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Five Tips For A Successful Resident Referral Program

Digested from Entrepreneur

One secret to having a successful property management company in Albuquerque and Rio Rancho is to create a the big pool of quality residents to chose from when a home becomes vacant.  The best vote of confidence for our Property Management Lease-up Services comes straight from the mouth of our current residents.  I an surprised at how few companies and landlords incentivize referrals from their residents.  If you manage one property or a thousand units,

If you are considering starting a resident referral program—or already have one that isn’t as successful as you’d like—check out these five tips from Entrepreneur.

1. Make sure residents know about the program. Talk about your resident referral program in every communications channel you have—email, social media, website, leasing docs, staff interactions and text alerts. Ask new rental shoppers how they found out about your leasing services.  That will tell you which communications channels to focus on more.

2. Make it easy. Your referral program needs to be easy for residents to both make the referral and then get credit for it. If it’s a complicated or multistep process, they probably won’t bother. Test out your process on someone who will give you honest feedback.

3. Educate staff. Make sure staff understand how the referral program works so they can answer any questions about it. They can also help promote it in day-to-day conversations with residents.

4. Offer a good bonus. Residents need to feel properly incentivized to send their friends and family your way. Make sure what you are offering is what residents want—and will prompt them to act.  It is not the size of the bonus as much as the usefulness to the resident.

5. Make residents happy. The best promoted, most awesome referral program in the world won’t work if your apartment community isn’t meeting your residents’ needs. People don’t provide referrals to things they don’t like.

Albuquerque and Rio Rancho Rental Investments

A plan for finding the best Albuquerque and Rio Rancho Single-family investment property

The following are a few things to consider when planning on investing in a rental home in the Albuquerque Metro Area.   People have been building wealth by investing in real estate since the beginning of civilization. In Albuquerque and Rio Rancho metro areas approximately ten percent of the single-family homes are an investment property.  Just as every market is different every single-family home is different.  This discussion is intended for the investor who wants to hold their property as a rental for at least five to seven years and not for someone who is looking to “flip” a property for a quick profit. The following are some of the things I have learned over many years of investing for myself and managing thousands of single-family rental properties for Single-Family Home Investors.   These are simply my suggestions.  Be sure to check with your financial and real estate professionals when developing your own plans and benchmarks.

Strategies for finding the right long-term single-family home investment

1. Create a plan. Include in your plan, both the local and the micro local market in which you want your investment. (All real estate is local but market rents are micro local.).

2. Be sure to factor in the vacancy time as well as the cost of getting the property in condition. Inspections are crucial to include in your plan. From the inspection you will be able to assess better the condition of the property.

3. Deferred maintenance is a double-edge sword. Limit your fix up items to carpet, paint, yard work and minor carpentry, or as I call it lipstick and eye makeup. Larger projects often cost twice as much as estimated and take longer than expected.  The loss of monthly income generation plus the remodel cost can be hard to make up in rent increases.

4. If you pay cash, remember to factor in the cost of insurance and property taxes when figuring out the net present value of the initial investment and revenue streams.  Consider using a self-directed ROTH IRA.

5.  Be conservative with  vacancy cost and maintenance cost in your calculations.  For my own calculations I use a three year block of time.  I estimate an average of 18 months leased with four weeks of vacancy and  approximately two and a half months rent as routine maintenance cost.  This does not count any capital improvements.  If you anticipate having to make a capital outlay within five years factor that cost as well.

6.  The investment return % can be calculated using many of the revenue stream present value calculators available on the internet.  I escalate my rent by 2% each year and use a 2% inflation factor from the initial purchase for sales price at the end.  I wantshoot for a 6+% net present value over seven years as my minimum benchmark.

7. There is always a risk that something unexpected can go wrong with the rental process.  People, money and many Federal, State and local regulations are involved.  You can minimize that risk when you hire a local professional property manager with great experience and enough staff.  Murphy’s law of rentals says: if you do not have an expert on your team you will need one.  My corollary to this is: if your property manager does not have enough qualified staff the person you need will be sick or out of town when you really need them.   If you want to do your own maintenance at lease hire a professional for the lease up.  It you have a quick temper, do not do your own maintenance.

 

Albuquerque Rentals And Lead Paint

Nice Homes In Lovely Neighborhoods Can Have Lead Paint

Many popular rental neighborhoods in Albuquerque have homes that can cause lead paint concerns.  Most Albuquerque pre-1977 rental homes are located in the established neighborhoods that mushroomed around the city center in the 1950’s and 1960.  These lovely older neighborhoods especially appeal to young couples who rent as a first step from apartment living and people with young children who want a large yard for the play area.   Although, the use of lead pigmented paint was banned in the US in 1977 due to rising concern over its toxicity, the possibility of lead paint toxicity still remain as long as some of the original home is standing.

Children Chewing on Window Sills Is Not The Issue

The average pre-1977 rental home in these tree shaded established neighborhoods of Albuquerque are usually in excellent repair and have been repainted outside and inside many, many times.  Many people do not realize that simply sanding or cutting into a wall painted with a lead based product can create substantial risk.  If you have owned a pre-1977 rental home for a while or have recently purchased one as an investment you may be considering doing some remodeling such as in the kitchen and bathrooms.  Remember that toxic lead paint may be lurking behind old cabinets, moldings, etc.

Lead-based paint will continue to be a concern in pre-1978 properties for many years to come, requiring diligent attention by all who work in any capacity with renovation or repair. The landlord needs to be aware of potential toxicity of the presence of Lead paint and the regulations that need to be followed.  Studies have proven that protection from the potential hazards of ingesting lead from the paint extends far beyond not chewing on window sills and that adults are at greater risk than originally believed.  The EPA web site contains vital information with which every consumer, contractor and landlord should be familiar. The following link takes you to the EPA Repair, Renovation and Painting Program page. A little time spent in educating yourself can save a lot of grief! http://www2.epa.gov/lead/renovation-repair-and-painting-program

A Little History

In January of 2011 the Environmental Protection Agency established a series of regulations regarding procedures to be followed when areas containing lead-based paint are disturbed in any way. Failure to follow these procedures creates substantial risks to health and can result in very heavy fines

The use of lead based paint came about in part as a result of public health concerns. In the late 1800’s and early 20th century, millions of people worldwide died from infectious diseases. Although the concept of bacterial and viral infections was ill understood, the medical community encouraged people to regularly wash the walls of their homes. Most walls of the day were covered with paper, a fact which made regular washing both difficult and ineffective. Enter the era of paint. People of the time most often relied on professionals to paint their houses and the products of choice by tradesmen contained lead pigments, prized for its shine and durability. The Federal Government even specified the use of lead pigmented, “lead-based”, paint in government buildings.  The detrimental effect of lead on health has long been documented. Studies in the late 1800’s showed the ingestion of lead to be the cause of a wide variety of health problems, particularly in young children. As early as 1904 a link was made between lead-based paint and health problems among children. The wisdom of the day was that even though adults are also adversely affected by lead, they were not at as much at risk since children were more likely to ingest lead. The slightly sweet taste of lead (the ancient Romans added small amounts to their wine) often tempted young children to eat paint chips or “chew on the window sills.”

 

Should you allow cats or dogs in your rental home?

First, I believe renting to people with pet cats or dogs can be good business.   Approximately, eighty percent of the people applying to rent a single-family home own a cat or dog (“pets”).  This discussion is limited to these two types of pets. I do not recommend accepting renters with Parrots, but that is another story for another time.    In my thirty years experience, the risk and the cost of small-unsupervised children causing property damage above the security deposit is higher than the risk and the cost of dog and cat damage. This risk is harder to screen, as Fair Housing Laws do not allow most landlords to discriminate against families with small children.  Pet risk is also much easier to manage, and when managed correctly, pet damage rarely exceeds the security deposit.

The pet owning renter demographic provides a favorable supply and demand curve for landlords.  I would define a low risk renter as: a single professional with no children or pets that also has perfect credit, a spotless background check, plays well with neighbors, and has plenty of income to cover the rent.  Unfortunately, for single-family rental homes this renter is scarce.  They often prefer the no maintenance, amenity laden, high-end apartment over a single family home.  Further, they need to be looking for your rental home when it just happens to be vacant. Since, vacancy is normally the landlord’s biggest expense, occupancy percentages favor renters with pets.

When landlords allow pets their gross rental income is higher.  Renters are usually willing to compensate the owner for allowing their pets.  The common term in our area for this compensation is pet rent.  I recommend pet rent over collecting a separate pet deposit.  In the Albuquerque and Rio Rancho metro areas the landlord must pay interest if combined security deposits and pet deposits exceed one month’s rent. Pet rent is simply a higher rent for the privilege of renting with a pet. Be sure you treat everyone the same as to pet rent.  Further, a pet deposit can only be used to cover pet damage, while a security deposit can be used for rent and other charges the resident may owe, including pet damage. The extra pet rent is is not refundable.

To manage the risk, I recommend my clients accept pets on a person-by-person, pet-by-pet basis. I believe that three should always be the most pets allowed in a rental home. We find that when pets are well screened, pet damage, if any, rarely exceeds the security deposit.

 

 

 

Court Update | Renting to Felons

The court has spoken on renting to felons
WA Attorney General: Racist for landlords not to rent to felons
by: BY ERIC MANDEL, Digital Content Producer Updated: Oct 17, 2016 – 10:36 AM

The Washington Attorney Generals’ Office says it’s racially discriminatory to use a felony conviction against a potential tenant. (AP)© 2016 Cox Media Group.

A recent court filing indicates that the Washington State Attorney General’s Office believes that denying a prospective tenant with a felony conviction is racially discriminatory.

A member of the Attorney General’s Civil Rights Unit served a Consent Decree on Dobler Management Company, a property management firm in Tacoma, after conducting a simulated test on whether the landlord was illegally discriminating against potential tenants.

According to the briefing sent to KTTH’s Todd Herman, in May, the state asked a TESTER to follow up on a rental property advertisement on an internet rental site, which said the apartment complex would automatically deny renters with a felony record. The state’s tester confirmed that the unit was still available and asked if he could apply for the unit despite having a felony conviction. The leasing consultant responded via email that a “FELONY WOULD BE AN AUTOMATIC DENIAL”.

“IN DENYING THE TESTER, THE LEASING CONSULTANT DID NOT CONSIDER WHEN THE CONVICTION OCCURRED, WHAT THE UNDERLYING CONDUCT ENTAILED OR WHAT THE TESTER HAD DONE SINCE THE CONVICTION,” THE STATE WROTE IN A CONSENT DECREE FILED IN PIERCE COUNTY SUPERIOR COURT.

The state explains that there is a discriminatory link between criminal history and restriction of housing:

“In Washington, racial disparities exist in the criminal justice system. African Americans are arrested, convicted, and incarcerated at higher rates than non-African Americans. As a result, criminal history restrictions on housing justified by a legitimate nondiscriminatory interest and is tailored … a housing provider’s blanket policy prohibiting tenants based on criminal history discriminates based on race or color.”

Herman says that this explanation is based on a new theory called Disparate Impact, which was recently enshrined into law by the Supreme Court. He says that this leads to the assumption that if there are unequal outcomes between races, that tacit racism exists, even without any intent.

The AG’s decree comes on the heels of the Seattle City Council’s renter protection ordinance in August that made it so landlords can no longer choose which tenants they believe will be best. Seattle landlords instead have to choose the first applicant who qualifies. The goal is to prohibit discrimination against people with different forms of payment, such as vouchers and subsidies.

In the case of the State of Washington’s vs. the Pierce County property owner, the AG’s office seeks financial penalties and wants to force property owners into sensitivity training on the issue.

The attorney’s office representing the management company told Herman that there was “absolutely no engagement or outreach” by the AG or any housing regulator on this “novel” theory of liability, adding that the AG Ferguson’s office “began actively and aggressively ‘shopping’ for apartments under the guise that they had felony convictions.”

The defense says that the amended Washington RCW directs that a background check, including a prospective tenant’s “criminal history” is authorized.

Herman likened Ferguson’s standard as a form of blackmail. He says the logic is backward: “You can’t ban felons because there are more African-Americans who are felons. Therefore, if you don’t want felons living in your building, you are a stone-cold racist.”

Herman says the AG is using a “web of dictates” rather than looking to change the standards and deal with the real issues: Getting families back together, increasing graduation rates, etc.

“Is there any concern here in this state at all about why — Why more African-Americans are arrested and charged?” Herman asked. “Or is this the way we’re going to solve the problem, by not letting landlords screen out felons? Which one will solve the problem?”

© 2016 Cox Media Group.

Is Rover a Pet or an Assistance Animal?

Dogs as assistance animal

Assistance Animal and Rental Properties

One common concern for property managers and landlords is how to know if an animal is a valid assistance animal, or a pet in the disguise of an assistance animal in an attempt to get around the landlord’s pet policy or avoiding paying pet rent. Service animals, are not usually a point of contention as they are “workers” and are trained to provide disability-related functions. The contention arises with assistance animals, which have no specific training, and provide emotional support and companionship to help alleviate the symptoms of the disability such as anxiety. The following excerpt that was written for the multifamily housing industry contains one of the best discussions I have come across on the issue of assistance animals. An important caveat, check with a legal consultant if you have a difficult situation involving assistance animals to be sure you comply with HUD guidelines and avoid a possible fair housing claim.

Excerpt: “Clearing the Air On Companion Animals: What Property Managers Should Know
companion-animals” By Tim Blackwell, Property Manager Insider Sep 28, 2016

“While the multifamily housing industry has become pet friendly, some furry friends are catching the ire of property managers. Residents who attempt to bring their pets on property under the guise of them being companion animals are leaving some apartment operators fearing fair housing issues if they don’t comply.

In a spirited conversation recently on Property Management Insider’s LinkedIn group, some said it’s not worth the risk of legal action to fight a tenant who appears to be purposely abusing fair housing protections in order to avoid paying pet deposits, fees or skirt no-pet policies. Others disagreed, saying that if such situations are handled in accordance with the laws, properties can minimize the threat of a fair housing claim.

“It is important to ask the prospective resident what type of service the animal provides” said Billy Rosenberg, President of Infinity Residential Inc. “If the only service provided is companionship without any additional medical services, the application for request of a service animal can be denied and fees/deposits can be administered.”

Companion or Emotion Support Animals

Companion or emotional support animals fall within the definition of assistance animals under the Housing and Urban Development’s guidelines, “Service Animals and Assistance Animals for People with Disabilities in Housing and HUD-Funded Programs.” While service animals are generally animals that work and provide disability-related functions (such as guiding persons with vision impairments) other animals can be considered to assist somebody who has a mental or psychological disability by providing emotional support and companionship to help alleviate the symptoms of the disability.

Neither type of assistance animal is required by law to be specially trained, and reliable verification of disability and disability-related need for an assistance animal (unless both are readily apparent or known to the provider) is proof enough. By law, housing providers cannot charge extra deposits, fees, impose type, size or breed restrictions or prohibit the animal from living on premises, even if a “no-pet” policy is in place.

But landlords can cover themselves and put the onus back on the resident. Remember that residents must make a request for a reasonable accommodation and housing providers cannot ask the nature of the resident’s disability. Verification that the resident has a disability and that the animal is related to and needed because of the disability, unless both are readily apparent, can be requested. She also said that a certificate or other document indicating the animal is a registered service or emotional support animal isn’t enough. These documents can be acquired on the internet without any proof of disability or disability-related need for an assistance animal.

It is okay for housing providers to set reasonable rules of conduct that residents with assistance animals must follow. If the animal poses a threat to the health or safety of others or damages property, the resident can be held to the same standards as any pet, according to HUD. However, breed, size, and weight limitations may not be applied.

Property managers have a remedy when assistance animal owners don’t follow rules. Property managers can take action against residents who violate the assistance animal rules but should do so with a little extra care, Dover said. For example, warning letters recognizing that the animal is an assistance animal, but reminding the resident that they still must follow reasonable rules of conduct, should generally be issued, rather than serving a legal notice that might be used in the case of a pet rules violation. The landlord can state that if the problem persists, the animal may have to be removed. In any event, the landlord should state that if removal of the animal is required, alternative accommodations will be explored. That, Dover said, can include a request to replace the animal with another.”

Beware The Expert Liar

Ammre notices the expert liarDo not fall for the story of a glib liar trying to fool you into renting your rental property. Although, by far most people are honest and trustworthy, the world is full of expert liars. Most landlords do not have an opportunity to really know someone when they apply to rent their investment home. Decisions need to be made very quickly. People want to move-in, and the landlord wants to begin receiving rent. This is a great combination for an experienced liar trying to get away with something when applying for a rental.

The Rule of Thumb to Catch an Expert Liar

The rule of thumb is to question the veracity of every story or explanation a stranger tells you when they are trying to rent your property. Here are some tips to protect yourself and your property from renting to the expert liar. Be objective about what is on the application and what you are told. This advice is much easier for a professional property manager to follow than an individual landlord. Professional Managers are bound by Fair Housing and other Federal, State and local laws against any appearance of discrimination. The individual normally is not. To abide by these regulations and laws the professional manager must document in their paperwork that they used objective rental criteria before a rental shopper is approved for a rental home. Everything needs to be verified and documented. There is no room for gut feelings.

As an individual renting their own property they are exempt from most anti-discrimination laws and regulations. This leaves room for the owner/landlord to rely heavily on their gut feelings. Many Owner/Landlord’s run credit checks on potential residents as well as standard background reports the same as the professionals. When the individual owner asks the potential rental about something they noticed that put up a red flag they may not verify the answer. This is especially true when the owner/landlord formed a favorable impression of the potential renter. It is human nature to want to believe someone you like. People tend to like expert liars on first impression. They get away with their lies because they are likeable. An expert liar will be very convincing, charming, quick to self-disclose, and can even produce tears for effect. These liars can fool anyone, no matter how honed your liar radar skills.

Always verify what is said. Ask questions and ask for details. If it is not obvious how to verify what they are telling you ask them how you can verify the explanation. In my experience, honest people will accept your need for accountability and take responsibility for helping you verify the information. The person who immediately shifts their attitude from charming to defensive or does not provide the kinds of details needed to verify the explanation is potentially a professional liar. If this happens heavily weigh the red flags, ignore gut feelings, run the issue by an objective person, etc. Be prepared to walk away from this potential renter. Expert liars are not responsible people and in general make poor residents. Further, You may have to deal with the expert liar over maintenance, late rents, etc. for a year or more.

When Your Resident Gets Angry | Angry Residents

this cat is an angry residentDealing with angry residents is the hardest part of being a landlord or property manager. Most of the time when the resident is angry and things turn into a tirade they are not personally abusive. This type of anger is rarely personal. Instead it is an accumulation of several things that are happening in the resident’s life and the incident became the last straw. If the landlord or manager tries to quickly shut the person down, the resident usually becomes more angry and will accuse you of not caring, covering up etc. If the landlord or manager becomes defensive, the resident will usually escalate and repeat the rant over and over. What should the landlord or manager do in these situations?

Empathy is Important for Angry Residents

I recommend using empathic listening skills with angry residents. It takes practice to use empathic listening when you feel under fire. Remember that defusing the resident’s anger will make the time spent worth it: emotionally, financially and in time savings. The landlord-resident relationship is a two-way street. You may be in this relationship for at least one and often three to four years.

To listen empathetically, first, be calm, say nothing, pay attention and listen. Do not interrupt or butt in, give the speaker a few ques so they know you are paying attention. On the phone I like to say “yes?” when they take a breath and in person I nod my head so they know I am listening not tuning them out. When they take a real break, and you get an opportunity to speak, the first instinct is to go to solution or be defensive right away. Before going there train yourself to express your understanding of their complaint and acknowledge their negative feeling toward the situation. Concentrate on feelings such as inconvenience, frustration, discounted, etc. it is important to stay away from personal feelings such as dislike or disrespect that sound personal toward you. Try to remind yourself that you do not need to defend yourself, their anger is not personal toward you. You did nothing personal to them.

Ask if your understanding of the complaint is correct. This gives the resident confirmation that you heard them and that you acknowledged they are upset. For example, “The plumber did not show up when promised and you were very inconvenienced.” Most of the time this is enough to defuse the anger and you can both quickly move toward a resolution of the problem. If the resident starts on another tirade, take a short break. Try to accomplish this without making them feel brushed-off and offended. For example, I usually say ” I will be right back, I need to check my schedule for a moment, to be sure I can spend more time with you on this problem”. In a few minutes they become calmer and you can work on the solution together.

In the rare case that a resident will not calm down quickly, even when you are empathically listening to them, try your best to remain calm, keep listening and letting them rant. Usually the resident’s desire for a solution to the issue will quickly take precedence over keeping an angry rant going and they will wind down.

It goes without saying that you should never stand there and take it when someone verbally attacks you on a personal level. If the anger is over-the-top and directed at you personally, it is abuse. Stay calm, and walk away to somewhere they can not follow you (another part of the office, restroom, car). You can or a colleague can contact them to reschedule a time to re-visit the problem at a later time when the resident is calmer and you can conduct business.

Trends in Albuquerque Sales Market Today

What does the sales market hold

The following are my personal predictions for today’s trends in the Albuquerque sales for the residential market. Although, I am an industry expert, no one can predict with certainty what the future sales market will hold.

Affordability to Drive Albuquerque Sales

First, I believe the affordability of housing and the low cost-of-living in the area will drive housing growth. In return, these drivers along with a recovering economy, will bring an increase in people relocating to the Metro Area. A much needed trend for the Metro Area’s economic growth. Population growth has been stagnant in the Metro Area since the great recession of 2008.

Second, there is an emerging trend for an increase in first-time homebuyers to enter the real estate market. Many millennials are settling down with a life partner and having children. Despite the great recession, owning your own home is still an important part of the American dream. These millennials want a yard and a pet not another high-end apartment. As home buying declined in the past few years, single-family residential rents increased across much of the country, including New Mexico. In the Metro Market it is usually more affordable to buy than to rent. For this reason there has been an uptick in investors buying homes to rent out in the area.

Third, the metro real estate market is benefiting from the the wave of baby boomers reaching 66 every year for the next ten years. The word is out, the Albuquerque Metro Area is affordable and we have a very pleasant climate. The boomer’s children are well established and have family homes of their own. As an example, the Del Webb division of Pulte homes has recently opened up a new 55+ active community in a planned development, Mirehaven, of over 500 homes. This project is selling so quickly they are looking for another Del Webb location in the area. The majority of purchasers in these communities are coming from out of state. Great news for population growth. Locally the 55+ demographic are downsizing in record numbers. This demographic shift will create a large demand for housing in the smaller well-appointed homes.

Market for $750k Plus Homes Lagging

I saved the soft spot for last, the demand for homes over $750,000 has lagged for a long time and will continue to lag until some time next year. The metro continues to be in a 2008 post recession housing slump for expensive homes. As I see it, political uncertainty and the volatility of the stock markets have kept the upper-end homes from rebounding. High-end homes are going for much less than the cost basis of these homes. I believe this market will experience some relief starting in Spring of 2017 when the election dust clears. If you are in the market for a fabulous home in the Metro, now is the time to buy.

New Bill Proposes Tax Breaks For Renters

tax breaks for rentersTax Breaks Bill for Renters

A recently introduced bill in congress would allow renters to deduct from their federal taxes part of what they pay for the primary roof over their heads. “There’s an unequal treatment now of owners and renters,” says Rep. Alan Grayson, a Democrat from Florida, who introduced the bill. He hopes this bill would “level the playing field for renters”. Mindy Ault, a research associate at the National Housing Conference, a group that supports affordable housing, notes that rents are steadily rising, but wages aren’t necessarily keeping pace. “It could be a great boon for renters,” Mindy says.The bill could save some renters thousands per year.

In 2015 approximately 37% of US households were renters according to the Joint Center for Housing Studies of Harvard University. There are an estimated 21.3 million renters in the US who are considered “cost-burdened” by the amount they need to pay in rent compared to their income. Currently homeowners can deduct the interest on their mortgage and property taxes on their home for Federal Income Tax purposes. The bill’s detractors raise concerns that it would have an adverse effect on homeownership and the economy. Proponents say a federal rent Tax deduction would help homeownership, as renters could save more money for a down payment on a home.

Linda Couch, senior vice president for policy at the National Low Income Housing Coalition, says that “the likelihood of the bill being signed into law is slim. Proposed laws tend not to get passed the first time they are introduced”. This bill is very controversial with strong support for and against the bill. Further, the true cost and benefits of such a deduction have been difficult to quantify.