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Apartment Sector to be Among First to Recover

This morning, in an article (Early Surge Seen in Apartment Demand) published in the Investors Business Daily, the apartment sector is predicted to be among the first to experience recovery. While the labor market remains very unstable and this week's unemployment figures (increasing unemployment) don't bode well, the recovery (when it does finally occur) should visit the apartment sector first.

This is welcome news as multi-family housing has, during the current recession, become an euphemism for younger families losing their homes. Mom, Dad, and children are moving in with Grandma and Grandpa. Young single adults have opted for the financial security of living with Mom/Dad in some cases, or a larger number than usual of roommates in the home or apartment.

The central point in all of this is that there is pent up demand for additional living space when the economy improves. Some of that demand is being felt as the economy has improved over the last few months, but it will require a sustained recovery for demand to return to normal levels.

Dealing with Bad Tenants

There are advantages to being a landlord. It can make for a nice additional income enabling one to get ahead financially. This is what everyone wants in today’s financially unstable world. If rental property is selected wisely, the mortgage debt can decrease over time while having a positive increase in cash flow. Sounds good? Definitely sounds manageable when we have easy renters and minimal upkeep.

But with those problem-free tenants, we also encounter the opposite extreme. One of the most difficult things to deal with as a landlord is bad tenants. These tenants can range from being vicious criminals, to trashing your property, to not paying rent, or to being sue-happy. However there are some things we can do to protect ourselves as landlords, but still we must proceed with caution.

• Resident Screening. To help sift out potentially bad tenants, the first key step is to screen them. Check if they have a criminal history, contact past landlords -- use every resource to make a decision whether to even accept a tenant in the first place.


• Detailed Rental Application. Get as much asset information as you can on record and then you’ll have this for collection purposes if necessary.


• Strong Lease Agreement. Know the lease and the law. Lease Agreements should be specific to your state. Make sure policies are clear, clarifying how and when rent is to be paid and the penalties for late payments, criminal behavior, and dirty and damaged apartments. Also include some kind of peace and quiet phrase, covering any type of complaint that could be possible from other tenants. Even have signed leases for every adult in the apartment/house, sending separate notices to each of them. This can help you avoid sticky situations in the future where one roommate may not receive a notice or when evicting there’s another tenant living there and you have no signed lease with them.


• Divulge Legally-Required Rental Disclosures and Abide with the Eviction Laws. If renters don’t pay, their lawyers will be seeking out any disclosures that weren’t actually ‘disclosed’ to the tenants. Find out what your state requires or you may be out on rent. You can do this by reading your state’s landlord-tenant code directly, hiring a real estate attorney, or using an online landlord form system. Also comply with laws when evicting a tenant. Once again you can hire a real estate attorney or an eviction specialist which can get expensive. Best advice: do your homework first, know the laws as it will save time and money if put in a difficult situation.


• Provide a Succinct, Written Notice. This will be an explanation of the expectations of the tenant. For example, they’ll be expected to leave by a certain time if rent isn’t paid or damages aren’t fixed. This will provide documentation in case you need to take the tenant to court for unpaid rent or damages.


• Offer a Deal. The aim here is to have the tenant vacate quickly. Avoiding eviction for the tenant can keep their credit untainted and can also save you paying high legal fees which may be higher than the ultimate amount you’ll be able to get from the tenant. Judgments against the renters can be on their credit for years and this information may help motivate them to get out fast, leaving no mess behind.


• Treat all Tenants Equally. Never single a tenant out. The Fair Housing Act safeguards the tenants. Even with evictions, you can’t threaten tenants. If they’ve filed a complaint against you, it would be looked upon as retaliatory. And when sending notices, give nonpayment notices to all the renters at the same time.
  

Showcasing our Investment Property

Purchasing property is generally seen as a good investment. Whether the economy is good or bad, people always rent. The first step is to choose the right property in an ideal location. The second key step, which is often overlooked, is the showcasing of the investment property. The interior can be cold or welcoming and this could then result in more or less value for our rental property. We’ve all heard the tricks of baking bread or cookies when we’re selling our home and even the profession of stagers. Yes, people can be paid to come into our home and transform it when it’s on the market to make it more inviting. So as an owner of an apartment complex or some kind of rental property, we must be our own stagers. Tenants don’t have the right to make major changes so they’ll be aware that if the interior is unpleasant, they’re stuck with it. Success here means making money on our investment property and it starts from the very beginning: Showcasing our investment property correctly. Here are the important factors to remember when showcasing.

• Decorating. The two most critical ingredients in decorating are simplicity and knowing your potential tenants. It’s important to keep to neutral colors. These are easy to decorate with as bold colors won’t appeal to all. And who are our potential tenants? Students don’t require luxurious finishes but executives will expect lavish superior finishes.


• Maximizing Spaces. Apartments are smaller than homes so we need to learn how to best maximize the spaces to make it appealing. Are there hidden storage spaces that can’t be seen?


• The Building. Potential tenants will want information about the building, its amenities and management, so have that information easily available. Is there anything distinctive about the architecture? They will be more confident when making rental decisions if they have this information.


• General Information. Make it simple. How many bedrooms and bathrooms? Is there a patio area or a place for tenants to have a small garden? Does the apartment have a garage space or is it street parking? What’s the general location and of course, how much to rent?


• Positive Features. Expand on these as much as possible. What’s striking about the location? Close to good schools, dining and shopping? Is the view spectacular?

Purchasing an Apartment Complex

Apartment Tenants: A Fire Hazard?

Fires can be devastating; homes can be gutted, an apartment complex burned to the ground, and lives taken. But most devastating may be that it could have been avoided. Fires can be caused by various means such as extension cords being overloaded and used improperly, exposed or frayed wiring, candles, lighters, dryers, cooking and grease fires, or heaters too close to other objects or in need of a clean. In many of these situations, prevention is simple by merely unplugging unused or unmonitored electrical equipment.

But apartment managers and rental property owners beware. A new type of fire is on the rise: Meth fires. Meth fires are not an uncommon event anymore and nor are they just for the rural area. Next time when watching the news, take note of where these meth labs are set up. These meth cooks seek out rental properties in suburbia land. It offers them the safe image they're seeking. Take the case that occurred in Cullman, Alabama just last month. This meth lab caused a fire in city apartments. Mark Meherg and Joshua McAlpine were arrested for unlawfully manufacturing a controlled substance. So how was this discovered? It was a scenario where smoke was seeping from the apartment window and a potent chemical smell was in the air. Officers checked it out and sure enough evidence showed they'd been making methamphetamines. This is a Class A felony which can result in life in prison (Read the full story here).

If we were renting to such tenants, it's an environmental catastrophe lurking around the corner. These are people that aren't trained chemists, but yet this concoction of corrosive chemicals is more hazardous than any legal chemical plant. The gases created are flammable and are usually not sealed off therefore a mere pilot light on a heater could put the whole property in flames. And after the fire, who knows the long term effects to the property such as residual chemical contamination, and even neighborhood quality of life. Rental property owners end up paying for this. Why? This meth activity attracts other criminal activity, affecting property values. This then can affect whether good tenants desire to rent where such a history has occurred. Eviction periods and the lack of good renters then directly affect the pockets of the property owners.

As property owners, we need to use all the tools available to know who we're renting to. The most obvious tool -- at least initially -- is to perform a resident screening. This can provide us with crucial information. After the resident screening and our good renters are settled, we must still observe with our eyes wide open. Look for potential indicators of meth use such as falling behind in rental and utility payments, or keeping a filthy house. Other signs may be a change in car traffic (ie. expensive vehicles out of place or cars stopping for short periods of time), or disheveled visitors, visitors bringing in tools to trade for drugs, and children or pets showing signs of neglect.
So if worse case scenario, we do have tenants that are high risk and even a fire hazard to our property, what fire safety precautions must we take?

• Every apartment needs to have a smoke detector.



• Every apartment should have a carbon monoxide detector.



• Learn how to use the fire alarm system and recognize the alarms as well as knowing where each alarm is located.

Property Investing with Wisdom

With the downturn in the economy, property prices are still relatively low and interest rates are down. If we're investors, this would seem like the perfect time to invest in properties, but it's not as simple as purchasing a property and then allowing the rental checks to flow in. Perhaps to some, but as a mere income generator we're not paying much attention to the actual property so how long can this kind of small business truly thrive? There are key choices to make in the process. One of the first questions to ask ourselves is whether we'd look after the property ourselves or hire a property manager. What are the pros and cons of this choice?

Much of this decision depends on our time constraints and financial resources. Do we have the time to screen our potential renters, seek out those overdue rents and then maintain the property? No problem we may think. True if we have good renters, but wait for those bad tenants . . . then the difficulties may arise. If we're serious, we need to do our homework. It may be in our best interest to hire a property manager -- we'd want to take into account their commission rate -- or decide if we really have the time to oversee our properties. We can expect the positive -- all great tenants -- but we must also prepare for the worst. It's only then that we have a chance of running this small business successfully. What kind of information should we be aware of?

• At a minimum, perform a resident screening on our potential tenants.




• Understand the law and how to enforce lease agreements. For example there are ways to quicken evictions with our nuisance renters especially if we're dealing with gangs and drugs. Working with the police could enable us to legally get them out.




• Are we a handyman? Do we know how to repair things on our property?




• Are there safety hazards on our property that we need to remedy?




• Know the neighbors. Let's be courteous towards them and do all that we can to seek out good tenants. We do have a responsibility to the neighborhood and our community.

The Smoke Screen

When I was a kid, smoking was for the supposed cool older teenagers and some select adults. I remember sitting in the back seat of my friend's car enveloped in a shroud of smoke exhaled by her mother. Her mother had pretty painted nails and a long, delicate cigarette held between her fingers, but I had a headache and my eyes hurt. It didn't seem so cool after all and then there were the commercials with the catchy jingles --smoking makes your teeth yellow, smoking makes your breath smellow, I'd bellow that song to my neighbor's girlfriend when I'd jump out from behind a bush, catching her lighting up and wishing to educate her. Nowadays we're a little smarter and more aware of the health risks. By law, smoking is limited in many social gathering places such as bars and restaurants. Part of the solution is to have certain designated smoking areas, but in many places there is a smoke-free policy. No longer can you light-up in airplanes -- nowhere -- not even in the bathroom. With this, it may be due time to have residences that are smoke-free. Perhaps as part of our resident screening process, we may want to screen out are smoking renters.

So this may seem harsh, but it depends on whether you're a smoker or not. It's harsh to breathe in that second-hand smoke also. It's up to the landlords whether they require all or part of the building to be smoke-free. But really, as a landlord, would it really help us if we prohibited smoking? Or would we scare away potential renters and therefore lose money? Let's look at the benefits of a smoke-free environment.

Less complaints from non-smokers.
Insurance premiums will be less in a smoke-free building because the risk of a fire will be less.
Smoke stains from nicotine are dirty and difficult to remove and in order to have a gleaming rental for a new renter -- increasing the potential of renting -- more cleaning is required and therefore more costly.
And the most important issue for everyone . . .
The health issue -- second-hand smoke. Most people will not rent anything if it compromises their health or the health of their family.

What exactly is second-hand smoke? Second-hand smoke is a combination of smoke exhaled by the smoker and also the smoke coming right from the burning tobacco. And what are the risks?

• The immediate risk is irritation. Second-hand smoke can cause a sore throat, nausea, dizziness, headache, cough and eye irritation.
• Long-term -- lung cancer in non-smokers is believed to be mostly due to exposure to second-hand smoke.
• Second-hand smoke contains a number of harmful chemicals, including carcinogens, but also chemicals that can block and harden arteries which in turn can cause hypertension and eventual heart attacks.
• Asthma and smoking don't mix, either by exacerbating the asthma or inducing it.

Cold Eviction Laws?

What do you do if you have bad tenants, they only pay rent when it's convenient, and your good tenants want them out? Simple you say, evict them. Not so easy in Cook County, Illinois. Why? There's a court order that doesn't allow evicting tenants when the temperature is below 15 degrees, it's extremely snowy, or it's holiday time. That's compassion, we say, there's nothing wrong with that. But what if some tenants do have the money but they know they can get away with it when Jack Frost is in town. Who then pays? It's the property owners.

Harold Slinkman, with sons Mike and Mark, own about 50 apartment buildings in the southern suburbs of Cook County. Mike Slinkman isn't pleased with Cook County Sheriff Tom Dart's acts of compassion in refusing to implement court-ordered eviction notices on tenants. Dart denies this, claiming that he only won't enforce it on those people who are stuck in a home foreclosure. However Mike Slinkman claims that it's the 10% who are working the system and who stop paying rent for the cold months of November through February -- these are the tenants causing him grief and that he can't get rid of. Slinkman believes in compassion but also justice. He volunteers in a homeless shelter, he's helped people who have been down and out, but it's the dishonest ones that may cost him his family business.

So is Sheriff Tom Dart being compassionate? His actions and responses don't add up. The original Cook County Circuit Court order had absolutely nothing to do with home foreclosures or the economic difficulties we all now face -- rather it had everything to do with the outside temperature and not endangering people by putting them out on the street. And not only that, but Dart was never consistent, putting people out one day and not the next. It's not a happy story when a property owner has to depend his livelihood on the whims of a Sheriff (Read all the details here).

As property owners, it's essential that we do all that we can to find honest tenants. We then wouldn't need to rely on laws to protect us -- which obviously sometimes don't -- but then again we don't live in Disneyland and we don't all have crystal balls. We can use all tools available such as resident screening on potential renters and clear and concise contracts. After that, it's the whim of the Sheriff . . . or not.

Curb Appeal and Renting

When we're apartment owners and we're looking for good tenants, there are a number of things to take into consideration. We perform the resident screening, ensuring we're not renting out to criminals or deviants or people who have no way to pay their rent. However before we even get to that point and decide whether to rent to prospective tenants, we have to attract tenants. The nicer the curb appeal of our complex, the more likely we'll have renters knocking at our doors and then we won't be so desperate to accept anyone who approaches.
Here are some tips to increase curb appeal:

1. Clean the exterior. Pressure washers are miracle workers, cleaning filthy exterior finishes due to dust, wind, rain or snow. These can be rented, but may be a good investment if it's something needed to be done often.
2. Is your complex an eye-catching color package? Do the bricks compliment the color of the window trims or doors?
3. Trim shrubs and bushes. If the outside is clean and pristine, it hopefully reflects a similar interior. Do these bushes block natural light from entering windows?
4. Widen your walkways so more than one can walk side-by-side.
5. Make your complex unique with pretty seasonal flowers, attractive paving stones, hidden benches -- anything that welcomes potential tenants and makes them feel at home.

Remember, potential renters can lack imagination. If the outside needs some work, they'll assume the inside does also. Even if you're in the middle of renovating, it can sometimes be difficult for others to picture the final result. And if they do show interest, chances are it'll be "let me know when it's complete." So don't be hasty, do your advertising WHEN you're ready for residents and they'll be ready to sign. This way, we'll get the pick of the tenants and we won't have to be desperate when our resident screening process gives undesired results.

A good example of what not to have was found in two three-story apartment buildings in Oakland, California. This rundown complex had no power, no running water and was infested with rats. Apparently the owner had passed away and the widow couldn't stay on top of the maintenance or the payments. The Oakland fire officials condemned the buildings and the nearly 200 tenants were required to leave and go to the emergency shelter. (Read the full story here).

Renters from Hell . . . or Not?

On August 16th, two apartment complexes in Waco, Texas filed lawsuits against a number of former renters being accused of property damage, resulting in hundreds and even thousands of dollars. These apartments are located in upscale areas and the tenants are professionals who would be considered the cream of the crop when considering their finances. The claims are apparently legitimate, however a few seem unjustified. One couple in question was Baylor University associate professor Sung Joon Jang and his wife. And the allegation? Damage to carpet and countertops. They've since prevailed at trial, claiming the apartment was actually in better condition when they left. The prior tenant to the Jangs testified that she and her family caused or inherited these damages. The jury has now ordered the complex to fork up almost $12,000 to repay the Jangs for all their legal fees. Another couple who are currently fighting a property damage allegation -- specifically carpet -- is Mike and Karen Singleton. They said it was a direct result of the toilet hose disconnecting while they were at work. The case is still pending. To view the full story, read it here: Waco Apartment Complexes Taking Many Former Tenants to Court Over Damages

So yes, it's important to protect yourself and your apartment complex but make sure you're going after the right tenants or it could end up costing you even more and the lawyers will be the ones filling their pockets.

When an apartment is really damaged maliciously or through negligence, the landlord faces a number of potential financial problems; repair work, loss of rental income, tenants vacating without paying rent. Or if the residents do stay and don't pay, it can be time-consuming to get them out. Recently I read a post of a landlord who rented to a young couple with a toddler. The background and credit checks went well and they happily moved in. The first month, they paid no problem. The second month, they were a couple of hundred dollars short but promised to pay soon. Long story short -- and you can read the post yourself at Be careful who you rent to -- when they finally vacated a short time later, there were doors destroyed, a microwave oven stolen and dirty diapers all over the floor. And of course no forwarding address or phone number was left behind.

It's crucial that we be as thorough as we can when screening residents and checking references. Obviously for this landlord, even with the background check, it was ineffective. A previous landlord may help decide for you. But check property ownership and make sure prior landlords aren't friends merely playing the part. And if you do decide to rent, get the oral agreement in writing. Write out a lease, be as specific as you must be. Think about when you rent a car, they check for dings before you rent. Do the same with tenants -- write any prior damage -- respect for respect. You'll then both know if damage was incurred. Most importantly, even if you're a veteran landlord, keep up with the changes in the law so that you can protect yourself as best as you can. You want to trust others, but protect yourself first, knowing who's done the damage. Need more convincing? Check out these youtube and metacafe videos. I think it'll do the trick.

Renters from hell

Tenants from Hell