KNOW THE LAW AND FORMS
Reading up on the landlord laws and necessary forms will mean the difference between success and unnecessary headaches.
Join an Income Property Association
These types of organizations are a great way to build contacts with other multi-family owners, real estate lawyers, and property management firms. They also will be able to assist you with any problems or questions that may arise unexpectedly.
Change the Air Filter
Change each units air filters yourself once a month or every other month. Why? It gives you the opportunity to see how your tenant is living as well as giving you a chance to visually inspect the unit to see if anything is broken or destroyed. You may also be able to see how many people are living in the unit. Just be sure to give 24 hours’ notice before dropping by.
Do an Annual Inspection
An annual inspection gives you the opportunity to thoroughly inspect every inch of your building from closets to kitchen sink. Videotaping your findings would be appropriate in case you will need proof of your findings at a later date.
Some property owners only keep one set of financials for all of their properties. Do not do this! In the event that you decide to sell or you get audited, this will surely become an unbearable headache. Keep each building’s financial records separate.
Tenants and Maintenance
Encourage tenants to report maintenance issues. Though it is not easy to deal with a leaky shower pan it is much better to fix the initial problem rather than dealing with the costly outcome of a deferred maintenance issue.
Survey the rents of competing properties on a quarterly basis—though you do not have to raise rents each quarter. This is a great way to make sure that your rents are keeping within market range.
Screening Potential Tenants
No matter how perfect a potential tenant may look on paper, do a criminal screening, employment verification, credit check and a verification of previous residence. By talking to the owner of the potential tenants last residence you’ll be able to hear firsthand any complaints or trouble the tenants may have caused. If you do not know how to do any of these searches an investigation company can be hired by contacting your local income property association and requesting recommendations.
When Inspecting a Vacant Unit
Though you hope that your tenant has left the unit clean, be prepared for anything. When opening the door to the unit, stand back for a few seconds so that anything that may fall won’t fall on you.
Initial Walk Through with Tenants
Videotape the initial walk through with tenants in order to have a complete account of everything, especially the state of the unit.
Final Walk Through with Tenants
Videotape the final walk through with tenants in order to have a record of the unit and any potential damages. Save both the initial and final walk through video for six months after the tenants have left. These tapes are your insurance in the remote possibility that you end up in court.
The rules and regulations surrounding evictions are numerous and confusing. For this reason many landlords use a real estate lawyer or eviction service. Their education and expertise at handling evictions and other real estate problems is well worth the added cost.
If you are going to rent to Section 8 recipients do not allow HUD to do the annual rent survey. HUD will only survey other HUD buildings in the area potentially resulting in a decrease in rent prices for you. Provide them with the rent comps for the entire area.
Screening Section 8 Potential Tenants
Screen like a normal tenant—that includes criminal screening, employment verification, credit check and a verification of previous residence. If they have a history of being a trouble maker or delinquent on payments, find a better Section 8 tenant.
TIPS FOR SELLERS
Preparing to Sell
Before you call an agent, make sure you have collected the necessary information about your property. Prepare an accurate account of the past two years of financial records including;
- Current rent roll
- Income and expenses
- Current tax statement
- Five year loss run insurance statement including any claims made, fire and water damage
- Make sure all hot water heaters are double strapped
- Test all fire alarms—if broken, replace them
- Repair any big ticket problems—crumbling roof, decrepit parking lot, broken air conditioners, etc
Doing a thorough inspection of the exterior and interior of the property will afford you the opportunity to potentially find anything in disrepair and fix it. Of course, you don’t want to alarm or alert tenants to the fact that you will be selling the property. Just tell them that you are doing an annual inspection and give them 24 hours’ notice.
If your rents are substantially below market value, it is advisable that you raise rents in order to maximize the value of your property.
It would also be in your best interest to decide whether you’ll be taking advantage of a 1031 Tax Deferred Exchange or retaining your equity.
Looking for an Agent
Looking for an agent to represent you in the sale of your building is not difficult. Finding an agent that has specialized in income properties is. When selling your property you want an agent who is adept in multi-family market with a proven track record for serving client needs. 100% of their deals should come from the multi-family market. Why risk your investment property to someone who does income properties part-time?
Networking with other property owners through your local income property association is a fantastic way to find an agent who is a multi-family specialist. Find an agent that other agents use. Since agents have inside knowledge on who’s-who within the market, finding their “secret weapon” will help your property goals. The Central Valley’s “secret weapon” is Marc A. Thurston. Over the past 22 years Marc has serviced over 28% of the income property sales in Kern County
Prepping Your Property to have “Curb Appeal”
Prepare your property from a buyer’s perspective. You and your agent should tour the property. This will allow the agent to view the property, possibly finding anything that could enhance the value, while determining if there are any outstanding maintenance issues.
Small changes to the landscaping and exterior can make a significant difference in boosting “curb appeal.” Easy things like picking up trash, weeding, edging, and planting flowers can turn a so-so exterior into a stunner. Here are some other tips:
- Clean driveway and sidewalks of dirt, leaves or refuse
- Water the lawn extensively, well in advance of selling
- Remove old lawn ornaments, toys and play sets
- Clean and repair rain gutters and siding
- Touch up exterior paint
- Pick up any litter
- If needed, touch up interior paint and repair cracked plaster
- Repair any other minor flaws