Definition Of Property Management

The 3 Critical Things You Need to Do Once Your Tenant Moves Out

2009-11-19T22:56:00.000+08:00

Now a couple of things have to happen between the moment they move out and when you return that security deposit.

Move Out Inspection

One is - you would do some sort of move out inspection, and you would do that to look for any damage in the property that is over and above normal wear and tear. What is normal wear and tear? Well, that's always a tough one. I would suggest that you probably have a pretty good sense of that yourself.

If the carpets are dirty and could be obviously shampooed and vacuumed and would be fine again, that's normal wear and tear. If the carpets are so dirty and so smelly that you could no longer clean them and bring them back to sufficient condition, that can be considered damage over and above wear and tear, and you can assess the charge to replace the carpet to that tenant's security deposit.

If the tenant does something like break a window, that's very obvious. One of the things we see a lot is that in a kid's room they will put the fancy details on the walls or whatever on the ceiling. We see that a lot. Then you try to pull those details off and the paint comes off with it. That to me is excessive above normal wear and tear that requires you to go back and paint that room again. That is an example of where you can charge the tenant some extra money.

You've got to use some common sense. One of the things I suggest in this course is to have a schedule of some sort that you provide the tenant when they move in. If we have to shampoo the carpets, it's a $200 charge. If a window's broken it's $X. If the oven's knobs are misplaced, it's a charge, or a charge per room for painting.

If you provide that information ahead of time, later on when they move out, you can say, "All right, one, two, three, four items," and then you simply add those items up and then you deduct that from the security deposit.

Other Deposits

A couple other things to keep in mind, again using the state of Pennsylvania, things like key deposit is not really required to be escrowed. A pet deposit is not required to be escrowed. If you have any other types of deposits, you do not have to escrow those in the same manner that we're talking about with the security deposits. Those you could, in theory, put in your general operating fund and go ahead and use that.

Then if you have to, when they move out, you would have to pay those back, of course, but you do not have to escrow those into some sort of special account. I think that's it on security deposit. Again, focus in on what your state requires. Spend a few minutes and read it.

Do Not Abuse Security Deposits

I will just give you a concept here, which is do not try to take advantage of security deposits. It's a bad business practice, frankly, and it's not something I would recommend. I've been in front of a lot of judges over the years. Judges do not like landlords that abuse security deposits. They really take that to heart.

They think that is - well, they don't think, they know that money is the tenants and you are holding it on their behalf. If you try to use that in some sort of abusive way, let's say the tenant's paid late or you and the tenant just never got along, whatever. It was an emotional thing and you tried to make up a bunch of repairs to try to get kind of get back at the tenant and the tenant took you to court, the judge is not going to look very kindly upon that. I guarantee you, not only will you probably lose, you could potentially pay two times the amount that you withheld.

That's the way Pennsylvania works, they can double the fine, but also if you're ever in front of that judge again he'll remember that and you'll really have a damaged reputation in front of that judge. I recommend being very careful. Do not use security deposits in a punitive way against tenants.

Residential Property - A Gamble Worth Taking

2009-11-19T22:43:00.000+08:00

Investing in property is one of the safest ways to utilize any surplus money you have. As the population is increasing day by day hence the property rates are bound to increase in the near future. But if you want to buy residential property then you should definitely check the future plans set by the government. People who don't have enough liquid cash to buy the entire house in one go can opt for a home loan that can be easily availed from various banks all around the world. Buying property is a complex job and you should thoroughly research the market in order to get desired results.

Another profitable way to utilize your money is a residential investment. Having a huge apartment in or around a bustling city is a dream of every individual nowadays. You can choose from a large variety of residential buildings as you can buy an apartment or a villa. Residential investment should always be made carefully so that it provides future benefits to you. You should also analyze various other aspects like parking space, security, distance from the market and connectivity of the place through public transport. Additionally you can also buy a variety of well furnished flats all across the place.

Investing in residential property has become bit of a gamble as no one exactly knows the future trend but the bigger the risk the bigger will be the profit. Residential property generally proves to be very fruitful investment as the prices are bound to increase. On the other hand the property will provide high rental yields which would further help you in the monetary terms. You may be coming across various advertisements of a number of residential areas being newly developed hence investing in such areas can prove to be a profitable decision.

Before buying a residential property you should always consult the experts who will show you the right way. Residential investment Brisbane is proving to be a very profitable deal as the city is rapidly growing and seeing the future needs you could earn huge profits in the coming years. Brisbane is one of the biggest cities in Australia and the population is estimated to rapidly increase in the near future. Hence the city will require thousands and thousands of new homes. A wide number of residential estates are planned in the outer skirts of the city. Buying a house in this area would result in huge profits for the buyer.

A wide number of suburbs will develop into luxurious residential apartments. This is a golden opportunity for you to invest your hard earned money. Even the government authorities have recommended quality housing packages all around the city.

For any help on Investing In Residential Property, check out the info available online; these will help you learn to find the Residential Investment!

Valuation of Property and Its Factors

2009-11-19T22:41:00.000+08:00

A property value in general terms is also called as market value. It is a practice of improving an opinion about the on going value of the real property. The values of these properties are heterogeneous in nature as these prices differ from place to place and from location to location. And this is why two identical properties from diverse locations differ in terms of their value.

The location of the property is one of the major determinants that have a direct bearing on the value of that particular property. As these prices differ according to different locations, there cannot be an centralised auction for these kinds of properties. So this in turn gives rise to the expert and experienced valuation of these real estate properties.

The real estate valuations require license and certifications to perform such activities, and these cannot be performed by any person or private authority. A property appraisal is generally done by a certified and licensed appraiser who is also called as the or the land valuer. Depending on the norms and standards laid by the government under the real estate appraisal section, the valuer appraises the value of that particular property. In most cases, the valuations are based on the market value, which utilises the highest and the best use of the property.

So if you are planning to buy a property/ home for yourself, then are some factors that you should consider while determining the property value. Some of these are:

1) The first and foremost for valuation of property is the location. Place of the property determines the value. If the land/ house is in central and in a hype area then it may have a good price as well as demand. On the other hand if the property is situated in out-skirts of any place than it may lack the demand as well as price.

2) The appraisal of your property can have hype depending on your surroundings. If your surroundings have beautiful parks and pleasant atmosphere than the price of that property will be higher.

3) Another factor for land appraisal is the upgrading of the property/ home. If you upgrade your home by putting some extra painting on the walls and re-decorating the landscape will further increase the chances of property valuation.

4) Sometimes if the buyer is lucky, then it happens so that the seller needs to sell the house as quickly as possible, because of this reason he may take little less amount than the real property value.

5) The last factor of valuation of property is the time period. Generally we can see that most of the properties are bought and sold during the months of March and august. If you sell your property at this period of time, there are good chances of reaping benefits/ profits out of it.

These are some of the points which you should retain before selling as well as buying a property.

Learn the One Secret You Must Know to Prevent Being Burned by Maintenance Contractors

2009-11-19T22:38:00.000+08:00

One of the things you're going to learn is always make sure you are behind the contractor in the amount of work. Let's say the contractor does a $1,000 repair. What I suggest is that you only give that contract $200 or $300 to start.

Make sure he goes out and buys the supplies and all that stuff. He starts the work and gets about 50% done, so then in theory he's done about $500 worth of work but you've only paid him $200-300. That's fine. If he wants to wander off and go do something else and not show up on time you can get out of that and you haven't lost any money.

At that point you maybe give him another $300. Now you're into him for $600. He finishes the job. He did $1,000 of value and you've paid him $600. At that point you would inspect the job, make sure it's done properly, and maybe have your tenant test it. If it's a toilet or something like that, make sure it works and everything looks like it's okay. Then you would pay him the final payment.

What I am saying is always, always make sure that you are paying them behind the amount of work they've done. I guarantee it will make your life so much easier.

Now if that guy wants to start playing games and show up late or go wander off to do another job for a week and leave you hanging, you know what? You can get somebody else to come in and finish the job. It's not the end of the world. It's certainly not what you want, but at least you're not going to lose money.

Don't violate this thing. Don't let the guy talk you into paying you $1,000 up front and then do only $300 worth of work and you can't get him on the phone. That's when you really get upset. That's when you guys are exposed. I'm trying to save you from some of those things. Make sure that you are behind the contractors in terms of payment.

Let's say you can't get there to test it. The contractor's finished and he's really bugging you to get paid. What I would suggest is you hold back 10%. In the example we did, you would hold back $100 until you can get out to test and see what's happened and if the work is done right.

Make sure, particularly in a cleaning or something like that, they clean up properly and stuff like that. If you had to hold back 10%, you at least try to compensate yourself for having to maybe clean up after your own contractors.

Make sure that any time a contractor is going to do work - let's say over $200 or $300, anything significant - that you have it in writing. Have what's going to be done, when it's going to be done, what materials should not be used and things like that. It's very clear and concise.

It's remarkable how often contractors and you a week or two or three later and your recollection of what was to be done changed quite a bit. His recollection will shrink quite a bit and yours will expand. What will happen is you will get into a lot of discrepancies and arguments.

Try to get it in writing particularly if it's significant dollars. If it's over $500 there's no question that it should be in writing. Smaller jobs you may be able to get by without it. Make sure it's writing so it's very clear as to what's going to be done, when it's going to be done and things like that.

Becoming a Property Manager - Manage Your Properties Yourself

2009-11-19T22:36:00.000+08:00

In most cases, once you've started buying properties, you have to decide if you want to hire a property manager or be your own manager. There are pros and cons to both situations, but usually being your own property manager will save you a lot of time and hassle. There are a few specifics you should know when becoming a property manager.

• Know where to find tenants. Exposure to find tenants is everywhere. You just need to know where to look. Go to local realtors; they are the most knowledgeable and will know those who are looking to rent. Finding the right tenants is just the beginning of the job when you're the property manager. You'll also have to keep them happy, maintain the units, handle insurance issues, and any conflicts that arise. You may even have to evict tenants.

• Find a good contractor. There are a hundred things that could break on a house. You need to have a go-to contractor to call when things go bad. You especially need a contractor you can trust. If you don't already have a contractor, call a recommended one, ask for a bid, and go from there.

• Have patience. There will be some difficult times when you're property managing. You may have problems with tenants paying rent or not taking proper care of your property. Just remember, a little patience goes a long way when dealing with your property. You, and your tenants, will be much happier if you are patient and work through issues together.

Really, once you've found tenants and a contractor to trust, you've got the most important things down. It's also important to have good organizational skills, to keep on top of paper work, and maintain good client/landlord relations. In the long run, it's going to save you money and time by becoming your own property manager. Just make sure you've done a little research beforehand.

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Residential Property Management - How to Set Up a Chart of Accounts

2009-11-19T22:34:00.000+08:00

We have several balance sheet accounts. We have assets, cash, receivables - rent that's not been paid but is due - supplies, pre-paid rent, the value of your building less accumulated depreciation, and then you have equipment. There are some other accounts that in theory you could put in here, but it's really not required.

Liability Accounts

Then we have what are called liability accounts. These are your accounts payable. These include salaries payable, taxes payable - real estate or even income taxes. If you have a mortgage on your property, mortgage payments, you would set it up as a liability.

Equity

The third compartment of all balance sheets is your equity. Your owner's equity and the amount maybe you've taken out of your business.

These are a basic, fundamental set of chart of accounts that you can take and can incorporate into your balance sheet. Things like Quicken and most of these software packages will have these chart of accounts pre-populated. You don't even have to worry about it.
A lot of times they have too much. You can start to delete some of them out, because it gets kind of confusing. In particular if you only have a few properties you want to keep it relatively simple.

Statement Accounts

The next are the income statement accounts. We talk about revenue accounts. These are obviously rent. There are late fees, application fees, and potentially interest. If you have a security deposit, then there might be some interest there, and then other. There are potentially other ways that you can earn. You might do some assignment fees and things like that. Those are our basic set of revenue accounts for most landlords to be sufficient.

On the expense side, this is the basic set that we use. There are administrative fees, bank fees, supply expenses, salary expenses, payroll taxes and fees, and things of that nature. Taxes - if you have unemployment or worker's comp you have to file those taxes. There are rent expenses. Maintenance and repairs are going to be a big one for your buildings. If you have a property manager you would have a management fee.

Insurance

Insurance is definitely another big one. You would obviously have insurance or interest expense. You're going to have marketing costs. You're going to have an office, so there are office supplies, equipment, computers, a fax, and things like that. These are all expenses.

Legal and Accounting Fees

There will be legal and accounting fees if you have an accountant or an attorney involved in your business. You would have to expense those things. There might possibly be corporate taxes. There could be court costs if you have to file evictions and things like that and then miscellaneous expenses. These are a basic chart of accounts that you can use to set up your income statement. That's really it as far as the accounting.

A couple of highlights here. Make sure that you do not co-mingle money. Keep things in nice little silos. Make sure if you've got payroll that you take money from the operating account and move it into the payroll account. That way things remain fairly concise.

Make sure you reconcile your accounts on a regular basis. As you grow and expand, as you get more properties, make sure that you are reconciling those accounts on a fairly regular basis. Do not wait weeks or months before you start reconciling your accounts. It will make your life miserable if you have to spend a lot of time trying to reconcile an account six or eight weeks later.

Learn How to Cap Your Maintenance Costs at Only $400 Per Year

2009-11-19T22:28:00.000+08:00

One of the things small owners may want to consider and is really a pretty good idea is what they call these home warranty programs. These programs are basically insurance that cost $400 to $500 per year and you essentially insure your entire house.

There is a deductible and if something breaks and the warranty people have to come out and inspect or repair it, you're only charged $50 or $60 typically. That's your exposure. If it costs them more to fix it, then they have to pay it. You've bought insurance above that. They work fairly well. Some of them work better than others, but for the most part they work fairly well.

They are not always fast. They don't work great, if it's like a heater in the middle of winter. They have to use their particular workman and sometimes it takes a while for them to call back.
Things like that at times are a little bit problematic.

Typically if it's done right these things work and you just have to work within them. They're really not a bad plan at all. They really limit your maintenance exposure. Once the tenant's in there you're only exposed to $50 or $60 if something breaks. It's really something you want to consider.

Rehab Versus Normal Ongoing Maintenance

The other thing you have to remember is make sure you think about whether you're doing a fairly major rehab versus normal ongoing maintenance. Normal ongoing maintenance is something that would be covered under your home warranty program if you were to buy that. That's something to consider.

If you're doing a fairly substantial rehab at the beginning, you obviously would budget and plan for that. Get the rehab done and then purchase the home warranty program.

One of the things I wrestle a little bit with owners is the fact that as a landlord you have a duty to provide good quality safe housing. That means if something breaks you have to fix it. If a window, heater, or hot water heater breaks, you as the owner would have to fix it. That's part of the obligation of being a landlord.

I understand you collect rents and do all that, but in the end you also have an obligation to that tenant to provide them with good quality, safe housing. It doesn't have to be extraordinary housing or anything of that nature, but it has to be good quality safe housing.

If something breaks you really have got to fix it in a fairly timely manner. I guarantee you the number one complaint that we get from tenants is not responding to maintenance items fast enough.

We get a lot of tenants that say, "The landlord will not return my call. Whenever I call them blah-blah-blah." That is one of the ways, and I think we spoke about that the first call. You upset the tenants, they get tired of that, and that's when they leave and you lose a good tenant. If you perform the maintenance quickly and professionally on time, the tenants will be much happier to stay.

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