The first decision to make when a tenancy is going to end is deciding if you need time to make repairs or upgrades to your rental property while it is vacant. It is much easier to do repairs when you don’t have to work around a tenants schedule; however, it does cost you. Do you give up some rental income to avoid inconveniencing a tenant, or do you ask your tenant for their patience and keep your income stream flowing?

Next, consider the current rental environment. Is it over a holiday period? Is there an abundance of rentals already on the market? If the market is slow, be creative. A small amount of money spent on 1st month rent discounts or other incentives will more than offset the cost of lost rent for a month or two.

At what point do you show your unit- when a current tenant is still in the unit, as soon as they leave, after you have had a chance to do maintenance? This depends on the current tenant. If you have a good relationship and you know they have taken good care of the property, then start showing the property before they leave. If not, it may come back to the current market conditions. In a tight rental market, you can afford to take some risk and show a property before it is in top condition. In a soft rental market, you want to put your best foot forward, so you may want to hold off on showing it until it is empty and clean.

Task List

• Walk through the property to understand the condition it is in
• Schedule vendors to do necessary repairs
• Ask the current tenants if they know any potential tenants
• Schedule your advertising
• Begin screening potential tenants
• Make appointments to show the property
• Make sure you have updated paperwork for a new tenant- rental application, credit check forms, lease, etc

As a property manager, you will be more profitable when you take an aggressive stance to keeping your properties occupied. My goal is always to check a new tenant in the day after my current tenant leaves – not always attainable but not unrealistic either.

You can take some preliminary steps on your own if you need to evict a tenant but don’t go too far without hiring a lawyer. Evictions can move quickly if done correctly, dotting every “i” and crossing every “t”. If the tenant does not comply with your first request to vacate, an attorney may be your assurance to complete the eviction quickly.

Eviction reasons, processes, periods, and participants vary from state to state. Below is a general overview.

Reasons to Evict a Tenant

• Nonpayment of rent
• Violation of the rental agreement
• If the lease period has expired, most states don?t require a reason to evict but they do require proper notification.

How to Evict a Tenant

• The landlord must first serve a notice to correct the problem. The notice gives the tenant a specified number of days to pay the rent or comply with the rental agreement.
• If the tenant has not fixed the problem within the specified time, the landlord can begin litigation by filing an action in court.
• If the tenant does not file an answer with the court, the sheriff can post an eviction notice on the door. The sheriff can then remove the tenant if they do not respond to the eviction notice.

It is easy to end up on the losing side of an eviction if you don’t meticulously adhere to the rules. Property managers can help walk you through the process. They should be familiar with the laws in your area and know when to involve an attorney.

Principal Duties

Marketing- keeps properties occupied with qualified tenants through advertising, lead follow up, property showings for prospective tenants.

Tenant Relations- develops rental agreements, selects qualified tenants, collects deposits and rents, enforces terms of rental agreements, resolves tenant complaints, oversees eviction proceedings if necessary.

Facilities Management- schedules maintenance and repairs, negotiates contracts with vendors, regularly inspects property to ensure it is in good working order, quickly resolves emergency maintenance issues.

Financial Reporting- keeps financial records from property operations, creates monthly financial reports for property owner.

Owner Relations- keeps open dialogue with property owner on vacancies, tenants, physical condition of property, financial issues.

Knowledge & Skills Needed

• Familiar with applicable local, state, and federal laws and regulations
• Strong interpersonal & business communication skills
• High level of organization and attention to detail
• Competence with office management software
• Knowledge of financial reporting
• Licensed Real Estate Broker (in most states)

Salary Range

$35,000 – $65,000 depending on experience and location.

At the federal level is the Federal Fair Housing Act, which makes it illegal for a landlord to discriminate because of a person’s race, sex, national origin, religion, and disability.

Most states have a Residential Landlord-Tenant Act. This is where to find the majority of the rules, often addressing security deposits, rental agreements, and evictions.

Local housing codes and ordinances provide another layer of controls, usually outlining minimum requirements for living conditions and further protecting tenants from discrimination and illegal evictions.

We’ll take a look at a few of the areas that could cause trouble if not done correctly, beginning with security deposits.

Make sure you know the answers to all the following questions.

How much of a deposit can you collect?
Do you have to pay the tenant interest income on the deposit?
Do the funds need to stay in a trust account?
When returning the deposit do you have to itemize the amounts you withheld?
Can funds be withheld from the deposit for normal wear and tear?
Can you charge for your own labor when withholding security deposit amounts?
How many days do you have to return the deposit?
What are the consequences if you do not comply with security deposit rules?

Laws governing security deposits and other landlord-tenancy issues are continually changing. As a landlord you should consider having a real estate attorney specializing in landlord-tenant laws, or you should have a property manager that performs this role for you. At a minimum, you should regularly check your states’ landlord-tenant regulations. There are many great websites out there for both property owners and tenants.

If you have not decided whether you are going to hire a property manager to manage your rental property here is something to consider. One bill from a real estate attorney because of an inappropriately handled security deposit could be as much as the fees you pay to your property manager for a year.

We will look at issues surrounding evictions in the next posting.

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Adjustable rate mortgages often finance homes threatened by foreclosure. Homeowners got in over their heads and figured they could sell their homes, or refinance their loans, if their mortgage payments became too much of a burden. Unfortunately, they did not anticipate falling real estate prices.

Some estimate that as many as 40% of foreclosures are investment property owners that were looking to flip the house and make a profit. Again, falling real estate prices derailed their plans.

Interest rates on over two million loans will jump over the next two years. How many of these will end in foreclosure? The effect on property managers, investment property owners, and tenants remains to be seen.

LA has one of the lowest vacancy rates in the country, hovering around 4%. They are experiencing high foreclosure rates. According to RealtyTrac, LA has one foreclosure for every 113 households. In addition, they have a challenging real estate market. Home prices have continued to decline over the last year. KB Homes, one of the largest homebuilders in the US, expects California prices to fall another 10-15% in the next 18 months.

How do these factors affect property management and the rental market?

• Low Vacancy Rate- The supply is tight, prices increase
• Homes Foreclose- homeowner forced into rental, reduces supply, prices increase
• Housing Slump- would-be buyers rent until market is less turbulent, reduces supply, prices increase

Economics 101 tells us these things combined would cause rental prices to go through the roof. Los Angeles property managers can charge $2000 a month for an average two- bedroom rental property. How high can prices go?

There is one outcome of these economic factors favoring tenants. Los Angeles property managers are finding that property owners are placing more condominiums and homes in the rental market. Rather than having properties sit empty because they are not selling, investment property owners are hoping to collect rent to cover their costs. Will this addition to the rental property inventory keep rents stable over the next couple of years? Only time will tell.

Los Angeles Property Management Companies

February: 1400
April: 8654
September: 15758

These numbers speak for themselves. Las Vegas has shifted from being one of the hottest real estate markets in the country to one of the most challenging. What impact has this had on Las Vegas Property Management?

While many would-be buyers are waiting to see what happens with the turbulent markets in Las Vegas and are choosing to rent, another dynamic is taking place keeping the Las Vegas rental market soft. In past years, with increasing home values there were many rental units shifting into the condominium market. Now that the inventory of homes is growing so rapidly, condominiums are shifting back into the rental market. This shift is creating an oversupply of rentals.

According to the National Association of Realtors the vacancy rates for rentals has gone from 2.9% in late 2006, one of the lowest rates in the country, to 4.9%.

Translation for Las Vegas Property Managers- it is hard work right now. If you are an investment property owner needing help renting your property, you need to find a property manager with the skills to fill your vacancy in a difficult rental market. You also have to work a little harder to keep a good tenant. There are many good deals available for rentals, and many incentives to lure tenants from other rentals. The property manager must not only fill your vacancy, but they need a support system in place to be able to retain the tenant over time.

Las Vegas Property Management Companies

1. Interest

The largest tax deduction for a landlord is usually mortgage interest. You can deduct interest on loans you have taken to buy or improve your rental property. Let’s say you have a $200,000 loan on your rental property at 6% interest. The interest deduction is roughly $12,000 a year.

2. Depreciation on Real Estate

Depreciation represents the decline in the value of an asset. The IRS decides what the useful life of an asset is, thus setting its depreciation period. As an example, a computer has a useful life of 5 years, and residential rental property has a useful life of 27.5 years.

Rather than deducting the entire cost of your rental property in the year you buy it, the IRS says you have to deduct the cost over 27.5 years. Note that you can never depreciate the value of land.

On a rental property worth $180,000, you can take roughly $6500 as a depreciation deduction each year. There?are various ways to calculate depreciation, refer to the IRS tax publications for an exact amount.

3. Repairs

The IRS defines repairs as something that keeps your property in good operating condition. Repairs include repainting, fixing leaks, replacing broken windows. You can deduct the cost of repairs each year. Do not confuse repairs with improvements. Improvements are changes that add to the value of the property or prolong its useful life, such as replacing a roof. You depreciate these costs.

Do the math to see the great tax benefit. Let’s say you are collecting $1200 a month in rent, or $14,400 a year. In the examples above, the top two tax deductions alone amount to $18,500. You will not pay any tax on the rental income you collect.

Stay tuned, I will review a few more of the tax deductions in my next blog.

1. Credit Report

The credit report is a tool to assess the prospective tenant’s ability to pay bills on time. If they have had a difficult time paying bills in the past, there is a good chance they could have a difficult time paying in the future.

2. References

I don’t place much weight on personal references. An applicant is only going to list references that will give positive remarks. Employers and previous landlords on the other hand can provide useful information to select a tenant.

3. Rental Application

Not only do I get the basic details from the rental application, but also I take a close look at how it was done. If it is incomplete or messy, it can be an indicator about the applicant. It may not be enough to reject a tenant, but it contributes to the evaluation.

Remember you cannot be arbitrary about rejecting prospective tenants. According to fair housing laws, it is illegal to reject an applicant based on race, religion, ethnic background, sex, age or because he or she has children or a physical disability.

If you are considering hiring a property manager, check in with them about how they select tenants, it is one of their most important jobs.