1836 Blog

How to Choose the Best Property Manager

Whether you’re a new rental property investor or you have several properties in your portfolio, a savvy investor understands that enlisting a property manager makes good business sense. A property manager will care for your investment, making sure that it’s healthy and earning its potential. A great property manager will also defend you and your property against abusive tenant and their personal problems. If you are overwhelmed by the sheer number of property management companies you’ll need to research to find yours, we’re here to help. Below, we’ve outlined the most important criteria for evaluating property managers to hire the best one for you: experience, rates, and what informs their decisions.

According to a 2016 Buildium survey of property owners, 51% of rental property owners currently enlist a property manager, with a full 24% more looking to hire one.

Three Criteria to Help You Evaluate Property Managers

Years of Expertise in Property Management

How long the company has been in the property management industry is paramount. Did they just buy a franchise and set up shop in your city? Or, have they built their expertise with sweat equity with over a decade of experience? According to Malcolm Gladwell, author of Outliers, it takes about 10,000 hours to become an expert in a professional field. This has been upheld but a study at Princeton University. The last thing you want is to hire a property manager who plans to cut their teeth on the back of your investment.

A subset of this expertise, is, how well do they understand the Austin rental market? No two markets are alike, having a different set of economic factors, laws, demographics, and historical data. How much do they know about the Austin renter – your client? Do they know what the shifting trends are for the Millennials and how they are willing to interact in the marketplace. Marketing traditional methods to a new generation provide the best results.

Hire a company that has a cross-section of both property management and market expertise to get the best return on your investment.

Property Management Rates

Are their rates fair, and equitable? By fair and equitable, we don’t mean inexpensive. When property management companies charge property owners too little, they cut costs in ways that can have a detrimental effect on how they manage your property.

Take direct labor, your property management companies biggest expense. Direct labor covers the people part of your business that responds to tenant inquiries, handles maintenance, and answers your requests as an owner. Pretty important, right? Unfortunately, when companies have to cut corners, very often the human-centric part of your contract gets a trim first. You’ll notice this as less property oversight, slower response times to you and your tenant, and a lack of oversight and follow-through on maintenance. You’ll also notice a degradation in the quality of your property overtime as a result of the lack of oversight and attention to detail. This typically costs tens of thousands to remedy and far exceeds any potential savings from low cost providers.

Successful property managers know that having boots on the ground is the most critical part of managing properties well, and they will charge you for this service. Expect to pay between 8-12% for a percentage-based fee. Of course, you could always go with the least expensive option, but you may pay the price in the long term!

What Informs Their Policies and Practices

Why they do what they do is an essential criterion for evaluating property management companies. What is behind their practices, policies, and decisions? Do they use data to make decisions? Or intuition?  Consider tenant criteria. A company that knows how their tenant criteria works, proven over many years, and there are statistics to back up “the why” behind that list of tenant qualifications, will be much more successful at finding you a great tenant. Guessing or using unproven, non-quantifiable criteria will end up in an eviction.

Just as the practice of investing in rental properties is a business, so is property management. Companies that run their business off of industry best-practices and statistical outcomes will be much better partners for your venture overall.

We hope that these evaluation criteria will help get you closer to finding the right property manager for your Austin property. Learn more about this, and other property management topics, on our YouTube channel.

Should I Lease or Sell My Property?

Most homeowners will have to answer this question at one time or another. You might relocate for a job, or decide to combine households with your significant other, or it might be time for additional square footage to accommodate your growing family. Whether to sell or lease your home is an important decision. While this question can be fraught with emotional baggage and sentimentality, for the best interest of your family your answer should come down to the math. Seek guidance not just from someone trying to sell your property but also from someone who can guide you on leasing. Some companies can run numbers on both scenarios and offer both services. Plug in your numbers and consider the outcomes. Some companies even have the data to forecast future financial potential for your property.

In your calculations, you should assess your financial situation, your future housing plans or goals, your state and federal tax ramifications, and the current and projected home values in your neighborhood/local market. Next, learn how leasing can be a beneficial way to grow your wealth and evaluate your local rental market. You already own the asset so there is no additional cash outlay to obtain something that may already be positioned to produce a return on your initial investment.

To Hold? Or, Fold?

Real estate is like a game of poker, only with market data and forecasts. As Kenny Rogers croons in his classic song, “you gotta know when to hold ‘em, Know when to fold ‘em.” The answer to whether you should hold (lease) or fold (sell) ideally, is a resounding ‘hold ‘em!’ Why? Keeping your home and turning it into a rental property enables you to continue to build equity on your purchase while you are paying down your mortgage. On top of this, keeping and maintaining your home as an asset helps you build substantial wealth in your financial portfolio.

Of course, there are scenarios when folding might be appropriate. If you are experiencing a divorce, death of a spouse, or have crushing medical debt, selling your real estate asset can help you wade through the storm financially, and emotionally.

The last thing you want to do is to take your cash-producing, equity-building asset, then sell it, and pour the money into a new, larger home, or a non-cash-producing asset. It might be tempting to take your proceeds from the sale and buy a long-yearned-for boat, but you’ll induce cringes amongst your real-estate friends. The goal is to make your money work for you, not to continue to purchase things which may you work for them.

Consider Your Local Rental Market

You’ve done the math. Now take a look at some Austin rental market forces that can help make or break your rental business venture. While our rental market is slowing, tenant incomes are healthy, and the job market continues to roll along. You’ll want to do some in-depth research and consult the experts, but here are a few bright notes to consider.

In 2016, an average of 159 people moved to Austin each day. (BizJournals)

According to a 2017 affordability survey of major American cities, Austin ranked #5 in offering incomes large enough to support day-to-day living. (GoBankingRates)

In areas surrounding Austin, such as the northwest and northeast Austin, occupancy rates are much higher at 94% (Statesman)

Austin boasts a robust pool of potential renters, with money to spend, in a metropolis that continues to expand outward. Chances are, Austin will support a strong rental market for years to come.

The Payoff Takes Patience

Real estate investing is a long-term game. Very often the people who didn’t want to get into the game find that in year three or four, they recognize the money they’re making, and reap the benefits from that additional income. Those formerly reluctant landlords then start looking for their next rental property to buy. Be patient for your payoff! We’ve seen even the most reluctant landlords get excited when they see the results.

Concerned about the time it will take to manage your rental property? Based in Austin, 1836 Property Management specializes in managing real estate investments for clients around the world. We take the hassles and the worry of being a landlord off your shoulders. If you decide to lease your property, the 1836 team can help you profit without the headaches.

Watch a video excerpt on this topic, and others on our YouTube channel.

 

How do I get my property ready for a tenant

The 2 Stages of Preparing Your Rental Property

You’ve purchased a rental investment property, and you’re anxious to bring it on market and find tenants as soon as possible so that you can start making money. Preparing a rental property takes time and due diligence. When getting your rental property ready, don’t rush through the particulars, don’t cut corners, and don’t waste your time and money. Taking these shortcuts can cut into your future earning potential! The foundation of your new business venture is a clean, functional, and sound property. Take the time to do it right.

How do I get my rental property ready for a tenant?

These two stages of preparing your property are critical for several reasons. The care and quality of your property directly affect the quality of your tenants and whether or not you retain them, and the amount of rent you can charge. Additionally, regular care and maintenance of your property will ensure that your home doesn’t decline in value.

Before You Market Your Property for Rent

Have a property inspection. This inspection will give you a list of needed repairs so that you can plan accordingly. Regular checks will help you prevent sustained, long-term damage and potentially dangerous situations for your tenants (creating liabilities for you). Inspections and more in-depth repairs are always better done without someone living in the property.

Make sure that your property adheres to state laws. Get to know your state and local property code requirements, such as

  • Prepare to have the exterior locks rekeyed and upgraded as necessary. You’ll want to do this with each new tenant, preferably on move in day.
  • Install safety-related devices.

Your property’s plumbing requires the most care. Hire a good plumber to:

  • Inspect your property and make recommendations to correct and prevent plumbing issues.
  • Upgrade the shut-off valves at water sources like toilets and sinks.
  • Ensure the correct ventilation for your water heater. If the unit is in a garage, make sure it sits on a proper stand. If your water heater is over eight years old, consider replacing it now. It’s not a question of if a leak will spring, but when. Head off future water damage and gain peace of mind with a new unit.
  • Check your property’s water pressure. If your pressure regulator is defective, it could be a ticking water bomb.
  • Locate your property’s water shut-off valve lives so that you can show the tenant. Make sure it’s not buried and works efficiently and adequately without tools.
  • Check your washer hoses. Steel braided hoses hold up better than rubber. Rubber can wear down leading to leaks after five years.

A property requires regular maintenance, so make sure you to hire a state licensed inspector to perform a full inspection before purchasing the property and then have an expert to walk the property and look for problems that the tenant may not have reported at least twice a year.

The Make-Ready Between Each Tenant

Once your property is sound and that there are no significant functional, or structural issues, you’ll need to prepare your property for your new tenant, the ‘make-ready.’

  • Check every moving part in the house. Keep a running list a list of all functional issues and then have your contractor repair them. This check will likely be part of your walk-through after your previous tenant vacates the property.
  • Have your plumber inspect your property and make recommendations to correct plumbing issues such as slow drains or rusting angle stops.
  • Leave a garbage disposal wrench in your property so the tenant can clear blockages on their own.
  • Paint the interior. Don’t scare off potential tenants with bright or specific color palettes. Neutral paint will appeal to most renters and will help them visualize themselves in your property.
  • Have your property professionally cleaned, including carpets
  • Replace any flooring that is beyond repair.
  • Smell something strange? Hopefully, it’s just a minor issue, but odors can also indicate major problems. Plus, no one wants to rent a property that stinks! It doesn’t matter how clean your property is if it doesn’t smell great.

Now, it’s time to document. Everything. Take photos of the condition of your property before your tenant moves in. Walkthrough the property with your tenant on move-in day and log any cosmetic issues you both see. As an alternative, you can ask your tenant to provide you with a list of problems within three days of move in. Remind them that if they do not send you a list within three days, they agree that the home was in perfect shape. Your lease should already cover this in detail, but it never hurts to reiterate it.

Here’s the bottom line. A better quality property, sound in structure, clean, and well maintained, a better quality tenant you will attract.

If making your property ready for renters feels overwhelming, 1836 Property Management can help you take your time and do it right the first time. We help you manage all aspects of your rental property, from leasing to maintenance, so that you can achieve the highest return on your investment.

 

Why am I Not Making Money on My Rental Property?

A lot of factors are in play when it comes to making money from your rental property and sustaining a profitable rental investment business. As a new investor, you might be anxious to see your newly purchased property bring in cash flow, but it isn’t typical for properties to produce cash immediately, even when you are an experienced investor.

What affects your property’s ability to produce cash?

Here are two things to consider.

How much money did you put on the table?

Many people initially come to real estate investing as an owner-occupant, then they move out of the home and decide to turn it into a rental property. If you have lived in your home less than 2-3 years, it’s unrealistic to expect the property to start producing cash right away. It typically takes an average owner 4-5 years to break even with what they pay in mortgage principal, interest, taxes, and insurance (or, PITI payment). Each situation is unique. In many cases, the market doesn’t support rents high enough to cover your PITI payment and put a little extra cash in your pocket month over month.

The time it takes to get to this break-even point depends on how much cash you put down on your initial purchase and how fast appreciation and rental rates go up. Many homeowners take advantage of 10%, 5%, and even 0% down markets. It’s an excellent deal for home ownership, but it’ll take you longer to get to the break-even point, whereby you can start earning cash.

A smart investment strategy is to purchase a property with 20-25% down, with a goal of breaking even on the PITI payment, principal, interest, taxes, and insurance, in a shorter time frame.

For many experienced investors, cash flow is not their primary strategy because any cash earned in the investment cycle is subject to taxation by the government. Investors don’t always want to make cash in the short-term, but you can bet they want to make a profit in the long-term. There is just more to a great return on investment than cash flow alone.

Am I managing my rental correctly?

If you are post-purchase, there’s not much you can do to change the amount of money you put down on your purchase. However, in the short run, other factors could be contributing to your property bringing in less cash than it should on paper.

Maintenance issues and periods of extended vacancy are two essential aspects of managing rental properties, and they can directly affect each other. If you have ongoing or unresolved maintenance issues or repairs or have long periods of vacancy either due to the latter, or because you don’t have the time and know-how to oversee maintenance requests, inspections, and larger renovations properly, your bottom line will be impacted.

It might be time to consider partnering with a property management company to oversee your rental. The benefit to you is that property managers have proven processes, relationships with trusted contractors, and the market expertise to market your property to your ideal audience, rent it quickly, and ensure that the property functions smoothly during the tenancy. If you select the right property manager and follow their advice you should be able to plan on increased productivity and results.

Even if you’ve hired a property manager, maintenance issues and vacancies are incredibly important. Tackle these problems alongside your property manager when getting started. Get a handle on what is happening by having your property manager take pictures, or go together to visit your property in person. You’ll want to deal with any latent issues up front.

In the end, investing in real estate is a long game. Learn the data and understand your market. And, consider finding a good property management partner. Your property manager will have statistical proof of what the market is doing so that you can ensure the highest performance for your investment. 1836 Property Management can service your rental property from leasing to maintenance. We work every day to care for your property, minimize your risk, and maximize your profit.

 

What to Look For When Buying a Real Estate Investment

Real estate investing is a science. Experienced investors know the data, understand the market, and have a knack for picking rental properties that will make them money. What to look for in a rental property is relatively simple, and it comes down to what kind of investor you are.

Two Types of Real Estate Investors

The Speculator

The speculator is a gambler with deep pockets, who enters a hot or soon-to-be-hot market, who looks to buy big, expensive places and expects their value to rise quickly through appreciation. You’ll see this type of investor at play in markets such as Miami, Vancouver, and even downtown Austin. His or her game is typically short-term. While the rewards can be great, the risk can be greater. Markets are cyclical, and it requires experience and a heavy dose of luck to time them to your benefit. For a non-real estate example of speculation, you needn’t look any further than the current Bitcoin craze. The cryptocurrency bubble will burst, and folks that stay in the market too long stand to lose.

The more typical investor cares about the numbers, first and foremost.

The Number Cruncher

The number cruncher cares about two things: cash flow and return on investment. This investor usually owns 1-3 rental properties, and their end goal is long-term. Cash flow isn’t always an immediate benefit, but this type of investor knows that he or she is building a financial foundation that will pay off down the road.

What to look for in your rental property

  • Single family home or townhome
  • Suburban
  • 3 to 4 bedrooms / 2 to 3 bathrooms
  • No HOA or condo fees

Have some communities in mind? Look for a single story home, one that is the smaller, lesser expensive choice in the neighborhood. Generally, this type of home will be your safest bet for generating rental income.

Do you research, and consider future forecasts for Austin demographics, changing demographics in your chosen neighborhoods, and evolving trends in contemporary or traditional fashions. Knowing your market will enable you to look at potential properties with this information in tow, and will dictate whether you need to renovate the property you eventually purchase.

A cautionary note about fixer-uppers. While you may have romantic visions of buying and renovating a fixer (thanks, HGTV!), you could end up with a money pit. If a property is clean, functional, and the style fits your neighborhood, then that’s money you don’t need to spend. Save the fixer dream for your dream house.

If you’re ready to look for an investment property, we’d love to help! 1836 Property Management can assist you in finding your rental property and then help you manage it for the highest return on investment.

Should I Evict My Tenant?

One of the most stressful situations any landlord will encounter is the need to evict a tenant. No one gets into real estate investing and the ownership of rentals because they delight in kicking people out of their homes, but, ultimately, your rental property is a business, and hopefully, a money-making venture. That problem tenant can be a costly diversion. We sat down with Colin Newberry, Senior Associate Attorney, to discuss when and how to go about evicting a tenant.

So, should you evict your tenant?

Newberry says, “If you are asking this question, the answer is ‘probably.’” The fact is, if you are thinking about eviction, you’ve likely had several problem experiences with the tenant that have you heading down this path.

Evictable Offenses

Failure to pay rent

Owing back rent is an obvious one and is the most straightforward offense to enforce and prove. Is your tenant’s failure to pay rent this month an unusual circumstance? Or, is this just one instance of many months where they haven’t paid rent?

 

Failure to care for your property

What if the tenant pays rent, but doesn’t take care of the property? Your tenant is full of excuses as to why they aren’t keeping the place up, things such as not bringing in the garbage cans or the yard is a mess. Can you evict over maintenance issues? The answer is YES.

The above scenario shouldn’t get to the eviction point if you have a good property manager. Whether you are self-managing your property, or you’ve hired a company to do this for you, it’s essential to keep good records of the obligations of the tenant (per their signed lease) and their compliance with those requirements.

Lest you think a messy lawn is not a big issue, it can affect your overall property value. Some landlords, especially those with higher-end properties, provide lawn services as part of their contract with the tenant for this very reason.

Protect Yourself in the Case of Eviction: 3 Tips for Managing Your Tenant-Landlord Relationship

Communicate

A tenant-landlord relationship is like any other. It’s success, or failure comes down to communication. Excellent communication from the beginning can ensure that you find the right tenant and that they understand their obligations as your tenant per your lease agreement. A good back and forth dialogue between you, or your property manager, and your tenant will also help to nip contentious issues in the bud when they arise. Make sure this is in writing. Emails can be very helpful in court.

Don’t Let it Fester

As a landlord, the worst case scenario is to find yourself in a situation that you had the chance to prevent, lessen, or solve early-on. A tenant that has ongoing issues paying rent or that continues to neglect your property is a problem for your bottom line. With consistent communication, you can head off problems before you (or your tenant) get too deep in a hole.

Bottom line: if they can’t pay rent, then they can’t pay on a judgment against them if you enforce legal action. The less time you let lapse, the less money you’ll lose. The longer you let it fester, the worse off your business will be. After all, this is a business!

Document. Everything.

If your tenant-landlord dispute escalates and you must present your case in front of a judge, documentation of your requests and your tenant’s responses will go a lot further than merely he said/she said.

Landlords, prove your case by providing:

  • Documentation by email, not text.
  • Photos of your property before tenancy/upon move-in
  • Pictures of the condition of your property at the center of the dispute

Judges will look for a way to let someone stay in their home. The burden is on you, as the landlord, to prove that you’ve done everything you could to make this work, that you have a property that you value, and that your property has not been cared for per the tenant’s lease obligation.

While we hope that you never have to evict a tenant, enlisting a property management company, such as 1836 Property Management, can help you protect your rental investment business. We care for your property with comprehensive services that span from finding the right tenant to administering lease contracts and compliance with state laws and regulations, to managing day-to-day communication, maintenance, and property oversight, to conducting an eviction should a need arise. Contact us to find out more.

The Three Most Avoidable Landlord Expenses

Making money from your rental property comes down to a simple equation, right? Earning a return on your investment is not as easy as charging your tenants more than your monthly mortgage + expenses. If that were wholly true, then it stands to reason that cutting your costs as far as possible puts you on the road to a massive return on investment. Instead, as the adage says, you must spend money to make money. The spend-to-make principle applies to any business, including your real estate investment. Despite this knowledge, many property owners walk headlong into expenses that they could avoid.

Avoidable costs start piling up when property owners cut too many corners on their expenses in the name of trying to eke more profit out of their properties. This strategy, although tempting, is short-sighted. You must be smart, not cheap to succeed in real estate investing.

Watch out for these three common and avoidable landlord expenses.

Forced Vacancies: The vacancy you can control

What’s a forced vacancy? It’s a vacancy that is caused by something you did or did not do as the property owner. Vacancies are expensive, so try to avoid these two scenarios.

Your rent is too high.

But, you say, “I need to raise the rent every year! Most everything else in life goes up in price over time, because, inflation!”

Let’s say you have a wonderful tenant who has lived in your property for the past ten years, who pays the rent on time, and cares for your property like it’s their own. You’d like them to stay indefinitely. But, when you keep raising the rent on them arbitrarily, that’s a recipe for your ideal tenant to look elsewhere.

Treat rent increases with care, particularly if you have a fixed mortgage.

Your property is not well-maintained.

Don’t let your dream tenant leave because you neglected to fix something. Tenants don’t want to move and uproot their lives any more than you want to have to find another fantastic tenant. But, they will find another place to live if they are bearing the most significant burden of the upkeep and nagging maintenance issues keep rearing their ugly heads.

By maintaining your property well beyond the make ready and move-in, you will ensure that your renters feel that their tenancy is appreciated.

Bonus – by doing regular maintenance, you’ll also have less of a maintenance lift when you have a vacancy and need to get your rental property quickly back on the market.

High Days on Market: Get it right, then to market

When you bring your rental property to market, make sure it is priced right. When it is priced according to the market or slightly aggressively, you ensure that your rental property rents quickly. But this is only one-half of your go-to-market strategy. You must also get the condition of your property right before you bring it to market.

Don’t put it on the market to test your rent number, then decide that you might need to replace that carpet with a big stain on it to warrant that number. As we said above, vacancies are expensive! By getting the condition right before going to market, you’ll speed up the time it’ll take to get your property rented, and you’ll attract a better tenant.

Deliver your property to market in a great condition
with a great price and you’ll find a great tenant.

Repetitive Maintenance: Don’t spend good money after bad

When it comes to avoidable expenses, repetitive maintenance is a biggie. You know those things that come up every time you have to turn over the apartment to a new tenant? Carpet’s a big one. Don’t replace it with a low-quality option just because it’s cheap and fast. You’ll have to replace it again in 3-5 years. Engaging in short-term thinking will come back to take a big bite out of your wallet over time.

Don’t spend good money after bad, and spend it repetitively!

A better strategy is to pay more for a higher-quality product, like commercial-grade flooring that will last you 10-20 years. You’ll pay up to 25% more, but you’ll also get a break from having to replace it frequently.

Being a rental property investor can be your ticket to financial independence, so it’s worth doing your due diligence when it comes to the care and pricing of your rental property. Owning a well-maintained property that attracts (and keeps) long-term tenants will help you steer clear of these avoidable expenses and provide you with a great return on your investment.

Are you just starting out in real estate investing? Download our free e-book, Real Estate Investing 101: Your Path to Financial Independence. It’s full of tips, resources, and Austin-specific information to help you win in the rental property market.

 

What are people saying about 1836 Property Management?

There are good days and bad ones but we are on a roll!

We had a tenant move in this week and they were so happy they brought us Tiff’s Treats! Thank you! Thank you! Thank you! Now to go run off those five new pounds.

I’m not sure what other property managers do but we survey our tenants once maintenance is complete to find out how we and our vendors performed. Here’s one result from this week. Spot on service!

If you’re looking for the best Property Management Services in Austin you’ve found the place. I dare you to compare quality of service. Ask another manager if they survey their tenants. Ask if they include professional photography, custom floor plans or optimized walk through videos for every listing. Soon we’re going to have drone footage for our All Included Clients. Now that’s service!

Call us today for the best Property Management Services in Austin! 512-994-4323.

Here’s how our tenants feel about our service. How do your tenants feel?

 

Page 1: Punctuality of Service.
Q1

Did the tech show up on time/as promised?

  • (no label)They were on time as promised.
Q2

What was the name of the company and the specific tech?

Appliance Connection, I think his name was Lane?

Page 2: Quality of Service.
Q3

Did the tech complete the work to the job specifications or have they agreed to obtain parts and finish the job if required?

  • The job was completed wonderfully and/or I trust they will return as soon as they can. I’ll be referring them business.
Q4

If a follow up appointment was needed were you able to get this scheduled?

  • Yes
Page 3: What else can we do to support you and/or do the job better next time?
Q5

Should we need to follow up on your service call, we’ll need to know your address. Please fill that in here.

(redacted) St Austin TX 78702

Q6

What else can we do to support you and/or do the job better next time?

totally great service, really appreciate it

What in the world is going on in Austin with the Real Estate Market?

Find out here!

 

If you’re interested in Austin Texas Real Estate here is your monthly update. Find out what prices are doing and why. Where to invest and where to avoid. Call us today for the latest information. 512-994-4323.

http://1836realty-austin.housingtrendsenewsletter.com/

Austin Texas Rental Market and Real Estate Investment Update June 19, 2017

Considering purchase rental properties in Austin, TX? Join our youtube channel for weekly updates on the rental and real estate market in Austin. For the best property management services in Austin call us today. 512-994-4323.

 

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