As a property manager, our ultimate goal is to make investment property ownership a stress-free and profitable experience for the property owners we work with. There are many ways we do that and we are constantly striving to find new ways to meet the needs of our property owners.
One of the many services we offer are video inspections. This includes a recorded walk through of the apartment prior to a new tenant moving in as well as a recorded work through of the apartment when the tenant moves out. Video inspections are also provided when large repairs or improvements are being recommended.
We have found the use of video inspections to be beneficial for both us and the property owners we work with. When a property owner decides to work with a property manager, there is a certain level of trust that has to grow in order for that relationship to work.
For example, when a manager contacts the owner to let them know about repairs needed to the property that will cost the owner money, the owner has two options:
One thing we do to eliminate the potential for an awkward situation and to build that trust with the owners is to conduct video inspections. This is effective in several ways. You can see a lot more detail in a video that you can in photo, and it allows us to zoom in on areas of damage while still providing perspective on where the damage is within the property.
A video can also provide a better overall view of the property. This can be especially helpful when comparing the condition of the property when a tenant moves in compared to the condition of the property when the tenant moves out.
Limitations of video inspections
Video inspections can be limited in that it creates a sometimes long process; particularly if you have to look through an entire video just to find one area of damage. However, we mitigate that limitation by using the video inspections in conjunction with a written inspection report.
For example, if a property has exterior damage that needs to be addressed, we can provide a written report detailing the damage, repairs needed, and expected cost along with a video of the damaged area. In this respect, the video will enhance the information provided in the written report.
Interior video inspections while a tenant is living there are sometimes difficult to get due to valid privacy issues for the tenant. However, this particular limitation can be addressed on a case-by-case basis.
Benefits of Video Inspections
By providing the video inspections along with inspection reports we are building trust between us and the property owner while eliminating a possible awkward situation of the property owner feeling the need to ask for verification of property damage and repair estimates.
Videos are also helpful when a case goes to court. We have found that video is significantly more effective when a tenant needs to be evicted or taken to court and there is property damage involved. Getting a video tour of the damage has a greater emotional impact than photos. The videos can also be used to show a clearer before and after condition of the property in court.
If a deposit is withheld due to damages and the former tenant argues that they deserve all or part of their deposit back, it is the property owner’s responsibility to prove the damages were legitimate and caused by the tenant. This is when before and after videos are most useful.
Video can also be used to lease properties faster and more effectively. How to leverage the power of video to promote your properties will be covered in How to Use Video to Lease Your Property Faster.
Every month we read a book together in the office, and today I’d like to review one that we just went through. It’s called Head Strong, by Dave Asprey. Dave Asprey calls himself a “biohacker”. He’s an individual that is always on the look for new ways to more energy, thinking clear, and being more productive overall; and all of these are accomplished through the implementation of life habits tweaking along with the use of interesting technology applications. He’s done research and experimentation of all of this on himself, and this book is based on those findings. We found several bits of useful information in this read, and I’d like to share a bit of that with you.
One of the more interesting topics he speaks about is that one related to how the energy in our cells actually function, and how their efficiency levels change under certain circumstances. First mitochondria provide cellular energy and are the basis for healthy cellular function. These are the “powerhouses of the cell”, the parts of cells that turn sugars, fats and proteins that we eat, into forms of chemical energy that the body can use to carry on living.
When mitochondrial energy reserves dwindle due to any given cause (being sick, lack of food, etc.), one of the first areas that is affected in our body is our brain; more specifically the frontal area of our brain, the one that takes care of higher thinking and all of that which makes us productive. The back of our brain remains a priority, since it’s in charge of maintaining all of the basic functions that we need in order to not die – It’s also important to consider that the brain uses approximately 10 times more mitochondrial energy in it’s cells than most of our other body parts. In the book, he mentions several tips and hacks designed to help us manage this energy reserves and keep our bodies as efficient as possible, in order to maintain focus and keep our higher thought processes in levels that help us maintain our productivity and creativity.
He also speaks about a concept called “light pollution”. Light pollution refers to how we, in our endless quest to embrace more and more technology into our lives, are bombarded by different spectrums of light which are different from the Sun’s spectrum and overstimulate our visual cortex. This area specifically, burns 10 times energy than other areas of our brain, and when overstimulated, can deplete our energy reserves very quickly.
Some hacks he mentions in order to combat this over stimulation is the use of red lights near screens and other blue light sources in order to balance their output and reduce the impact. This is because blue light is the most troublesome type of light when speaking about visual over stimulation, and fluorescent sources as well as LED bring in lots of it with them. Also, the use of blue light-filtering glasses is recommended, and these can be purchased online. Basically, they work by filtering out the amount of blue light we receive into our eyes on different levels depending on the glasses (these can be easily purchased online if you’re interested).
Wim Hof, also known as “The Iceman”, is also mentioned in his book. He holds several world records regarding to survival and resistance to cold. Some of the techniques used by Hof have been recommended by Asprey. Special breathing techniques and cold therapy can dramatically increase energy, modulate immune systems and hormones in order to help you increase and better manage your energy reserves. These are only a few applications of his work, but more exist – if you’re interested in this field as we are, or are looking for ways to make changes to the quality of your lifestyle, we can’t recommend this book enough.
Usually when we think about landlord and tenant rights, we think about how the law seems a little bit skewed towards tenants over landlords. This turns out to be especially true when speaking about giving tenants the benefit of doubt, and at times even extra rights outside what is outlined in the law, by a judge in certain situations. But where exactly do landlords stand in all of this? Let’s talk a little bit about the most important rights landlords possess at the time of being in a lease agreement with a tenant.
1.- You can ask for as much as you want.
As a landlord, you are entitled to ask for as much money for your property as you want. This is something completely permitted by the law, and you can go as low or high as you desire. However, it’s not wise to go way too high or way too low – we will provide you with advice in regard to this, usually leaning to asking for more at the beginning, and then work it out with the tenant from that. As well as paying mind to market feedback in order to help you decide on a good starting price. Remember you CAN ASK for as much as you want, but you CAN’T FORCE anyone to pay as much as you want. So, sometimes it boils down to negotiating in good terms.
2.-You can set your own terms for the lease agreement
When entering into a lease agreement with a tenant, you have the right to set your own terms for the use of your property AS LONG AS they don’t enter into conflict with what is stipulated by the law. It’s also really important for you not to violate any of the anti-discrimination statutes that the law stablishes (which are ever expanding in different ways from state to state). One way to avoid falling into this when evaluating for possible tenants is to keep your focus on non-subjective aspects, and making your case from them, such as credit history, when trying to filter out potential tenants that have a heavy criminal record for example. You also need to keep in mind that the type of tenants your property will bring in will definitely depend on its level of attractiveness. When helping you find a tenant, we have a very specific screening process that we follow, designed to take all of this into consideration so we can help you find the best option.
3.- You can evict tenants for non-payment of rent and sometimes non-money related situations
The law states that if a tenant does not pay rent, he/she can be subject to eviction by their landlord. It is really important to pay mind to other types of payment besides the official rent amount when considering this option. For example, utility bills can be considered as a form of rent. If tenants are obligated to pay for these according to the lease agreement, their non-payment can be used as cause for eviction. This holds up even if the lease contract has been renewed or still has a longer period of time remaining before it ends. In our case, one of our lease clauses specifically states that non-payment of utilities is considered non-payment of rent and this can be cause of eviction if neglected.
At the same time, if the tenant enters into a violation that materially affects health and safety, you must give the tenant a 30-day window of time along with a notice, to resolve this issue. After this time has passed you can file for the tenant’s eviction if the tenant has not resolved the violation, even if they have been paying rent on time.
4.- You have the right to access the property after a 24-hour notice.
As long as you provide your tenant with a 24-hour written notice, you can access the property for inspection or any other purpose that you as a landlord deem reasonable. This can be made in form of the postal service, or even e-mail. We recommend that along with the written notice, a call is placed in order to let the tenant know a notice has been sent, this way it’s impossible for them to claim to have missed reading the e-mail or the document in paper. It’s important as a landlord though, to avoid entering in any behaviour that could be considered intimidation – as this is not permitted by the law. This becomes even more important for delicate situations in which the relations with the tenant have already deteriorated for other reasons or when an eviction process has been set in place and there is tension between both parties.
You can also access the property without notice if you believe as a landlord that an emergency-type of situation exists (a gas or water leak), and proof needs to be presented in relation to this emergency, in order for it not to be a violation.
5.- You have the right to get your property back in the state you delivered it to the tenant
This pretty much holds up for every aspect of the property EXCEPT for what we know as “ordinary wear and tear”. We will speak more thoroughly about this aspect on a different post, but it’s basically really unclearly defined by the law. In order to counter this ambiguity, we have a very detailed process in which we take photos and videos; then we present potential percentage values of responsibility for both tenant and landlord, and we keep these open for negotiation – usually starting high and leaning towards the landlord’s favor and negotiating from there while making value judgements.
Our aim is to keep this out of court, but if you do wish to take it there, it’s important to consider that if your claim as a landlord doesn’t hold up and you lose, you will end up paying double the value of the tenant’s security deposit -hence why we try to negotiate out of court and try to keep it reasonable for both parties.
6.- Other rights
Just by owning the property, you’re pretty much entitled to a whole bundle of other rights, and you transfer some of these to the tenant, when entering into a lease agreement. For example, as a landlord, you never transfer your rights to your property’s title and deed through the agreement. The only thing you transfer from yourself to the tenant is the right of access for the period to the lease. You keep this right to a certain extent, but as we mentioned before, there are limitations.
This is just one example of those additional rights, and we consider that it’s important for you to be familiar with at least the most important ones, but if you’d like to inform yourself on the details on the rest we offer you a link to the document “Tenant/Landlord Rights and Obligations”, this is a pamphlet provided by the Ohio Bar Association. The link is below.
So you found a house you like that is offered as lease option. What exactly is a lease option? In simplest terms, it’s a way you can participate in home ownership if you’re not exactly ready to purchase a home. There are two parts to this:
An option, or purchase agreement, that allows you an extended time to purchase the house for an agreed upon price. At the same time, you’re getting a lease, so for that period of time, usually anywhere from 6 months to five years, you’re also living in that property and making monthly payments. In some ways, it’s the best of both worlds — you lock in a price and participate in home ownership — even if you’re not exactly ready to own a home.
The option fee which is the money you pay in order to have the right to purchase the property (an option agreement).The owner cannot sell the property once you’ve paid your option fee or and signed your option agreement. The option fee is not a security deposit and is non refundable so you want to make sure you will be able to complete your agreement. The option fee varies between 2 months rent and 10 percent of the total purchase price of the house and typically varies based on the condition of the house, the location of the house, the length of time of the option agreement and the corresponding rent amount. The option fee paid at beginning of agreement will be applied towards purchase as a down payment if tenant buyer chooses and is able to exercise their option to buy per their agreement.
There are potential opportunities to negotiate an option where some of the monthly lease payment is conditionally applied towards a future down payment if and when property is purchased. That is not a guaranteed term, but it can be included in the negotiations.
Overall lease options can be an excellent way to get the benefits of leasing and owning a home. However just like home ownership lease optioning a home is a significant agreement and you want to make sure to get any home you are leasing optioning checked out by a trusted professional before moving forward with an agreement.
Many people that want to begin investing in properties have a very common doubt right off the bat – Should I be registering my Cleveland property with the county and city? And how? This question is pretty understandable, since some new owners are not from Ohio, and some are actually trying to get into the game for the first time, so it’s our job to help you understand how the system works and what is the most convenient path for you.
The short answer is yes, you should register your property. It gets a little more complicated than that though. But let’s take it one step at a time. First, let’s refer to county level. You should definitely register your property with the county. It’s actually a misdemeanor if you don’t. It’s a really easy process, you only need to fill out a form and turn it in, and it’s free. We usually do this for our clients right away, even if they don’t ask us to do it, it’s pretty standard.
Municipality level is different. We take care of business in around 30 different municipalities, and around half of those require registration. Out of those, the cost to register a property varies a lot, ranging from $30 to $325. Then, the enforcement of this registration fee is different as well for each municipality; for example, some of them just make it work with the people that actually register, not trying to enforce it at all; some of them tell you that they will enforce it if you don’t register, but they don’t really have a staff to go after you. So basically, the cost of not doing it varies a lot depending on the municipality. Either way, we always recommend to comply with the law and register no matter which municipality your property is in, it’s the good thing to do, and you’re being a good citizen (regardless of its constitutionality).
Here are a few examples where registration might not be advisable:
The first example would be a situation in which you have just acquired a property, and it’s not registered; or maybe you have owned the property for a long time but never registered it. In the case that they never went after you for not registering check with counsel but it might not be in your best interest to register because: 1) They probably won’t go after you if they haven’t done it before; 2) Even if they caught you, the punitive fee that you would be incurring wouldn’t be much different than what it would be if you turned yourself in for not registering in the past. This type of situation means not registering will may place you in a better situation than trying to comply and actually getting you into trouble.
The second example is related to rental registration. In certain municipalities, in order to register your property for rental, they will freeze your ability to actually lease the property for about 15 days or so until it goes through. This means you’d be losing those days’ worth of rent. Renting the property within that period of time, would incur a violation fee which could be a minor amount in comparison to the extra rent. In this case you might choose to go ahead and rent your property and violation fee.
Whether you should register your property depends entirely on the specific context and your own comfort level however with our clients we always confirm registration by default and register your properties if they are not registered already with the appropriate municipalities.
I’d like to give you some information about corporate entity strategy in order for you to be able to better protect your assets. Even if you find this information useful, remember to always consult your attorney and your certified public accountant before you make any important decisions.
Let’s begin with taxes. Here at RTS we issue 1099s as required for most of our owners based on gross income received by us, when it is received by us. Your money comes directly to us, and when it does, IRS considers that money is becoming yours at that point. So, it’s not the net income you receive after it owner pay out, it’s the gross income we receive in your name. After we receive it, you can use our statements and deduct any expenses off your taxes from that 1099.
If you have a property that is in an LLC, you have certain level of choice in regard to the way you file it. This means you can basically choose how your LLC will be looked at by the IRS. You can file you LLC as a S corporation, C corporation, or a pass-through sole proprietorship. This means that the LLC lets all income and expenses pass through directly to the owning entity, whether it’s a person or another corporation.
Usually, if you have several properties, each with their own special LLCs we recommend to take them and turn them into sole proprietorships, passing all of the income and expenses directly to the owning entity. This allows you to reduce accounting expenses, since you will be doing fewer filings and movements for these properties. This is in general terms what we’ve seen most of our clients that own several properties do (as well as myself), but there could be other advantages or disadvantages related to doing this, depending on the amount of money and context that are being taken into consideration. Either way, always check with your legal advisor and accountant in order to know what’s best for you.
The key to maximizing profitability and minimizing risk as a landlord has a lot to do with choosing the right tenant. That starts with the marketing of the property, and the energy that can be produced off that. There are a few tricks to creating effective advertisements to help find the best tenants for your properties. You can advertise in the newspaper, on billboards, or on the Internet; however, you may be wasting your time and money advertising to people who either aren’t interested in what you have to offer or aren’t qualified to meet your criteria.
A good ad campaign lets you target and attract the kind of tenant you’re looking for. An advertisement works best when it’s appealing. So, before you decide what information to incorporate, think about what characteristics you value in a tenant. Here are some good examples:
· Stable employment
· Pays rent on time
· Has never been evicted or used a landlord as a revolving line of credit
Once you’ve identified characteristics you like in good tenants, think about what factors contribute to a good rental experience for landlord and tenant. What did you as the landlord have to offer your last tenant? Was the last tenant happy and satisfied? Assessing this information will help you decide how to focus on the marketing aspect for the property.
Often you will attract high risk tenants who use landlords as a revolving line of credit when advertising your rental property, so it is imperative that you attempt to identify these tenants immediately. Here at RTS, we have a very specific checklist process for screening tenants and filtering out bad elements for your property. Sometimes we even go as far as contacting up to two previous landlords for the potential tenant in order to verify their background. This can get tricky, since some landlords will lie in order to either keep their tenant (say they’re awful when they’re not) or lie in order to get them to leave (they will say they’re great when they’re not). This is why we have such a detailed process, and it will reduce the risk of you getting a bad tenant for a good property.
It’s important to note that, if the marketing aspect of the property is done right at the beginning, usually bad tenants will filter themselves out even before the screening begins. Rest assured though, that we will do our best to get you the best tenants we can find for you to do business with.
After years of experience in the industry I have learned that it’s a really common practice for many real estate agents to not only mis-value properties during their first encounter with the owner, but also declare a fixed price for it, in hopes of trying to get your business. This goes for both rental price evaluation and sales price evaluation. You would think that, since they are professionals, they probably know about this and have the expertise needed to place a price on your home or apartment with one look. Well you would be wrong.
One very important thing to remember is that value is not a synonym of price. In general terms, the word price represents the amount of money that is asked for in order to purchase a certain something. Pretty basic right? That’s when value comes in. Value represents the actual benefit you are gaining by paying a price at the time you make a purchase. Value is that extra space you would love to have in your bedroom for a triple dresser. Or those extra square feet you need in your backyard for the vegetable garden you want to grow. Or a good view of the beach from the second floor.
And this is why stating that your property is worth a fixed amount and can only go for a certain price is plain wrong. It is wrong because even when an expert is able to assess the approximate worth of a property based its characteristics and recent history, a whole set of additional circumstances go along with that into actually defining the end value of the same property for individual potential buyers.
Maybe there’s a very specific circumstance in relation to the neighborhood surrounding the property that will give one buyer a less attractive standpoint in regards to the value of the property while at the same time, another person will actually offer an additional premium due to the fact that its really close to their workplace. In the second case, as this happens, and this new offer appears due to a single need met by this specific property, the market value begins to vary. This is basic supply and demand going into action.
For this same reason, when stating a property’s potential worth, it’s common practice to use ranges when speaking about actual pricing. This way agents take into account a variation of value that a set of different additional circumstances offer, as well as other changes in market behaviour that could very well affect the value of the property at any given time.
So, if you get to meet a new agent and he/she instantly states a fixed pricing for your property, always remember – they are either lying to you, or they have a crystal ball.