Posts Tagged ‘Property Management’

Collecting Rent with Direct Debit

February 27th, 2012

Having tenants pay their rent by direct deposit tends to be extremely convenient for rental managers as long as everything is going well.

In the absence of difficulties, payments arrive on time, there is no paperwork or need to physically deal with checks or cash and it is typically easy to set up with most banks. The ability to monitor payments online can also be helpful, as doing so can lower administrative costs and time spent on accounting.

The convenience may also encourage tenants to pay on time and in full, and make it more difficult for them to present excuses justifying failure to do so. Whether tenants are honestly forgetful or trying to cheat their landlord, direct deposits may avert problems

Risks of direct debit

There are some potential flaws, however. Landlords and property management companies should ensure they understand any fees being charged by the bank receiving these deposits, and other costs or restrictions.

Bank policies vary somewhat concerning overdrafts on direct deposits, which could be a problem if some tenants are less careful to keep their accounts stocked. It will be necessary to monitor the account to ensure funds were properly received, but this is generally no more work than other methods of collection. When giving banking information to tenants, ensure that only necessary data is shared to maintain security and avoid fraud.

Rental activity will continue with strength, according to MBA

February 22nd, 2012

The latest forecast from the Mortgage Bankers Association (MBA), released during its Commercial Real Estate Finance/Multifamily Housing Convention & Expo 2012, indicates that commercial property will continue to expand this year.

Larger economic factors have come into play, the according to the MBA. While real GDP growth is expected to drop this year, MBA chief economist Jay Brinkman stated that employment has been on the rise since spring 2010. Traditionally a limiting factor on rent levels and the number of new renters, employment’s slow rise is not ideal. With other factors encouraging Americans to rent, however, the fact that it is rising is beneficial.

Those who wish to become involved in the prosperous rental sector may be interested to learn that commercial and multifamily originations rose 64 percent between 2010 and 2011, and are expected to rise further, showing the advantages of rental property investments. A previous drop in originations was caused by the European debt crisis, according to the MBA, rather than problems with the market itself.

With slow apartment construction rates and a growing number of empty single-family homes, rental managers may be able to help property owners find tenants for their holdings and manage them to improve profitability while the conditions are favorable.

Major REITs reveal 2012 projections and 2011 profits

February 21st, 2012

The rental housing sector had a strong fourth quarter, if recent reports from several sizable real estate investment trusts reflect the industry’s status.

BRE Properties reported that earnings during the final quarter of 2011 exceeded projections, with funds from operations more than four-times higher year-over-year. Other indicators also improved, according to Multifamily Executive, although not to the same extent. The REIT projected strong business in 2012, including rent growth in Seattle, the San Francisco Bay Area and Los Angeles.

Associated Estates Realty had similarly positive results, citing net collected rents jumped more than 5.5 percent and also predicting further positive developments in 2012. Also, Equity Residential noted Denver and San Francisco as strong markets, while AvalonBay Communities reported improvements in Boston, San Jose, Los Angeles and San Francisco.

AvalonBay reported that valuations and rents reached pre-downturn levels and attributed the strong 2011 performance to a combination of increasing employment among young workers interested in renting and falling homeownership rates. Plans for new development were a theme when looking ahead to 2012.

Property owners considering expansion may need rental property services to see to their housing and tenants’ needs.

2011 rental prices little changed from 2010

February 20th, 2012

Rental housing market data indicates that rents were much the same when comparing 2010 and 2011, according to credit reporting agency TransUnion.

The company collects information from property management companies, who reported stable rent levels over the course of the past year. High unemployment is a major factor, according to TransUnion, holding back rent growth despite high demand for rental housing.

Despite this, demand is evident in one respect. Rental managers seem to have become more selective about who they offer favorable rent terms to, now that there is a larger pool of applicants to choose from.

TransUnion’s data shows a national average rent decrease of about $11 to $820 between the final quarters of 2010 and 2011. At the same time, average security deposits did increase slightly to $284, up from $269. Markets such as Denver bucked the trend. The city experienced growth in both average rents and deposits. These changes suggest that local factors are strong enough to override national economic conditions in some areas, though not necessarily in others.

The TransUnion report may be unexpected, given real estate data firm Reis’ report that shows vacancies dropped to 5.2 percent at the end of 2011, their lowest level since 2001 and a significant decrease year-over-year from 6.6 percent.

Rental properties sold well as 2011 ended

February 20th, 2012

Real estate data firm Real Capital Analytics recently reported apartment sales were up substantially, reaching $16.6 billion during the last quarter of 2011 to make it the best quarter the market has experienced since 2007.

That level was achieved through a 16 percent quarterly increase, but represents 24 percent growth on an annual basis. Rental managers may be encouraged by this level of demand. While apartments do not necessarily reflect all rentals, those striving to appeal to the modern renter may be interested to learn that garden-sector apartments were particularly strong in 2011.

While they were less strong at the end of the year, garden apartments sales were 47 percent higher than in 2010 and Multifamily Executive notes the momentum is expected to be maintained into this year. This may be a sign of a shift in renter preferences that property owners and rental management personnel can position themselves to meet.

Some submarkets were especially strong, MFE notes. Denver sales volume went up 170 percent and Chicago experienced 140 percent growth, while the Virginia suburbs attracted much attention and saw sales rise 98 percent.

Low-income housing finance becoming easier

February 19th, 2012

Banks have become more interested in investing in community development, as the low-income housing tax credit (LIHTC) industry has become more important, a change from the previous state of affairs.

While the Community Reinvestment Act mandated that banks lend in low-income neighborhoods if they accepted deposits from them, Apartment Finance Today notes, the primary concern for some time was complying with government requirements. More recently, the LIHTC industry has come to be seen by some as an opportunity for profit, rather than just a compliance concern.

Executive Ed Sigler at JPMorgan Chase Bank told the news source that taking advantage of the growth opportunity LIHTC business represents will require the bank to move outside of its traditional investment areas somewhat. Should the interest in LIHTC investments spread, affordable housing financing may be easier to find for some markets.

This could change housing availability, forcing property management companies and owners to adjust. Such a change could be beneficial for the market in areas that have traditionally had difficulty obtaining financing. Sigler referred to Boston, Minneapolis and Nashville as areas with potential.

How to Reject Tenants

February 19th, 2012

Whatever criteria a property management company or landlord uses to choose between or reject tenants, they must be applied consistently to avoid liability.

Federal and state laws protect against discrimination, and it is wise to review a state’s requirements to avoid later legal problems. Standardized lease documents and practices can avoid many potential difficulties, although any documentation should be examined by a legal professional to ensure it does not violate government requirements.

When rejecting a tenant, it is best to do so in writing. Keep a record of the communication and any others before or after, for corroboration in case of a complaint. The credit reporting law requires that applicants be informed if they were rejected because of their credit report, and provide the name, address and phone number of the credit reporting agency.

The Fair Housing Act forbids discrimination against children, elderly or disabled residents, pregnant women or against anyone based on their race, color, national origin, sex, religion or family status. Outside of those requirements, however, landlords can deny applicants for any reasonable cause, unless state laws say otherwise.
These factors are what make standardization so important. A record of consistent reasoning and documentation can confirm that a rental manager or owner is following procedure, not making exceptions to benefit or harm specific applicants.

Accessibility concerns are part of due diligence

February 19th, 2012

Investors should examine accessibility as part of their due diligence when looking at a property, since federal and local codes may mandate certain standards.

To evaluate an existing building’s accessibility, experts told GlobeSt.com an accessibility survey or review may be appropriate – one that studies paths of travel, parking spaces, signage, restroom and guestroom design and other features. If a property does not meet legally mandated accessibility requirements, then the owner may be liable.

Rental managers and owners should study local laws and review federal requirements under bills such as the Americans with Disabilities Act, which lay out applicable regulations.

GlobeSt.com notes that accessibility surveys are often separate from reviews focused on a property’s condition or other concerns. Even if accessibility issues are not mandated, the property owner and manager should be aware of how accessible the rental is so that they can communicate any desirable features to prospective tenants.

Learning about potential repairs or adjustments ahead of time can avert compliance issues and give investors a clearer picture of any costs associated with owning a particular property.

NMHC quarterly survey shows positive development for rental industry

February 18th, 2012

The National Multi Housing Council’s latest quarterly survey revealed improvement in all measured areas of the multifamily industry, the seventh quarter that has been true out of the last eight.

All four indices went up, according to the organization. The Debt Financing Index reached 74 from a previous level of 70, with half of respondents saying now is a good time to borrow, compared to 22 percent a year ago. Meanwhile, the Market tightness Index grew to 60, while the Sales Volume and Equity Financing Indices finished the quarter at readings of 50 and 60, respectively.

All grew except the sales volume index, which was previously at 54. This was the lowest it has been since July 2009, but marks the tenth consecutive quarter it has been measured at or above 50.

“In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch-up to the growing demand for rental housing,” said NMHC chief economist Mark Obrinsky.

He predicted the pace of transactions is expected to slow in 2012, but also noted long-term demographic shifts seem to favor rental housing. These trends could be beneficial for all investors and rental managers not just those working with apartments, particularly with the currently limited supply of housing and affordability issues of homeownership.

What to Look for in a Tenant?s Financial History

February 17th, 2012

When examining a prospective tenant’s financial history, there are a number of signs a rental manager can look for to separate good renters from those better avoided.

It is important to apply any financial criteria for renters consistently, regardless of what they are, in order to avoid discrimination. Otherwise the property owner or property management company may be sued under the Fair Housing Act and other laws.

One real estate investor noted that common criteria include a verifiable income at least three-times the monthly rent amount, to ensure that rent will be regularly paid on time. A credit score limit might be set, or tenants with past evictions can be excluded.

Credit and timing
When examining a credit report, it is important to differentiate between overall activity and recent activity. A stable credit score could be a legacy of better times while a tenant is financially strapped. Alternatively, a slightly low credit score could be the result of a problem years in the past, or trouble with a joint account that is no longer open.

Looking at credit card, automobile, insurance and other regular payments may reveal more useful information about a prospective tenant’s payment habits. A one-time problem, even a serious one such as a foreclosure or eviction, may not reflect the individual’s ongoing circumstances and reliability.