Known as the “Mile-High City” because of its elevation of exactly one mile– or 5,280 feet–Denver seems to have become one of “the” places to live in recent years as it offers incredible outdoor opportunities with the benefits of living in a city–and a cool city at that.
Located between the Rocky Mountains and the High Plains, Denver is known for its great access to world-class ski areas, craft breweries, great restaurants, and its healthy economy. The city boasts over 200 parks, 12 recreation centers, and numerous community gardens; it also owns several mountain parks including Winter Park Resort and Red Rocks Park.
Denver has four distinct seasons, claims 300 days of sunshine a year, and because of its elevation and location on the edge of the Rockies, extreme weather isn’t uncommon.
Denver’s diverse economy includes strong performances in areas such as telecommunications, energy, technology, tourism, finance, and distribution. Forbes lists Denver as #6 in its listing for Best Places for Business and Careers. Unemployment in metro Denver was 6.5 percent in 2013, a decrease of 1.2 percent from 2012. The Metro Denver Economic Development Corporation (Metro Denver EDC) projects employment growth in 2014 will increase 2.7 percent; the unemployment rate is expected to fall to 6 percent.
With a population of about 634,000 Denver is the 23rd most populous city in the US. The city has a relatively young population, tying for third with Seattle for its increase in 25- to 34-year-old residents. Median household income in metro Denver is a healthy $61,453, significantly higher than the average for US metro areas as a whole ($53,607). Net migration for metro Denver was 23,344 in 2013 and is projected to be 23,675 in 2014.
Denver Real Estate Market
The median sales price of single-family homes in Colorado’s metro region was $273,000 for Q4-2013, marking an increase of 7.8%, year over year, according to the Colorado Association of Realtors. The number of days on the market decreased compared to the prior year, dropping 26.2 percent, from 65 days to 48. As of December 31, 2013, there was a 2.3-month supply of single-family homes.
Denver Rental Market
Metro Denver EDC reports that the number of new residential units in 2013 was 12,235; that number is expected to increase to 14,885 in 2014.?The Denver Post reports that despite the addition of these new rental units, average rents in metro Denver increased by $63 in 2013, from $978 to $1,041.
The apartment vacancy rate in Q4-2013 was higher than it has been in two years, at 5.2 percent, according to the Denver Post. Demand by younger professionals for high-end apartments close to Downtown has been blamed for the increase in rents. According to Ron Throupe, a professor of real estate at the University of Denver, the city has been one of the hottest spots for young adults and “when they come to town, they aren’t going to buy a house. They are going to move in with a friend or get a unit on their own,” so they’re more likely to rent.
Apartment rent and vacancy rates aside, looking at vacancy rates for all rentals of 1-4 units, the Colorado Division of Housing reports the metro Denver vacancy rate in Q3-2013 was 2.9 percent, with average number of days on the rental market at 48.2 and an average rent of $1,140.55, up from $1,090.76 the previous year.
So How’s Denver Doing?
Denver’s economy, real estate market, and rental market are strong. CoreLogic Case-Schiller predicts home prices will increase 2.7 percent from Q3-2013 to Q3-2014, and 3.4 percent from Q3-2014 to Q3-2015. 10,000 to 12,000 apartments are expected to enter the metro Denver rental market; predictions are these will be absorbed over the next 2-3 years. Their impact on rents and vacancy rates is yet to be seen, but the influx of young professionals, seeking a solid career and great lifestyle options, doesn’t seem to be slowing.
Are you a property manager or realtor in Denver? We’d love to hear how things are on the ground, please comment!
By Tracey March
Freezing temperatures signal winter is here and the end of the year is just around the corner. Whether you’re a self-managing landlord, or you have a property management company managing your rental property, five things should be on your mind:
- winterizing your rental
- preparing for snow and ice storms
- filling vacancies quickly
- end of year tax to-dos
- planning for next year
We asked some of our best professional property managers about their end-of-year priorities, and we got some great advice.
Here are some critical checklist items for winter that you can’t afford NOT to do:
Winterize Your Rental:
Proper winterizing will help you in a myriad of ways, including preventing slip and fall lawsuits, lowering heating bills, and saving thousands in potential maintenance disasters, like frozen pipes or severe water damage from leaks.
Fred Musilli, Broker of Record at DJCRE Sales, Leasing, & Property Management in Philadelphia, says that while there are many preparatory items an owner needs to be concerned with in the winter, he ranks these two items as priorities: chimney safety/CO2 detector maintenance and snow removal responsibility.
Chimney safety and carbon monoxide detectors go hand-in-hand, advises Musilli. If your rental property is not exhausting properly, tenants can be seriously injured, or even killed. Much further down on the list of reasons, he adds, a chimney and burner cleaning will also improve energy efficiency and prolong the life of your heater.
Musilli also advocates a review of your snow removal plan, which should include not only who should be doing the dreaded task, but also how much needs to be cleared, by when, and proof of compliance. Somebody has to do it, and it is important not to make clear who has responsibility for what.
Another checklist item (for the over-achieving landlord), suggests Musilli, is a review of tenants’ intended use of individual space heaters, which can wreak havoc on an electrical system and create needless emergency calls when the electrical box fails. If tenants use cheap, non-UL rated, or damaged extension cords, a house fire is more likely. Discuss use of these heaters with your tenants in advance to avoid expensive repairs, and increase tenant safety and overall satisfaction. If haven’t done so already, consider addressing space heaters in your lease agreements or “house rules.”
Checklist: Winterizing Tips
- Chimney safety inspection
- Carbon monoxide detector inspection (and smoke detector while you’re at it).
- Review snow removal responsibilities.
- Review your tenants intended use of individual space heaters.
- Clean gutters.
- Block leaks from outside.
- Check to see if you need to add more insulation to any attic areas.
- Take down screens and install storm windows.
- Wrap pipes, and consider heat tape if frozen water in your rental property’s pipes is likely.
Prepare for Snow and Ice Storms:
While general winterizing is a critical part of taking care of rental property, being prepared for the unique issues raised by severe winter storms is worthy of separate consideration. Kyle Beck, of Your Local Leasing Company, which is located in Philadelphia (so he’s seen his share of snow storms), has the following advice for preparing for winter storms:
Checklist: Preparing for Winter Storms
- Maintain an adequate supply of snow and ice removal tools, including salt or sand, snow shovels, and possibly a snow blower to remove large amounts of snow.
- Make sure your snow removal contractors are alerted and prepared to tackle forecasted storms.
- In case of a power or gas outage, be prepared with flashlights, bottled water, and blankets. Keep an extra stockpile of those supplies in case a tenant needs them. A warm blanket can go a long way toward making a miserable night a little bit better.
- Check your properties for loose or low-hanging tree branches. Gusty winds or ice build-up can cause loose branches to fall, presenting a hazard to both tenants, employees, and visitors.
- Keep an eye out for loose roof tiles or faulty furnaces. While this should be a part of your annual winter inspection, it’s imperative that these items continue to function properly throughout the winter months. Heavy snow buildup can quickly lead to damaging leaks in a unit, and you certainly don’t want a furnace to stop working during a winter storm.
- Stay on top of the situation. With 24-hour weather available via television and the Internet, it’s easily than ever to track storms and their potential to hit your properties.
Minimizing Your Vacancy Rates
Winter has the worst vacancy rates, and you lose rental income every month your rental home sits empty. Having a tenant move out at this time of year is often considered the kiss of death because finding tenants in the winter is more difficult. Kevin Haag, Founder and CEO of Douglas Realty & Development, Inc., encourages his rental property owners to offer something nobody else would to avoid an empty rental property in December and January. Consider an incentive such as “sign your lease before Christmas and get the first week of January free” or “sign your lease before New Year’s Eve and get a $100 gift certificate from your local grocer or well-known restaurant.” Haag suggests that if you dare to be different your results will improve.
In addition to offering incentives, compare your rents with those in the area to make sure your rent is fair. There are many different ways to do this, from checking comparable properties on rental property websites, to using an online service such as Rentometer. While your rental unit or home shouldn’t be priced too high, make sure it’s also not priced too low for two reasons. First, you want to maximize your rental income. Second, if potential renters think the rent is too low for the area, they may assume that something is wrong with your rental property and not even come and look at it.
Also, If you or your property management company (if you have one) doesn’t have a professional website to advertise your rental property, now’s the time to try to do something about that. Recent studies show that the vast majority of renters rely on the Internet to find rentals. And having a rental property on a landlord’s or property management company’s professional website is one way potential renters can confirm the rental home isn’t part of a rental scam. If you feel ill-equipped to take building a website on yourself, seriously considering hiring someone to help you.
Checklist: Minimizing Your Winter Vacancy Rates
- Offer incentives to move in to prospective tenants.
- Make sure your rents are fair for the area.
- Set up a website, or consult with a company that can do it for you.
- Consider being more flexible on the length of the lease.
End of Year Taxes:
While tax returns aren’t due until April, to minimize your tax burden the strategy of accelerating rental property expenses should be considered now, according to Larry Nelson, CPA and partner at Kerkock Katter & Nelson LLP in Bend, Oregon. With twenty years of experience assisting rental property owners, Nelson suggests that deducting these expenses this year could be more important than ever, especially if you’re affected by the new Affordable Healthcare Act tax. Under the Act, if your modified adjusted income exceeds $250,000 (filing jointly) then you’ll pay an additional 3.8% tax on any rental income or other passive income above that amount. Rental property expenses are deductible only in the year they are paid, so December is your last chance to pay for any rental property-related expenses that you want to deduct this year. Additionally, you can pay your expenses in advance, so consider paying in December some expenses due next year (such as a mortgage payment, property taxes, or utility bills) to offset this year’s income.
As far as rental income is concerned, don’t be tempted to defer rental income for December rents to next year. The Internal Revenue Service matches 1099s for commercial leases, and they want to see rental income match up with 1099s. While residential rental owners don’t receive 1099s from their tenants, Nelson says he has been involved in audits where the IRS examined residential lease agreements and had issues with the rental owner declaring less than a full twelve months of income if the unit was occupied for the entire year. But what if you were on vacation for all of December and didn’t check your mailbox until mid-January? Nelson says that’s still income for December.
Nelson also says it’s important to not make assumptions about rental income losses–he’s seen several clients get burned because they thought they could deduct these losses. The problem is that rental income losses fall under the “passive income rule” which can be a complicated beast. Rental income is considered passive income, and under the rule, passive income losses can only be offset against passive income, which means you need to have another rental property that makes money or some other passive income source. The rule is different if your adjusted gross income is less than $150,000. Nelson emphasizes that passive income rules are very complex and everyone has a different situation, so it’s critical that you consult with your tax advisor before you act on any assumptions. Also see our article on Tax Tips for further ideas about legitimate deductions.
Checklist: End of Year Taxes
- Meet with your accountant to discuss end of year tax strategies.
- Consider paying now expenses due next year to offset this year’s income.
- Let your accountant know if you anticipate any rental losses next year, or if you’re planning on refinancing, buying, or selling rental property as these activities may have tax consequences that might be partially mitigated with informed planning.
- If you formed an LLC or S-Corporation to hold your rental property, order 1099s now to send to your unincorporated vendors (to whom you paid more than $600) by January 31st–it can sneak up quickly.
Revisiting and evaluating insurance policies and rental regulations and laws is key to protecting your rental property investment. John Bradford, CEO and Founder of Park Avenue Properties, LLC, recommends that rental property owners set an annual calendar reminder to review their insurance policies for proper and adequate coverage and check on new local ordinances affecting landlords.
Insurance policies and their respective coverage amounts change frequently. Bradford has seen many owners move out of their property and convert it to a rental but forget to call their insurance provider to make sure their policy is updated from a primary occupant policy to a landlord policy. If an owner does not make this policy change then it is very likely a future claim will be denied for the wrong policy classification. Bradford cautions that he has witnessed firsthand a property owner who received a claim denial because the policy was still considered a primary occupancy policy and not a landlord policy. The classification change to a landlord policy will likely result in a premium increase but without the proper classification the property owner is not adequately insured which, in the end, will be a much bigger price to pay.
City ordinances can change quickly and are difficult for distant and even local landlords to be aware of. While a local professional property manager should be able to help you with local ordinances, Bradford cautions that it is ultimately the property owner’s responsibility to make sure rental property is compliant with local city and county ordinances. The City of Charlotte, for example, recently required all landlords within City limits to register their rental properties online with the local police department. There is no charge for this registration but failure to register rental property could result in unnecessary fines.
In addition to local ordinances, make sure you understand federal and state laws that impact rental property, such as fair housing requirements and your state’s landlord-tenants laws. Your property manager, if you have one, will be an important resource here. If you self-manage your rental property, consider joining a state or local landlord association, as these groups often have attorneys provide updates on changing laws as well as provide other benefits.
Checklist: Year-end Review
- Review rental property insurance policies; update amounts if necessary.
- If you don’t have an umbrella liability insurance policy, consider one.
- Make sure that if you have converted your primary residence to a rental property, that you made that classification change with your insurance company.
- Review local city or county ordinances for changes, such as registration requirements.
- Review federal and state laws, including fair housing rules and your state landlord-tenant statute, for any changes.
Planning for Next Year:
While it might be a slower time for year for landlords and property management companies, the winter, especially December, can nonetheless get busy because of the holidays. However, it’s important to have a game plan for the coming year. Schedule a planning meeting to meet with key people, including any co-owners of your rental property or your property manager, if you have one, to address these issues:
Checklist: Planning for Next Year
- Confirm annual or six-month rental property inspections are scheduled.
- Review lease agreement template.
- Review policies or “house rules.” Consider adding a policy addressing space heater safety.
- Review rents and consider an increase.
- Discuss whether any significant repairs, such as re-roofing, need to be undertaken in the coming year.
What year-end tasks would you add?
Please comment–we’d love to keep adding to the list!
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If you aren’t using the Internet to market your rental property and communicate with your tenants, you’re probably missing out. A new survey confirms what most of us already knew: people are relying more and more on the Internet to find rental homes and apartments; they’re using online review sites to make decisions; and you could improve tenant retention by using social media sites to inform your tenants about the great things happening in your neighborhood.
Researchers at J Turner Research recently surveyed 41,303 apartment home residents about how they use technology to find apartments and communicate with property managers, as well as how they use social media and online review and ratings websites. While this survey focused on residents in larger apartment communities, much of the information is applicable to smaller multi-unit rental properties and even single family homes that are either self-managed by landlords or being managed by property management companies.
The survey found:
- 64% of apartment residents used a rental listing site on the Internet to find their apartment. Craigslist was particularly popular.
TIP: use Craigslist or another rental listing site to advertise your available rentals. Because potential renters are becoming more and more nervous about rental scams, make sure you include a link to your business website. Most scammers don’t have the time to create a professional looking, functional website.
- An overwhelming majority of people didn’t use Facebook or Twitter to find their apartment.
TIP: Don’t advertise your rentals on Facebook or Twitter, especially if you have several available that could clog up your follower’s feeds. Instead, reserve those social media accounts for more friendly, useful posts, such as community events, or interesting photos.
- Prospects rely heavily on apartment community websites when researching apartments. They especially like to see information on pricing, amenities, floor plans, and unit availability.
TIP: If you have a website for your rentals, include a list of available units, with pricing, a page for amenities (including laundry, parking, wi-fi, etc.), and a page for available floor plans. Property management companies should consider listing available rentals on their websites, and should include detailed information for each one.
- Most apartment research is done on personal laptops, not mobile phones.
TIP: Make sure your full website is running well and providing the information renters want before you focus on a mobile site.
- Residents are more likely to use their smartphones to pay rent than to mail in a check by 3:1.
TIP: If you don’t use one already, it really is time to consider using an online rental payment service. Not only do these services make it easier for your renters to pay you, they make it easier for you to track rent payments, and you don’t have to worry about lost checks, or drop boxes getting broken into.
- 1/3 of respondents prefer not to receive texts at all; 62% want to limit them to emergency announcements.
TIP: When new tenants move in and fill out their contact information forms, include a question asking them if you can text emergency information to them, or let them know in your “house rules” that in some emergency situations, you may text them.
- 74% of respondents used online ratings and review sites when they were doing their apartment hunting.
TIP: Whether you’re a property management company for smaller properties or large apartment communities, stay on top of your online reputation by checking review sites and responding in a timely manner to negative comments with positive remarks. Set up a “google alert” with your company or apartment community name so you can track what people are saying about you. And respond to the nice stuff too!
- Respondents visit their Facebook pages 1-3 times a day, and they’re interested in neighborhood information such as restaurants, theater information, and community events.
TIP: Use your Facebook account to let renters in your local area or apartment community know about upcoming events, store openings, and special local deals. Knowing about these events helps your tenants realize they live in a great community. If you prefer to use Twitter, check out this list of Fifty Twitter Ideas for Property Managers and Landlords.
Does any of the information from the survey surprise you? Do you have any tips on how to respond to negative online reviews, or how to use Twitter and Facebook in your business?