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Who is better to give you questions to ask a property manager than a professional property manager!
We are discussing over 50 questions (more like 65) to ask when you are interviewing a new property manager to take over your rental properties.
In this episode we go over questions to give you better insight into their personal and business background as a property manager as well as contracts and fee structures. We also give you questions to learn more about their legal history and the different forms of communication they use.
We not only give you the questions to ask, but we also discuss WHY they are important to you as a rental property owner. This is key because each of you has different aspects of property management that are important to you. So now you can decide how much weight to give the question based on its significance to your success.
Not only do we share personal stories of how we manage our own properties, but how we manage properties for others and several issues we have found while using a property manager for our out of state property.
A LOT of good stuff in the episode! Part 2 will drop in a few days just so you don’t have to wait a whole week and lose your momentum on the questions.
And don’t you worry! We have created a questionnaire of all the questions we suggest you ask so you can just blast it out in an email or use it as a reference if interviewing a property manager in person! We will drop that with the next episode so keep an eye out for it!
LINKS
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Article provided by BiggerPockets
A federal jury has decided that several brokerage firms colluded with the National Association of Realtors (NAR) to enforce inflated commission rates. According to the plaintiffs, the conspiracy was evident through a written rule that requires sellers’ agents to offer a set rate of compensation to the buyer’s agent when listing a property on an MLS.
The ruling came last Tuesday after just a few hours of deliberation. Sellers of hundreds of thousands of homes in Kansas, Illinois, and Missouri, the plaintiffs in the Sitzer/Burnett lawsuit, were awarded $1.785 billion in damages. That amount may be trebled to greater than $5 billion. And the copycat lawsuits have already begun.
The verdict alone could have a ripple effect on the real estate industry. It could lead to lower commissions through negotiations between sellers and agents or even leave buyers to foot the bill for their own agents.
Brokerages are likely to prioritize pro-competitive policies to avoid future litigation, and that could mean clear opportunities for discussions about commission rates. According to the NAR, commissions are always negotiable under its rules—but in practice, most real estate agents won’t budge on their rates, according to a report from the Consumer Federation of America.
What the Defendants Have to Say
In a written update on its website, the NAR indicated plans to appeal the verdict. Keller Williams and HomeServices of America are also reportedly considering appeals. RE/MAX and Anywhere (the parent company of Sotheby’s, Coldwell Banker, and Century 21) previously agreed to settlements in the Sitzer/Burnett case and similar Moehrl lawsuit.
Regardless of the outcome of those appeals, it will take time for a judge to issue an order. That injunction could also include a requirement to change NAR rules or brokerage practices.
“We disagree with the verdict but respect the jurors who decided the case based on the issues in front of them,” said Darryl Frost, spokesperson for Keller Williams, in a statement provided to BiggerPockets. “We are disappointed that before the jury decided this case, the court did not allow them to hear crucial evidence that cooperative compensation is permitted under Missouri law.”
For example, Missouri law states that a seller may authorize a broker to share the seller’s compensation with another broker.
“This is not the end,” continued Frost. “Keller Williams followed the law regarding cooperative compensation and stands by the evidence presented on the 100-year-old practice of sellers’ agents offering commissions to other agents who help market and sell homes. Looking forward, we will consider all options as we assess the verdict and trial record, including avenues of appeal.”
That 100-year-old practice was commonplace before the NAR mandate was made, in large part because cooperative compensation may be the best tool sellers’ agents have to attract buyers. It’s practical for sellers’ agents to offer compensation to buyers’ agents in exchange for their marketing efforts, which brings more offers to the listing. That could be why the practice still continues in areas where cooperative compensation isn’t required. For example, Northwest MLS eliminated the requirement while also allowing brokers to publicly list compensation offers, with no noticeable market changes.
BiggerPockets also contacted the NAR and HomeServices of America for comment, but as of this publication, they have not responded.
The Journey to a Ruling
After deliberation, the jury answered yes to four questions. They agreed that there was a conspiracy between the brokerages and the NAR, that the conspiracy increased or stabilized commission rates, that the defendants willingly joined the conspiracy with knowledge of its goals, and that the plaintiffs overpaid for real estate services as a result of the conspiracy.
At issue in the case was NAR’s cooperative compensation rule, which requires sellers’ agents to offer compensation to buyers’ agents when listing a home on a local MLS. The blanket offer is made without knowledge of the time or effort the buyer’s agent will bring to the deal.
The plaintiffs argue that homebuyers aren’t privy to the offer of compensation, so buyers’ agents can steer homebuyers toward the homes with the highest payout. To ensure that buyers’ agents show the home to their clients, sellers’ agents are therefore incentivized to offer a competitive rate. That keeps commission rates artificially high.
One witness for the plaintiffs compared the current commission system in the U.S. to other countries, where commission rates are significantly lower, arguing that the NAR and the brokerages were responsible for keeping U.S. rates elevated. Commission rates remain stuck, even as internet resources have shifted much of the work of finding a home to the homebuyer, and home prices have skyrocketed. However, that same witness denied evidence of a conspiracy.
But Michael Ketchmark, the plaintiffs’ lead attorney, argued the written rule itself constituted a conspiracy. The defendant brokerage firms required their agents to join the NAR and follow their rules. They were, therefore, colluding with the NAR to enforce high commission rates, a form of price fixing, the plaintiffs argued.
In his closing remarks, Ketchmark positioned the case as a fight between consumers and corporations, saying: “Our system doesn’t have to forget people. You can hold corporations accountable.”
A World Without Cooperative Compensation
Economist Lawrence Wu testified that homebuyers in Australia typically don’t rely on buyers’ agents—their services are instead handled by lawyers and CPAs. That might be preferable, given the surfeit of inexperienced agents in the U.S., but someone must pay for those services. In the absence of cooperative compensation, whether a buyer pays for legal services or real estate services, their upfront costs may be greater.
It’s also possible that the sellers’ agent would still charge 6% for doing the buyer’s agent’s share of the work. So was the testimony of Jen Davis, vice president of MAPS Coaching at Keller Williams. That outcome could mean real estate transactions get more expensive for everyone involved.
That scenario would be particularly tough on real estate investors, who often rely on the guidance of qualified agents to navigate markets they may be unfamiliar with.
On the other hand, it’s also possible that changes to the industry could lead to more negotiation between consumers and real estate agents in general.
Sellers might ask for reduced rates in exchange for reduced marketing efforts in a hot market. Buyers might pay a flat fee for limited real estate services, and the mortgage industry might evolve to allow those services to be financed. The reduced commission burden on the seller may be reflected in lower home prices. If all of those outcomes came to pass, everyone would win.
The NAR has been central to real estate transactions for so long that it’s difficult to guess what the industry would look like without the association’s influence, and other countries don’t necessarily provide an apples-to-apples comparison.
The NAR’s Reputation
Whether or not you believe a conspiracy was taking place between the NAR and the named brokerage firms, the NAR faces several reputational threats that may be a catalyst for change within the trade association and the industry. Between the antitrust lawsuits, Redfin’s breakup with the NAR, the accusations of sexual harassment, and the subsequent resignation of president Kenny Parcell and another high-profile resignation of its CEO, Bob Goldberg, just this week, the NAR has good reason to update its policies.
To gain the trust of its members and consumers’ respect for the Realtor membership mark, the NAR will need to reinvent itself as a pro-consumer organization and take clear action to prevent intimidation and harassment of its employees. Those policy changes could impact the way homes are bought and sold. Likewise, if the NAR fails to maintain its powerful influence, that could open the door for swift changes to the industry.
The NAR has always maintained that its policies are consumer-friendly. “NAR doesn’t tell people what to charge or to receive a commission,” the association wrote in an update on the trial. “NAR rules are very intentionally pro-consumer and pro-business competitive, and buyer brokers exist because consumer protection agencies thought they were important.”
Still, the trade organization has fallen short of requiring local MLSs to publish commission rates publicly or mandating the removal of cooperative compensation requirements. That could change. And the climate of real estate transactions could shift due to the Sitzer/Burnett jury verdict—where home sellers were once afraid to discuss commission rates with their agents, they may more courageously negotiate pricing in the future.
The Bottom Line
Whether the outcome of the lawsuit leads to lower average sell-side agent commissions remains to be seen. How it will affect buyers and buyer agents is also up in the air. And whether the effect of shaking up the industry will have a net positive or negative effect on consumers depends on who you ask.
Still, the case is far from over, with appeals expected and the details of the judge’s order uncertain. We’ll provide updates as the situation unfolds.
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Article provided by World Property Journal
As U.S. Lenders Chase An Increasing Number Of Delinquent Mortgages In 2023
According to ATTOM’s newly released fourth-quarter 2023 Vacant Property and Zombie Foreclosure Report, almost 1.3 million (1,294,505) residential properties in the United States are vacant. That figure represents 1.27 percent, or one in 78 homes, across the nation – virtually the same as in the third quarter of this year.
The report analyzes publicly recorded real estate data collected by ATTOM — including foreclosure status, equity and owner-occupancy status — matched against monthly updated vacancy data. (See full methodology below).
The report also reveals that 320,765 residential properties in the U.S. are in the process of foreclosure in the fourth quarter of this year, up 1.7 percent from the third quarter of 2023 and up 12.8 percent from the fourth quarter of 2022. A growing number of homeowners have faced possible foreclosure following the nationwide moratorium on lenders pursuing delinquent homeowners was imposed after the Coronavirus pandemic hit in early 2020 and was lifted in the middle of 2021.
Among those pre-foreclosure properties, about 8,900 sit vacant as zombie foreclosures (pre-foreclosure properties abandoned by owners) in the fourth quarter of 2023. That figure also is up slightly from the prior quarter, by 1.4 percent, and up 15.3 percent from a year ago. The latest increase marks the seventh straight quarterly rise.
However, the fourth-quarter count of zombie properties represents only a tiny portion of the nation’s total housing stock – just one of every 11,412 homes around the U.S.
“The ongoing strength of the U.S. housing market continues to benefit neighborhoods around the country in so many ways, with the near-total lack of zombie foreclosures standing out as one striking example,” said Rob Barber, CEO for ATTOM. “Rising equity flowing from rising home values has not only kept foreclosure cases from spiking since the moratorium was lifted. It also keeps giving delinquent homeowners a valuable resource they can use to either stave off eviction or sell their homes and move on. As a result, we continue to see none of the widespread abandonment that followed the housing market crash after the Great Recession of the late 2000s.”
The stable number of zombie properties in the fourth quarter has come as the U.S. housing market has rebounded from a temporary setback last year.
The nationwide median home value grew 11 percent during the Spring-Summer buying season this year, hitting a new record of $350,000. Those gains followed an 8 percent decline from mid-2022 into early 2023. The growth in values has helped keep homeowner wealth at historic highs, with 95 percent of mortgaged owners having at least some equity built up and about 50 percent owing less than half the estimated value of their properties.
Zombie foreclosures rise in half of states but remain mostly absent around nation
A total of 8,903 residential properties facing possible foreclosure have been vacated by their owners nationwide in the fourth quarter of 2023, up from 8,782 in the third quarter of 2023 and from 7,722 in the fourth quarter of 2022. The number of zombie properties has decreased or stayed the same quarterly in 24 states and annually in 21.
While most neighborhoods around the U.S. have few or no zombie foreclosures, the biggest increases from the third quarter of 2023 to the fourth quarter of 2023 in states with at least 50 zombie properties are in Kentucky (zombie properties up 15 percent, from 53 to 61), Connecticut (up 15 percent, from 87 to 100), Maryland (up 13 percent, from 229 to 258), Texas (up 13 percent, from 112 to 126) and California (up 12 percent, from 244 to 274).
The largest quarterly decreases among states with at least 50 zombie foreclosures are in New Mexico (zombie properties down 15 percent, from 95 to 81), New Jersey (down 8 percent, from 205 to 188), Maine (down 7 percent, from 56 to 52), Nevada (down 7 percent, from 99 to 92) and Georgia (down 4 percent, from 85 to 82).
New York continues, among the 50 states, to have the highest ratio of zombie homes to all residential properties (one of every 2,115 homes), followed by Ohio (one in 3,690), Illinois (one in 4,338), Iowa (one in 4,380) and Indiana (one in 6,114).
Overall vacancy rates also hold steady
The vacancy rate for all residential properties in the U.S. has remained virtually the same for the sixth quarter in a row. It stands at 1.27 percent (one in 78 properties), which is virtually the same as the 1.26 percent rate in both the third quarter of 2023 and the fourth quarter of last year.
States with the largest vacancy rates for all residential properties are Oklahoma (2.26 percent, or one in 44 homes, during the fourth quarter of this year), Kansas (2.18 percent, or one in 46), Michigan (2.07 percent, or one in 48), Alabama (2.04 percent, or one in 49) and Indiana (2.03 percent, or one in 49).
Those with the smallest overall vacancy rates are New Hampshire (0.33 percent, or one in 302, in the fourth quarter of this year), New Jersey (0.36 percent, or one in 280), Vermont (0.39 percent, or one in 259), Idaho (0.45 percent, or one in 221) and North Dakota (0.63 percent, or one in 158).
Other high-level findings from the fourth quarter of 2023:
- Among 166 metropolitan statistical areas in the U.S. with at least 100,000 residential properties in the fourth quarter of 2023, those with at least 100 properties facing possible foreclosure and the highest zombie foreclosure rates are Peoria, IL (12.4 percent of properties in the foreclosure process are vacant); Indianapolis, IN (9.9 percent); Cedar Rapids, IA (9 percent); Fort Wayne, IN (8.6 percent) and South Bend, IN (7.9 percent).
- Aside from Indianapolis, the highest zombie-foreclosure rates in major metro areas with at least 500,000 residential properties and at least 100 homes facing foreclosure in the fourth quarter of 2023 are in Cleveland, OH (7.3 percent of homes in the foreclosure process are vacant); Baltimore, MD (6.7 percent); St. Louis, MO (6.1 percent) and Pittsburgh, PA (6 percent).
- Among the 23.6 million investor-owned homes throughout the U.S. in the fourth quarter of 2023, about 842,400 sit vacant, or 3.6 percent. The highest levels of vacant investor-owned homes are in Indiana (6.9 percent vacant), Illinois (6.1 percent), Oklahoma (6 percent), Alabama (6 percent) and Ohio (6 percent).
- Among the roughly 15,000 foreclosed, bank-owned homes in the U.S. during the fourth quarter of 2023, 15.9 percent sit vacant. In states with at least 50 bank-owned homes, the largest vacancy rates are in Kansas (30.8 percent vacant), Michigan (25.9 percent), Ohio (24.5 percent), Missouri (23.8 percent) and Wyoming (22.6 percent).
- The highest zombie-foreclosure rates in U.S. counties with at least 500 properties in the foreclosure process during the fourth quarter of 2023 are in Peoria County, IL (15.6 percent of homes in the foreclosure process are vacant); Baltimore City, MD (14 percent); Marion County (Indianapolis), IN (13.1 percent); Broome County (Binghamton), NY (11.4 percent) and Cuyahoga County (Cleveland), OH (8.2 percent).
- Among zip codes with enough data to analyze, 82 of the top 100 where zombie properties represent the largest portions of all homes are in New York, Ohio and Illinois, including 10 in Cleveland, OH. The largest portions are in zip codes 10993 in Rockland County (West Haverstraw), NY (one in 191 homes); 73554 in Greer County (Mangum), OK (one in 222); 44108 in Cuyahoga County (Cleveland), OH (one in 223); 61605 in Peoria County, IL (one in 229) and 44112 in Cleveland, OH (one in 236).
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Thank you for this informative article provided by TurboTenant.
According to a recent GOBankingRates survey, 43.72% of Americans have had trouble paying utility bills over the last six to 12 months – and nearly 78% saw a rise in their household utility bills in 2022.
If you typically cover the heat as part of your lease agreement, this hike in pricing probably has you wondering if you can legally forbid your tenant from changing the temperature. The short answer is yes, but it’ll require some forethought and a signed contract.
Key Takeaways
- You must provide your tenants with access to heat unless your lease explicitly says otherwise.
- Your state and city laws dictate the minimum temperature a rental unit can be.
- Conducting an annual energy audit along with regular inspections will help you manage the energy bill.
Before we get into the age-old debate of who’s allowed to touch the thermostat, let’s clarify your role as a landlord.
TurboTenant: A landlords one stop shop for tenant management…for FREE
You can’t beat free and the only time you pay is if you want to purchase a lease or have expedited rent deposits. Most everything else costs zip, zero, zilch.
What Landlords Must Provide for Tenants
As a housing provider, you are held accountable for your tenant’s implied warranty of habitability. In other words, landlords are required to provide safe, livable conditions for their tenants since paying rent is conditional on the landlord’s duty to maintain a habitable living space, says Cornell’s Legal Information Institute.
While specific rules and regulations dictating habitability vary by city and state, ApartmentGuide highlights that landlords are typically responsible for:
- “Maintaining the structure of the building’s interior and exterior
- Keeping hallways, stairways, and common areas clean and well-maintained
- Operating plumbing, sewage, and ventilation
- Checking for environmental hazards
- Exterminating rodents and insects
- Supplying cold and hot water in appropriate quantities and at reasonable times
- Providing heat in appropriate quantities and during reasonable times”
Their article also quotes Samuel Evan Goldberg, a lawyer with Goldberg & Lindenberg, who noted that the “landlord must provide heat and hot water to tenants. The hot water must be a minimum of 120 degrees Fahrenheit. Landlords are required to provide heat during the months of October 31st through May 31st.
If the outside temperature is 55 degrees or below between 6:00 am and 10:00 pm, it must be at least 68 degrees in the apartment building, and the inside temperature must be 62 degrees [between 10:00 pm and 6 am].”
In short, landlords must provide access to heat – but your responsibilities don’t end there. If you’ve agreed to provide heat or other basic utilities, Pine Tree Legal Assistance lists four situations that would likely break the law:
- “The temperature in your rental is so low that it ‘injures the health’ of anyone living there. (This rule does not apply to someone who is so sick that he cannot stay healthy with a normal amount of heat.)
- The heating system is not able to heat the unit to at least 68 degrees when it is down to 20 degrees below zero (-20 F) outside.
- The heating system doesn’t keep the building’s systems (like water pipes) from freezing.
- Other basic utilities in the unit don’t work, making it unsafe or unfit.”
If you’re not sure whether your heating system can warm the unit to at least 68 degrees, test it “by setting a thermometer at least 3 feet away from an outside wall and about 5 feet above the floor.” Note that the reading doesn’t count if it’s closer to the floor or wall.
Pro Tip:Be sure you know your state and city’s requirements regarding minimum and maximum temperatures your unit(s) can be! If you see conflicting information between your local laws, follow the stricter ordinance. And don’t be afraid to ask a legal representative or your city code enforcement office for help as needed.
Controlling the Temperature in Your Rental
Though the best rule of thumb is to ensure that your rental can maintain at least 68 degrees when the temperature drops outside, you may have more control over the temperature settings – if you and your tenant(s) have signed a lease agreement that supports your position.
Your residential lease agreement should note which party is responsible for paying the heat bill and any other stipulations regarding energy use. So, if you and your tenant signed an agreement stating that they wouldn’t have access to the thermostat, you can decide which temperature to set your unit(s) – but be careful. Assuming that level of control means you need to be on top of the weather forecast to ensure your units are properly heated and your tenants stay safe.
If you give your tenants access to the thermostat, they can adjust the heat without needing to bother you. If the idea of giving your tenants access to the thermostat sends a chill down your spine, here are a couple of thoughts to consider:
- Preparing your rental unit for colder months will help keep energy costs low. Check out our comprehensive article if you need help winterizing your rentals.
- If you currently foot the heating bill, consider passing the expense – and the control – to your tenant(s) at their next lease renewal or through a lease addendum.
Did You Know?It’s most common that single-family rentals have thermostats that the renters can control whereas multifamily properties may have only a single thermostat for the whole building.
How to Reduce Your Rental Unit Heating Costs
Whether you decide to let your tenant control the heating or continue carrying the responsibility yourself, there are certain steps the U.S. Department of Energy recommends to help lower heating costs this winter, such as:
- Conducting a yearly energy assessment, which entails checking insulation levels, inspecting heating equipment, and locating leaks
- Advising your tenants to open curtains and shades during the day to let sunlight warm the rooms
- Recommending that any unused rooms stay closed (as applicable)
- Performing seasonal inspections to check for drafty windows, broken vents, and air duct leaks
- Upgrading your unit’s heating system as newer high-efficiency heating systems can run at 90-98.5% fuel efficiency ratings compared to older systems, which run at 56-70% fuel efficiency ratings, according to CNET
You should also consider investing in smart technology as a way to lower the energy bill.
Get Smart: Using Technology to Cut the Energy Bill
Smart technology has come a long way since its inception – which is great news for those looking to save money on their energy bill. According to Reviews.org, “almost half of the cost of the utility bill comes from your cooling and heating system.”
That’s where smart thermometers come in.
Whether you elect to control the temperature as agreed in your lease or allow your tenant full range, having a smart thermometer enables the unit to hone routines that support energy conservation.
For example, your tenant could program the thermometer to hold the unit’s temperature at 68 degrees while they’re at work, then kick up to 70 degrees at 5 pm when they return home. That way, the unit isn’t eating up energy while no one is home – without your tenant having to sacrifice their comfort.
Smart thermometers range in price, starting around $140.
Bottom Line
If your signed lease agreement says that your tenant won’t have access to the thermostat, then you get to dictate the temperature within the unit – but be sure to appreciate the great power that comes with this responsibility. Keep up with the weather forecast, and plan ahead to ensure your tenants are warm and safe within your rental property.
When in doubt, maintain a comfortable 68 degrees (or at least above the minimum temperature dictated by your local laws), and don’t hesitate to check in on your tenants when particularly bad weather is ahead. Reaching out to make sure they’re safe, well-stocked, and prepared for the storm will save you from getting frantic calls once the snow falls – and it helps your landlord-tenant relationship thrive, no matter the weather!
TurboTenant, Inc does not provide legal advice. This material has been prepared for informational purposes only and TurboTenant assumes no responsibility or liability for any errors or omissions in the content of this material. All users are advised to check all applicable local, state, and federal laws and consult legal counsel should questions arise.
Written By: Krista Reuther
Krista Reuther is the Senior Content Marketing Writer at TurboTenant where she writes data-driven, actionable material to help landlords and renters alike.
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In this episode of the Your Landlord Resource podcast, Stacie and Kevin Casella explore the intriguing world of tenant buyouts for rental properties. If you’re a self-managing landlord or property owner, this episode is packed with valuable insights that can help you navigate tenant buyouts with confidence.
Discover the essential differences between tenant buyouts and cash for keys, and why it’s crucial to understand these distinctions. Learn about the situations where tenant buyouts come into play and why they are becoming more common, especially in rent-controlled areas like California.
Gain insight into the legal aspects of tenant buyouts and the importance of involving a real estate attorney in the process. The hosts delve into the intricacies of negotiating tenant buyouts, including how to determine the right amount to offer and when to pay it.
Listen to real-world examples of when landlords might consider tenant buyouts, from selling a property to making major renovations, and why it’s essential to approach these situations with sensitivity and open communication.
Discover how tenant buyouts can be a viable alternative to eviction, potentially saving you time and resources. Whether you’re a seasoned landlord or just starting in the rental property business, this episode provides invaluable guidance for dealing with tenant buyouts effectively.
Tune in to the Your Landlord Resource podcast and empower yourself with the knowledge to confidently handle tenant buyouts in the rental property business.
LINKS
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Stacie@YourLandlordResource.com
Kevin@YourLandlordResource.com
👉 Our FREE 10-Page Guide on Placing Your Ideal Tenant
Learn several of the tips we use to place tenants who pay rent on time, respect your property, and follow the policies you have set.
Our FREE 10-page guide includes:
- Creating Qualifying Standards/Policies
- Understanding Marketing for your unit
- The Application Process
- Performing Background Checks
- Handing Over the Keys/Move-In
👉 Episode 19: Your Tenant Wants To Break The Lease, Now What?
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If more than a couple of these factors ring true for you, it may be time to consider selling your property and possibly make a 1031 exchange into a passive replacement property.
Sign 1: Your State/Local Landlord Regulations Have Become Intolerable
Oregon and California recently became the first two states to impose statewide rent-control legislation. Not only do these laws cap annual rent increases, but they also impose onerous requirements for removing tenants after 12 months of occupancy.
If you feel like your state or local governments are adversarial to your interests as a rental housing annual provider, you are not alone.
RECENTLY IMPOSED STATE/LOCAL REGULATIONS INCLUDE:
✓ Screening limitations or prohibitions
✓ Security deposit restrictions
✓ Seasonal eviction moratoriums
✓ Late-fee limitations
✓ Forced relocation assistance
✓ Complicated notice and eviction procedures
Sign 2: Your Risk of Legal Liability Has Exceeded Your Comfort Zone
When you own rental real estate, you expose yourself—and your assets—to a whole new world of potential legal liability. In addition to the dozen ways a rental housing provider can trip over federal fair housing laws and local landlord regulations, state premises liability can be devastating.
Courts in California effectively presume that an injury was the result of a breach of duty and shift the burden to the property owner to prove otherwise. This stems from the California Supreme Court’s view that regardless of actual fault, “liability should often be imposed on the party, often a business, most able to implement steps that promote social welfare by enhancing safety, spreading the risk of loss and ensuring compensation.”
In other words, some courts promote the notion that you should pay for more than your fair share of injuries occurring on your property simply because you have more money than your tenants or their customers.
If you are tired of worrying about being sued in a pro-plaintiff state, you may be ready for a “change of venue.”
Sign 3: Demographic Trends May Not Be Positive for Your Area
DEMOGRAPHIC/ECONOMIC FACTORS DRIVING RENTAL PROPERTY PERFORMANCE:
✓ Positive migration
✓ Overall population growth
✓ Job growth
✓ Supply of rental housing relative to demand
Differences in economic prospects and cost of living can drive migratory behavior. Such differences, in turn, reflect differences in tax policies, business friendliness and right-to-work policies.
Click here to see an example of how disparities in living costs impact interstate mobility.
If you live in a state whose employers are leaving (and whose employees are following), you may not be able to count on past patterns of upward population growth.
Sign 4: Your Yield on Equity is TOO LOW
Over the last 12 years, many rental housing providers on the West Coast have watched their equity increase much faster than their rental income. This is particularly true for landlords whose property was once an owner-occupied property, such as an SFR, condo or townhouse. In these examples, prices are driven by the supply/demand for single-family properties, rather than multifamily cap rates.
Twelve years ago, you may have purchased a property with an 8% yield on equity (aka cash-on-cash yield) and today the same property may only generate a 2% yield. Why would you continue to accept such a low cash flow while bearing all of the risks and burdens of individual property ownership?
If you feel your current net cash yield—as a percentage of your property’s equity—is too low, you should consider relocating your equity to a market with potentially higher yields.
Sign 5: The Burdens of Operating Your Property are Affecting Your Life
Sometimes, enough is enough. Younger landlords simply have more energy to cope with the trials and tribulations of property ownership than the older versions of themselves. And sometimes, the wrong property manager simply exacerbates the problem.
Whether your hot button is problem tenants, overwhelming bills/accounting, unending property maintenance or looming capital expenditures, you may be ready to “tap out.”
You are in good company. Each year, thousands of people make the transition from active operators to passive investors. There are multiple options for investing in real estate without the weekly headaches of self-managed rental properties.
RICHARD D. GANN, JD
Managing Partner
1031 Capital Solutions
(800) 445-5908
1031CapitalSolutions.com
Richard (Rick) Gann is an attorney, licensed real-estate broker, and general securities principal
specializing in 1031 exchange solutions and he is co-author of the book How to Retire from Being
a Landlord.
Want to read about our experience with our 1031 exchange?
Recently, we decided to sell farmland in one state and exchange it for a 4-plex multifamily complex in a different state, neither state of which we resided in. Having never done this before, we thought our readers might like to know what our first experience with a 1031 exchange as rental property owners entailed. Where we gained insight and learned a lot, it certainly was not an easy task. Would we do it again? Click HERE to read about our experience to find out and determine if a 1031 exchange is right for you.
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By: Spark Rental
You’ve probably seen condemned signs on houses. But how do properties become condemned, and what do you need to know as a buyer or seller?
There is likely a condemned house somewhere in the neighborhood you live in. Some are so far gone that demolition is the only answer, while others just need some good TLC (and a solid investment) to bring value to their owner. Here’s what happens when a house is condemned, and what it could mean in terms of buying, selling or simply owning that property.
What Is The Definition Of Condemnation In Real Estate?
A property is considered condemned when a government entity deems it unsafe or no longer fit to live in. Once a home is condemned, it may not be inhabited again until it has been rehabilitated and inspected, if that’s even possible.
In many cases, condemning a home does not necessarily mean it is a lost cause forever. Whether or not you can un-condemn a property depends on why it was condemned in the first place.
What Are Grounds for House Condemnation?
Most condemned homes are only condemned after they have already been abandoned and the owners or residents stop maintaining the property.
According to the US Department of Housing and Urban Development (HUD), there are currently more than 10 million abandoned residences in our country. Many of these will be well on their way to being condemned if no one steps up to maintain their care.
Regulations can vary based on municipality. Generally, a home may be condemned if:
- The house has been abandoned for an extended period of time; in some cases (and depending on the condition of the property), this could be as few as 180 days.
- It is dilapidated and/or deteriorated to the point where it’s no longer structurally sound.
- It is considered unsafe or unsanitary.
- The house does not have adequate utilities, such as power, water, electricity and/or sewer.
If a home is condemned, it is no longer legally habitable. If the problems are not fixed within a specified period of time usually stated on the condemned house notice, the home’s occupants will need to move out.
A home can also be considered condemned when eminent domain powers are exercised. This means a perfectly safe home may be forcibly acquired and modified — or in some cases, even destroyed — simply because of its location.
In cases of eminent domain, public authorities seize private property, such as a home and land, if it is in an area that is to be used for certain public projects. That means if your state wants to build a highway or airport through your backyard and you don’t want to sell, they can still condemn your property. (Yes, you’ll be compensated.)
How Long Does It Take to Condemn a House?
The length of time necessary to condemn a home depends heavily on its condition and why it’s being condemned. The specific regulations also vary from one municipality to the next.
Generally, the process of condemning a house or building takes time and involves notifying the owner and/or residents that the property is in violation of health and safety requirements. This often means receiving citations about the property’s violations, sometimes in a pattern lasting weeks, months or even years.
If the owner doesn’t correct the violations, the property generally goes before the courts for a formal legal hearing, at which time it may be declared condemned. The owner may then have a specified period of time, often between 30 and 60 days, to correct the violations, request new inspections, and apply for new permits before the property is declared uninhabitable.
In some cases, condemning a house can be much faster. If the property is determined to be structurally unsound, for instance, it can be condemned immediately and the residents forced to vacate with little or no notice.
How to Sell a Condemned House
If your property has been declared condemned because of code violations or lack of upkeep, you may decide that it’s not worth repairing. In this case, you can choose to sell your condemned property, though there are a few important things to keep in mind.
The first is that, generally, without making the required repairs, you will be unable to sell the condemned house as a structure. Instead, you can sell the lot the home is on, drawing in buyers who would plan to demolish or renovate the property themselves.
This is common, said Glenn Phillips, the CEO of Lake Homes Realty, a multi-state real estate brokerage based in Alabama. “We operate real estate brokerages in 33 states, and more often than not, we will see buyers purchasing a condemned home mainly for the lot. Once the sale is complete, the home is demolished and construction of their dream home begins.”
Expect a limited buyer pool for condemned properties. Buyers will have a difficult time getting a mortgage lender to approve a loan for a property that contains a condemned, even as a fixer-upper. Instead, you may have better luck selling to a buyer with cash or an investor who has the backing of a hard money lender.
There are also a number of companies that buy homes , often “in any condition.” Depending on the location and value of your land, you may get a fair offer even with a condemned house still on the property.
Buying a Condemned House
If you are simply looking to demolish the structure and build on the land, your biggest hurdle will be finding a lender. If possible, buy the property in cash. You can also borrow from a hard money lender like Kiavi or LendingOne, but you’ll still need to come up with a down payment.
If you’re looking to rehabilitate the home — either to live there yourself or even flip the house — you’ll want to do your due diligence and determine what you can afford.
Once a home is condemned, there are added steps in order to facilitate a purchase. For instance, if the property was condemned because of safety violations, you work with a code enforcement entity when making your offer. If the property was foreclosed on, you deal with a bank rather than an owner.
In this case, having a good real estate agent on your side can be very valuable.
Additionally, many lenders will only approve a mortgage based on the value of the property as it stands. This means that the land value and the condemned structure’s current value are factored in, but you may need significantly more money in order to actually demolish or renovate the property.
Having a partner investor or working with a hard money lender can be a good way to purchase the property and also have the cash necessary to complete your project.
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Where to Find Condemned Properties for Sale
Was the property eventually condemned because it was abandoned, or was the property abandoned because it was declared condemned?
No matter which came first, condemned and abandoned homes frequently find themselves on the path to bank foreclosure. And once these properties are foreclosed on, it can be easy to locate and move toward purchasing them.
You can also check with your city or county to see if they keep a list, or even a website, with local condemned homes. These condemned house lists can give you a great place to start looking if you’re interested in buying a condemned and abandoned property.
Your area may also hold auctions for abandoned and condemned properties; your county clerk may be able to direct you if such auctions exist in your town or county. These auctions can be a good opportunity to find a good deal on a property, though they may only be held periodically.
Lastly, if you come across a home that appears to be abandoned or has been declared condemned, one option is to contact the owner about purchasing the property. You can often reverse-search addresses through your county tax assessor’s office, which will give you information about the owner of the home. Then, you can contact them directly to see if they’re interested in selling and how much they’re willing to take.
Can You Fix a Condemned House?
A condemned home may initially seem doomed, that its only future involves demolition. However, you can often fix a condemned house and restore it to a beautiful property.
“The main benefit of buying a condemned home is the value,” Phillips said. “While some people will perceive very little value in many of these properties, they often have the bones necessary to create a wonderful home. Often, architectural elements from condemned structures can be saved and incorporated into an updated home.”
A home’s condemned status can be reversed, as long as the reasons it was condemned in the first place are corrected. If the home was condemned because of code and safety violations, that usually requires a significant investment into the property to bring it up to date.
The issues could be serious and structural in nature, or something as simple as electrical wiring. Be sure to get copies of the original condemned orders as well as a trusted home inspection before you buy, so you know what you are getting yourself (and your bank account) into.
Once you complete any necessary repairs, you need to request inspections from local authorities. If the renovated property passes those inspections, the condemned status can be reversed.
But does a stigma remain attached to those once-condemned homes, even years later?
“After a home has been renovated or replaced with a better version of itself, the stigma goes away and the homeowners will have a house they love,” Phillips said.
Final Thoughts on Buying and Selling a Condemned House
While many of us think of boarded-up eyesores when we hear “condemned home,” the truth is homes can be condemned for many reasons.
Whether you’re looking to sell a condemned property, build on a lot with a condemned home or plan to renovate a previously condemned house, it’s important to go into negotiations knowing what sort of value the property retains and how expensive your project will be. Buying or selling these properties may involve jumping through a few hoops, but the value that can be found in a condemned lot can be well worth the extra work.
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If you’re at all interested in multifamily real estate investment, then there are two words you need to learn right now: house hacking.
What does it mean to hack a house? The definition is simple: buy a residential multifamily (4 units or less) with strong cash flow numbers, live in one of the units, and rent out the rest.
New investors are discovering house hacking as the best way to get started in real estate investment. In this post, I’m going to share three big reasons why that’s the case.
Ease of Financing
One of the benefits of multifamily investing, in general, is economy of scale. One transaction gets you multiple income-producing units. As a result, per-unit acquisition costs on multifamily properties are typically much lower than single families. From a cash-on-cash perspective, that’s terrific news.
Economy of scale matters for financing, too. Especially with new investors, lenders like to see a property with multiple streams of income. They want to know you’ll have enough cash flow to keep paying the note even if a tenant disappears on you.
On top of that, lenders will typically count 75% of the income from those additional units in your favor. That added income will help you qualify for higher dollar amount than you could on a single-family property.
Scale isn’t the only thing that makes financing a house hack easier than a commercial multifamily. Thanks to FHA, residential investors can take advantage of loan products with significantly lower down payment requirements and better rates than the alternatives.
A Smarter Way to Pay for Housing
Consider the following scenario:
You’ve got a decision to make: buy and live in a single-family or a duplex. You’ve only got 5% to put down, so you’re going for an FHA rather than a conventional mortgage.
Let’s take the single-family first. You find a house you love for $300,000 and put 5% down on a 30-year loan at 4% interest. Assuming a tax rate of 1.5% and insurance at $2000/yr., that’d put your monthly payment at about $2,000/month. You might decide to rent out a room or two. If not, that $2,000 is entirely on you.
Now, let’s imagine you choose a duplex instead at the same price point, down payment, and loan terms. Let’s put the rent at $1,250 (about the national average for a 2-bedroom). Congratulations. You’ve effectively lowered your monthly housing obligation to $750. Not bad.
Take that scenario a step further and imagine you went with a triplex instead of the duplex. Assuming the units you choose to rent are both 2-bedrooms, that puts your monthly gross income at $2,500. Now you’ve got a $500 surplus at the end of the month to plow into expenses, capital improvements, and so on.
This isn’t pie in the sky math. This is how house hacking works.
Of course, you’re going to have to trade off some things in the process—a bedroom or two, yard space, parking, etc. But this is just the beginning of your investment journey, not the end. Just a few years in a hacked plex will prepare you to move into the single-family of your dreams soon enough.
Learn on the Job
“Passive income” is a paradox. It doesn’t just happen; it takes years of hard work to establish a portfolio and a system that’ll put real money in your bank account every month without you having to handle the day-to-day.
One of the hardest parts of that early journey is learning to manage property. Nobody’s born with a filled-out property management toolkit. It takes time to build up the business sense and emotional intelligence needed to handle people and properties well.
The question is: where are you going to get that experience?
House hacking answers that question in the least intimidating way possible. When you hack a plex, you become your property’s on-site manager. From a tactical standpoint, that puts everything within arm’s reach. It’s much easier to manage a property from next door than from the next state over.
From an experiential standpoint, you get hands-on experience as a landlord: marketing property, showing units, screening tenants, writing leases, collecting rent, and fielding maintenance calls. You’ll outsource these things soon enough, but it’s always better that you understand these basic mechanics before you hand them off to someone else.
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There’s no better way to learn this business than to immerse yourself in it. House hacking literally accomplishes just that. If you want to build a massive commercial portfolio someday, then that’s fantastic.
Source: Rod Khleif
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Listen On:
In this episode of “Your Landlord Resource,” we do a deep dive into the world of risk management for rental property owners. We cover a broad spectrum of topics to help you feel more confident and professional in operating your rental property business. From the very start, we emphasize the importance of knowing your numbers, with a focus on financial metrics like cash flow, cap rate, and more. We discuss the significance of cash reserves and how they can save you from unexpected expenses.
When it comes to property-related risks, we talk about the importance of insurance, including rental property insurance, umbrella insurance, and rent default insurance. These policies can help safeguard your investments and protect you from unexpected liabilities. We also discuss the value of regular property inspections and preventative maintenance to minimize potential issues.
When it comes to tenant-related risks, we explore tenant screening, lease agreements, and tenant retention strategies. Communicating effectively with your tenants, setting clear boundaries, and using incentives to encourage lease renewals can significantly reduce risks associated with tenant turnover. Lastly, we touch on the importance of setting up your rental property business with the right legal structure, such as an LLC, to protect your personal assets.
Remember, managing rental properties can be a rewarding journey, but it requires proper risk management. Join us in this episode to master the art of reducing and mitigating risks, ensuring a safer and more profitable landlording experience.
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- Handing Over the Keys/Move-In
👉 Podcast Episodes:
Episode 4: The Importance of Rental Property Inspections
Episode 16: Is Holding Your Rental Properties in an LLC Right for You?
Episode 20: Part 1: The Nuts and Bolts of Residential Rental Property Insurance
Episode 21: Rental Property Insurance Part 2, Interview with Ryan Bravo
Episode 28: The Cash Reserves Blueprint: Protecting & Expanding Your Portfolio
Episode 32: Our Lease and Addendum Breakdown, A 3-Part Masterclass, Part 1
Episode 33: Our Lease and Addendum Breakdown, A 3-Part Masterclass, Part 2
Episode 34: Our Lease and Addendum Breakdown, A 3-Part Masterclass, Part 3
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In this episode of “Your Landlord Resource,” we dive into the world of pet-friendly rental properties and Emotional Support Animals (ESAs). Our guest, Logan Miller of Our Pet Policy, is a real estate investor and an expert in pet management for rental property owners and he’s here to give us his insights on ESA’s and pet rules.
We explore the process of handling ESA requests, verification, and the laws surrounding ESAs. Logan sheds light on the concerning issue of fake ESA certificates available online and the potential legal consequences for doctors who misuse the system.
We also discuss the pros and cons of allowing pets in rental properties, including the importance of limiting pet breeds and sizes. Logan offers valuable insights for landlords looking to create pet policies that are both accommodating and responsible.
Join us as we equip self-managing landlords and property owners with the knowledge and confidence they need to navigate the world of pets in rental properties. If you’re seeking to make informed decisions about ESAs, pet policies, and more, this episode is a must-listen.
P.S. Logan has graciously offered our listeners 3 months free service with Our Pet Policy when you sign up and register your tenants’ pets. Listen to the episode to see how to take advantage of this opportunity.
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👉 Episode 22, The Pro’s and Con’s of Renting to Pet Owners
👉 Our Pet Policy, Contact Us to set up your pet polices.
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👉Help other DIY landlords discover what we have to say… Please leave us a review of our podcast!
On Apple Podcast or ITunes, please scroll to the bottom of our main page (with our logo) and click “Write a Review”.
On Spotify, please click the 5.0⭐ on our the front page of our podcast page.
👉 Join our Private Facebook Group! A space to ask questions and network with other DIY landlords.
👉 Follow us on Instagram, Like us on Facebook
Want the podcast link emailed to you weekly? Subscribe to our FREE newsletter, Landlord Weekly!
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