Texas Has Fresh Take on Affordable Housing

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Texas Has Fresh Take on Affordable Housing

Developers in Houston and San Antonio are thinking outside the traditional apartment box when it comes to affordable housing options. With home ownership and multi-use options, these developers are making the rest of the country stand up and take another look at Texas.

Midtown Condos Offer Houstonians Downtown Option

Surge Homes has taken over the corner of Isabella and Main streets in Midtown, and will be introducing its mid-rise condos to Houstonians in December 2019. Priced from $150,000 to $600,000, the 208 units offer everything from efficiency lofts to penthouses, all with private garage parking inside the gated complex. But, with a walkability score of 84 out of 100 points, Midtown acolytes may not even need their cars to get around; the METRORail stops just across the street.

All of the units feature fully customizable interior designs, an interior courtyard, fitness center, pool, and owners’ lounge with televisions and a full kitchen for entertaining. It’s a model that Surge first perfected with its development of Parc at Midtown, Upper Richton, and Museum BLVD.

Refurbishing the Heart of San Antonio

Dougherty Mortgage LLC is also leading the way in affordable urban housing in Texas. The company just secured Fannie Mae financing for its 84-unit Balcones Lofts project in Balcones Heights. The unit feature one to three bedrooms in a contemporary design with modern amenities, as well as a fitness center and mixed-use retail space, all in a pet-friendly package.

Affordability is starting to take on new meaning in an urban environment, and the rest of the country would do well to keep an eye on Texas developers who are change leaders when it comes to well-priced design in the heart of the city.

 

Original article: http://www.classamgmt.com/texas-affordable-housing/

 

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Best Practices To Follow for Peak Rental Portfolio Performances

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Written by Michael Blank

In my Bigger Pockets article “3 Key Lessons for Avoiding The Dark Side of Passive Income” I make the case that no investment is or truly should be passive. The same goes for managing your rental or apartment building portfolio. While you don’t need to be involved on a day-to-day basis, you need to establish a rhythm of reviewing the numbers from your property manager and making adjustments accordingly.

I have investors in my deals and so there is a certain amount of reporting that I do for them. I provide them with adhoc updates if there’s something unusual going on. But normally I will give them a quarterly report with a Profit & Loss statement along with any distributions.

When you don’t have investors, you tend to pay less attention (trust me, I know), and this is not good. You should ALWAYS pay attention to your investment, even if you don’t have investors to report to.

Here are the best practices to follow on a weekly, monthly, quarterly and annual basis to make sure your building is performing to plan and maximizing your profits.

Weekly Activities

Proactively Fill Vacancies

You need to know what’s going on with your income. Which units are vacant? When will they be rent-ready? How many viewings were there? How many applications were received? Do you need to adjust the rent or offer incentives?

Review Delinquencies

You want to know which tenants are behind on their payments. Find out from the manager why they’re behind and if legal action is necessary. I’ve found that the right combination is prompt legal action while proactively communicating.

Understand All Bills Paid

You want to understand exactly what bills your property manager paid last week. What was it for, and for which unit? Was it necessary? Could it have been avoided? Could it have been done cheaper?

You want a record of EVERY bill the property manager paid, how much, who the vendor was, a description of the expense, and for what unit. It’s not uncommon for someone else’s bill to show up in your records. Errors are easily made, but no one but you will catch them.

Bulk trash has been a real issue in Washington, DC, for example. This is where your tenants and neighbors throw out larger items that don’t fit into your trash bin. For the last year, the city has been enforcing bulk trash with hefty fines. As a result, my property manager leased a truck to go by each of their properties to pick up any bulk trash to avoid the fines. This is a great service, but each time they pick up any bulk trash, they charge me $65. In the last couple of months, I’ve had about 3 pick-ups per week!

Because I noticed these escalating costs in my weekly review, I was able to address the issue with the property manager. We decided to upgrade to a larger trash bin to see if that would cut down on the amount of bulk trash. We’ll see if it works, but the point is that you’re catching issues as soon as possible so you can make adjustments quickly.

Call Your Property Manager

I’ve found that a short weekly call with your property manager is key to staying involved with the property. Many of the key metrics you need should be available from the property manager’s online management website. Review those first, and then follow up with a regular phone call to ask questions and discuss any issues.

Monthly Activities

Create the Profit & Loss Report

Once per month I create the Profit & Loss statement for that month. The income and expense numbers should not be new to you since you’ve been reviewing them every week. The monthly P&L report shows you trends and lets you see how you’re performing to your projections.

Review Work Orders

Once a month I also review the work orders. I specifically look for two things: (1) Are there any units that are costing more than others? If so, why and what can we do about it? And (2) How long does it take to close out work orders? Establish an acceptable baseline with your manager and then track this metric. Work orders that don’t get addressed on a timely basis can result in unwanted turnover.

Once Per Quarter

Make Distributions

Once per quarter I pay myself and my investors. You already have the P&L report done from your monthly activity. The only other thing you have to do is create a cash flow and bank balance report: see what you have in the bank account, deduct any bills that are due in the next couple of months (like real estate taxes or larger repairs). Keep a reserve (this will vary, but you always want a reserve in the account!). Whatever is left is money you can distribute.

Analyze Turnovers

If we’ve turned over any units in the past quarter, I want to understand why they turned over and if there’s anything we could have done differently to avoid it. I ask my property manager to talk with the tenant to find out why they’re moving out.

If you feel you’re having an issue with turnover, one thing you can also do is to mail a questionnaire to each of the tenants with a self-addressed, stamped envelope to get feedback from them. What do they like about living at the property? What do they feel you could do better?

Once Per Year

Review All Contracts

Once per year I review all of my contracts, such as insurance, trash, landscaping, snow removal, and common area cleaning. I may bid out some or all of these contracts to see if I can save any money.

Complete Your End-of-Year Report

Again, even if you don’t have investors in your deal, I think it’s critical that you develop the discipline to actually write an end-of-year report. Include the annual P&L with the monthly numbers as well as your budgeted P&L. If the actual numbers were significantly different from your projections, explain why. What can you do differently in the next year?

Create the Budget for Next Year

Based on the past year’s performance and the changes you want to make, create the Pro Forma for the next year. Get your property manager’s input and get them to commit to it. Then track your actual performance as you repeat the cycle of review and adjustment.

Conclusion

It’s a mistake to let your property manager do whatever they want without ANY oversight from you. Interact with them frequently and review the key metrics regularly, as I described in this article. If you do, you can make adjustments promptly and ensure you’re on track to maximize your property’s value.

This article originally posted on http://www.themichaelblank.com/

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The Anatomy of the Millennial Renter

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Our friends at SmartMove conducted research on younger renters and put together an infographic on the Anatomy of a Millennial Renter.  The study discusses millennial renter’s values, priorities, characteristics and rental property preferences.

The study findings can be helpful for landlords who are renting to this generation.  For instance, 60% of millennials chose to rent.  They also generally prefer to move into apartment buildings. The majority of millennials surveyed cited rental property affordability as the primary reason for renting, likely due to financial constraints such as slow wage growth and large student debt.  While deferring home-ownership until later, millennials are comfortable now with renting now because it appeals to their desire for flexibility and convenience.

The Pew institute cited that Millennials are the largest generation in America. FICO reported that millennials tend to have shorter credit histories and more delinquencies than other age groups.  And, over 1/4th of millennials credit scored in the 300-579 score range.  With so many millennials in the rental market, Landlords should continue to mitigate rental risks and exercise good tenant screening practices.

 

Original article: https://www.rentometer.com/articles/the-anatomy-of-the-millennial-renter

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Are Property Management Companies Worth the Cost? Costs, Pros & Cons

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By Martin Dasko

Purchasing a property and renting it out to tenants can provide a healthy income stream to willing investors for a very long time. But no matter what kind of property you purchase – commercial or residential, single-family or multi-unit – hassles and headaches are inevitable. Lots of patience and hard work go into finding the right tenants, maintaining the property, and acting responsibly as a landlord.

Unless owning and managing rental properties is a full-time job for you, or you want it to be, consider a property management firm to streamline your landlord duties. But before you sign with one, be sure to fully consider the pros and cons of managing your own property versus delegating tasks to a dedicated management firm.

What a Property Management Firm Does

The responsibilities that come along with property management include screening the credit histories and backgrounds of applicants, drawing up leases and processing rent payments, maintaining tax and legal records, and dealing with maintenance issues and complaints that crop up. Depending on the size of your property, these tasks alone can constitute more than a full-time job.

Every landlord has to decide whether the tasks required of property management are better suited to a dedicated firm or handled first-hand. The first thing to consider is whether you have the time and expertise to manage your own property. Are you comfortable doing basic handyman tasks (or do you know someone dependable who is)? Do you know a reliable electrician and plumber who offer same-day service? Do you mind being on call 24/7 to handle issues that inevitably arise? Are you comfortable confronting tenants over complaints or late payments? Or would you rather spend the money to free up your time by delegating these and other responsibilities?

While hiring a property management firm can eliminate after-hours phone calls and mitigate day-to-day hassles, nothing ever fully relieves you of management responsibilities as long as you own the property. Some maintenance issues (such as determining whether to repair an old dishwasher or replace it with a new one) are sure to require you to assess the situation and determine how to proceed. Additionally, certain tenant problems (such as eviction) will need your attention.

If you’re looking for a firm to take every single worry off your shoulders, you’re going to be disappointed – but if you want assistance lightening the load, a good property management firm provides a range of valuable services.

Dealing With Tenants

A big part of what any property management firm (or hands-on landlord) does is deal with tenants on a day-to-day basis. Responsibilities include advertising open units, interviewing and screening prospective tenants, drawing up leases, handling move-ins and move-outs, dealing with complaints, collecting rent, handling late payments and, in the worst scenarios, managing evictions. Property management firms should have a familiarity with legal aspects of the landlord/tenant relationship – and that includes understanding the rights of each party and how to proceed legally in the event of a problem.

Paperwork

For some, one of the best aspects of hiring a property management firm is that it handles a good deal of the necessary paperwork. A firm can relieve you of finding and screening tenants, checking credit reports, conducting background checks, drawing up lease agreements, and billing and accounting for monthly rent. Also, if you offer subsidized housing, you know that a fair amount of additional paperwork is required to be maintained.

If you only have one or two rental properties with long-term tenants, dealing with paperwork shouldn’t take more than a few hours each month, nor should it occupy more than one drawer of a filing cabinet. However, if you own an entire building with a high turnover rate, that volume and time commitment can add up quickly.

Of course, even with the help of a management firm, you’re still responsible for maintaining a record of documents relating to taxes, insurance, and mortgage bills – not to mention receipts from the property management firm itself. However, the reduction of paperwork can be worth the fees charged.

property management paperwork

Repairs and Maintenance

If your building has a new roof and a new water heater, it’s a reasonable assumption that you won’t be called upon for repairs as frequently as you would for an older property with older features. If the roof and plumbing are old, the baseboards are peeling, and the physical structure of the unit has seen better days, you could face frequent calls and expensive repair bills.

As a landlord, you don’t just own a house or building – you also likely own the land it’s sitting on. In addition to the repair and maintenance of buildings and individual units, you need to devote some resources to making sure the land is attractive and well-maintained. That can mean planting and keeping flowerbeds, repairing pathways, mowing lawns, and installing grass sprinkler systems, among other duties.

You may authorize the management company to handle repairs under a certain dollar amount at its discretion, but you’ll still need to authorized bigger, costlier repairs. Your decision as to whether to hire a management firm hinges on just how involved you want to be, and how immediately available you want to make yourself to your tenants.

The Cost of a Management Firm

While cost is a primary concern in contracting with a firm to manage your property, it’s not the only thing to consider.

Cost

Although prices vary from firm to firm and depend largely on the area of the country you’re in, you can expect to pay a residential property management firm anywhere from 8% to 12% of the monthly rental rate, according to All Property Management. However, ManageMyProperty.com puts that figure at 4% to 12% “based on the number of properties you need managed, the number of units in each property, the location and condition of the property, and most importantly, what services are included for that fee.” It also cites property type as a big determining factor. In addition, you may be charged a fee of 80% to 100% of one month’s rent for “tenant procurement,” according to real estate agent Eric Lansing, commenting on Zillow.

Structure

Not all pricing structures are the same. Some companies may charge a flat per-month rate – which again varies according to area, duties performed, and the total value of the rental – while others charge a percentage rate, as noted above. Price can also fluctuate depending on the size and number of properties you own. For example, if you own several apartment buildings, you may get a “bulk” discount that a person with a single home or apartment might not receive.

Term

Typically, a landlord signs an agreement with a property management firm for a certain length of time – 12 or 24 months, for example – with an option to renew. Contracts can be drawn up so that they automatically renew if neither party takes action opposing it. Termination clauses allow for early termination if the property management firm is in breach of the contract in any way.

Services Included

Make certain you establish exactly what maintenance services are included with your fees. It may be that when something needs repair, certain labor costs are included with your monthly flat rate or percentage charge (for example, changing out lighting switch plates and replacing faucet handles) while others are billed individually (such as replacing broken windows and installing new sinks).

Regardless, everything should be clearly stated in your contract. Keep in mind that these fees may require you to increase your rental rate, which could make finding – and keeping – tenants more difficult.

And remember, property management fees can be negotiable. Depending on how much you’re willing to pay, you may be able to get a lower price by sacrificing certain services and handling them on your own.

apartment condo complex buildings

Final Word

If you’re turning a primary residence into a rental property, be sure to consult with your insurance provider to make sure your policy is adequate. You need landlord insurance that can cover you appropriately in the event of fire, vandalism, flood, or any other mishap. And remember that even though you’re delegating tasks to an outside company, the responsibility as owner ultimately belongs to you. In fact, contracts with property management firms typically stipulate that if lawsuits are brought based on the manager’s work, the owner pays all legal fees and any related damages. So, choose who you do business with wisely, and always keep an eye on things – no matter how removed you’d like to be.

Have you considered hiring a property management company?

 

Original article: http://www.moneycrashers.com/property-management-companies-worth-cost/

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