Month: November 2015

How Much Should I Charge For Rent?


Matthew Whitaker - Tuesday, November 17, 2015

Marketing your home for lease starts with a comprehensive look at the market to understand what your home will lease to a well-qualified tenant.

If you choose too low a market rate, you end up not making as much money as you should. If you choose over market rate it takes longer to lease (another money waster) and will typically be leased to the wrong person.

Why the ‘wrong’ person?

Well, in our experience we have found that there are two kinds of tenants willing to pay more than market rent for a house.

A tenant who isn’t familiar with the area and therefore unfamiliar with what they should actually be paying. These tenants wise up a few months into the lease and usually end up being short term tenants…gone after a year.

A less than qualified tenant who is willing to pay more in order to tempt you to overlook their credit shortfalls. You may get excited that they’ll pay more than the house down the street….but be careful. You will be assuming more risk than is necessary and if it turns out bad, an eviction could be in your future.

So finding market rate is both an art and a science.

While you are working on finding the market rate of your home, keep one very important truth we’ve learned – tenant prospects, unlike buyers of homes, have a very short-sighted mindset. So, when a buyer is looking to purchase a home, it’s not unrealistic for them to take months, or even years to purchase one. Tenant prospects will not take months, much less a year, to find a place.

Tenants tend to have three or four characteristics they are looking for in a home and will settle on the first one in their budget that checks all those boxes – typically for fear of someone else renting the house.

Why is this important?

Tenant prospects will be comparing your home to what is available to them in that time window. Therefore, the most important data you can determine is an accurate measurement of the homes you are competing against.

Let’s look at some techniques we use to find the market rate.

1. Zillow.com and Trulia.com – Formerly two companies, these two joined forces in recent years. If you are unfamiliar with them, they are websites that take local real estate data and extrapolate certain assumptions – i.e. value of homes, future value of homes and (for our purposes) the market rental rate of the home.

I routinely hear people snub their nose at the values these websites provide of their home, citing things like their inability to determine amenities or certain other unique characteristics their home has and assign an appropriate value to it. And, while they are correct that it is hard for a computer algorithm to determine an accurate value, tenant prospects are looking at these values and find them helpful.

Homes that are too far out of line with these values, typically don’t get as many showings as homes with marketed rental rates that are more in line with Zillow or Trulia’s values. To some degree, they’ve become a self-fulfilling prophecy – particularly in an age when data is so widespread and available to everyone.

Look at the screenshots to get an idea of how to use Zillow and Trulia.

It’s really simple…just type your address in the box after you’ve chosen “Rent”.

Once you click “Search” you’ll see your property and off to the right will be some nearby properties for rent. You’ll need to determine if they are really comparable properties or if they’re in a different type of neighborhood or the house is different.

In the example below you’ll see there’s a town home listed as a comparable. I wouldn’t use that as a legitimate comp for a single family residential home.

2. Local Property Managers – Search the available homes on local property managers’ websites to determine if they have any nearby. By doing this, you are typically able to determine what the professionals think homes are worth in that area. You can also look at the pictures on their site to determine if the houses have similar features and amenities.

Take our gkhouses site as an example. When you pull up all of the listings we have, just put your zip code in the appropriate field and you can see any houses we have in your general area. You could then pull up the map view and see if there’s anything close to your house.

You can see the results we came up with when you entered the zip code. Now I can determine based on the 50 photos if this house is similar to the one I’m trying to rent.

3. Your neighborhood – Drive your area and look for ‘For Rent’ and call to inquire. When you do this you’re able to ask questions to gauge if the house for rent is similar to your house. It’s always good to do a little competitive analysis as well!

The point is that if you want to find that GREAT tenant for your house it’s best to take the emotion out of it, do your homework and strive for true market rent. Great tenants will be happy paying market rent and like we mentioned before, bad tenants will agree to pay ‘above’ market rents just to get in a house.

But there’s a good chance that you won’t get paid steady…if at all…after about four months. It’s unfortunate, but true.

And we know from experience a bad tenant…or average tenant…will end up costing you more than a great tenant at the true market rate in the long run.

Trust us on that one.

Another point about finding ‘market rate’ is that your goal is to keep a tenant long term in your house. A long-term tenant is as valuable an asset to you as the house they’re living in. It costs more money when short term tenants fill your properties and vacate after 12 months.

When that happens you will need to spend money to get your house back up to rental standard. And depending on how that tenant left your house will depend on how much money you need to spend!

We hope that helps and if you still need a little help, don’t hesitate to give us a call and we’ll lend you our expert opinion.

The Best Property Managers in Birmingham


Matthew Whitaker - Monday, November 16, 2015

We’ve been managing homes for well over ten years in the Birmingham area and currently manage over 1,000 homes for others. We meet with hundreds of people every year and many more read our blog articles and eBooks on rental homes and trust our opinion on all things rental.

Because we’ve built this trust, frequently we get asked the question, “Other than gkhouses, who’s the best property manager in Birmingham?” In the past we might attempt to avoid this question, because it required us to be “uncomfortably transparent” about our competitors! Well, we’ve decided to change our approach and be uncomfortably transparent with you in this blog.

So here goes nothing . . .

AHI Properties – The owner of AHI Properties, Bryan Jenkins, is one of the most honest men I know. I’d have to put him at #1, because of the length of time he has been managing homes in the Birmingham area and his membership in the National Association of Residential Property Managers (NARPM) with me. Their office is in Shelby County, off of Valleydale Road.

Alabama Rental Managers – ARM is also found down in Shelby County and specializes in Shelby County rental properties. They manage a lot of houses and have a very good collection of rental homes – mostly in the A and B class neighborhoods.

Decas Group Property Managers – Probably the youngest company in my list, Decas was started by J. Benoit and has grown very big, very quickly. They have good, knowledgeable, people who manage for them. Many of these people have been in the business a long time and have managed in a number of different cities. Decas manages a lot of houses for local and out of state investors and seem to do a good job.

Mega Agent Rental Management – Located down 280, Mega Agent Rental Management, much like Alabama Rental Managers, manages a lot of very desirable homes. The owners are very smart people and have done a great job marketing their services to owners.

Red Rock Realty Group – Red Rock has been around forever. They used to be called The Property Managers, but changed their name a number of years ago when they changed ownership. They manage single family homes, multifamily properties and commercial properties. They have a solid reputation in the Birmingham market.

Rudulph Real Estate – Ok, I said five, but I couldn’t leave this one out because this company has been a staple in Birmingham as long as I can remember…and who hasn’t seen their bright yellow signs? When people think of Birmingham management, this is the name that has the “top of mind” awareness. John Rudulph has really built quite a business and is an excellent manager.

So you’ve asked and now you know. I’d consider speaking with some or all of these. While you are speaking with them, keep in mind two things that we’ve found Owners are interested in – once they sign with a manager – Trust and Communication.

And if you’re wondering what questions to ask a manager once you speak with them, we’ve given you a list of valuable questions to ask any manager.

3 Reason Millennials Choose to Rent over Buy


Matthew Whitaker - Tuesday, November 10, 2015

3 Reasons Millennials Choose to Rent over Buy

Renting homes is here to stay and not just a phase our country is going through. As Millennials enter the job market and become the largest group of people working and producing in America, they aren’t going to run their lives the way the Baby Boomers or Gen X did.

They are a completely different group of people with completely different values. Because their values are so different from previous generations, it will manifest itself most greatly in the choices they make on big ticket items, including where they live.

Despite what previous generations believed, most Millennials do not value owning a home.

While they may have some desire to own a home one day, it is way down on their list of priorities. What are those priorities? Let’s take a look at three reasons Millennials will continue to rent over buying a home . . . Reason #1, they value their freedom. Generations past used to value a safe secure job, with benefits. A company they could sink their teeth into, spend long hours, buy their time and retire. That is not what the Millennials value. They want to lead the company . . . today.

They believe that working for the same place their whole career would be boring and that this wouldn’t develop them as a person. They understand that their corporate ladder will include multiple cities and multiple companies. In fact according to Forbes, Millennials change jobs three times more often than any other generation.

Buying a house for them is permanently planting their feet in the city where their current job is located. Not a good idea if you consider your next job to be hundreds of miles away. What if they got the “job of their dreams” and they couldn’t move because of the home they own? They may miss the opportunity.

They also value their freedom on their weekends. We have a number of Millennials here at the office and last weekend, two were in Auburn, one was visiting her brother and the other spent all weekend watching football with friends.

Owning a home has obligations like, cutting grass, fixing the broken door handle and installing blinds in the 3rd bedroom. All of these are a huge hindrance to the “on the go” weekends they desire.

Reason #2, they aren’t handy. Baby boomers are famous for the idea of being able to fix it themselves. If the dishwasher broke, they fixed it. If the carpet needed cleaning, they cleaned it. They actually enjoyed doing these tasks on their weekend.

Not Millennials.

They don’t care to understand how to fix something. Renting for them allows them to have a full time handyman service at their fingertips. Something breaks, call on the way to work or submit an online work order and it is fixed by the time they arrive home. Again, they get to protect their weekends.

Reason #3, their parents were foreclosed on The American Dream. Millennials don’t see owning a home as the American dream anymore. Too many, they saw their parents get foreclosed on and it became a family nightmare. They swore that would never happen to them.

They believe that their wealth will be in their savings account and, most importantly to them, the experiences they gain while living.

What does this mean for us?

Since Millennials are here to stay, what does it mean for the world of renting?

Certainly, it is great for the apartment industry. Single people rent apartments and Millennials certainly qualify given the average age people get married is pushing further and further back.

But, what about the Millennials with families? People with significant others don’t lease apartments for very long. Particularly when they start to have kids. Millennials will be the fuel that grows rental housing for the next decade. More Millennials, more rentals.

Since we will be leasing to more Millennials and their values are so different, this will require a different type of rental home. One that meets these needs and values of a Millennials. Here are just a few ideas:

Weekly landscaping – who doesn’t like to come home to a manicured lawn?

Faster turnaround on work orders submitted – along with real time updates on where the work order is in the process of being completed.

Online payment features.

Home sitting – when they are gone for three weeks, who is going to ride by the house?

Monthly house tune up – replace the filters, change the light bulbs, check the smoke detector batteries.

The future of renting homes is bright . . . Thank you Millenials.

Questions You Should Ask Before Hiring A Property Manager


Spencer Sutton - Thursday, November 5, 2015

Questions You Should Ask Before Hiring A Property Manager

Hiring a property manager can be a stressful situation for a homeowner.

That is why we came up with 27 questions you should ask before hiring a property manager!

We are called and emailed each week by owners interested in finding the best property manager in one of the markets we serve. They are also interested in knowing more about what services gkhouses offers to owners.A woman thinking about all of the questions you should ask before hiring a property manager

There are several ways to determine a good fit for both owner and property manager. To do this well, we believe there at least 27 questions you should ask before hiring a property manager.

However, most homeowners only ask a handful of questions. The typical questions we hear are things like:

What are your owner fees?

How long will it take you to rent my house?

How do you handle maintenance?

We believe these are good and valid questions.

However, in this post, we want to give you a comprehensive look at property management services and the 27 questions you should ask to determine if they’re a good fit for you.

So here we go….ready?

27 Questions You Should Ask Before Hiring A Property Manager

When you set out to call/email and begin to ask questions to a property manager, it probably means that you’re well on your way and may have even decided to rent your house.

Most of the owners we speak with are ready for someone to come to their house, help them determine a rental rate, and sign paperwork. But for those of you who aren’t quite ready to pull the trigger, here are some things you should strongly consider before you decide which company you will use to manage your house.

Let’s look at the questions surrounding these different subjects – Strategies, Results, Systems for a Property Manager, and Experience and Maintenance Team Experience.

1. Strategy Questions You Should Ask Before Hiring A Property Manager

ResponsivenessWho typically responds to questions and how quickly do you answer? The speed the manager responds to your initial questions is a good indication of how responsive the manager will be once you are a client.

Another good indicator of their responsiveness is if you reached out for more information on their services and it took them a day or two to get back with you…that’s not the best sign!

ProfessionalismWhat do your managers typically wear on a normal day? Our industry is what we consider to be a ‘mom and pop’ industry. This means that most management companies are smaller (up to 300 houses under management) and continue to keep old practices even though their business continues to expand.

A manager may feel comfortable showing their own house in shorts and a t-shirt, but it’s not the best business practice. How the manager represents the management company is a good indication of how the manager will represent your home.

Take a look at the manager’s website, current marketing materials, and current listings. You may want to weed out several managers before you give them a call.

ReputationWhere can read testimonials from your owners and tenants? There’s no need for you to work with a manager who has a bad reputation in the community. We have seen that end badly for owners for various reasons. You deserve to work with a reputable manager.

Here’s a recent survey we conducted with our owners where we share the good, the bad, and the ugly! No manager is perfect, but reputation is a big deal…especially when good tenants are looking to rent houses.

SatisfactionDo you offer any guarantees to owners? Sometimes things don’t work out the way we plan. You may decide to terminate management for whatever reason. It’s wise to discuss beforehand if the manager has any performance guarantees.

Those guarantees can be with management, tenant placement or maintenance.

The point is that managers with solid guarantees are putting their money where their mouth is and they believe in their ability to deliver an excellent service to owners.

Management Strategies – This is extremely important because it relates to the systems and processes that a manager has set up to run their business. When you speak to a manager ask these questions regarding their management strategies:

How do you come up with market rent for your house?

What are your collections procedures and process if a tenant is late?

How do you underwrite prospective tenant applications?

These three strategies will give you a sense of whether or not a manager is on top of their business.

2. Result Related Questions You Should Ask Before Hiring A Property Manager

Vacancy RateWhat’s your vacancy rate? You should be curious about the manager’s vacancy rate for their portfolio. These should include houses that are rent ready and those marketing.

Obviously, a manager cannot control if an owner is trying to sell a house or refuses to do the needed work to get a house ready for the rental market.

What you’re looking to do is gauge the manager’s ability to fill vacant houses. Also, understand that an owner’s ability to understand true ‘market rent’ is also important.

Eviction RateWhat’s your eviction rate on tenant’s you place? No one believes an eviction is fun…especially the owner who must suffer months of slow pay and no pay during the process. Every manager knows the percentage of tenants that make it through the underwriting process, are placed in a house, and eventually, get evicted.

This gauges the quality of the manager’s application screening process.

It’s doubtful that the percentage is 0%, but it shouldn’t be at 10% either. This number will not include tenants that were not placed by the management company.

If an owner brings us a house with a tenant already in the home, but we need to evict them, it will not count against us. Other managers will calculate it the same.

Collections RateWhat’s your collection rate on billed rent? It doesn’t help an owner if a lease is signed and then the manager can’t collect the rent! You should be looking for the percentage of the money they receive based on how much they bill.

It reminds me of a Seinfeld episode where a rental car company had taken a reservation, but when Jerry went to pick up the car, they didn’t have it. He complains that anyone can take a reservation, but holding the reservation is the most important part of the deal!

You want to deal with a property manager who not only charges rent but also collects the rent. That’s an essential part of managing your property!

Average Length of Tenancy – What’s your average length of tenancy? This is just a fancy way of asking how long their tenants stay in their houses. The national average is three years, and we’re proud to say that ours is six years. An owner doesn’t make near as much money if tenants continue to move in and move out.

The longer a tenant stays in your home, the more money you should make. This is because:

  • Long-term tenants take better care of your home
  • Less Vacancy = More Money
  • Long-term tenants mean less repairing of the home to be “show quality.”

3. System and Reporting Questions You Should Ask Before Hiring A Property Manager

Team StructureWhat is the team structure in your office and who is responsible for owner communication? First, you should be able to understand who’s on the team through a property manager’s website or their marketing material.

Also, it is helpful to know how the management team structured. In other words, who are you going to be interacting with on the team? Do they have a person (or people) dedicated to owner communication?

Probably what you should know is if you will have a direct contact that is readily accessible. If they do have a dedicated person, how do they typically communicate with owners – email, phone, or some other means?

Available InformationWhat kind of information is shared with you regarding your property? What you want to know is how readily accessible the accounting and property information is for you as the owner. Ask to see an example.

Marketing Your HomeHow would you market my home to find a great tenant? This is a big one. You want to make sure the manager you choose understands how to drive traffic (prospective tenants) to your rental.

We know that it’s a numbers game and so the more people see the house, the more people fill out an application. Eventually, you will find a well-qualified tenant for your house. Solid marketing helps you find that qualified tenant faster.

What unique strategies does the manager use to market your home? What web-based marketing methods are utilized? How many unique visitors does the manager’s website receive weekly?

If they are not doing anything that is unique, the manager is not creating any additional value.

A few additional things to consider when talking to a prospective property manager:

4. Experience Questions You Should Ask Before Hiring A Property Manager

Size of PortfolioHow many single-family homes does your company manage? How many owners does this represent? You want someone with experience managing your home. If a manager has been around for 20 years and only manages 200 houses, it may be a sign that owners come and go but rarely stay long term.

Core FocusDoes your company do anything else besides full-time job property management? You should ensure that your manager focuses on managing your investment full-time. Over the years we have seen more managers become turnkey providers in order to flip houses.

We believe this could lead to a conflict of interest because there is a temptation to place the best tenants in homes you are selling and not in homes that are managed ongoing.

Size of StaffHow large is your management staff? This should not include agents focused on buying and selling homes.

Maintenance CrewHow long has your company been working with your current maintenance providers? Are they employees or third-party contractors? Can you provide me proof that all maintenance providers are licensed and insured?

You don’t want to neglect this critical question because it can come back to you if someone gets hurt on the job or the contractor does a bad job. This can also go back to any kind of guarantee the manager has for their work.

That may seem like a lot to cover, but your rental property is a BIG investment, and you want your manager to treat it seriously.

We hope this helps!

Four Advantages of a Large Property Manager


Matthew Whitaker - Monday, November 2, 2015

When we started this business we had a big dream of driving around Birmingham and seeing gkhouses.com signs all over the place. We thought the more signs we could get in yards, the more tenants and owners we would attract.

Now that we manage over 1,000 houses, we worry that tenants and owners may be turned off that we are somehow “too big”. While there is validity to the argument that there are certain benefits smaller property management companies can offer their clients – and for some those benefits make smaller management companies a better option – we believe the benefits of a larger company greatly outweigh the smaller alternative.

We think the benefits can be found in all the categories – leasing, management, home maintenance, and communication.

Leasing

Marketing Homes: Marketing homes is like a sales funnel you may be familiar with seeing. Driving prospective tenant traffic to know that a property exists and is available for rent is the beginning of that funnel.

Large management companies have a unique opportunity to drive an inordinate amount of traffic to their website and to their leasing lines.

This is a screen shot of our gkhouses.com website traffic from October 6th to the 29th. We believe the majority (95%+) is from prospective tenant leads.

The largest sources of prospective tenant leads other than our website is Trulia, Zillow, Craigslist and Multiple Listing Service (MLS). While we do market on all those sites, savvy large managers will drive traffic back to their website so they can market that home and remarket other homes, which drives up the number of people that see that the home is available.

Going back to the sales pipeline, more prospects on our site looking for houses means we will receive more applications. See the illustrated sales funnel below:

Application Processing: Large managers are also at a unique advantage with regard to application processing in two areas:

The first is their underwriting skills. Large managers are used to hearing certain stories that don’t add up and are disciplined to lease homes based on their underwriting criteria, not on the whims or “gut feelings”.

The second is the ability to remarket other available homes should the home the prospective tenant applied for be leased while the application is in process. Once approved, an applicant is much more likely to pick from the available inventory of a large manager, instead of going out and beginning the process over again.

Focus:

The last point on the marketing of homes is the focus a large manager is able to devote to leasing.

Small managers typically have property managers that do leasing, managing, accounting and talking with owners. At large companies, they typically have a dedicated leasing person.

At gkhouses.com our leasing department comes to work every day with the goal of leasing homes. They have no other “more urgent” items that take their time away from leasing.

Managing

Once a property has been leased the work of a large manager has just begun. The benefits of using a large manager also stand out here.

Handling Tenant Inquires: Whether you manage 1 or 1001 homes, managing tenants is a full-time business. Tenants expect to be communicated with quickly when they have a need. Large managers should have a specific person that is in charge of tenant communication. Small managers don’t have the time or the resources to communicate with the tenant because (again) they are typically handling all aspects of this process – marketing, leasing, managing and maintenance.

Accounting: Tenants are getting loads of bills in the mail, shouldn’t yours be one of them? The “mom and pop” manager expects the rent to be paid on the first and for the tenant to remember – after all shouldn’t they remember to pay their rent? Large managers don’t think that is a good process, because it’s not the service people are used to receiving. Heck, sometimes you might forget to pay a power bill even when you DO get a bill!

Large managers should have an efficient system for billing – most of ours is done through email – the tenant for the next month’s rent and any other charges they may have accrued during the previous month. Again, if the tenant has a stack of obligations, don’t you want yours to be one of them they think about?

Here’s a sample of one of our Tenant Statements.

Services to the Tenant: Don’t you want it to be as easy as possible for a tenant to pay rent or submit a work order? Would it be possible that a tenant would stay longer if the manager offered modern day services such as online rent payment and online work order submission that the tenant would stay longer?

Large managers certainly believe this to be the case. They set up these services and others – perhaps lawn care – to make the tenant’s life easier and make it easier to interact with the manager.

Maintenance

Houses frequently need some TLC and large managers are in the perfect position to provide a tremendous value to their owners and their tenants with regard to maintenance on the home.

24/7/365 Hour Emergency Service: What happens when the oven breaks on Thanksgiving or the air conditioning shuts down on the 4th of July?

Large managers have the unique ability to offer solutions to these types of problems. When you manage a lot of houses, you don’t hope something like this doesn’t happen, you EXPECT it to happen! And…you are prepared for it when it does.

Typically large managers will have someone assigned to handle these types of calls through a rotating cell phone or we have a call service that handles these calls on our behalf. They are able to dispatch emergency vendors to handle these and other emergency situations that may arise. Tenants will remember how quickly you handled these situations and will stick around longer if they are handled appropriately.

Access to Multiple Vendors and Pricing Power: More vendors should mean more options on bigger projects. Large management companies are forced to utilize multiple vendors to get the job done.

Additionally, it makes sense that larger managers have more pricing power with vendors. More work orders should equal better prices.

Communication

Owners want to know what is going on with their home. We recently surveyed our owners (see survey results here), and what stood out to us is how important communication is to an owner. Large managers have the ability to communicate in three ways:

Online Owner Portal:

Large managers have the ability to provide online data and reporting to their owners. Owners have the ability to log in and see an owner statement, paid bills and work orders. Access to this owner portal allows owners to get information from the large manager without having to go through the hassle of contacting them.

The Phone:

Large managers have support staff dedicated to owner communication. Should an owner need something from the large manager, they should have the ability to pick up the phone and either get someone on the phone or receive a call back very quickly. At gkhouses.com we have that person who spends all day tracking answers down for owners and fielding questions.

Support email:

Large managers likely use software in their office where support emails can be tracked, sent to the right department and answered on time. This way an owner is not wondering who he should send the email to in order to get an answer…he/she simply emails the support email and the correct person answers the question. At our office we use Fusedesk as our support ticketing platform. It allows us to even see if anyone in the office has a support email they haven’t addressed. This allows us to make sure that balls don’t get dropped!

Conclusion

We understand that we’re a bit biased, but large managers provide very unique benefits over smaller management counterparts.

When it comes to leasing, no one will get you more prospective tenants to your house than a large property manager.

When it comes to management, a large outfit is well equipped to deal with unique situations that arise in the tenant world.

When it comes to maintenance, a large manager will work with quality people who are properly licensed and insured to work on your house.

And when it comes to communication, having dedicated staff to get answers and relay important information is a must.

Our advice to you is to do your homework on the front end and decide what’s important to you as an owner before you choose your property manager. Like we mentioned at the beginning of this article, there are benefits to smaller managers (we’ve been both)…but not enough tip the scales.