your new windows, choose dual-pane Low-E (low-emissivity) glass with gas fills between the panes. The more glass panes, the better—two or more will provide greater energy efficiency, improved impact-resistance and sound insulation. Low-E coatings on the glass reflect infrared light, which keeps heat out and helps protect your home’s interior furnishings from damage from UV light.
No. 2 – Add New Shades or Blinds
This is one of the 5 easy upgrades for your rentals that will really make a difference. With summer comes lots of sunshine and rising temperatures that can make your home feel uncomfortable – while increasing your energy costs. Not only that, but sunlight streaming through your windows can be annoying. And with more evening hours for neighbors and curious eyes to peer in, tenants will want to find a way to cover windows.
Whether you need to add window treatments to your home or replace your existing window coverings, installing new blinds or shades is a great way to help keep your home cool during the summer, improve your privacy, and update your home’s style.
When it comes to shopping for new blinds or shades, there are a variety of styles available on the market. Gone are the days when homeowners had only a few options to choose from. These days, homeowners can select from a range of styles, such as room-darkening shades, wood or faux wood blinds, and Roman shades, as well as bamboo blinds and woven shades for those who are looking for more unique and environmentally friendly coverings.
There are also a range of colors and control mechanisms to choose from, including cordless operation, which is recommended for apartments and rental homes with small children and pets.
No. 3 – Install New Ceiling Fans
Ceiling fans have a reputation for being noisy, outdated, and terrible for design—and perhaps this may have been true at one point in time. However, much like window treatments, ceiling fans now come in more modern options that are quiet, sleek, and elegant. There are many benefits to incorporating ceiling fans into your rental unit that go beyond simply moving air and keeping rooms cool.
For example, ceiling fans can help dramatically lower energy costs by up to 40 percent by making rooms feel cooler, allowing you to raise the thermostat and be just as comfortable. Ceiling fans are also extremely versatile and come in a variety of styles, sizes, and finishes to complement your home’s style. Many come with lights for greater illumination.
To get the biggest energy savings out of your ceiling fans, make sure you have them set to rotate in the correct direction. In the summertime, ceiling fans should rotate counter-clockwise, allowing the blades to push cooler air down; in the winter, reverse the direction so that the blades rotate clockwise, pulling cool air up toward the ceiling.
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No. 4 – Add Covers to Furniture
Another simple upgrade you can make is to provide tenants with slipcovers for their furniture or your furniture in a furnished unit, to protect them from becoming damaged in the sun. You can prevent sunlight from shining in by keeping your blinds or shades closed, but for added protection—and for beautiful days when tenants want to keep the windows open—consider adding slipcovers to furnishings.
No. 5 – Update Bedding and Pillows
One easy upgrade that makes a huge impact is swapping out your bedding. Our needs for our homes can change greatly depending on the time of year it is. In the winter, we need thick blankets with cozy layers and plushness to combat the cold; in the summer, we need bedding that’s airier and light.
Choose breathable fabrics, such as cottons and linens that won’t suffocate you in the heat and humidity, and store your down comforter until the temperatures start to cool down again. Another simple and quick update you can make to your space is to place a few new pillows around the house to give your rooms a crisp, summery feel.
After hibernating in your home during the cold winter months, the summertime allows us the opportunity to open our windows and invite sunshine and warm weather in. Whether you have the budget to take on larger updates or you simply want to make a few small changes, these five simple updates will improve your home and invite you to enjoy it this summer in style.
These 5 easy upgrades for your rental homes will impress your tenants and keep them happy.
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Many single-family rental investors look beyond their local market to diversify their portfolios and benefit from market variety. When these out-of-state investors start, the first thing they do is research the market. They look at financing, data on home sales, rental demand, price points, local industry, job market health, etc.
Up to a certain point, the properties themselves don’t matter. After all, it’s not a personal residence. You don’t need it to suit your tastes.
At the same time, certain things about the investment properties you buy matter—a lot. As you navigate the world of single-family investing, focus on these five essential elements of due diligence.
1. An Excellent Turnkey Provider
If you’re buying remotely, you’ll need a turnkey partner. The definition of “turnkey” varies, so you’ll want to thoroughly investigate exactly what’s being offered versus not. Ideally, you’re looking for a company that owns and invests in the properties they’re selling. They’re not middlemen. They are just there to broker a deal. They should have experience, well-developed operations, and in-house or highly trusted partners for property management and renovations.
Ask hard questions. Do your homework. Know their mindset and philosophy. And most importantly, know what you want and need so that you can choose a partner that aligns with your vision.
2. A Clean Inspection
We can’t stress this enough: No matter what property you buy or who you buy it from, get your own inspection. Remember, turnkey might mean something different to everyone. Problems you consider big might not be significant to the seller or turnkey provider.
It’s worth repeating: Get your own inspections done. Never waive them. You may want to go above and beyond for peace of mind—get the crawl space looked at and ensure your pain points are addressed.
Remember, you’re not likely going to be there for any final walk-throughs or see things for yourself in person. You need trusted eyes and ears on the ground.
We have been partners with TurboTenant for a while now. We love them for newer rental property owners because many of their services are FREE. These would be expenses that a lot of landlords do not include in their budget, like some of the costs associated with finding a new tenant.
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They handle tenant applications and screening, also no cost to the landlord. They have an option where you can have the tenant pay for this service, so you never have to handle reporting or recording the receipt of these fees.
Collecting rent is always FREE for landlords! Only tenants will pay if they choose to use a credit card for payment. Otherwise, ACH (our recommended method) is no charge.
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Manage your rentals and organize your documents all in one place. Efficiency is key and you will be able to streamline your rental property business with features such as in app messaging with tenants, handle maintenance requests, plus upload and store their rental insurance information. Available for the premium upgrade noted above ($8.25 per month).
If you are looking for a straightforward, easy to navigate, and low-cost option to help you manage your rental properties, look no farther. TurboTenant is our go to recommendation of property management software for newer landlords or for ones that presently only own a few doors.
3. Minimized Inconvenience
In addition to considering what your ideal residents want, consider what they don’t want. We’ve all seen properties that are just…off. Weird layouts, outdated design choices, quirky features—while these might be things someone likes, most people won’t.
You want to focus on ergonomic, appealing, and convenient properties. If they aren’t presently like this, what renovations would it take to get it there?
Sometimes it’s hard to see how inconvenient or frustrating a property can be until you’ve lived there for a while. That isn’t an option in this case, so anticipate needs and pain points. Listen to feedback as you go and seek out solutions. The more user-friendly a property, the less likely residents will have a reason to leave at the end of their lease.
4. Key Location
Location matters in both a broad and a specific sense. It’s the one thing you can’t change about a property. Be strategic. An imperfect house can be improved over time if the location is ideal.
At the same time, a perfect property in a poor location may have trouble staying occupied. Be mindful of the specifics.
5. Attention to Detail
You’re investing from a distance. Sometimes, it’s hard to know all the details, let alone focus on them. This is where your turnkey partner and property management team come into play. From the very beginning, you should only be with partners you trust to uphold a standard of excellence you can sign off on. They’re the ones who will see things and fix things—or not.
Sloppy renovations and corner-cutting maintenance efforts aren’t good enough. Leave your property in the hands of people who value quality from every angle. No investment property will be perfect—but they can get close! Choose stewards who show pride in their work and value your investment.
Provided by REI Nation
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By Tom Scalisi
Wildfires are dangerous and destructive. Following these tactics and tips can help safeguard your home—and your family.
The damage caused by wildfires can be absolutely devastating. According to a 2020 study by the nonprofit research group Headwater Economics, wildfires destroyed nearly 89,000 structures between 2005 to 2020. Worse yet, 62 percent of the losses occurred in 2017, 2018, and 2020 alone.
While wildfires might seem unstoppable (and in many ways, they are), there are ways to protect your property from fire damage. With the right information and a proactive approach, anyone can take steps toward safeguarding their homes.
Clear Brush and Dead Vegetation
In some parts of the world, wildfires also are known as brush fires because they feed on the dead brush, vegetation, and trees in drier regions. One way to slow a wildfire’s approach is to keep the property clear of those combustible materials. Cutting down dead trees as well as removing dead brush, grass, leaves, and other debris will provide less fuel for a wildfire, slowing its approach across the property.
Create a Defensible Zone
Creating a defensible zone around your property is one of the best strategies to lessen a home’s risk during a wildfire. This zone includes everything within a 100-foot radius of the house, and it’s best to break the property into smaller, manageable zones:
- Zone 1 includes 0 to 5 feet from the house. Remove combustible outdoor furniture, fences, and storage under decks from this area. Also, use hardscape and concrete to create fuel breaks. Be sure to remove any dead plants and keep the plants in this zone irrigated.
- Zone 2 covers the area 5 to 30 feet from the house. Remove dead brush, maintain 18 feet of space between tree crowns, and plant trees and vegetation in small clusters.
- Zone 3 includes 30 to 100 feet out, and it’s important to keep these trees trimmed and the zone free of brush as well. Also, remove any small evergreen trees growing between mature trees, as they’re full of combustible pitch.
The National Fire Protection Association (NFPA) publishes a guide to defensible zones that contains additional useful information on the topic.
Protect Your Roof
Since flying embers from wildfires are often the causes of structure fires, protecting the roof is key. Using Class A-rated shingles will help to lessen the chances that an ember landing on the roof causes a fire.
The good news is that your roof might already be Class A-rated; most asphalt shingles are Class A-rated, and all metal roofing is Class A-rated. While these shingles won’t fireproof the home, they offer protection for its most vulnerable surface.
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Keep Embers Out of Vents and Windows
Flying embers are just as likely to float into open windows, cracks in vents, and open eaves. If the threat of a wildfire approaches, it’s important to safeguard these areas from danger. Sealing off attic vents and windows with ⅛-inch metal screening will prevent embers from floating in while still allowing airflow. As for exposed rafter tails and open eaves, it’s best to box them in even though it will affect the aesthetics of the home.
If a fire approaches and you are told to leave or feel threatened, be sure to close all windows and doors and leave them unlocked. If you have time, remove flammable window coverings and move flammable furniture away from windows and doors.
Work With Your Neighbors
You can take all the precautions in the world to protect your property from wildfires, but if you live in a densely populated area, your home is only as safe as your neighbors’ homes. Work with your neighbors to create safer yards and ultimately a safer neighborhood by following these protocols on their properties as well.
Prepare Your Escape Route
If you’re told to evacuate, ignoring the evacuation order and staying at home puts you, your family, and the crews responding to the fire at unnecessary risk. Instead, prepare an escape route. Keep your vehicle full of fuel and prepare a bag with some necessities. Also, know a few different ways out of your neighborhood to ensure you can escape regardless of the fire’s direction.
The smoke from nearby wildfires can reach across several states and affect air quality. Consider purchasing an air purifier before a local or regional wildfire starts to ensure your breathing air is safe while at home and when you return after evacuating.
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Financing opportunities and federal funds are available to multifamily if you just know where to look
Illinois Sen. Everett Dirksen, perhaps the last great Congressional orator, didn’t like spending the peoples’ money. To make his point he once said: “A billion here, a billion there, pretty soon it begins to add up to real money.”
That quip has become synonymous with government overspending. When it comes to multifamily housing, though, most providers don’t think Uncle Sam spends enough. But it turns out there is an appreciable amount of federal money going into apartment development that people just don’t know about.
Indeed, you can stick a shovel in the ground just about anywhere and you’ll find the federal government involved in multifamily and home lending. What we’re talking about here is the Community Development Financial Institutions Fund, a program better known for incentivizing business lending.
But the main CDFI fund operates several smaller, targeted programs, including a Capital Magnets Fund that financed almost a quarter of a billion dollars worth of multifamily housing during the six-year period from 2016 to 2021.
According to the Fund’s website, recipients used $246.6 million in CMF funds to finance or support 37,650 rental units. Indeed, the multifamily sector handily outpaced the fund’s home ownership component, which came to just 5,500 units and $37.2 million in disbursements.
The Opportunity Finance Network, a financial intermediary that has a coalition of 400 CDFI’s throughout the country, has reported significant real estate activity along with business lending by its members. The OFN touts its own intermediary multi-family and home mortgage programs in addition to aiding business lending.
OFN lending
The Opportunity Finance Network, a coalition of more than 1,400 CDFIs throughout the country, has reported significant real estate activity along with business lending. The OFN touts its own multifamily and home mortgage programs in addition to its business lending.
“Through 2022, OFN member CDFIs have helped support the development or rehabilitation of nearly 2.4 million affordable housing units nationwide. And CDFIs nationwide have financed $2 billion annually in mortgages,” the Network claims. The investments help develop affordable and desirable rental homes throughout the nation as well as in Puerto Rico and the U.S. Virgin Islands.
Here are a few examples of apartment deals using OFN money:
- The Florida Community Loan Fund provided financing for the Fort Lauderdale Community Development Corp. in both 2015 and 2020 to sustain and rehabilitate 37 multifamily affordable rentals and a single-family affordable home.
- CDFI Pathway Lending of Nashville helped Catfish Moving Co. to find office and multifamily space in the Music City.
- In Maine, the Caleb Group turned to the Genesis Community Loan Fund, a local CDFI, for a $1 million construction loan in January 2019 to purchase and preserve multifamily units. In this case, the deal involved Norway Savings and was supported by a Federal Home Loan Bank of Boston grant and an investment from Bath Savings Institution.
Looking for more information or a support network on the investing side of rental properties?
Check out BiggerPockets! They provide resources and tools to help people learn about real estate investing and build wealth through rental properties. Their website offers a community of over 2 million members, educational content, networking capabilities, and software tools. BiggerPockets also publishes books and podcasts about real estate investing.
Looking to the future
The Citizen Potawatomi Community Development Corp. in Shawnee, Okla., hasn’t done any CDFI multifamily transactions just yet. But Executive Director Cindy Logsdon says that “doesn’t mean we couldn’t in the future.”
Her fund has looked into one deal that had retail on the first floor and rental housing on the upper floors before ultimately passing on it.
But Citizens Potawatomi has used CDFI Bond Guaranty money to build an industrial park. According to Logsdon: “if several large manufacturers came into the industrial park, they could create 1,000 jobs,” creating an opportunity for multifamily. After all, business lending is the CDFI’s forte and in recent years it has expanded into residential mortgages.
Similarly, Uncle Sam’s New Markets Tax Credit Program was designed to emulate, on the business side, the Low Income Housing Tax Credit, which has financed multifamily housing for more than 30 years and is earmarked in the current budget for a significant increase in funding.
Even with its business orientation, the NMTC has still managed to fund more than $28 billion of real estate since its inception in 2000. And while rental housing doesn’t qualify directly for an NMTC award, savvy developers and lawyers have found a workaround that makes it an essential tool for mixed-use multifamily. They do so by using the tax credit to finance the retail component on the lower levels and build apartments above, utilizing separate financing structures to do so.
One such development, the Sibley Building in Rochester, N.Y., has 10 different condominium-style regimes, including three housing-related ones for senior, market rate and workforce/affordable housing. While this particular deal didn’t use the NMTC to develop the retail in the million square feet of space in the building, there are plenty that have.
For example, the Corporation for Supportive Housing of New York City received a $50 million allocation in a NMTC round a couple of years back. Its plans were to invest in homes that served low-income, high-health-need people who were homeless or at risk of homelessness or who resided in supportive housing.
Tapping the NMTC
CSH has received a number of NMTC allocations over the years. One transaction actually tapped funds from both the NMTC and the low-income housing tax credit for its Blackburn Building in Portland, Ore.
The project had a $15 NMTC million allocation to Central City Concern for a 51,000-square-foot health facility. The LIHTC component went towards 124 units of single-room occupancy and studio units.
On the Native American multifamily side, Native CDFIs are starting to tap both federal programs. The Native American Bank of Denver (which is also a Native CDFI) received a $50 NMTC million allocation in 2023 and McKinley Asset Growth Management of Alaska, also a Native CDFI, has received more than $100 million in several allocations.
While neither of the NMTC and LIHTC tax credits are in the billion dollar range, taken collectively, they have a lot of heft. And a billion here and a billion there… well, you know the rest.
Source: Multi-Housing News
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By Emily Koelsch
Investing in Rentals in HOAs
Homeowners Associations (HOAs) are becoming increasingly popular across the country. Fifty years ago, less than 5% of people lived in communities governed by HOAs. In contrast, around 25% of Americans are currently part of HOAs. Once thought of only in the context of condominiums, there are now homeowners’ associations for townhomes and single-family home communities too.
Given their growing popularity, more real estate investors are faced with the question of whether or not to buy rental properties in HOAs. To help you answer this question, here’s an overview of HOAs, the pros and cons of owning rentals in HOAs, and tips for anyone considering investing in real estate governed by an HOA.
What is a Homeowner’s Association?
A homeowner’s association is a governing body that manages and regulates a residential community. The purpose of HOAs is to set rules that all members must follow to maintain established standards that benefit the whole community. Generally, HOAs are run by a board of directors elected by the HOA members.
When purchasing a property, the agent or property manager should disclose if it’s part of an HOA. You need to have this information from the outset because if you buy a property in an HOA, you are automatically part of the community and bound by its rules. You cannot opt-out.
Each HOA must outline all rules, regulations, and fees in their Covenants, Conditions, and Restrictions (CC&R). This is a public document that HOAs must file with the local county assessor’s office.
Benefits of Buying Rentals in HOAs
There are some distinct reasons that HOAs are becoming increasingly popular. Perhaps the most compelling, properties in HOAs maintain their value well and often appreciate at above-average levels.
HOAs also offer some distinct advantages for real estate investors:
- Amenities that help attract Tenants. Communities with HOAs usually have more amenities than other properties, like a gym, swimming pool, playground, or tennis court. These amenities help Landlords attract Tenants while also increasing rental values for units in the community.
- Fewer maintenance responsibilities. Owning a property in an HOA means less maintenance for Landlords and Tenants. HOAs usually handle landscaping, snow removal, and trash services. The result is less work for Landlords and the peace of mind that the property is well maintained.
- The Property and neighborhood stay in good condition. HOAs set specific standards for all properties and outdoor spaces. In addition, they have systems in place to ensure that all members comply with these standards. For Landlords, this is good for both property values and attracting Tenants.
- Mediation of disputes with neighbors. When conflicts arise in HOAs, the board helps to mediate and resolve disputes. This resource helps alleviate Landlord headaches that can come with difficult neighbors.
Disadvantages of Owning Rental Units in HOAs
As you might imagine, HOAs also have some substantial disadvantages for Landlords. Here are the most significant challenges investors should consider before purchasing a rental in an HOA.
- Rental restrictions. HOAs can set limits and regulations for renting properties in the community. Common Lease restrictions include limiting the number of Leases per year, establishing a minimum lease period for short-term rentals, requiring owners to live in the unit for a certain period, and capping the number of units in the community that can be rentals. Investors should always read the CC&Rs before purchasing a rental unit to be familiar with applicable restrictions. Also, it’s important to realize that HOA rules can change, so even if there aren’t currently restrictions, there’s always the risk that the board will add new restrictions.
- Management expenses. HOAs assess monthly, quarterly, or annual fees to cover the cost of maintenance and amenities. These fees vary widely based on the services and amenities provided, and this fee cuts into a Landlord’s monthly cash flow and annual returns. It’s vital to include this expense when running the numbers on a property, and it’s also worth noting that fees are regularly reassessed and generally increase over time.
- Special Assessments. When an HOA board determines significant repairs or upgrades are needed, they’ll require a special assessment from all members to cover the expense. Special assessments are unpredictable costs for Landlords that directly cut into cash flow and returns.
- Interference with property management. HOAs can set rules and restrictions that interfere with a Landlord’s management of their property. For example, banning certain types of pets, setting specific Tenant Screening criteria, requiring Tenants to review and sign by-laws, and having strict requirements for upgrading or repairing your property. These regulations can increase management costs and Landlord headaches while also making it harder to find Tenants.
- More Landlord liability. When you own a property in an HOA, you’re responsible for complying with all rules and fees. If your Tenant violates rules, you’re ultimately the one who will have to deal with the HOA, resolve the issue, and pay any fines. Additionally, if you pass on HOA fees to a Tenant and the Tenant doesn’t pay, you’ll be responsible for this fee and any late charges.
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Tips for Investing in Rental Units in HOAs
There is no blanket answer to whether investors should buy rentals in HOAs. Instead, it’s an issue to address on a case-by-case basis. Here are some tips to help with this analysis:
- Always review the CC&R and be familiar with any rental restrictions that will impact your business.
- Analyze monthly fees to determine whether you can recoup these costs. For example, can you increase rent to cover the cost of amenities, and are the maintenance expenses comparable to the amount you would have to spend to keep the property in good condition?
- Consider the potential for a special assessment and have an emergency fund to cover this expense.
- Think through the risks associated with HOAs – for example, changes in rental restrictions or fees – and determine whether this is a risk you’re comfortable with.
Thinking through these tips will help you make an informed decision about rental properties in HOA. As you expand your portfolio, visit ezLandlordForms.com for investing tips, Tenant Screening Services, and state-specific Lease Agreements.
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The rental housing market expanded over the past decade thanks to a growing customer category – the single family property renter. As waves of interest rate increases and property value inflation priced many potential homeowners out of the market, consumers (especially young, upwardly mobile professionals) re-defined their expectations. They settled for tenancy over homeownership. However, their aspirations for “big space” living, combined with a growing preference for remote work situations, resulted in increased demand for single family property rentals. These new single family renters present opportunities and risks. Finding quality, long-term renters is a property manager’s dream. However, dealing with credit risks, scams, and delinquencies is always a nightmare. In this blog, we show single family property managers how automated leasing tools alleviate current operational challenges, accelerate qualified lead conversions, and effectively combat rental fraud.
1. Automate for Leasing Success in 2024
Despite the economic headwinds impacting the housing market, at large, the single family rental property market offers a silver lining.
Single family housing inventory is expanding, creating opportunities to capture new revenue from an expanding market of new renters.
The Department of Housing and Urban Development (HUD) recently reported that single family housing completions in January 2024, were 2.8% above the number in January 2023. Fannie Mae reported a similar growth trend by projecting that 2024 single-family housing starts to be 5.7 percent higher than in 2023.
While this increased supply and demand bodes well for all involved, single-family operators still face operational challenges before achieving leasing success.
For instance, because the parallel growth in inventory and demand is likely to hold rental rates steady, operators must find new ways to strengthen their bottom line. Also, in order to maintain high occupancy rates, property managers must accelerate leasing velocity and convert more leads. All the while, inflationary pressures continue to constrain operating budgets and staffing shortages persist. Increasingly, property managers must “do more, with less”.
As a result, property managers are discovering that automation alleviates many of their current operational pressures and even offers the potential to achieve ROI gains.
“Leasing automation is the ultimate ROI enhancement,” Rently COO Andre Sanchez said. “It plays a key role in facilitating better, more personalized experiences for customers while moving them through the entire leasing process faster and more efficiently.”
By integrating leasing automation tools into their lead management, operators have seen conversion rates of 30 percent or more. In fact, often and ideally, by the time customers interact with a leasing associate, they are ready to sign a lease.
The decision to automate is an important first step towards leasing success. However, equally important is choosing which tasks to automate in order to still create a positive and engaging renter experience.
2. Become a Smooth Operator
In order to preserve renter engagement, while automating parts of the leasing process, it’s important for managers to optimize the entire renter journey.
Renters will hardly notice automations threaded through their journey if their cohesive experience is positive and smooth. In fact, by integrating multiple leasing steps into one seamless (frictionless) experience, automation benefits both renters and managers.
To increase leasing velocity, it’s essential for property managers to create an airtight “lead-to-lease” funnel that accelerates renter momentum and quickly drives conversions.
By using new and proven automated leasing tools, single family property managers can make sure to keep renters engaged and impressed during every step of the renter journey.
3. Introduce your property with dynamic online listings
Not so long ago, property listings could be found in newspapers or posted on flyers in leasing offices. With the Internet came exciting new marketing possibilities.
Internet listing sites (ILS) offer an effective way to reach millions of online renters and maintain constant contact with the marketplace.
Automating property listings enables syndication across multiple listing sites, creating a strong multiplier effect for lead generation.
In addition, the ubiquity of mobile devices makes it possible for renters to see online listings from anywhere, at any time, with real-time notifications of property availability. According to Zillow (2022 Report), 74% of renters now search for properties online using a mobile device, and 60% use an app.
Online listings are your first point of contact with a prospective renter. Make sure your listing includes the automations to keep that renter connected and moving forward through your marketing funnel. For instance, adding rental criteria to property listings quickly identifies qualified leads and saves time by screening out unqualified prospects.
4. Quickly set a tour date with automated tour scheduling
Leasing professionals understand the challenge of managing countless leads and trying to schedule them all for property tours.
However, imagine being able to instantly respond to 100% of your online leads with an automated option to quickly schedule a tour directly from a listing site. This feature is especially appealing to renters accustomed to on-demand experiences because it allows them to schedule and confirm a tour immediately after finding a listing that interests them.
Auto-scheduling tours accelerates leasing velocity by quickly moving your pre-qualified rental prospect from the initial interest phase to an onsite touring commitment.
In addition, by eliminating the time and hassle of manually arranging appointment logistics, your leasing teams can better spend their time on lead engagement at more important points in the renter journey.
Tour auto-scheduling saves property managers up to 30 minutes per requested showing. Multiply that by 100 showings, and you’ve just reclaimed a whopping 50 hours! That’s 50 hours your team can redirect towards other critical aspects of your business.
5. Show properties faster with automated tours
When a renter schedules a tour, an automation can offer them the choice of scheduling a self-guided tour, or an agent-led tour.
Self-guided property tours combine a user-friendly mobile app or web experience with property smart access devices like lockboxes or smart locks, creating a secure and independent property-viewing experience.
Self-guided tours offer managers significant time savings by eliminating the need to travel to and spend time on-site. In addition, self-guided tours increase overall touring traffic by 25%, boost lease conversions by 2% and reduce a property’s time on the market by 75%.
Originally designed to accommodate the 42% of renters preferring tours outside regular business hours, self-guided tours have widespread appeal. The ability to tour when convenient, combined with managing the entire process from a mobile app, resonates well with modern renters and property managers alike.
While self-guided touring has become a popular option, some renters still prefer the personal interaction of an agent-led tour. For these renters, automations also exist to streamline their experience. For example, when scheduling their tour, renters can directly sync to an agent’s calendar to find an opening and make a reservation. This eliminates time-consuming staff coordination.
6. Combat rental fraud with automated rental screenings
Single family rental properties are a serious investment, and it’s critical for operators to find renters with the financial stability to meet monthly payment obligations. Avoiding the drama and cost ( $7,685 per instance!) of evictions is a priority.
However, identifying high-risk renters is often a real challenge:
Source: NAA
Furthermore, the average renter screening process takes anywhere between 4-10 hours per rental application. In addition, 72% of property managers also noted the extra time and attention required to make sure that their rental forms meet the guidelines of the Fair Housing Act (FHA). This is all valuable staff time spent on just one leasing task!
It should come as no surprise, then, that automating the applicant screening process to activate multiple verifications at the same time, is a major time-saver.
It should not be complicated or stressful for prospects to tour and apply to rent a property. Similarly, it should be easy for managers to collect applications and identify quality residents. The smoother the process, the better the experience for everyone involved.
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7. Rently’s unique leasing automations
Years ago, Rently recognized that leasing automation has the potential to greatly benefit both renters and property managers. Based on real-world implementations, Rently saw that automations create an enjoyable renter journey, streamline leasing operations, accelerate lead-to-lease conversions, and enhance security. Therefore, Rently successfully integrated leasing automations into every step of the leasing lifecycle, from listings to leases.
Rently Listings, our company’s increasingly popular ILS receives 10 million visits and facilitates 3 million self-guided tours each year. Rently Listings is the #1 lead generation tool to reach today’s tech-savvy renters who want to tour on demand.
Rently Listings helps millions of renters find smart home properties that offer self-guided tours. Conversely, Rently Listings provides property managers with immediate exposure to a giant universe of renters who desire to tour on demand.
Rently Listings also automatically syndicates to more than 30 other listing sites. Therefore, property managers save hours of valuable time because they no longer have to manually upload/update listings to multiple sites. They can simply use Rently Listings to update all their listings, on all sites, at once!
Rently Listings automatically syndicates to the following ILS:
In addition to creating a listing platform that quickly drives prospects to smart home properties, Rently also offers groundbreaking, automated renter security and screening features. These save property managers hours – even days – completing the due diligence required to ensure quality tenants.
Even before a rental prospect enters a property for a tour, Rently completes a stringent ID verification process and ensures that prospects match the rental criteria set by a property manager. As a result, only qualified and verified renters gain access to properties.
Similarly, Rently’s screening automations also support post-tour leasing steps. For example, Rently automations prompt prospects to submit an application immediately after they tour. This engages renters at the peak of their interest and increases the number of applications submitted.
Once applications are submitted, Rently’s screening empowers managers to do their best due diligence. By combining six critical renter screenings into one automated process, Rently’s screening saves time and eliminates the hassle of verifying renter information with several third-party service providers.
Rently’s Screening auto-verifies the following renter data:
- Government-issued ID and selfie photo are matched, using facial biometrics before a self-guided tour
- Top fintech partners verify income documents, pay stubs, and W-2 forms
- TransUnion applies ResidentScore™ criteria (rental industry specific) to verify credit ratings, bankruptcy, eviction, and criminal records.
These automations expedite the screening process so that renters receive faster responses and managers accelerate lease signings.
Finally, Rently also offers a unique approach to data centralization and cross-platform integration.
From Rently’s centralized data dashboard, property managers are provided a single view of their property’s leasing automations. From there, they can track lead status as they make their way through the marketing funnel and engage with renters, in real time, at critical moments. In this way, automations allow managers to focus on what really matters – building relationships and closing deals.
To further maximize its value, the data collected by Rently’s leasing automations is easily integrated across popular PMS platforms. This is accomplished thanks to open APIs and customized plug-ins, such as those for Appfolio and Buildium.
Conclusion
Whether managing a small or large portfolio, single family operators benefit by using automated leasing technology to optimize operations, create a frictionless renter experience, and screen out high-risk rental prospects.
For Rently, automation is a leasing enhancement. It’s how we help property managers streamline time-consuming tasks and simplify operations to achieve larger business goals.
We see leasing automation as helping (often understaffed) property management teams move renters through the entire leasing process faster, while still creating a personal and positive experience.
Provided by Rently
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By Emily Koelsch
Digital landlord is an increasingly popular term, so we thought we’d dig into what it means for real estate investors. Before getting started, it’s important to note that there are two different types of digital landlords: those that manage digital assets and those that use technology to manage physical real estate.
We’ll discuss the second category – Landlords that leverage software and technology to manage their real estate portfolios. To help you understand this growing category of Landlords, we’ll discuss what digital Landlords are, why this strategy is increasingly popular, and how you can get started as a digital Landlord.
What It Means to Be a Digital Landlord of Residential Real Estate
A digital Landlord is someone who uses technology to self-manage their rental property. A true digital Landlord uses technology in every phase of the rental process, including:
- Marketing the property
- Rental applications and tenant screening,
- Lease creation, signing, and renewal
- Collecting rent and issuing rent receipts
- Sending official notices
- Tenant communication
- Keyless entry
For example, a digital Landlord markets their property using online platforms like Zillow; provides applicants with an online rental application; screens Tenants using online screening services; creates a Lease electronically that can be reviewed and signed online; and uses electronic rent payment systems.
The Benefits of Being a Digital Landlord
There are some clear benefits to being a digital Landlord, and we’re seeing more investors take this approach. The biggest benefit is that it makes property management more efficient. This increased efficiency makes it possible for more investors to manage their own rentals.
Real estate investors benefit from self-managing their properties because it allows them to select Tenants, oversee repairs and maintenance, and stay in communication with Tenants. Unfortunately, property management can be time-consuming and stressful if you don’t have the right tools. Digital landlords take advantage of technology to automate more tasks and make property management less time-consuming.
Another huge benefit for digital Landlords is flexibility. They can manage properties from anywhere and have more control over the hours they dedicate to property management. This means investors have the flexibility to buy properties out of state, move, or travel.
Beyond these two advantages, there are several other benefits of being a digital Landlord:
- Consistently for Tenants. Automated systems and procedures provide consistency for Tenants. This consistency improves Landlord and Tenant relationships and improves your Tenant’s experience.
- Necessary records and documentation. Effective systems for property management help you stay organized and ensure you have the documentation you need for taxes and dealing with Tenant issues.
- Preventative Maintenance. Leveraging technology makes it easier for Landlords to be proactive about preventative maintenance and repairs, which helps keep rental units in good condition.
- Scalability. Once you have property management systems in place, it’s easy to grow your real estate portfolio and continue to self-manage your properties.
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The Tools You Need to Get Started a Digital Landlord
The key to becoming a successful digital Landlord is having the right software, resources, and tools. Each Landlord develops their own systems, but there are a few “must haves” to be successful as a digital landlord.
Here’s our list of tools you need to get started as a digital Landlord.
- Online rental application and tenant screening services.
- Electronic Lease creation, signing, and storage.
- A system for Tenant communication, including both informal check-ins and maintenance requests.
- A system for sending official documents like Notices and Lease Renewals.
- Electronic rent collection.
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AAOA is well known for its knowledgeable and helpful customer service team. Throughout the day, they are available to answer all types of questions from AAOA members ranging from “How do I place an order?” to “Can you help me analyze this credit report?”
But one question that is particularly moving is when someone calls and says, “My parent(s) recently died and left me their apartment buildings. I need to find a new tenant and I don’t know anything about being a property manager.”
“While there are many ways to mishandle an inheritance, chief among them is a lack of preparation,” says Forbes. “Parents may spend time and money to ensure that their estate is organized properly, but those efforts may be wasted if they don’t also prepare their heirs to manage the properties they have inherited.
To empower future generations to oversee and sustain inherited wealth, it is necessary to equip them with the skills and knowledge they need to do so.” To help the next generation thrive, take the following proactive steps:
DEVELOP A PROPER ESTATE PLAN
Forbes continues, “It’s easy to neglect estate planning. Aside from the discomfort of facing your own mortality and the thought of your children navigating the world without you, estate planning can require considerable effort and expense.”
That’s probably why only 32% of Americans have created a will—and even fewer people have taken the care to construct a thoughtful estate plan. Nonetheless estate planning allows you to reduce costs and maximize the inheritance for heirs.
Leaving Real Estate in Your Will
Your last will and testament is just one section of your estate plan. It sets out how you want your assets to be distributed upon your death. You can leave real estate in your will, but there are pros and cons to doing so. When real estate is left in a will, the debt on it, i.e., any mortgages or liens, must be paid off immediately. This may or may not be financially feasible for your beneficiaries. Furthermore, if you have left the property to more than one individual, each of them owns an undivided interest in it. It is vital that you appoint a reputable sponsor to assist your heirs in building and preserving your generational wealth.
Leaving Real Estate in a Trust
Setting up a trust is another way that you can leave real estate to your heirs. A trust is a separate entity that can own real estate, which is then managed by a trustee. You can place real estate in a living trust and then act as the trustee to control and benefit from it during your lifetime. Then, upon your death, the property transfers to the beneficiaries of the trust.
Leaving Real Estate Utilizing the Deed
to others can have an impact on you as the property owner as well as your beneficiaries when you are gone. The deed gives specific rights to its parties, both in how they own the property, and, in some cases, at what point they take ownership of it.
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FAMILIARIZE YOUR HEIRS WITH YOUR PROPERTIES
Once you have created your estate plan, it is time to tell your heirs about the details and what is expected of them when they inherit your multifamily properties. You have worked hard to build your portfolio and you want to be assured that it will continue to flourish once you’re gone.
Review Your Holdings and Your Plans for Them
Even if your heirs have visited your investment properties over the years, it is quite another thing to see them through the eyes of a future landlord. Visit the properties with them, introduce them to your tenants and give them as much information as possible about the building as you can, including procedures, problems, maintenance issues, etc. Set up a meeting with your property manager if you have one.
Introduce Your Team
Of course, your heirs would assume that you have an accountant, attorneys and real estate agents to support your financial needs. This is a good time to introduce these experts to those who will be inheriting your multifamily property. Your heirs should also meet your maintenance team, gardener and anyone else who helps you keep your holdings in good shape. When it comes time to replace a tenant, your heirs need to know how to find someone new. In addition to telling them where and how to publicize a vacancy and how to prepare it for a new tenant, they should have your username and password for your AAOA member account. AAOA is a very important part of your team and is ready to help your heirs through the process of ordering a tenant credit check and a tenant screening report and helping them analyze the results
CONCLUSION
It is smart to discuss your wishes with your family in advance, so there are no surprises and everyone is on the same page. It will benefit both the heirs and the property’s tenants and employees. And you can be comforted by the fact that your legacy will continue to flourish according to your wishes.
NANCY ABRAMS, Assistant Editor American Apartment Owners Association
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By Bradley Barth
Rental income property owners need to fully understand the Corporate Transparency Act (CTA) of 2021, a federal law that took effect on January 1, 2022. The law mandates that all “reporting companies” (LLCs, Corporations, LPs and others) must submit a report to the Financial Criminal Enforcement Network (FinCEN) of the U.S. Treasury disclosing specific information.
- THIS INFORMATION INCLUDES DETAILS ABOUT:
- Beneficial owner(s) of the reporting company.
- The individual (referred to as the “applicant“) responsible for establishing
the company by submitting its formation documents (such as articles or
a certificate of organization, articles of incorporation, or a certificate of
partnership) to a state agency, for example a Secretary of State.
WHAT IS A BENEFICIAL OWNER?
A beneficial owner is defined as an individual who, directly or indirectly, holds substantial control over the entity or owns or controls at least 25% of the entity’s ownership interests through contracts, arrangements, understandings, relationships, or other means. If your living revocable trust holds any of your properties, then a review of your trust must be done to identify “control” persons within the terms of the trust.
CORPORATE TRANSPARENCY ACT
(CTA) FINES
Beginning January 1, 2024, the Corporate Transparency Act began enforcing reporting companies to file. Failure to file a FinCEN report by the due date can result in significant fines. Specifically, FinCEN can impose a $500/day fine for each day that the Corporate Transparency Act form remains overdue. The CTA also includes provisions for criminal penalties in cases of willful violations of the law.
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ARE YOU EXEMPT?
It’s worth noting that nearly all entities formed in the U.S. fall under the category of reporting companies, regardless of their formation date. However, there are exemptions comprising entities that are not considered reporting companies and are thus not obliged to submit a FinCEN report. Certain small businesses, with fewer than 20 employees and less than $5 million in gross receipts or sales, are exempt from the reporting requirements. Additionally, certain types of entities, such as publicly traded companies, are also excluded from compliance. If your company is not exempt from the CTA, it qualifies as a reporting company and must file a FinCEN report. If you own your property in an LLC or other legal entity, you are most likely required to file the FinCEN report. If you own your property in your own name or your living trust there is another important topic to consider, which is your liability exposure. You have unlimited exposure to all of your assets from a liability at your property if you do not own your property in a proper legal structure.
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