Property Management and Investor Information: April 2009

When my son was in high school I asked him if he might possibly want to consider a career in my chosen profession, property management.

As he laid on the couch he stated, "Dad, no one wants to be a property manager."

After I got done laughing I took off for work and left him to his summer enjoyment.  I am happy to report that at 26 my son is now a full time school teacher in special education.  He has a knack for it.

Of  course the answer depends.  But, the issues are many.  First, the homes going for that price or lower in the greater Sacramento area are usually going to have a lot of work needed to make them a rental.  I would venture to say that you will be likely to spend from $15-25,000 in fixup costs for such a home.  Keep in mind the following when looking at homes in this price range:

1.  Fix up costs including issues below the surface like missing pipes, bad roofs, mold, and missing wiring.

2.  The neighborhood is most likely suspect.  Once you fix the property up you may experience vandalism.  This is common in lower priced neighborhoods.

3.  Take a look at the neighboring properties.  Those properties may be a clue as to how much trouble you may experience in vandalism and difficulity in reselling or renting.

4.  Be aware that the rent most likely will be well below average rents.  Why?  Read #2 and #3 above.

5.  Since many people are looking for these deals they will be difficult to attain.  Figure on making your offer on the first couple of days of the property coming on to the market.  Then you will be in a competition with many others.  Not good odds.

My suggestion is to move up a level to homes priced between $50,000-$100,000.00.  These homes are in better neighborhoods and will rent closer to $1,000.00 a month.  They are easier to manager and easier to sell.  

www.HomePointe.com

According to New York-based real estate research firm, Reis Inc., U.S. apartment rents fell in the first quarter and the vacancy rate rose to a five-year high as job losses and falling incomes reduced demand.

Vacancies climbed to 7.2 percent from 6 percent a year earlier and 6.6 percent in the fourth quarter. Vacancies were at the same level as the first quarter of 2004, matching the highest since Reis began conducting its survey in 1999.

The U.S. has lost 5.1 million jobs since the recession began in December 2007. These job losses and falling wages are shrinking the pool of potential renters, bucking expectations that apartments would benefit from slumping home sales.

According to the report, rents paid by tenants fell 1.1 percent from the previous quarter to $984 on average. They were up 0.1 percent from a year earlier, Reis said. And occupied space fell by a net 31,878 square feet, the largest one-quarter drop since the first three months of 2002, excluding apartments lost to condominium conversions. Its survey measured 9.56 million apartments, including 22,833 units completed last quarter.

Reis expects more than 90,000 new units to come to market this year, comparable to the annual average from 2006 to 2008, when the economy was stronger. This suggests rents could fall further as apartment owners offer price breaks.

This does not bode well for the Sacramento area. Sacramento is a middle of the road economy and generally reflects the trends of the national rental market. The bottom line is job loss and population trends.

When I was attending UC Berkeley one of the most interesting courses I took was "History of Blacks in Film" The professor was black and was quite a character. There were over 150 people in the class and he had every persons name memorized by the third class session. He had an amazing memory and was a good teacher too.

One day he announced to the class that this class session was optional. He encouraged everyone to stay and watch this important movie, but no one had to stay and there would be no test. To my amazement the movie was "Singing in the Rain".

Most people stayed and it, of course, is a great movie. I just watched it again for the umteenth time tonight and it was great all over again.

The set up on this clip is when Gene Kelly is leaving his new love, Debbie Reynolds, at her doorstep. They have just affirmed that they love each other. Just before that, Gene, Debbie, and Donald O'Conner have figured out a way to save their movie studio from ruin. Gene Kelly is feeling very lucky and very happy. You will too when you watch this clip.

I know, any property manager with more than a few years experience should hate pets.  But, then there is the real world.  My wife loves her Golden Retriever and so I tolerate it and even show some affection at various times.  I even read the Dog Whisperer.  I am the leader of my pack.

Our property managment company suggests that our clients allow no more than one pet per household in a single family home rental and I think that is a good rule. We have the tenant sign a pet agreeement and pay an extra security deposit.  It normally works out just fine and the tenant gets their deposit back upon vacating the rental.  Since around 63% of the population has at least one pet, it makes sense to do this from the landlords point of view.  Limiting your market will increase vacancy and lower your rent.

Think about it, if my vacancy goes one more month due to not allowing a pet, I just guaranteed that my cost of ownership has gone up say $1500.00.  Allow the pet and maybe my costs will be much less.

We draw the line at one pet, but many people ask us to accept 2 or 3 dogs or cats and dogs.  All I can see is a lot of poop and a smelly carpet.  

Sorry, one pet will have to do for now.

www.HomePointe.com

We get asked this question all the time. I think we get asked it because many property management companies completely close down for the weekend. Many smaller companies struggle with this issue since property management work never truly takes a day or night off. Can you imagine for a moment owning a company with no human backups, and having to be on call 24/7? Easy to talk about your customer service, but much harder to deliver, week(end) after week(end), night after night, holiday after holiday. One of the reasons I expanded my company is that to truly deliver adequate customer service in this business, the company has to be large enough to share the responsibility.

Here is how HomePointe Property Management delivers superior service over the competition.

1. We have more than 10 people in our company that share our 24/7 duties. Each person takes a week in turn taking after hours emergency calls. That way, no one person is on call all the time. Burn out is reduced and the person on call knows that the late night calls will not last forever. Our clients get a person late at night and weekends that knows who to call to solve a problem. This Easter Weekend our on call agent solved a plumbing backup which included getting a plumber to the property, getting a bid to replace the collapsed sewer line, and calling the owner to apprise them of the situation. In the end, the tenant got their sewer line working and the owner got a great price from one of our many vendors that serve our clients.

2. Our property managers and owners meet with many prospective and current clients after hours and on weekends. This weekend I met a prospective client in Land Park with one of our property managers to give him a complete picture of what we could do for his Land Park house. He wants to rent it but needed some advice on what to do. We suggested painting the exterior trim and base and paint for the interior. The hardwood floors already looked great so nothing to spend there. The point is that the owner was only available on the weekend and we happily made the appointment.

3. On Saturday our company showed 54 vacant houses for rent to prospective renters. On Sunday we showed 17 houses for rent. The showings were all printed in the Saturday Real Estate Section of the Sacramento Bee and posted on our website 4 days in advance. We do not want to miss a prospect that might not have internet access so we use the Sacramento Bee, signage, and many websites to attract potential renters. The point here is that four different people from HomePointe were out showing our vacancies over the weekend while many other companies were either waiting for their phone to ring or just taking messages that they will return Monday morning.

If you are needing a place to rent and need to look during business hours or on the weekend, or if you rent from us and need service, or if you need to make a weekend appointment to have us view your rental, give us a call or email us.

Property Management and Maintenance 916-429-1205

Rentals 916-429-1302

www.HomePointe.com

The newest worry for property managers is that their client will go into foreclosure after the manager finds them a tenant.  Some managers are trying to figure out how to solve this problem.

How in the world can you make sure someone will pay their mortgage month after month?  I cannot guarantee that and I do not know anyone that can.  Even if a client owns a property free and clear, they could take out a mortgage next week and then we back in the same boat.  

At HomePointe we sign a management agreement with our client and check the tax records to make sure that the person signing owns the property.  After that, we go to work.  If the property goes into foreclosure, we take care of our end and close the account. 

There is nothing more to do other than worry.  But I choose not to worry about things I cannot control.  Kind of like worrying about a meteor hitting earth.  It might happen, but I can't do anything to stop it.  

My wife and I got into an argument yesterday.  We decided to go for a truckers breakfast on Sunday morning with the morning paper.  We left grandma and the kids to sleep in.

We both just turned 55 and this was the first time we were at a restauant that offered a 55 or over senior discount.  Our bill ran about $20.00 and the discount was 10%, so we could get $2.00 off.  We can afford the $2.00 and my wife thinks that the restaurant needs the money more than we do.  She argued with me but I took the discount anyway even though the cashier carded me!

I think she does not want to be considered a senior, but she claims we should not take the discount since we can afford the regular price.

I run a business and if I offer discounts customers run to grab the deal.  No one has ever said, I can afford more, so I will pay more.  So who is right?

I have to tell you that this new show on HBO is a lot of fun.  It takes you the African country of Botswana, a little country just north of South Africa.  The lifestyle reminds me of people living in the old American west circa 1850 with cars and cell phones.  The characters are funny and the cases that Mma Romotswe takes are interesting and she solves the cases in very clever ways.  

This is a case of HBO gambling that a show can develop an audience without violence or sex.  Family fun for sure.