Property Management Maven

http://www.virginia.edu/uvatoday/newsRelease.php?id=7838

While the Central Virginia area has been fairly immune to the foreclosure crisis effecting CA, FL, AZ and other states, we are not immune to the “fall out” from incoming area new-hires from those same areas who are unable to sell their current homes.  If they are fortunate enough to have good long term tenants in their current home, they will be better able to weather the real estate market in those areas while leasing a home in Central Virginia.

I find myself giving property management advice to my current renters since they are NOW landlords themselves.

Two property owner/clients I fired in the last 2 years now want to come back.  I’ve never had this happen before that I can remember.

One client did not like the repair/rennovations I suggested for long-term holding of their property so I suggested they find another property manager.  They elected to try to sell the property and had their Realtor handle the temporary leasing of the property.  Well, it did not sell, their “faux” property manager failed to use the correct leasing forms and lead disclosure, the tenants are gone and the property owners have had no income since December.  I’m going to have to think about this one as they may have other issues with the property.

The second set of clients were “new” and after an hour property presentation, 19 page management proposal and numerous e-mails, they wanted to choose the tenants, I said NO; they did not want to repaint children’s rooms to a neurtal color and they did not want to include yard service as we originally discussed.  Since I had very little time invested in setting up the property, I suggested they find another property manager who would agree to their conditions.  Evidently, they made the same demands of other PMs in the area and got similar responses and they now feel that my management program and marketing efforts are superior to the other area property managers they talked to and still want me to handle their home.  I’m leaning toward NO as I see similiar conflicts in our future relationship.

I now see why many property managers are electing to charge a set-up fee when taking on new management accounts * I charge a $400 fee if the 2 year management contract is cancelled within that time * I’m going to pay more attention to the time I invest in setting up a new property and consider it more seriously.

I just wanted to thank you for taking the Deadbeats and their 4 children.  I know they presented their “prior landlord” as a heartless B-witch and that the property they rented was full of mold; however, the truth is that they were late 3 times with their rent in the FIRST 6 months of their 12 month lease and I had placed them on CERTIFIED/BANK funds only for their FUTURE payment of their rent.  I allowed them to pay their December, 2008 rent on the 15th and I agreed to waive their late/notice fees provided they were not late for the remainder of their lease. 

When they did not pay their January, 2009 rent on time, I served them with a 5-day pay or quit and filed the unlawful detainer/eviction on them on the 12th of January.  They then proceeded to bring up mold, as well as many mis-assumptions regarding the Virginia landlord tenant statutes.

They failed to appear in court; however, they advised the judge via a fax that they would be willing to leave the property in 30 days.  The judge awarded me immedite possession and I filed for a writ of possession that same day.

I advised them I would stay their  removal by the sheriff for a week so that they could move over the following weekend which is when they contacted YOUR real estate agent and offered to lease your beautiful home.  It is unfortunate that your Realtor failed to call me for a reference on them or check the county court website which shows the eviction I had filed. Had your agent run their credit report, they would have noted my inquiry in July, 2008 and that should have triggered a suggestion that they call me directly and verify their story regarding the property they were leaving so abruptly.  Had your agent driven by the property they rented from me, he would have seen a 3 year old $350,000 home, much larger than your home and in much better condition.

Again, thank you for taking my deadbeats.  If you and your sloppy real estate agent not taken them as residents for your home, I would have had to remove them through the sheriff, gone through abandonment postings for items left at the property  and notifications per Virginia eviction rules.

Don’t expect your rent for the next few months.  I am having his pay garnished for the judgement for the January rent and I have filed a Small Claims court action against them for the February and March rent. 

Wallace S. Gibson CPM *
Gibson Management Group, Ltd.

A recent posting on the real estate web site, ActiveRain, invites comments on the “Today Show” real estate guru Barbara Corcoran discussing the real estate woes of the country with specific emphasis on renting.  The AR post brought out some heavy comments from landlords and property managers.

The AR discussion dovetails beaufitully with a recent e-mail discussion I had with a prospect that wanted me to come down $200 (20%) on rental price of a home from the rent that had been charged for the last 2 years….I am not going UP at this time of the year; however, my e-mail correspondant insists that rents in Charlottesville are too high and they AND real estate prices have come down….tell that to the City Tax Assessor who when UP on recent assessments - just not as much as the last few years.

As I explained in my e-mail, our area rental home (SFR = single family home) market is extremely tight.  More families moving into the area for grad school, JAG, law and med school are electing to rent rather than buy as they have in the past.  Likewise, the influx of 800+ new-hires at NGIC are also predicted to be renters as they currently own homes that they can not sell and access equity to purchase in our area.

In her Today Show appearance, Barbara Cororan’s discussion emphasised asking for concessions, reduced rent and then going on to the next ad (or Craigslist listing) may well work for listings in Orange County (OC), CA where there are estimated 2200 to 2800 rental listings DAILY on Craigslist…..her suggested process will not work for prospects for local homesin our area as we have no where near that number of rental homes AND our number of rental homes is actually lower than in years past as our “shadow rental market” (unsold homes rented for a short term) have actually been absorbed and are rented.

Knowing how to deal with these prospects is a challenge since many are over-reaching their income capability to move from an apartment to a SFR just as first-time home owners over reached their ability to buy when interest rates were down and they were ignorant that their interest rates would adjust UP in a few years. 

I’ll make rent concessions after I have run a credit report, checked the applicant’s FICO score and have a deal making offer * lump sum rent up front; long term lease; assuming landscape/yard maintenance duties….to reduce stated rent just because the Today Show guru says so is WAY DOWN on my LIST of reasons to reduce the rental rate. 

I’ve just finished Sue Grafton’s T is for Trespass ….heroine Kinsey Millhone, sometime CA PI/process server/insurance investigator does some work for a landlord serving 3-pay or quit notices and after serving some delinquent tenants, she gets a call from the landlord advising her that the neighbor of the deadbeats has reported the residents appear to be leaving and he has to go to San Francisco. He asks Kinsey to arrange to do the CA mandated check-out inspection ….Kinsey responds “Look, Richard, I’m happy to help you out, but I’m not in the property management business. You should really hire a professional to handle things like this.”

Landlord Richard responds “I could, kiddo, but you’re much cheaper. A management company would take ten percent of the gross”.

I won’t spoil the rest of the story, suffice it to say, 10% is CHEAP for what the landlord has to ultimately lay out.

On The Real Housewives of Orange County this week, Jeanna and Vicki will argue about the delinquent tenant Jeanna put into Vicki’s rental property. Both of these women are successful business women * Vicki has made millions in the insurance business and Jeanna is a Re/Max Top Producer and owner of several rental homes in upscale Coto in the OC.

While these storylines make good TV DRAMA and ENTERTAINING READING, they send the wrong message to the public regarding our profession.  When the emphasis is on the COST of professional property management and not the VALUE ADDED aspects that a professional property manager bring to their clients and residents in the equation, we all loose in the depiction…..and in this economy, many absentee-landlords as well as investor rental property owners need professional property managers with the skills, tools and expertise to aid them in managing their investments.  

Area Craigslist rental listings are slowly dwendling, homes are renting FAST and prescreening is even MORE important with gas at $4+/gallon.

I can tell more and more landlords are pre-screening caller/applicants.  Prospects when they call ALREADY know what questions to answer - when they need to move, what kind of pets they have, how long they have been in the area, how many in their family. 

Also, they are spending more time on my web site previewing homes by viewing interior photos and floor plans and charting distance from the property to their work and schools….once they use my website, they can really enjoy the benefits of the mapping capability and neighborhood features.

Although schools and neighborhoods are still VERY important in their selection process, driving distance and commute times are entering the pre-screening conversation more and more.  Questions about appliances, storage and services included in the rental rate are also being asked in the pre-screening contact. 

Prospects are traveling with laptops or using computers at their new job to narrow down their choice and are viewing several properties in a given area at the same time.

I’ve had prospects call me from in front of a property after viewing it from their laptop in their car as they had signed on to a neighbors unsecured wi-fi signal.

It’s good to see prospects are doing their HOMEWORK * I guess that’s why they call it HOME WORK!!

One of the main reasons I have not suggested purchasing condos as investments has been the tendancy to have self-managed board of directors cost ALL owners money.

A few Sundays ago, I was at my office when I received a phone call on one of my rental signs.  The caller identified himself as member of the new board of directors and that my FOR LEASE sign would have to be removed.  For the last 2 years, the new HOA had been self-managed by the developer who obviously had had sufficient sales to trigger the formation of the HOA under the original governing documents.  I asked the board member if he realized the long term effect of not allowing For Lease or For Sale signs and he indicated he thought it would approve the appearance of the property.  I suggested that from 40 years of experience, the opposite would be the case.  I then went to the property and removed my sign.

Rather than getting into a  philosophical discussion, I decided to post a question on ActiveRain - the 80,000 member real estate website…..almost all replies came back that my argument was true.

Most real estate signs are professionally made and well-maintained.  Many agents actually have covers for their signs for storage in their cars, basements or offices.  My signs are stored in my basement and maintained and discarded when they deteriorate.

Most real estate signs actually benefit the unit owner whose unit is For Lease or For Sale in addition to the HOA….In these hard real estate times, marketing is critical and by posting a real estate sign, the agent/owner is notifying adjacent owners that a unit is for sale is a good way to market units in new buildings.  Additionally, unit purchase prospects driving through the development can see other units on the market that may better suit their needs.

Unit owners who can not post a real estate sign in front of their unit often post a hand-made sign in the window of their unit…..now that can be TACKY!!

Vacant units that remain on the market in the current real estate environment often remain on the market longer, causing financial hardship on the owners.  If the unit owner goes into foreclosure, any back/deliquent HOA fees are erased and the ENTIRE association membership/other unit owners share in the increased cost of these deliquencies. 

The HOA should ENCOURAGE any and all efforts in assisting in the financial health of all unit owners and that should include getting rid of any onerous rules and regulations including no real estate signs in front of units.

 

Education and experience have always been major differences between individual, private landlords and professional property managers and thanks to the government, the gap is widening.

The availability for private landlords to run credit checks on applicants has become next to impossible.  Unless a landlord has had a home inspection of their office and had the security of their tenant files verified, they are unable to subscribe to credit reporting/tenant screening services.

Almost 5 years ago, the government tightened the rules on the BIG 3 credit reporting agencies who in turn tightened the rules for their subscribers and third party re-sellers of credit reports.  One of the new criteria is that there be a “site inspection” for where reports are ultimatly stored and a review of the office practices of the landlord.  Having a locking file cabinet for tenant records is a “must” and separate area in the house for the “landlord’s business” is also verified.

Most landlords who only have a few rental properties, either won’t pass this site inspection or don’t feel they need the extra expense of a locking file cabinet or lock on their home office so they just pass on this part of the process.  Landlords who are only renting until the “market gets better” rarely run credit reports since they see this as a one-time event.
 
These are the landlords that “poor credit” tenants find and take advantage of.  While first-time landlords BRAG about finding a tenant with their “first Craigslist post”, they often end up having to evict them within three to five months.

Since most of the rental properties in my management portfolio are high-end (rent over $1,000/mo), I am amazed at how some prospects follow the directions, read the instructions and get it right the first time, while some want to short cut the process and waste their time and spin their wheels.

Although my properties appear VACANT on my website, they are actually occupied and the current residents have given their notice so that the property will be available for re-renting on the date specified in our listing.

If a prospect needs an area rental home in July, they should be looking at those homes that will be vacant and available in that timeframe.  Wasting time looking at a property that is available NOW  - 3 or 4 months BEFORE their planned move-in date and then asking if I can hold the property shows a certain lack of logic as applied to the landlord-tenant relationship.  I have actually asked a prospect “nicely” why I would hold a property for them for 3 months in order to loose $5,000 in rental income……I saw the “eye roll” over the phone.

Likewise, if the listing photos and floor plan show 3 bedrooms, why ask me if there is a 4th bedroom?

When there is no photo of a garage, no garage shown in the floor plan, no garage checked in the listing information, trust me, there is no garage….I’m sure.

I love it when they ask if I have seen the property….DU-AH!!!  Maybe it is because I answer the phone or respond promptly to their e-mail inquiry that they think I am “the help”….their treatment of me thinking I am “the office help” is very telling.  Some insist on speaking with Mr. Gibson.  It used to be fun saying….”I’m HE”…now, I just say ”I’m Mrs. Gibson”…..further along in our relationship they should figure out I am female.

When they don’t get the responses they want and tell me they are a would-be client, I advise them that my property owners are my clients, my residents are my customers and I start screening for my customers “at first contact”….sometime they get it, most of the time they don’t.

How a prospective tenant treats me in our phone conversation; in their e-mail inquiry; the questions they ask; the information they have already gotten from my website ALL show not only how interested they are in my property listing but how good they will be as residents during our 12+ month relationship.

Prospects NEVER get a second chance to make a GOOD first impression.