Written By: Chad Carson
Think big! Accumulate hundreds or even thousands of units. Use economies of scale. Syndicate. Benefit from maximum leverage. In other words: Go big or go home.
Aren’t these the messages we hear so often here on BiggerPockets? Aren’t the biggest and the best the ones with the most cash flow, the most flips, and the most rental units?
Well, I’m here to tell you that bigger is not always better. In fact, in this article and my new book, The Small and Mighty Real Estate Investor, I plan to show you that smaller and simpler is actually better for many of you.
I’m trying to start a new movement. I hope some of you will join me. The motto is “go small or go home.” And the hero is called the small and mighty real estate investor.
Big Isn’t Bad
Life is too complex to say big is bad and small is good. We all have different motivations, don’t we? You aren’t wrong if you have big, large-scale real estate aspirations.
I would say it’s only wrong if you think big is the only way to live a rich, amazing life. There are other, simpler investing options that don’t get enough publicity because, well, they’re too simple.
You don’t have to get big to accomplish incredible financial and life goals. Small-scale real estate investing with even a few properties can do that, too. These mini-real estate models can give you plenty of money, plenty of free time, and plenty of flexibility. And they can help you avoid a lot of hassle and risk that comes with growing a big business. Isn’t that what most of us wanted in the first place?
Unfortunately, smaller real estate investing does have its downsides. You may not get famous with a best-selling book. And I’m sorry to tell you that you probably won’t get an HGTV show contract. But as a consolation prize, you CAN get a life of financial security, simplicity, and freedom that most people only dream of.
To begin exploring my point, let’s look at an interesting story of three BiggerPockets investors.**
A Story of Three Real Estate Investors
One summer, three real estate investing couples travel together to Europe. These investors originally met as beginner investors on the BiggerPockets Forums. They liked each other and helped each other grow. Along the way, they became friends.
Fifteen years later, they each have experienced success with their real estate, and they want to enjoy the fruits of their efforts. They spend 14 days visiting the Mediterranean coast. First, they explore ancient sites in Italy while enjoying amazing food and wine. Then, they continue with a high-quality, Mediterranean cruise to explore stops in Croatia, Greece, and even BiggerPockets author Erion Shehaj’s beautiful native country of Albania.
Could these investors afford a nice trip like this?
The Financial Scoreboard
Couple No. 1, Liz and Tom, are in their 50s. They live, invest in, and self-manage their properties in Missouri. Over the last 15 years, they’ve bought 10 single-family houses, one by one, in good neighborhoods.
Liz and Tom searched hard to buy these houses as fixer-uppers below value, and they used the BRRRR technique to recoup most of their cash on each deal. Then they used the debt snowball technique to pay off their mortgages early. Their houses now produce $7,000 per month, or $84,000 per year, in positive cash flow.
Couple No. 2, Tiffany and Darius, are in their early 40s. They live in New York, and they invest in North Carolina using a property manager. Fifteen years after starting, they now own one 50-unit apartment building.
Tiffany and Darius began with smaller properties and then used 1031 tax-free exchanges to trade up to bigger units until they had enough equity for a down payment on the 50-unit building. They have a solid, fixed-interest, 25-year mortgage on the building, and the property produces $10,000 per month, or $120,000 per year, in positive cash flow.
Couple No. 3, Mike and Lauren, are in their late 40s. They live in Nevada and own properties all over the country. Fifteen years after starting, they now own 500 units!
Mike and Lauren began with their own rentals, but because of their ability to put together great deals, they also began syndicating deals by pooling money from others. As the general partner, they have become multimillionaires, and their portion of the rental income equals $60,000 per month, or over $700,000 per year! Their portfolio produces the most money out of the three couples.
It’s clear to see that all three couples can easily afford to pay for this nice European vacation. This is exactly why all of them began investing in the first place.
But the story gets a little more interesting as they approach the end of the trip.
Let’s Extend the Trip!
By the end of this trip, all three couples have had a fabulous time. It’s been so great, in fact, that couple No. 1 (Liz and Tom) propose that they all stay a few weeks longer to explore more.
Liz and Tom’s rentals are all full of self-reliant tenants who automatically deposit their rent each month. The tenants can email or leave a voicemail with any maintenance emergencies, but this rarely happens. And with no debt or immediate plans to buy more properties, their business schedule is amazingly flexible.
Couple No. 2 (Tiffany and Darius) check their calendars. They have a few community and church functions, but those could be put off. Their property manager is competent and in control of day-to-day issues at the 50-unit apartment building. And because no major financing or remodel projects are looming, they happily agree to stay on as well.
However, couple No. 3 (Mike and Lauren) has challenges. They want to stay and can easily afford the expense of extending the trip. But there are projects looming back at home.
Remodeling contractors are waiting for their guidance on recent value-add apartment purchases. A new property manager needs to be found to replace an underperforming one. Their corporate bookkeeper and administrator need help. And some of their equity investors want to meet with them to discuss some past and future projects.
As a result, Mike and Lauren regretfully need to decline the vacation extension.
The Myth of the Passive Big Business
Mike and Lauren do not have a bad business. In fact, it is financially the most successful business of the three investors. But here are the questions I always ask the Mikes and Laurens of the world:
- Did your investment business meet your true goals?
- Are you spending your time doing what’s most important to you?
- Would alternative approaches have met your goals just as well, with less hassle and risk along the way?
It’s possible that Mike and Lauren are happy with their current situation. If so, I’m happy for them. But my experience has shown that many people in their situation are less than happy. Their extra money has come at a cost.
And I’m sure I’ll get examples in the comments about Shark Tank hosts, famous entrepreneurs, and BP Podcast guests who’ve built big businesses that also check all the goals off the list. It’s fine to provide successful examples.
But the bottom line is, what are your goals? And what’s the best way to achieve them? Are you a Shark Tank host, or are you a regular person trying to free yourself from the 9-to-5 grind so that you can live an extraordinary life?
I know a lot of entrepreneurs and real estate investors. The ones with the most money have big businesses. If that’s your No.1 metric, go for it. But the ones I know with the most free time, the most flexibility, and the least stress have smaller, simpler businesses and portfolios. And interestingly, I don’t see these smaller investors worrying that they have a smaller net worth than the big investors. It seems they’re too busy enjoying life!
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Can You Control Frankenstein?
So far, it might seem that I’ve beaten up on the big real estate investing model. But I’ll readily admit that it’s not impossible for you, as the owner of a bigger business, to have it all. You can create systems and teams of people that both produce a lot of money AND allow you to be relatively passive and flexible. It does happen.
But very importantly, it’s a lot harder and more time-intensive to manage a bigger, more complicated business. There are more people involved, more moving parts, and more things to pay attention to.
I think of it like Frankenstein’s monster. Without extreme focus, a business can become a scary, out-of-control creature that takes on a life of its own. And yes, it can even get hungry and eat your money, your free time, and your life!
The Frankenstein business monster becomes the most scary during the business’s growth spurts. Look at this graph of a business life cycle, for example:
The growth spurts of this graph are the steep inclines. These are the danger zones. This is when you, the business owner, are most susceptible to cash crunches, dramatic market changes (i.e, the 2008-2010 Great Recession), personnel problems, and even personal burnout.
These danger zones are where the Frankenstein monster rears his ugly head. You can win against the monster. But just be prepared for a battle.
Finding Your Business and Investing Sweet Spot
You, as an entrepreneur, have to decide where on the business lifecycle graph you want to end up. You have a virtually endless choice of plateaus that you could aim for. The sky is the limit in our economic system. But again, your choice will depend on your personal financial goals.
And your choice will also depend on your willingness to take on the risk and hassle of the perilous climb up to higher economic ground. The reward at the top better is worth the sacrifice of the climb (and the fights with the Frankenstein monster)! Unfortunately, plenty of people have arrived at the top of the financial mountain to realize they lost everything they really wanted along the way.
The key is to find your personal business sweet spot. As you’ll see in the graph below, I’ve marked two different sweet spots. One is smaller (fewer assets, fewer employees/team members, less money), and the other is bigger (more assets, more employees/team members, more money).
Both sweet spots are beautiful, level plateaus where you’ve increased income while also gaining efficiency that frees up your personal time and reduces hassle. The bigger sweet spot has more money earned. But nothing comes without a cost. You must make the choice if bigger is worth it for you.
And that choice may come down to the concept of “enough.”
The Fulfillment Curve & a Place Called “Enough”
One of my favorite personal finance books is Your Money or Your Life by Vicki Robin and Joe Dominguez. In the book, they share a graph called the fulfillment curve. Here’s my drawing of what that looks like:
While the authors shared this as a personal finance concept, it also applies to the real estate investing business. As you move up the curve, you pass milestones like survival, comfort, and even small luxuries that make life sweeter. But you finally arrive at a place called “enough,” the peak of the fulfillment curve. In terms of happiness, it doesn’t get much better than this.
But as you continue moving past the peak of the curve, each subsequent amount of money you earn and spend has diminishing returns on your personal happiness. This occurs because the extra you earn, spend, and accumulate carries with it clutter, complexity, stress, and hassle.
The place called “enough” is different for each one of us. But it’s vitally important as a real estate investor to learn what it is for you. The main point here is that smaller, simpler businesses can take many of us to this place called “enough.” And going past the peak of the fulfillment curve by getting bigger and more complex just clutters our lives.
“But I Enjoy Growing and Staying Busy!”
By this point, I’m sure some of you are with me, and others are completely turned off. That’s what I expected. But some of you may still be on the fence. Perhaps you know you’ve got enough financially, but you’re thinking something like this:
But I like working. I enjoy being busy. If I weren’t continually buying more deals and building a bigger business, I don’t know what I’d do with myself. I’d rather stick with a pattern that satisfies me than risk an unknown void in my life. What if I get bored?
I feel your pain. I’m a model member of the club for the recovering Type-A, job-identifying, workaholics anonymous.
The truth is that, of course, work is fulfilling. It really can provide a wonderful sense of purpose, growth, and challenge. I personally enjoy it, too. And there’s no reason to give up that outlet in your life if you like it.
But would your “work” projects be different if you knew you had enough financially? Would that allow you to negotiate a different approach to work, your investing, and your schedule? You could even keep doing the same basic activities, but you’d do it completely on your terms.
Sometimes this leap requires a little bit of imagination.
What Do You Want to Be When You Grow Up?
You’ve been hard at work for years. Even if you just graduated from college, you’ve still been through years of schooling, which conditions you to constantly perform and check off endless to-do lists.
I’ve found for myself that this hardworking, 9-to-5 grind for many years causes me to lose something. That something is the creativity and imagination of a child. It’s that inner force that caused you to stare off into space as a kid and say, “I want to do [insert your passion] when I grow up!” Adulthood has a way of squashing dreams with the hammer of practicality (under the disguise of money).
In 2009, my wife and I took a sabbatical trip for four months to Spain and South America. During the trip, I finally got a glimpse into my own forgotten imagination. Six weeks in, my uptight, ambitious self finally let go a little bit. It happened after spending several magical hours just sitting with my wife and watching the bay of a Mediterranean fishing village in Cadaques, Spain.
We first watched a sunset, then the arrival of a beautiful star-filled sky, and finally the biggest shooting star we’d ever seen streaking in green across half the sky! During the entire experience, I could physically feel myself relax as a big knot untied itself in my chest.
There weren’t any specific epiphanies at that moment. But I was stunned as I realized how one-tracked and focused my life was. Without that trip, that space, and that slowing down, I may have talked myself into thinking I needed to continue growing and pushing for another couple of decades. It was like I had woken up to brand new, child-like possibilities.
Go Small, and Do What Matters in Your Life
The story I just shared was my specific experience. But I’m convinced that we all can regain our own unique imaginations if we just give ourselves the space. And to create that kind of space, it helps to have a particular kind of real estate investment business. It’s big enough to give you enough financially. But it’s also small enough to give you free time and space to think, to explore, and to do what matters in your life.
What matters. That’s an interesting concept.
On my personal website, I wrote something called the “Money-Life Manifesto” that talks about what really matters to me. Everyone’s life priorities are different, but perhaps this excerpt from my manifesto will resonate with you:
- Sleep more. Relax in the morning. Sit in a rocking chair.
- Learn something new. Be impractical. Explore.
- Visit amazing places. Go on adventures. Hike trails. Ride a bike again.
- Unplug from the matrix. Do work you love. Buck the system. Say “shove it” to the man.
- Raise your own kids. Play silly games. Help with homework. Spoil your grandchildren.
- Plant a garden. Grow your own food. Eat healthy. Exercise.
- Slow down.
- BREATHE.
- Pursue your passions. Volunteer. Listen to people. Make an impact.
- Advance your cause. Create your art. Write your story.
- Get OFF the 9-5 treadmill.
- STOP selling out!
- DO what matters!
Henry David Thoreau once wrote one must “live deliberately.” Our businesses should work the same way—because real estate investing isn’t just about real estate, is it? It’s about what matters to you.
I wish you the best of luck in your real estate journey to discover what’s enough financially, to find your investing sweet spot, and to start doing more of what matters, whatever that means for you.
*I heard a variation of the “three real estate investor” story at a seminar at least 10 years ago. I think it was the late Jack Miller who told it. If someone knows differently, please help me give the correct credit.
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By Krista Reuther, TurboTenant
Building a successful property management business means becoming well-versed in various scenarios that non-landlords rarely have to consider. For example, most people assume that tenants always move out once their lease expires – but that’s not always the case.
Enter: the holdover tenant.
What is a Holdover Tenant?
A holdover tenant is a renter who remains in a unit after the expiration of the lease. If you elect to keep accepting rent payments, the holdover tenant can continue to legally occupy your rental property, and federal and state laws will determine the length of that tenant’s new rental term. In some cases, the original lease will convert to month-to-month tenancy.
However, it may not work for you to have the tenant stay. In that case, do not accept any monthly rent payments. Per Investopedia, “if the landlord does not accept further rent payments, the tenant is considered to be trespassing, and if they do not promptly move out, an eviction may be necessary.”
We’ve discussed the eviction process before, but let’s walk through what you would need to do if you suspect holdover tenancy is imminent.
Pro Tip:
Squatters and holdover tenants are easy to confuse, but there are some key differences between the terms. “Squatters” are typically strangers who never had a relationship with the property owner, nor any arrangement to live in the unit.
On the other hand, holdover tenants once had a signed lease with the landlord. While not all holdover tenants become squatters, it is possible – so read on to figure out what you need to do to keep your rental property safe.
Setting Up Eviction Proceedings: A Crash Course
Before the end of the lease, your tenant should have either elected to sign a new rental agreement or provided a notice of termination to end their relationship with you. Most states require either the landlord or the tenant to provide a minimum amount of notice regarding their plans post-contract. If your state doesn’t outline a minimum notice, we recommend touching base with your tenant at least 90 days before your written lease expires.
If the lease agreement ends and you don’t know your tenant’s next move, reach out to them. Are they planning to vacate the property on your established date, or are they interested in renewing their lease?
Let’s say your tenant doesn’t respond to your reach-out attempts or doesn’t have an answer about when they’ll leave; your next step is to serve them with a notice of termination yourself.
Typically, a notice of termination will detail:
- The reason for the termination
- The date that the renter must move
- The consequences if the tenant doesn’t comply by the date listed (usually legal action)
The requirements for this notice vary state by state, so seek out legal advice as needed.
Once you’ve provided written notice to terminate your rental agreement, your local landlord–tenant laws will dictate when you can initiate holdover proceedings. Investopedia says a holdover proceeding is “an eviction case that is not based on missed rent payments. This is a process that is usually handled in eviction or small claims courts.”
The notice itself may be enough to prompt your tenant to act. If it isn’t and you experience nonpayment of rent, either reach out to a real estate attorney or contact your local eviction court for more information about setting up a court date. Once you have a court date established, the eviction proceedings can begin. But be warned – it can be a costly experience.
Holdover Tenant Rights
Despite the fact that you may want the tenant out immediately, you can’t take any action to evict them outside of the allowable, legal means outlined in your state and local eviction laws. In other words, a self-help eviction is never the way to go in these situations, as even holdover tenants have rights.
However, you don’t have to simply accept a holdover tenant forever, particularly since they’re no longer bound to a lease agreement. Instead, holdover tenants engage in tenancy at sufferance, which Cornell Law School defines as being created “when a tenant wrongfully holds over past the end of the durational period of the tenancy (for example, a tenant who stays past the expiration of their lease). In this case, the landlord can hold over the tenant to a new tenancy and collect rent for the period the tenant has held over.”
So, while you’ll need to follow your state’s guidelines for evictions if a proper notice doesn’t encourage your holdover tenant to leave, you could potentially collect (or sue to collect) rent for the holdover period.
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How to Avoid Holdover Tenants
Prevention is the name of the game when it comes to avoiding holdover tenants. We’ll detail the steps you should take both before and after the lease is signed.
Before the Lease is Signed
- Clearly detail what will happen when the original lease expires. Landlords usually allow long-term leases to become month-to-month arrangements if a new long-term lease hasn’t been signed before the original contract ends.
- Highlight how much notice your tenant will need to give you if they want to renew their lease and how much notice you’ll expect if they choose not to renew their lease. Many states require renters to give 90-120 days notice before the lease ends, so align your request with your local laws.
- If your local landlord-tenant laws allow it, outline the consequences of not providing notice to renew or terminate their lease.
If you currently have a tenant under a lease that doesn’t provide this information, consider adding a lease addendum to your existing contract.
After the Lease is Signed
- Reach out to your tenants 90, 60, and 30 days before their “decision” date, aka the day by which they either need to tell you they’d like to renew their lease or that they’d like to move out. Remind them that you need to receive their notice by X date, then tell them the best way to share their decision (via email, text, etc.). We recommend getting their notice in writing rather than over the phone or in person, just in case you need the documentation for eviction court.
- Once you know their decision, you either need to set a date to inspect the property for the move-out process or send over an updated lease. If your tenant is on the ball and knows what they’ll do 90 days out from their decision date, simply make yourself a note to follow up two to three weeks before they’re due to move out or start their new lease.
Holdover tenants cause stress and anxiety, but you can set yourself up for smooth sailing by preparing your lease (either before it’s signed or through an addendum) and staying in contact with your tenant as your rental agreement comes to a close. Should you find yourself with a renter who doesn’t want to leave, you can choose to evict them or convert your arrangement to be month to month. Whatever you decide to do, TurboTenant’s all-in-one landlord software can help you feel confident about all your property management decisions.
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By Andrew Hensel
Of the 320 new Illinois laws on the books starting in 2024, several affect landlords throughout the state.
One of the measures taking effect in 2024 is House Bill 1541, which will prevent utility company shutoffs when the weather is warmer than 85 degrees rather than 95.
Senate Bill 1741 is the Security Deposit Return Act, which requires landlords to provide tenants with itemized bills.
Another law going into effect has to do electronic payments, according to Paul Arena with the Illinois Rental Property Owners Association.
“What it says is that a landlord can not require a tenant to pay electronically,” Arena said. “I use electronic payments in my business and encourage my tenants to use it, but the reality is some older tenants are sometimes not tech savvy and don’t feel comfortable conducting business online.”
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One of the measures taking effect on Jan. 1. is House Bill 2562, which requires landlords to keep the temperature of all common areas between 67 and 73 degrees.
“That bill affects the utility companies, so Nicor or ComEd can not shut off someone’s power or gas supply for air conditioning when the temperature is extremely hot,” Arenas told The Center Square, “It’s so you do not have people die of heat stroke in high rise buildings.”
Senate Bill 40 was approved earlier this year, and starting Jan. 1, the law requires single-family homes and newly constructed residential buildings with parking spaces to provide a conduit allowing EV charging if needed.
“It will increase the construction cost but not to the point where we felt it would be a deterrent,” Arena said. “Our concern was mostly around renovation and what activities the tenants were permitted to do.”
The measures go into effect starting Jan. 1.
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Provided by The Fair Housing Institute
As a property management professional, it’s vital to strike a balance between maintaining a safe, orderly community and ensuring compliance with fair housing laws, especially concerning rules that might impact children. This article provides valuable insights into navigating these complex issues.
Supervision Rules and Technology Access
When formulating supervision rules for facilities like pools or gyms, consider factors beyond just age, such as maturity and skill level. For instance, pool rules might be based on swimming proficiency rather than a strict age cutoff. Similarly, access to areas like the Business Center should reflect today’s tech-savvy youth. Rather than imposing an age limit, focus on responsible behavior and proper usage. These considerations ensure that rules are not only fair and inclusive but also adapt to the evolving digital landscape and diverse capabilities of younger residents.
Safety Versus Discrimination in Common Spaces
Distinguishing between safety measures and potential discrimination is crucial in rule-making. While banning activities like skateboarding for safety is generally acceptable, such policies should apply to all residents to avoid age-based discrimination. Additionally, rules restricting children from playing outside within complex gates warrant reconsideration. A more balanced approach might involve designated play areas that allow children to enjoy common spaces without causing disturbances. This strategy not only addresses safety concerns but also respects the rights of children to use shared facilities.
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Equal Access and Neutral Enforcement
When it comes to public areas of your property, it is important to ensure that equal access is granted with fair enforcement to avoid a fair housing violation. For example, the disparity in pool hours for adults and children could be seen as discriminatory. Instead, consider implementing family swim times or assessing the hours based on safety and usage patterns rather than age. Moreover, the enforcement of quiet hours should be uniformly applied to all residents. A fair and consistent approach in applying these rules is essential to avoid any perception of age-based bias and to maintain a harmonious living environment.
Regular consultation with fair housing attorneys ensures compliance with evolving laws. Additionally, actively seeking feedback from residents, especially families with children, can guide the development of rules that are both practical and respectful of everyone’s needs. This engagement not only helps in tailoring policies that are community-centric but also fosters a sense of belonging among all residents.
Documentation, Transparency, and Regular Reviews
Clearly documenting the reasons behind specific rules, especially those regarding supervision, is vital for transparency and can be crucial in case of legal scrutiny. Furthermore, the societal and legal landscape is constantly changing. Regularly reviewing and updating community rules to reflect these changes is essential in maintaining a legally compliant and inclusive environment.
Additionally, actively seeking feedback from residents, especially families with children, can guide the development of rules that are both practical and respectful of everyone’s needs. This engagement not only helps in tailoring policies that are community-centric but also fosters a sense of belonging among all residents.
In conclusion, this article underscores the necessity of formulating community rules with fairness, safety, and legal compliance in mind. It highlights the importance of adaptable supervision policies, appropriate technology access for youth, and uniform application of safety measures to avoid discrimination. Balancing children’s play rights with communal order, ensuring equitable policy enforcement, and actively engaging with residents are key. Regular training, transparent rule documentation, and staying current with legal developments are essential for maintaining an inclusive, compliant, and harmonious community environment. This approach not only aligns with fair housing laws but also promotes resident satisfaction and overall community well-being.
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By Sarah Yaussi
Understanding prospective renters’ preferences is a fundamental responsibility for property owners, developers, and managers.
However, it’s more than just about knowing what renters are looking for or would like to have; it’s about identifying the truly non-negotiable elements that are crucial for modern lifestyles and everyday enjoyment. Recognizing these dealmakers (and dealbreakers) ensures consistent and reliable occupancy — and happier communities.
Whether it’s high-speed internet, modern appliances, a pet-friendly policy or other in-demand features, emphasizing desirable differentiators can create a compelling marketing narrative that resonates with current and potential renters. In the 2024 NMHC and Grace Hill Renter Preferences Survey Report, renter respondents shared both the aspirational and practical elements that make the difference when they’re considering which home to rent. Based on 172,703 survey responses across 77 markets and 4,220 communities, the report provides a valuable snapshot into the needs and desires of a wide range of renters.
Renter respondents surveyed were focused on privacy, convenience, and lifestyle when communicating which features and amenities they simply were unwilling to do without. They’re looking for homes and communities that function as retreats for themselves, their friends, and their families.
Top 10 Features Renters Want or Would Not Rent Without
These are those dealmakers (or deal-breakers!):
- Air conditioning (93 percent)
- Washer/dryer in unit (93 percent)
- High-speed Internet access (90 percent)
- Soundproof walls (88 percent)
- Walk-in closet (87 percent)
- Garbage disposal (87 percent)
- Dishwasher (87 percent)
- Noise-reducing windowpanes (83 percent)
- Pre-installed window shades/blinds (83 percent)
- Refrigerator with water/ice dispenser (81 percent)
Amenities such as air conditioning and in-unit washers/dryers, which at one time were considered luxuries, are now essential components for comfort and convenience.
Survey respondents named these their top must-haves, each with 93 percent of renter respondents indicating they were interested in these features or wouldn’t rent without them.
Whether for remote work, streaming music or video, or gaming, high-speed internet access ranked high on the list of renter essentials as well (90 percent). Along with this, the privacy offered by soundproof walls (88 percent) and noise-reducing windowpanes (83 percent) allows renters a sense of refuge to get work done or enjoy an evening without interruptions.
Walk-in closets (87 percent) and pre-installed window shades and blinds (83 percent) were both important to renters, providing room for storage and the ability to settle into a new rental home quickly and easily. Similarly, upgraded kitchen appliances that were once considered desirable extras, such as garbage disposals and dishwashers (both 87 percent) along with refrigerators with water and ice dispensers (81 percent), are now considered essential for a well-equipped kitchen.
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Top 10 Amenities Ranked
A look at the community amenities renter respondents said they were interested in or wouldn’t rent without.
- Reliable cell reception (86 percent)
- Secure self-service 24/7 package access (76 percent)
- Covered parking (76 percent)
- Swimming pool (76 percent)
- Controlled property/amenity access (75 percent)
- Dedicated visitor/guest parking (73 percent)
- Fitness center (73 percent)
- Controlled-access parking (72 percent)
- Non-smoking buildings (71 percent)
- On-site back-up power supply (68 percent)
Renters expect seamless use of their mobile devices at all times for everything from answering emails to resourcing GPS navigation to video conferencing. This level of connectivity isn’t just considered convenient; it’s considered essential for personal safety, work-from-home professionalism, and family communication. Because of this, reliable cell reception topped the survey’s list of amenities that renters won’t live without. Another popular amenity—on-site back-up power supply (68 percent)—ensures that power outages don’t interrupt that all-important online access.
Whether ordering essentials from Amazon or dinner from the local take-out restaurant, secure, consistent, and convenient access to packages and deliveries was a significant consideration for 76 percent of the renters surveyed.
In addition, on-the-go lifestyles require convenient and reliable transportation and parking options, reflected in the preference for covered (76 percent) and controlled access (75 percent) parking. In addition, when guests arrive, ensuring that they have a dedicated place to park is also a high priority for 73 percent of renters surveyed.
Many renters look to their community amenities to provide resources that support their active lifestyles. A swimming pool (76 percent), fitness center (73 percent), and non-smoking buildings (71 percent) were high on the wish lists of renters surveyed, allowing them to stay healthy and fit close to home.
For property investors, developers and management companies alike, insight into the lifestyles and needs of the modern renter offers the opportunity to plan ahead, differentiate services, and develop marketing strategies that are tailor-made for potential residents in their properties. By knowing the difference between nice-to-have bells and whistles and must-have features and amenities that renters simply won’t do without, it’s easier to keep homes filled and residents happy.
Building more thoughtful, purpose-driven, and responsive communities is good for everyone.
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The Consumer Financial Protection Bureau (CFPB) has issued a new warning to consumer reporting companies to address inaccurate tenant background check reports as well as sloppy credit-filing sharing practices, according to a release.
Background checks often are critical factors when landlords and employers make rental and employment determinations. The information in the reports can cover a person’s credit history, rental history, employment, salary, professional licenses, criminal arrests and convictions, and driving records. However, as documented in earlier CFPB research on tenant screening, background check reports often contain false or misleading information about individuals.
The new warning has two primary ways it seeks to ensure that the consumer reporting system produces accurate and reliable information and does not keep people from accessing their personal data:
- First, an advisory opinion on background check reports highlights that those reports must be complete, accurate, and free of information that is duplicative, outdated, expunged, sealed, or otherwise legally restricted from public access.
- Second, an advisory opinion on file disclosure highlights that people are entitled to receive all information contained in their consumer file at the time they request it, along with the source or sources of the information contained within, including both the original and any intermediary or vendor source.
“Background-check and other consumer-reporting companies do not get to create flawed reputational dossiers that are then hidden from consumer view,” said CFPB Director Rohit Chopra in the release. “Background-check reports, and all other consumer reports, must be accurate, up to date, and available to the people that the reports are about.”
Criminal and credit system issues in housing decisions
The CFPB and Federal Trade Commission (FTC) launched a public inquiry in early 2023 and asked for people’s experiences with background checks used to screen potential tenants for rental housing. The CFPB and FTC received more than 600 comments. Most of the comments came from renters. They told the agencies about many problems they encounter, including not receiving adverse-action notices and finding inaccuracies and errors that are difficult to correct and that have a decades-long impact on housing opportunities.
Many described biases in criminal and credit systems transferring into housing decisions.
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The CFPB issued the advisory opinion on background screening to highlight that consumer reporting companies, covered by the Fair Credit Reporting Act, must maintain reasonable procedures to avoid producing reports with false or misleading information. Specifically, the procedures should:
- Prevent the reporting of public-record information that has been expunged, sealed, or otherwise legally restricted from public access.
- Ensure disposition information is reported for any arrests, criminal charges, eviction proceedings, or other court filings that are included in background check reports.
- Prevent the reporting of duplicative information.
In addition, the advisory opinion on background screening reminds consumer reporting companies that they may not report outdated negative information—and that each negative item of information is subject to its own reporting period, the timing of which depends on the date of the negative item itself. For example, a criminal charge that does not result in a conviction generally cannot be reported by a consumer reporting company beyond the seven-year period that starts at the time of the charge.
Credit File Disclosure
People have the right to know what information consumer reporting companies keep about them as well as where the information originates. Disclosure of a person’s complete file, upon their request, is a critical component of a person’s right to dispute false or misleading information. Consumers must be provided with all sources for the information contained in their file, including both the originating sources and any intermediary or vendor sources, so they can correct any misinformation.
As explained in the advisory opinion on file disclosure, individuals requesting their files:
- Only need to make a request for their report and provide proper identification – they do not need to use specific language or industry jargon to be provided their complete file.
- Must be provided their complete file with clear and accurate information that is presented in a way an average person could understand.
- Must be provided the information in a format that will assist them in identifying inaccuracies, exercising their rights to dispute any incomplete or inaccurate information, and understanding when they are being affected by adverse information.
- Must be provided with the sources of the information in their file, including both the original and any intermediary or vendor source or sources.
In a January 2023 report, the CFPB noted improvements and continued challenges for the nationwide consumer-reporting companies. The CFPB has highlighted other consumer reporting problems and has reminded consumer-reporting companies of their obligations to consumers under the Fair Credit Reporting Act. For example, the CFPB issued guidance on permissible purposes for accessing consumer reports, identifying and eliminating obviously false and junk data, and resolving consumer disputes. Additionally, the CFPB has taken action against consumer-reporting companies when they have broken the law, as well as affirmed the ability of states to police credit reporting markets.
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By Pauleen Le
The new laws taking effect in 2024 are some of the largest changes Minnesota has seen in decades. State lawmakers passed more than a dozen changes in the 2023 legislative session.
Among the top changes, landlords will be required to disclose any fees including administrative, cleaning or moving-in fees as part of the ‘total monthly rent’ on the first page of a lease and in advertisements.
Landlords will also required to maintain the minimum temperature in units at 68 degrees from October to the end of April.
They will also have to give tenants a 14-day written notice before they file for an eviction if the tenant didn’t pay their rent on time.
Landlords will also have to give a minimum of 24 hours’ notice before entering the property for things including maintenance, showings to future tenants or deliveries.
Rachael Sterling, a housing attorney and communications coordinator for HOME Line — a local nonprofit organization that helps tenants navigate Minnesota’s laws — said they’ve been championing these changes for years.
She said she’s hopeful the changes will improve the communication between tenants and landlords to provide a better experience overall for everyone.
“When we talk to tenants, that’s one of the biggest issues is when communication stops or it’s poor,” she said. “That’s when problems arise and that’s when people start calling us. A lot of these are just about clarifying communication and making sure that there’s no assumptions that folks know what they’re getting themselves into.”
Sterling said since 2020, phone calls to the nonprofit for help have skyrocketed and are now on track to set a new record surpassing 20,000 calls this year.
She said the majority of calls the last two years have been about concerns related to evictions. Before 2020, most calls were about repair issues.
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Since the laws passed, leaders at the Minnesota Multi-Housing Authority have been working hard to understand and train their members on the changes coming in the new year.
The organization represents 300,000 rental units or nearly half of the entire rental market in Minnesota.
Cecil Smith is the MMHA’s president and CEO. He said several of the changes were already standard practice for many of the owners and landlords a part of the organization long before they became law.
He said the biggest adjustment for landlords will be giving tenants 24-hours’ notice before entry.
“That’s going to cost,” he said. “That’s going to take a lot of time and energy and organization because there’s maintenance requests that come in, there’s deliveries that come in and saying it has to be at least 24 hours requires more energy and scheduling and coordination and that takes time and energy and money.”
Smith adds there’s also concern that the cost to make all the changes could ultimately trickle down to the tenants.
“It’s already added more costs because we’ve done lots and lots of training with our members and they’re doing in-house costs, and obviously that’s taken staff time and resources already to do that and that’s not free,” he said.
Smith notes another major change happening later in the summer of 2024 where landlords will no longer be able to evict a tenant for committing crimes that happened somewhere other than their property…
Smith said MMHA plans to raise their concerns about the law in the upcoming legislative session.
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By John Triplett
Here are 7 predictions for where the rental market is headed in 2024 from the economists at Apartment List as the once red-hot rental market of previous years has now cooled.
Here is a key topline summary for 2024:
- 2024 will be the strongest year for new apartment construction in decades, giving renters more options and better opportunities to negotiate price and lease terms.
- “We expect that year-over-year rent growth will crawl out of negative territory next year, but that it won’t rise above the low single-digits.”
- Even though mortgage rates are expected to ease modestly, home prices will remain prohibitively high and continue to create more long-term renters.
No. 1 – 2024 will bring the most new apartments in decades
Construction data from the Census Bureau suggests that multifamily supply growth should remain strong through 2024. The number of new multifamily apartment units under construction hit one million for the first time ever in 2023, and completions are expected to peak in 2024. With so many units in the construction pipeline, 2024 should be the strongest year for new multifamily supply since the 1980s.
No. 2 – Low single-digit rent growth in 2024
2023 is set to have the second slowest rent growth of any year in the history of our estimates (going back to 2017), coming ahead of only 2020. Looking ahead to 2024, “we expect demand to bounce back slightly, but remain on the soft side. The labor market remains fairly strong and there is likely some pent-up demand for new household formation. However, affordability continues to be a major concern and sentiment data shows that Americans still lack confidence in the economy. Even in the most bullish scenario, it’s unlikely that demand will be strong enough to outstrip all of the new supply that we know is coming, likely resulting in our vacancy index rising modestly from its current level in 2024. We expect that rent growth will rise out of negative territory early next year, but that it won’t get above the low single digits in 2024.”
No. 3- The changing rent vs. buy math will create more long-term renters
Many families are remaining renters longer than they may have in the past. Even those who can afford to buy in today’s market may find that renting now actually makes more financial sense. Although most Americans still aspire to own homes, more are now finding themselves renting later in life, and that trend is likely to continue. Consensus expectations are that mortgage rates will ease modestly next year, but likely not enough to significantly alter the prevailing dynamics of the for-sale market. As paths to homeownership fade for many, renting will increasingly be seen as the more practical housing option.
No. 4- Hybrid work will cement itself as the new norm for office jobs
In 2023, the remote work narrative focused on return-to-office plans, but this focus obscures the fact the pendulum will never swing fully back to the pre-pandemic norm. According to the latest estimates, 28 percent of all work days are still from home, and that figure appears to be stabilizing at that level. 42 percent of American workers currently have some form of remote work flexibility, and hybrid arrangements are much more common than fully remote ones. The data shows that hybrid work is here to stay, driving demand for rentals that provide spaces and amenities that blend work and home life for today’s flexible workforce.
No. 5- Sun Belt markets will see more renters, but not necessarily higher rents
The nation’s fastest population growth in recent years has been taking place throughout the Sun Belt. But in many cases, Sun Belt markets have also been among the most accommodating of growth, allowing for new housing development to meet the growing demand. The key takeaway: fast-growing Sun Belt markets will continue to be renter magnets, but rent growth should be kept in check thanks to lots multifamily development.
No. 6- As the economy takes center stage in the presidential election, candidates will need to speak to housing concerns
As we head into a presidential election year, the question of whether the economy is good or bad has proven to be surprisingly complicated. Most of the key indicators of economic health are looking quite strong, but economic sentiment surveys show that confidence and satisfaction in the economy remain weak. It’s likely that at least some of this disconnect is being driven by waning housing affordability. As the election cycle continues to ramp up, candidates on both sides of the aisle will need to articulate housing plans and speak to what has become one of the most pressing concerns of the American electorate. 2024 could be the year where housing rises to the forefront of the political discourse.
No. 7- More renters will use AI in their searches
“We expect 2024 to bring a new wave of AI-powered tools specifically for renters. It will soon become commonplace for renters to use AI in their apartment searches to search, compare, and coordinate actions. It will take time for these advancements to change macro market dynamics, but the next high-demand rental market cycle may look quite different with new power in renter’s pockets. And as adoption of AI-enabled rental search tools accelerates into 2024, both renters and property managers can seize opportunities from this new technological frontier.”
Conclusion
“2024 is certain to bring twists and turns no model can predict, as the new year always does. But we hope that by forewarning of what’s foreseeable—from new supply waves to persistent homeownership headwinds bolstering rental demand—we can help you prepare for what is ahead.”
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Written by Andrew Syrios, Provided by Bigger Pockets
I’m a big fan of buy and hold and the BRRRR method. That being said, if you’re going to go down this path, you will want to know how to increase the rent and the return from your rentals. Doing so encompasses all factors of property management. Leasing faster and to higher quality tenants will increase your return. Renting for a higher price and increasing the rent upon renewal will as well. And so will prevent maintenance problems before they come up, as well as increase tenant retention. But how do we achieve all of these ends?
Well, I’m glad you asked. Here are 13 of the best ways, in this humble author’s opinion, to do so.
1. Improve the Appearance of the Front of the Property
It’s often noted that people make up their minds about you in seven seconds. In other words, you don’t have long to make a first impression. Neither does your rental. As I noted in previously, simple aesthetic improvements such as window shutters, painting the front door, mowing the lawn, hedging any bushes or trees, replacing the mailbox or address numbers, and the like can be hugely important.
For one of my properties, all we did was mow the lawn, cut back the low-hanging branches on the tree in the front, add a window box beneath the windows, paint the front door red, and add some bark mulch in the flower bed. A total expense of maybe $500-$700. But that can make an incredible difference in both getting a property rented quickly and getting top dollar for it.
2. Quality Advertising
I’ve heard it said occasionally that “all we need to do to rent a house is put a sign in the yard.” I think this is the wrong approach. As my brother—who is our property manager—put it:
“If all you have is a sign in the yard, then you won’t have as much interest as if it was online everywhere. Fewer prospects means less demand, and when the supply stays the same, the only consequence is a lower price.”
That’s Economics 101 for you.
Put simply, renting a property with only a sign probably means you are under-renting it.
Furthermore, you want to take high-quality pictures. If you can afford to invest in a top-end camera, it will pay for itself and much more. Just compare these two photos of this rather awkward house we own. One was taken from my old cellphone, and the other from a high-end camera. Which do you think is more likely to get that person scrolling Craigslist to call you?
Also, make sure to take pictures at about a 30-degree angle. Head-on pictures makes properties look very small, as the following examples show:
3. Make Sure the Unit is Well Lit and Smells Good for Showings
It should go without saying that you should clean a unit before showing it. But also, make sure the lights are on, and blinds are open, so the unit is well-lit when the prospect comes to look at. Dark rooms look smaller and less welcoming.
Also, put some air fresheners in the unit to make it smell pleasant. As the site Fifth Sense notes, “The sense of smell is closely linked with memory, probably more so than any of our other senses.” In other words, if the property smells good, then when the prospect goes home to debate which unit they want of the many they’ve seen, yours will stick out in their memory.
I even heard of one person who baked cookies before prospects showed up. Now that’s an inviting smell sure to get a signature on the bottom line!
4. Don’t Just Show. Sell
If you’re just opening the door and hoping the prospect will like your unit (or if your property manager is), you’re doing it wrong.
There are three great methods for selling during a showing:
- Building Rapport
- Using Anchors
- Using Reciprocation
If you’re doing the showings (or have hired someone to do them), you should use at least the first two and maybe the third.
Building rapport just means that you are friendly and open with them. Be genuinely interested in them. Ask questions and just shoot the breeze with them a bit. At the same time, don’t oversell or be pushy. People want to rent from people they like.
In other words, if you say that you think the house is 1,200 square feet, you have anchored in the prospect’s mind that the house is around 1,200 square feet. If you ask them to guess what they think it is, they will likely guess between 1,100 and 1,300 (assuming your number is in the ballpark, of course). If, on the other hand, you say you think the same house is 900 square feet, they may know that sounds too small but will probably guess between 1,000 and 1,200 square feet. So their answer will change solely because of your anchor.
But anchors can be qualitative, too. So, when I was showing houses, I would often say something like “I love this house,” or “the kitchen in this house is amazing” before opening the door.
Finally, in some cases, particularly in hot markets, it might make sense to use the rule of reciprocation. As Wikipedia describes it, “By virtue of the rule of reciprocity, people are obligated to repay favors, gifts, invitations, etc.” Psychologically, this works by people wanting to return a kindness (say renting from you) if you do something nice for them.
This may feel manipulative, but you aren’t going to convince someone to rent a turd from you if you give them five bucks. If you are renting a good property, what the Rule of Reciprocation does is set you apart from your competition’s equally good property. Putting such offers in your advertising will also help elicit traffic to your properties.
So, for example, in Eugene, Oregon, there is an oversupply of student housing, which we have a lot of. So we started offering a free pizza coupon to a popular college pizza shop just for viewing one of our properties. One year, we even offered concert tickets to local events being put on by an EDM productions company a friend of mine were partners in. There are lots of possibilities like this. Let your mind go wild.
5. Don’t Start Your Price Too Low—Usually
The basic principle with apartment rents is that if you have low occupancy, you can’t raise your rent. But if your occupancy is around 90 to 95 percent, then it’s time to increase the rent.
With houses, though, it’s much harder to know what to rent a place for since there’s only one of them. Yes, you can comp it out on Craigslist or Zillow, or you can ask the neighbors, but you can’t be perfect.
My recommendation is to approach renting a house from the perspective that you can fix a property priced too high, but it’s hard to fix one priced too low. If you under-rent a property, you’re stuck with it. But if you set the price too high, you’ll know quickly it’s too expensive because you aren’t getting any calls. Then you can quickly adjust the price downward. So start near the top of the range you think it can rent for.
Of course, you don’t want to go crazy with this. Every day a unit sits on the market means rent that is lost forever. And if you have a lot of vacancies or it’s in the middle of the winter, and few people are looking for a rental, you should certainly be more aggressive. But in most cases, it’s better to start at the high range than the low.
6. Screen, Screen, Screen—Then Screen Some More
High rent is useless if you’re settling for bad tenants. Take these two scenarios with the same house. One tenant rents it for $600/month and stays there all year. The other rents are for $700, but you have to evict the tenant and lose two months of rent plus the costs above the deposit to turn over the unit and the cost of the eviction. Here’s how it turns out:
With any sort of loan on that property, it would almost certainly have been upside down with Tenant 2.
Remember, it’s better to have a property sit vacant than to rent to a bad tenant. More than once, we’ve had a tenant do over $10,000 in damage. That kind of thing will ruin your cash flow for quite some time.
Make sure to check for evictions, their criminal record, and credit, and get landlord and employment references. We don’t accept evictions, nor do we accept felonies unless they are very old. The tenants should also make more than three times the monthly rent in income.
Finally, I would recommend turning over your employment and landlord references to AAA or another such company. There’s an incentive to hear what you want to hear if you check yourself, and that can bias your evaluation when talking to landlords and employers. Then you push through marginal prospects you probably should have declined. Third-party companies couldn’t care less, so you don’t get a blurry image when getting landlord and employment references.
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7. Always Raise Rent Upon Lease Renewal
As I once heard Dave Lindahl put it, “Tenants expect you to raise their rent each year, so don’t disappoint them.” These increases will at least keep your rent the same in inflation-adjusted terms and will often improve your bottom line.
Remember, assuming you are cash flowing, every additional dollar you can get in rent is pure profit.
That being said, it’s also important to let tenants know it’s coming. We inform them there will almost certainly be a rent increase each year when we sign the original lease.
8. Charge More for Month-to-Month Rentals
We don’t rent month-to-month, to begin with, but we will allow tenants to switch over to a month-to-month arrangement once they have completed a year lease.
But we’re not going to do it for free.
BiggerPockets’ own Brandon Turner explains a great way to do this:
“When raising the rent, try this trick often used by marketers: Don’t tell them what the new rental price is going to be, but give them three price options to choose from. Think about it. Almost every big business offers three price tiers:
By offering three choices, individuals tend to compare the choices given, rather than comparing the price to other businesses. A coffee at Starbucks may be ridiculously priced, but by giving the customer options—the “Tall” for $3.25, the “Grande” for $3.75, or the “Venti” for $4.25—people rarely even consider the $0.99 cup of coffee they can get at the local diner across the street.”
Thus, Brandon gives tenants an option of month-to-month, a six-month lease, and a year lease. The shorter the lease, the higher the price.
9. Allow for Pets and Charge Pet Rent
Remember what my brother said: “Fewer prospects means less demand, and when the supply stays the same, the only consequence is a lower price.”
While I wouldn’t recommend renting to people with dogs in apartments (maybe I’d allow one cat). With houses, I absolutely recommend it. Opening up your property to people with pets increases the number of prospects—and therefore demand and therefore, price.
The reason is that many people want to rent houses in large part because they have pets. And Americans love, love, love their pets. One survey found that 62% of Americans have a pet, and of those who do, 95% considered their pets to be “members of the family.”
Pets do some damage, though. Luckily, you can cover that with a nonrefundable pet deposit (we charge $250) and pet rent (we charge $25 a pet per month). We usually set a limit of three pets and do not allow dangerous breeds of dogs.
We probably make more from pet rent than we lose in damages, but even if these charges are completely offset by more maintenance, you have dramatically increased the pool of potential renters, and with more demand comes a higher price. You’d also be smart to do some extra due diligence here and read up on the pet rent laws in your state, as they vary.
10. Maintenance and Preventative Maintenance
Some of the best ways to increase returns are to lower expenses. Preventive maintenance can do just that. You should not rely on tenants to replace furnace filters, clean off A/C compressors, or clean the gutters. But these small repairs can save you thousands of dollars in HVAC and foundation repairs.
Furthermore, some tenants won’t tell you about leaks for some unknown reason. If leaks fester for too long, they can cause major dry rot and water damage.
Regular inspections can find and address these issues. It’s preferable to do them semi-annually, but even once a year is better than nothing.
Furthermore, good maintenance is the key to tenant retention. After a tenant signs a lease, their only contact with you is paying rent and maintenance. Neither is pleasant. And if they’re late a month, there’s another unpleasant contact with property management.
But if you provide good maintenance, this will go a long way in keeping you in good favor with your tenants and increasing the odds of renewal. And turnover is often a landlord’s biggest expense, so anything you can do to mitigate it is a good thing for the bottom line.
11. Maintain Contact With Tenants in Other Ways
In a similar vein, if you can find a way to positively maintain contact with your tenants, this will also help with renewals. It could be something as simple as a monthly newsletter or a social media presence.
You could also combine this with your marketing strategy. In addition to offering a pizza coupon to each group that viewed a unit, our Oregon management company also offered pizza coupons each month for those who rented from us. Yes, this costs money, but it not only works as a good marketing ploy. It also means that each month, while those students sent rent in, they got something back. That makes you look more positive in their eyes.
My brother asks for a prospect’s favorite restaurant on the rental applications. Then, if there’s a bad maintenance issue or one we handled poorly, he sends them a gift card to that restaurant. It’s more personal (and thus more effective) than a rent discount—and it’s cheaper, too.
Or you could put every tenant who paid on time each month of the year into a raffle and give away a TV or something like that. There are all sorts of ways to maintain a positive line of communication with your tenants, and doing so will help substantially with tenant retention.
12. Charge for Amenities/Perks
Are there any other amenities you can charge for? My brother implemented a program where tenants can pay for us to mow their lawn each week during the summer months. Not many took us up on it, but it’s another stream of income that was easy to implement.
Jeffrey Taylor will charge more for amenities, such as adding a storm door or ceiling fan. While he doesn’t make money from this, he does improve his property for free. What other such opportunities are out there?
13. Increase Renewals With a Resident Program
Jeffrey Taylor (Mr. Landlord) is the master of this idea. Here’s how he describes his “3-Star Resident Program”:
“When residents move into one of my properties, I welcome them into my 3-Star Resident program. It doesn’t cost them anything, and they get perks by being a part of it. Their ‘anniversary’ becomes a time of celebration. Every year, I give them a choice of property upgrades (costing between $25 and $75 each) for paying rent on time.”
This bonus goes back to the rule of reciprocity mentioned above. It also can act as that gentle shove in the direction of “yes” when someone is sitting on the fence and needs a tiebreaker to decide on whether to renew or not.
And Taylor goes further:
“…in the third year, I announce a new program: the VIP program. Starting the fourth year, I return $100 of their deposit.”
These are by no means the only things you can put into such a program, but they’re a very good start.
Conclusion
You should approach the management side of your buy-and-hold business as not just “what you have to do to own properties,” but instead as a profit-making business in and of itself. The more you can raise rents, lower costs, and increase retention, the better your bottom line will be. Good management can save bad investments, and bad management can kill good ones. Be proactive in increasing your rental returns.
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Whether you’re a home buyer, seller, landlord or tenant, there are several new laws set to go into effect in California in 2024 that will impact housing.
Here are six laws you should know about:
The sale of accessory dwelling units
Accessory dwelling units, also known as ADUs, have often been rented out by homeowners in California. Assembly Bill 1033 will now allow ADUs to be sold, which could in effect create two- or three-unit condominiums on a given lot.
Effective in 2024, property owners in participating cities that decide to opt-in to the new program will be able to sell their ADUs separately from the main residence.
This also would mean covenants, conditions & restrictions (CC&Rs), the set of rules governing the use of a certain piece of real estate in a homeowners association, would need to be created for these condominiums.
Disclosures for flipped houses
In an effort to mitigate the risks of shoddy renovations to buyers of flipped houses — those that are purchased, rehabbed and sold for a profit — Assembly Bill 968 expands existing sales disclosure laws.
Anyone who purchases a home and flips it within an 18-month period must disclose all repairs and renovations made to the property during that time. The name of each contractor who performed work and whether a permit was obtained for each renovation also must be disclosed.
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New fire hazard disclosures
Existing law requires a seller to disclose natural hazards, including whether a property is in a high or very high fire hazard severity zone, to a prospective buyer through the natural hazard disclosure statement.
Assembly Bill 1280 expands this criteria and establishes subcategories, including as to whether the property is located within a high fire hazard severity zone in a state responsibility area, very high fire hazard severity zone in a state responsibility area, or very high fire hazard severity zone in a local responsibility area.
If the property is located in any of these zones, the defensible space and (for properties built before 2010) fire hardening disclosures would then be required.
Tenants’ rights
Three new laws aimed at protecting tenants are set to go into effect at the start of the year.
Assembly Bill 12 limits the amount landlords can require in security deposits to just one month’s rent in addition to the first month’s rent. California landlords also cannot discriminate on the basis of an applicant’s source of income, which means they must consider Section 8 applicants.
Assembly Bill 1418 prohibits cities and counties from enacting “crime-free” housing programs and nuisance ordinances that require landlords to evict or refuse to rent to those with prior criminal convictions.
Assembly Bill 1620 allows local jurisdictions to require landlords whose units don’t have elevators to allow physically disabled tenants to move into similar units on a ground floor and keep the same rent rate and lease terms.
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