REI INK

Property Management

“Experience” Real Estate

Understanding the experience economy will position real estate professionals to deliver a unique customer experience. Over the past decade, a monumental shift has occurred in the way consumers are experiencing real estate. With the advent of online travel agencies, the mobility of the millennial generation and consumers’ desire for unique experiences, traditional real estate has been going through a transformation.  Understanding and adapting to these market dynamics will create newfound wealth for individuals who position their real estate assets to deliver a unique consumer experience. What’s Driving the Shift It used to be that if you were traveling for business, vacation or other personal reasons, you would book a room at a hotel.  Today, companies like Airbnb, HomeAway, Booking.com and Travelocity, which are referred to as online travel agencies, are giving the consumer access to properties that have been adapted to compete against traditional hotels. The short-term rental market, which consists heavily of single-family homes, condominiums and townhomes, used to be a cottage industry, but it has exploded into a mainstream industry. This past decade was simply the “coming out party” for an already proven option for consumers to experience real estate while traveling.  The short-term vacation rental industry’s rate of growth is 3.5 times the growth rate of the traditional hotel industry. By the end of 2020, the short-term vacation rental industry is projected to topple the hotel industry, according to Matt Landau, founder of VRMB, a leader in the short-term vacation rental industry. The Appeal of Short-Term Vacation Rentals Consumers are increasingly choosing short-term vacation rentals due to the amount of space they offer for the price, as compared to a traditional hotel room. Properties that are converted to short-term vacation rentals are usually more family friendly. As a guest, you have more control over your stay and what you want to experience. You get to choose what type of “hyper local” experience you want to have. You can choose to rent a property in a middle-class neighborhood or the urban center. Or, you can even rent a luxury home and live like you’re a rock star for the weekend. There is also the opportunity to share the cost with fellow travelers. Online Travel Agencies The internet has transformed many industries, especially the travel and hospitality industry. It used to be that traditional hotels had the primary access to mass media marketing channels to drive guest bookings to their properties.  The internet has given birth to online travel agencies, which allow owners of a single property to market their property for rent to a global market.  In addition to market reach, online travel agencies give the property owner the ability to showcase their property in a simple way and to secure bookings from the consumer.  From the consumer’s perspective, online travel agencies give the consumer confidence to book properties owned by a third party due to the amount of information they provide, including reviews from previous guests. Eighty-two percent of all travel bookings in 2018 were made online via mobile apps or websites, without human interaction. 148 million travel bookings are completed online each year, according to TrekkSoft. And, Google data shows that travel-related searches, including “today” and “tonight” have grown by more than 519% in the past five years. Millennials and “Experience Real Estate”? Unlike previous generations, millennials have grown up with mobile devices. They are an extremely tech-savvy generation. In addition, millenials are not content with the traditional approach to work and living—they are living while they work. They are searching to create experiences through their work environment. This is referred to as “bleasure travel,” which is the activity of combining business travel with leisure time. Millennials also spend more money on travel compared to other age groups. In fact, they are predicted to spend $1.4 trillion on travel in upcoming years, according to Hospitality Net. In their pursuit to create experiences, millennials increasingly rent properties. How to Deliver a Unique Real Estate Experience The individual managing the property creates the unique experience. The property manager brings the human, local touch that is all about giving the guest something they haven’t experienced with a traditional hotel.  The consumer needs to feel like the experience was created just for them. An example most people can relate to is Disney’s guest experience. If you have ever visited Disneyland, you know you are experiencing it with thousands of other people, but you also feel like it was created just for you. The small things in the guest experience create the magic.  For example, communication is very important to the guest. An effective manager delivers nurturing communication tracts to guide the guest from the moment they book to after they check out. The complete experience should communicate to the consumer “be our guest”!  Really good managers do many small things that make a difference. They consider the layout of the furnishings in the property, the smell of the property, the ease of property access, the linens, and the speed of response to the guest if there are any issues that arise during their stay. We’ve heard about managers who even cook local, authentic cuisine for their guests as part of their experience. Not only does the short-term vacation market give the consumer an opportunity to experience real estate in a different way while traveling, it also provides an opportunity for property owners to create wealth. Property owners generate recurring revenue from their bookings and realize increased equity over time as they pay down the mortgage with booking revenue. The property owner also has the flexibility to block out time to use their own property. Those who effectively combine real estate ownership with hospitality will capture this exciting market opportunity.

Read More

Technology Is Crucial to Lower Your Property Management Risk

Relying on a firm that uses modern technology and data not only mitigates risk but also creates significant trust and transparency between property managers and their management firms. The property management industry has needed a tech infusion for quite some time. Until recently, the property management space has been inefficient because many companies still manage in a very manual way. They’re mainly reactive, consisting of small and nonscalable teams managing an average of 300 properties and utilizing minimal data and automation. This lack of automation and data results not only in inefficiency but also in increased cost and a high probability of human error. Inefficiency is the main reason for slim profit margins for property owners. It also contributes to lack of trust and predictability. All of this adds up to a bad experience for tenants, which causes higher turnovers, shorter tenancy terms and extra costs. What does this mean for property owners and investors? Higher risk probability. A large part of managing risk in the property management industry is understanding data, which is the primary reason why property owners should be looking at property management companies that are moving forward and integrating technology in their management models. Using the latest technology can streamline communication and enhance the overall experience of both property owners and their tenants. The key services to look for in a property management firm when you are trying to mitigate risk are: Guaranteed income, even when the property is vacant. Efficient communication strategies. Fixed monthly rates. Proactive technology. Reliability. Let’s take a closer look at each one. Guaranteed Income According to the latest 2020 industry report by property management software company Buildium and the National Association of Residential Property Managers (NARPM), the No. 1 reason property owners said they want to own rental property is to have an active stream of income. Although most property management firms do not offer guaranteed income, it’s important to seek out the few that do. A company that provides guaranteed income ensures that property owners never have the burden of leasing their property to a renter. This is especially helpful for property owners and investors who live in another state or even reside outside the U.S. A company that offers a rent-guarantee program protects a property owner’s income by covering the rent in case of vacancy, moving the burden of leasing the property from the landlord to the property management company. Property management firms that offer guaranteed income ensure that the entire investment in real estate is a predictable hassle-free experience for their clients. Efficient Communication Strategies Data shows that the top challenge property managers face today is providing efficiency and top-quality customer service. As previously mentioned, for many small management firms, streamlining communication and customer service has become nearly impossible because so many still operate their firms manually. Without integrating technology, it’s difficult for these businesses to provide exceptional service in a world that now demands it, thanks in part to companies like Amazon, Uber and Apple. According to the report, more than 70% of property owners and tenants feel that it’s important that their property managers are easy to work with and quick to communicate. They want issues and repairs with the home resolved quickly. Property owners desire regular updates on their rental properties, with 43% preferring updates in real time. Enhanced communication between all parties can also improve overall customer service, which more than half of renters consider to be the most important quality of a property manager. Several tools and technologies are available for removing frustration from the equation. They expedite the communication and repairs processes. For example, look for companies that provide the option to communicate through an app for convenience and increased efficiency. This is especially useful when tenants request repairs, which according to the industry report, is a property manager’s most requested service. Using intuitive technology to streamline communication between tenants and service providers, all parties can track the entire process of the repair through a real-time mobile video and communications platform to ensure top-quality service and timeliness. Fixed Monthly Rates Investors and property owners often take on an exorbitant amount of risk because of unexpected fees. Air conditioning units break, roofs get damaged and pipes leak. Generally, property owners are forced to reach into their pockets to pay for repairs. However, there are some management firms that offer a one-rate monthly fee that never increases, providing a safety net against the inevitable costly repairs. Mitigate risk with a firm that uses intuitive technology to provide you with a fixed rate. Some of this technology uses a sophisticated algorithm that underwrites dozens of different property- specific data points and generates an all-inclusive, one-rate monthly fee for each individual property. Such a plan guarantees the net-operating profits for any rental because it includes a full operating expense protection. Paying a fixed monthly rate guarantees that the management firm will pick up the tab when claims are submitted. But most important, it also helps to remove the risk of repairs, turnovers, maintenance, advertising, listing and other fees. Proactive Technology More and more property management companies are turning to high-tech solutions for predicting repairs and maintenance, which is nearly impossible to do while operating manually. By using high-tech services and aggregating data from the home itself, it is much easier to avoid risk and costly updates. Some companies partner with smart sensors manufacturers to notify property owners of significant updates or repairs to the home before tenants even notice them. The sensors in the home monitor in real time the vital home systems and provide alerts about any changes that can’t be as easily detected by residents. That includes changes in the vibrations of the air conditioning and heating unit, blockage in plumbing systems, electricity pull and more. Reliability All the above can be narrowed down to one significant component that property management companies should have—reliability. The more technology is integrated into a company’s management model, the more dependable and consistent is the company’s communication,

Read More

How to Spot Troublesome Tenants Before They Move In

A well-documented and consistently used screening process can help you select better tenants. Residential landlords dream of renting to the right tenants—conscientious individuals or families who care for their rental property, notify the landlord of maintenance issues and pay rent without causing problems. But if you’re in the business of owning or managing residential rental property, you know that tenants don’t show up with a neon sign flashing either “I’m the ideal tenant” or “I’m going to cause trouble in the building and for neighbors.” In fact, a person or family can appear to be a good tenant at first blush and then show signs of trouble after they move in. Four Types of Troublesome Tenants There are four types of tenants who cause the most trouble for residential property owners and managers: The Destroyer. This is the tenant who damages property. This type of renter can cost hundreds, if not thousands, of dollars in repairs, legal fees and eviction costs. The Rule Breaker/Ignorer. These tenants don’t seem to care too much about the rules that tenants must follow when renting a house or apartment. The Tardy Player. This tenant doesn’t pay rent on time. He or she also does not answer calls, phone messages or emails. But they must think they’re better late than never, as they tend to pay the rent late (rather than on time). The Non-Payer. This renter stops adhering to the terms of the lease, including failing to pay the rent on time. They fail to pay, even after numerous knocks on  the door, missed phone calls, ignored messages and disregarded email messages. Tenant Screening Many residential property owners/managers have a tenant screening process. This screening can minimize the odds that a troublesome renter gets a foot in the door and causes a costly situation for you. If you do not have a documented screening process, make it a priority to create one. Using one can heighten your chances of spotting bad tenants. To better assess any tenant’s risk, residential landlords can look at three key items of information before offering a lease. Use all reasonable means needed to discover whether the potential renter: Earns the income they say they make (which is ideally no less than two-and-a-half times  the rental price). Has a good credit history. Has a good rental history that can be verified by previous landlords. Additional Considerations Besides using a screening process, keep an eye out for other warning signs. For an informal-but-also-informative process, try using these three questions to spot an irresponsible tenant before you offer a lease: Does the prospective tenant have trouble with questions on the application? A solid prospect typically can fill out an application in the rental office with only routine effort. They may need to verify contact information for previous landlords or double-check their credit score. But if they leave multiple spots on your application blank or seem unwilling to fill out the application after the initial showing, they may be trying to hide something, or they just may be disorganized and unprepared. Similarly, if a prospective renter cannot give you clear, straightforward answers to routine questions or if they grow defensive and evasive, that is also something to consider. Prospective renters might merely be nervous and unsure of how to answer, or they could have something in their history they don’t want you to know. Are they rushing to rent? A potential renter who is clamoring to move into a rental unit in less than a week could have a troublesome issue such as: Eviction from a previous rental property (or having been served a cure-or-quit notice). Inability to pay rent at their current residence, leading to desertion. A plan to leave a current residence without notice. A lease ran out and the tenant didn’t make living arrangements ahead of time. A disorganized, ill-prepared prospect is unlikely to be a reliable tenant. Is the prospective tenant complaining, demanding and haggling at every turn? Prospective renters tend to show best behavior during initial showings and meetings to impress a future landlord. But some display “not-so-best” behavior, such as: Being overly negative (especially if they only have negative comments about all their previous landlords). Making demands before they’ve signed a lease. Relentlessly pushing for a reduced rent price. These signs point to a tenant who is likely to make excuses instead of timely rent payments. Verify rental history with at least one previous landlord for another side of the story. What’s more, in both formal and informal screening of prospective tenants, consider what your “gut” is telling you. My own experience as property owner, attorney and insurance professional verifies that besides getting the right information, paying attention to your professional instinct helps minimize tenant risk. A robust, thorough screening process can keep troubled tenants from the doorstep. But even with the best process, you might still bat below 1.000. In  that case, the best-case scenario is that a “bad tenant” will be a little messy, a little loud and a little late on rent payments. The worst-case scenario is, well, much worse. Tenant risk is not diminishing. In fact, it’s growing with the market. Between 2006 and 2016, the number of single-family homes available for rent increased by nearly 4 million, lifting the total to 18.2 million  in the U.S., according to the Joint Center for Housing Studies of Harvard University. Tenants’ unpaid rent and property damage can stick you as the property owner or manager with high costs, even after the tenant vacates, fails to renew or is evicted. In that case, consider protecting against property damage and financial loss—and not just with a standard rental deposit and lease terms. One lesser known but emerging option for today’s residential owners and property managers is rent default insurance. When purchased in advance of a lease, it reimburses for loss of rental income and certain eviction costs in the event a tenant defaults.

Read More

The Hidden Weapon: Property Managers

Property managers can be the difference makers for profitable portfolios. Owning rental properties can be an outstanding investment. But managing and growing a portfolio is also full of inherent challenges and risks. Managing tenants, rehab and general maintenance, vacancy cycles, and even legal and code-related responsibilities can be complicated and challenging—often requiring a range of specialized skills, strategic vendor partnerships and operational capacity. Property managers can identify trends across your portfolio that you might not see. Trends they may identify in preventive maintenance, tenant screening and so on can help you to proactively make your portfolio more profitable and create a better experience for your tenants. Enhanced Tenant Experience Tenants are often a real estate investor’s primary revenue source. They can also be the cause of some of your biggest business risks, which is why creating and managing a tenant experience is one of the most important functions of a property management company. Working with a property manager who enhances a tenant’s renting experience can ultimately result in longer leases, fewer vacancies and your ability to maximize rents. A property manager will be available to your tenants 24/7 to handle emergency maintenance repairs, rent collection and move-ins/move-outs. They can also ensure that any damage is handled quickly, so that a small problem doesn’t become a big disaster. Better Operational Practices Property managers should have the resources to facilitate online payments, present key performance indicators and other data, eliminate extended vacancy and provide access to qualified and competitively priced maintenance/repair services. Property managers’ knowledge of local, state and federal landlord-tenant laws will ensure that all practices are in compliance. They should also have adequate processes in place to ensure proper record retention. In addition, property managers are experienced in recovering NSF checks (checks returned for “not sufficient funds”), collecting debts and evictions. Outsourcing these activities removes the burden from your operation and helps to insulate you, the investor, from having to carry out potentially difficult tasks. Property managers can also streamline tenant screenings and enhance due diligence, including checking credit reports, past evictions and criminal history. All of these help to ensure that only desirable tenants rent your properties. The Right Tenants Unfortunately, not all tenants are equal. Putting the wrong tenant in your investment property can significantly affect both short- and long-term profitability. Tenant screening goes beyond the basic credit check. Be sure you have a thorough understanding of the property management company’s tenant selection criteria. In a market with greater than 95% occupancy, it is an opportune time to charge your property manager with finding the optimal tenant. Finding the right tenants and keeping them happy increases the likelihood of lease renewal. A property manager should also look to increase profits by increasing rent at renewal. They will be able to gauge what a reasonable—but also profitable—increase should be, while also staying compliant with landlord/tenant laws. The Upside of Upkeep Most property management firms have standing relationships with a range of contractors from plumbers and roofers to HVAC technicians and excavators. Those relationships can mean less costly and faster repairs. Speed is a critical factor for many reasons, most notably tenant convenience and alternative living expenses. Routine maintenance, upkeep and upgrades increase the value of your property. According to data surveyed by PropertyMeld from  5,800 units across three markets examined over 18 months, preventative maintenance and overall upkeep can also reduce tenant service requests by 38%, thus cutting down on unexpected expenses. Regular inspections will ensure the property is kept in good condition and that the fire alarms are fully functional, while also verifying that all individuals living in the property have been screened and are listed on the lease. At time of move-out, the property manager should conduct a thorough inspection of the property and provide a report of all required and recommended repairs. Property managers can also help enforce that your tenants maintain an active renters/tenant liability insurance policy. Such a policy will help preserve the stability of your primary property and casualty coverage. According to a recent study by SES Risk Solutions, over 55% of all fire losses were tenant-induced—losses that would have been largely recoverable via subrogation, if a renters/tenant liability coverage were in place. Most importantly, a  property manager takes the burden of the day-to-day operations off the investor, allowing the investor to focus on growing the portfolio. A trusted property management firm can also allow investors to expand their holdings beyond a tight geographical area. Finding the Right Property Manager Property management companies often focus on specific property types (single-family dwellings, multifamily dwellings, condominium units, etc.), so it is critical that your property manager has the specialized experience to handle your unique needs. Property managers should be an expert in their respective field and be quick to adapt to changes in the market and industry (i.e., marketing approach, tenant communications, etc.). Select a property manager that wants to establish trust and offers consultative services, such as through a dynamic Not to Exceed (NTE) amount for repairs and maintenance. Additionally, look for property managers that have policies and guarantees that protect you if they are unable to place a new tenant within a reasonable time. Marketplaces (such as Roofstock), and property managers will sometimes waive fees, cover rent and offer one-year guarantees on repairs and maintenance. Several industry events provide great access to property managers, including IMN’s Property Manager Forum. Online searches are also another great place to start. Here are key search terms to use: <Your City> Property Managers <Your City> Property Management Rental Property Management Rental Management Property Management Companies Near Me Ask for recommendations from your local chamber of commerce or property manager associations such as the National Association of Residential Property Managers (NARPM), read blogs and network with fellow investors. It’s also a good idea to talk to your insurance carrier or other risk management specialists to find out if you’re fully covered and to ensure your prospective property management company carries the right insurance.

Read More

6 Keys to Determine the Rent for Your Investment Property

  • by
  • Comment Off
  • 882 views

The rental market is hot, but be realistic when setting rental prices. It’s no secret that the rental market in the U.S. has seen incredible growth in the past decade. Rental prices have steadily increased 3-5% annually, with an average increase across the last decade of about 3.11% year to year. From millennials to retirees, more and more people are choosing to rent rather than to buy. The steady growth of the rental market tempts some owners to think they can charge top dollar. But that’s not necessarily the case. The market may be hot, but you still need to take several factors into consideration to arrive at a fair market rent value for your property.  6 Factors that Impact Rates There are a number of factors to consider besides the popular “Rent Zestimate” as you determine your rental rates. Number of bedrooms and bathrooms Property amenities included (e.g., utilities, lawn maintenance, internet/cable, trash service, etc.) Parking (e.g., no parking, 1-car garage/2-car garage, covered parking, assigned/designated parking, number of spaces) Community/neighborhood amenities included (e.g., pool, fitness center, walking trails, recreation room, laundry facility) Appliances (e.g., refrigerator, microwave, dishwasher, garbage disposal, appliance age and color, electric or gas) Pets (e.g., are they accepted, how many allowed, breed restrictions, weight, age) Walkability Score In addition to these six key factors, another factor that affects rental rates is a property’s “walkability score.” A walkability score is determined by the property’s proximity to such things as shopping, parks, schools, restaurants, nightlife/entertainment and transportation. Research Other Properties Finally, don’t forget to research comparable properties. Knowing the answers to the six key factors mentioned previously (these are also key items you’ll want to mention when marketing to tenants) will be helpful as you evaluate your property against comparable properties in your area that have rented recently or are available for rent. Understanding which properties are currently for rent (i.e., your competition) is as important as knowing what has recently rented. How do you find the rent prices of comparable homes? Several online resources can help you find comparable property rental rates. Websites such as Trulia, Zillow and Rentals.com are valuable resources for conducting your research. The old-school, but proven, way to do research is to go out into the field and research the area yourself. The surrounding homes and the area, in general, will impact the rent value of your property. You can also consider using a local professional property manager. Self-managing your rental property may seem like it will save you money, but it could easily result in unnecessary frustration, wasted time and lost revenue.  By Jennifer Stoops Suggested Posts Perspective Grow Your Network, Grow Your Business by admin 0 Comments Profile Jeff Tesch Take the Reins at RCN Capital by admin 0 Comments Profile Jeremy Brandt: The Innovator Who is Making a Difference by admin Comment Off Regional Spotlight Kansas City: Stable Growth in a Hot Market by admin Comment Off Perspective It’s Time for a Checkup From the Neck Up by admin Comment Off Commercial Evaluating Your Commercial Real Estate Investment by admin Comment Off Commercial How to Become an Investor in the Best Investment in the World by admin Comment Off Risk Management Know the True Cost of Investor Insurance by admin Comment Off Single-Family Build-to-Rent Housing Garners Investor and Lender Interest by admin Comment Off Single-Family Here Come the iBuyers! by admin Comment Off

Read More