Buildium Blog

Particularly if you own a property in an urban area or near a university or center of business, many specialized tenant markets are just waiting to be captured. Specialized property management may be just the solution you’ve been looking for to decrease vacancies and guarantee steady rental income. When considering just a few of your options below, be sure that you take your property, location, property management style, and goals into consideration.

Section 8 and low-income housing
Essentially, the Section 8 program provides low-income individuals with government-assisted rent. Generally, tenants pay approximately 30 percent of a unit’s rent and the government pays the remaining balance directly to the tenant’s landlord. In such a scenario, the Department of Housing & Urban Development (HUD) will determine the unit’s fair market rate (FMR) and the landlord is not allowed to charge the tenant anything over this amount.  While it is up to you to choose whether or not to participate in Section 8, keep the following points in mind:

• You will be subject to property inspection to ensure you meet HUD’s Housing Quality Standards.
• You will not be able to charge a Section 8 tenant more than FMR.
• Regardless of your state’s laws, you cannot evict a Section 8 tenant without judicial action for eviction.

While there may be some similarities, low-income housing is not the same as Section 8. Rather than receiving rental income from the government, property owners who run low-income properties are eligible for the Low-Income Housing Tax Credit (LIHTC). But it’s important to bear in mind that these tax credits apply only if you adhere to the rules and regulations that determine who can live in your building and how much they can be charged. Not abiding by the rules that are set forth can result in a whole lot of headaches, not to mention economic loss. Despite the red tape that can come with low-income housing property management, there is a large pool of renters in need of low-income housing. If your property is in an appropriate situation, low-income property management may be a good solution for you.

Student housing
College students can be a landlord’s best friend or worst enemy. The problems with renting to students are fairly straightforward. Generally speaking, you’re dealing with younger renters (many of whom may be living on their own for the first time). With this in mind, you may be more likely to experience noise and upkeep issues. Because of the school schedule, you may also find yourself turning apartments over annually or having to deal with sub-lets during the summer months.

But there are some very real positives when it comes to renting to students as well, most of which are financial. If you are living in an area that houses a college or university, chances are you will have a more dense renting population than you would otherwise. This means that—for at least nine months out of the year—students offer a very real way to keep your vacancy levels low. Also, while students may not inherently have a lot of income (or any at all), when a parent or guardian co-signs the lease, in most cases that monthly check is just as reliable as it would be under any other circumstances.

Sure, you may have to be a bit more hands-on than you would otherwise be when it comes to running student housing. But the bottom line is, they offer a nice steady flow of income.

Corporate housing
More likely than not, managing corporate housing is fairly different from any other kind of property management you’ve done to date. First of all, you’ll be dealing with a company rather than an individual tenant. In most corporate housing situations, a company will rent out one or more rooms in a property, with the understanding that one or more of their employees or clients will occupy this space over the duration of the rental term. The way this actually works out may vary from having one stable tenant for a year at a time to having a cast of different tenants in and out on as little as a daily or weekly basis.

The good news here is that signing a lease with a corporate entity allows property managers to feel relatively secure that payment issues will be avoided. There are not necessarily downsides to this scenario, just things to consider that make this situation different from renting to an individual such as: assuming the responsibility for furnishing the unit; the potential inability to build a relationship with the tenant or screen for undesirable tenant behavior; and, in some cases, the knowledge that you will not necessarily have a tenant occupying the unit at all times to immediately alert you when repair and upkeep issues crop up.

If you are looking for ways to decrease vacancy rates and generate more income, remember: There are always ways to think outside of the box when it comes to property management. Before you undertake one of these (or any other) specialized property management endeavors, just make sure you have carefully thought out the pros and cons and are well versed on any specific tax considerations or rules and  regulations that may apply.

Depending upon where your property is located, parking may be a major consideration or something that you rarely think twice about. For example, if your property is situated in a rural area or a quieter neighborhood, chances are that providing parking to tenants—whether it’s street parking or on-site parking—isn’t something you actively consider. If, however, you are a property manager in an area where parking is scarce, it’s a whole different ballgame.

1. Parking Policy
First and foremost, if you do provide tenants with parking, make sure that a parking policy is included as part of your standard lease. Think of parking spaces as an extension of your tenants’ units. Just as they are renting a unit from you, so are they renting a parking place and, therefore, certain rules, regulations, and expectations should apply. If you provide additional “guest” spaces on your property, make sure that rules and regulations for them are included in your lease as well. Finally, if you live in an area where weather conditions or other specific events may affect parking, include specific instructions for such conditions in your policy. For example, if you live in an area where it snows frequently, make sure that any affect it may have on your parking policy is explicitly stated.

2. Price for Parking
Depending upon the neighborhood your property is located in, parking may or may not increase the rental value of your units. If, for example, you live in a safe area where street parking is readily available, chances are that providing tenants with parking spaces will add little or no value to your property in terms of rental rates. If, however, you live in an area that is unsafe or where parking spaces are scarce, on-site parking may well afford you with an opportunity to raise your rent.

If you are not already charging tenants who have parking spaces additional rent, be sure to check out the going rates for comparable units with parking spaces the next time a unit becomes vacant. You may just be able to increase your income.

3. Parking as an Amenity
Even if your situation does not afford you the opportunity to charge higher rental rates when a parking space is included, be sure that you are advertising your parking space as an amenity rather than a basic. You never know what could make the difference between a potential tenant choosing one unit over another, and a parking space could definitely provide you with an edge over the competition.

4.“Outsourcing” Parking
If you live in an area where parking spaces are a particularly valuable commodity or have fewer tenants than you do parking spaces, don’t let that space go to waste! Rent out your unused parking spaces, even if it is to a non-tenant. Particularly in dense, urban areas, each parking space can generate up to $200 additional income per month. Best, of all, we bet it will be the easiest unit you’ve ever had to maintain!

Depending on your situation, parking may be a welcome source of additional revenue or a great way to appeal to potential renters. Be sure to make the most of your property’s parking.

As a property investor, property purchases are likely less emotional and more logical than they are for the average real estate buyer. Even if you’re looking at property investment from a business-minded point of view, though, it’s still possible to overlook some critical factors when it comes to making property investment decisions. With that in mind, below you’ll find some tips for making sure you take care of due diligence before purchasing your next investment property.

For the most part, due diligence can be summed up in one word: Inspection. Nothing stands to save you as much money and headache down the line as contracting a professional inspector to come in and look over a property before escrow closes. Your real estate agent will almost surely have inspector recommendations, but you may also want to check the American Society of Home Inspectors. This organization provides a built-in system of checks and balances since all members must pass exams and meet basic standards. Of course, you’ll still want to call a reference or two—after all, a bad inspection can potentially cost you thousands of dollars down the line.

Have the inspection done after you’ve made an offer and make sure your agent builds in a contingency to let you off the hook should an inspection turn up any troubling information. While you can have an inspection done prior to making an offer, remember that you will have to pay for an inspector, so it may not be the most financially desirable decision.

Prior to the inspection, request a disclosure from the seller. This is meant to alert you to any forthcoming problems that may not yet be detectable through a basic inspection. Try to obtain this information prior to the inspection so that your inspector can carefully examine areas that may pose potential hazards or issues in the near future. Remember, however, that disclosures are not foolproof as sellers may not even be aware of some looming issues.

Now that it’s time for the actual inspection, make sure that your general inspector thoroughly completes all of the following:

1. Check for structural issues (this includes the roof, plumbing, foundation, and pest damage).
2. Check for any heating or electricity issues.
3. Check drainage.
4. Some inspectors check for pest issues, while others do not. If you choose an inspector that does not check for pest control, you would be wise to have a second contractor in to take a look. You will want this inspector to not only look for pests and termites, but also fungus and dry rot.

Also keep in mind, you may not be done after just one inspection; other specialized inspectors may be necessary as well. For example, if the general inspector finds roof hazards, consider bringing a roof specialist in to let you know exactly what you’re looking at. Additionally, to avoid environmental hazards that could potentially cost you big time down the line, bring in an environmental health hazard specialist to check for things like mold, lead, and asbestos.

When all is said and done, ideally you will not find any major problems, let alone a deal-breaker. If your inspection does turn up problems that will need to be addressed, you can negotiate with the seller, who may agree to make certain repairs or lower the property’s selling price. And if you do find a deal breaker, as unfortunate as it may seem at the time, rest assured that the price you’ve paid on inspections has likely saved you thousands down the line.

For more than a year now, the marketing world has been abuzz with all things Twitter.  And while Twitter has yet to prove whether or not it will stand the test of time as a viable marketing tool, with more than 70 million registered users, there’s no doubt that all property managers should at least be considering exactly how Twitter can help them grow and promote their business.

Why all the buzz over Twitter?
Of all the social networking and electronic marketing tools out there, Twitter is the most easily maintained. Unlike Facebook or MySpace, Twitter doesn’t require users to invest large quantities of time into creating profiles or maintaining a web page. With Twitter it’s as easy as signing up, creating a profile of no more than 160 characters (keep in mind that creativity counts with this sort of word limitation) and then beginning to broadcast updates (or “tweets”) of 140 characters or less. Because of the character confines, Twitter offers a blogging alternative that does not require a lengthy brainstorming or writing process. These short updates are also known as micro-blogging. Essentially, you can think of it as a “mini-blog;” it’s as simple as writing a sentence or two update and you’re done.

Twitter demographics
Businesses are especially drawn to Twitter because of the application’s demographics. Unlike other social networking sites that are primarily driven by tweens or young adults, Twitter appeals to older demographics. According to an April 2009 comScore study, Twitter’s highest user demographics are in the 45-54 year old age range, with 25-34 year olds filling in the second slot. In fact, Twitter’s two lowest scoring age contingents are the 18-24 and 12-17 year old age ranges respectively. With these demographics and the sheer number of users in mind, it’s safe to assume that a good number of your clients (and potential clients) are utilizing Twitter.

What am I supposed to tweet about anyway?
The beauty of Twitter is that it allows you to complete two separate functions, both of which are important to your business. First, you can broadcast general messages. These 140 characters can be used to engage or communicate with your customers, promote your business and achievements, market your company as an information source, and even to advertise vacancies. For example, start a discussion with customers by tweeting about pertinent breaking industry news or if you’ve recently purchased a new investment property, let everyone know.

You can also use Twitter to engage in ongoing dialogues and, through this, start building personal relationships with potential clients or renters. By keying in “@[insert username] before a message, you can tweet an individual or another company.

How do I get people to read my tweets?
Twitter updates will automatically show up on the home feeds for those who have subscribed to “follow” you on Twitter. While non-subscribers can still see your updates, they will have to proactively seek out your page. Obviously, the goal is to gather as many followers as possible so that your updates automatically appear on their home feed. So how do you get people to follow you? Simply use other media you are currently utilizing to point people toward your Twitter feed. Have a website? Be sure to provide web visitors with a link to your Twitter page. You can also actually create a feed on your web page that will allow site visitors to view your Twitter updates while they’re on your site. Also consider including your Twitter address on emails and other material that goes out to tenants, customers, and anyone else who follows you.

Keep in mind, though, it’s just as easy for people to “unfollow” you as it is to “follow” you in the first place. In order to keep people’s interest, keep your tweets as informative and/or entertaining as possible. Also remember that even though you have a 140-word limit you can also include links in your tweets that can direct followers to longer articles, blog posts, web pages, or anywhere else you may want them to go. To ensure that you don’t use up all of your precious 140 characters with a long link, utilize websites like www.bit.ly, which provide shortened links that lead customers where you want them to go.

Finally, think before you Tweet. News moves fast in cyberspace and, although this can be a very good thing, there are also some potential negatives to bear in mind. Consider this article about a landlord who set off a whole cycle of negative publicity by responding to a negative tweet involving him. When you’re only dealing with 140 characters, it’s particularly important to choose your words carefully.

Tweeting with the best of ‘em
For more information on making Twitter work for you, be sure to check out these  articles:

How to Use Twitter

The good news is that in this day and age, there are a number of options for keeping tenants updated about property events and updates on a real-time basis. Now it’s up to you to identify the mode of communication that works best for all of your tenants … and for you. Following are a few of your best communication bets and some tips for determining which ones will work best for you and your tenants.

Electronic communication
If you opt to communicate with tenants electronically, you have a few options: posting news and events on your company’s website, sending notification emails to tenants on an as-needed basis, or sending out a regular e-newsletter. When determining which sort of electronic communication works best for you, make sure that you carefully analyze its pros and cons. For example, updating tenant news on your company’s website requires minimal effort on your part—simply dash off a few sentences, post it on the website, and you’re done! But remember that websites offer a passive means of communication. In other words, if your tenants aren’t taking the initiative to surf on over to your site and seek out news, your updates may very well never actually make it to their intended audience.

Emails and e-newsletters offer landlords a more active way of distributing information; in other words, when you send out an email or a newsletter and you know that your tenant will see it in their inbox. But, remember, newsletters and emails tend to require a bit more maintenance than website news updates. You will have to update mailing lists, deal with distribution and bounce-back emails, and (if your property management portfolio is big enough) may even have to invest in a specialized mass mailing system.

Again, both websites and emails/newsletters offer today’s landlords a great, relatively low-maintenance way of keeping tenants informed in real-time. Just remember to carefully consider the pros and cons of both when you are determining the most efficient and effective way to communicate with your tenants.

Hard copy communication
Although sending letters and memos was the standard mode for landlord-tenant communication not so long ago, today it is one of the least efficient and cost-effective routes to take. Sending out notices via snail mail involves putting a mailing together, spending money on postage, and accounting for the lag time it takes between when communication is sent and when it is received. This is compounded by the fact that because many of your tenants (particularly those in younger demographics) communicate primarily electronically, they may not even check their mail boxes that often anymore. In other words, all of this effort could potentially be for naught in the end.

If you do want to utilize hard copy communication methods, your best bet is to post bulletins in highly visible areas of your property. For example, on the front door or near elevators and stairwells. If you do need to distribute hard copy communication to tenants on an individual basis, save time and money by distributing communication directly to their door. Despite all of these caveats, do remember that we are not yet living in a completely electronic world. Some of your tenants may still rely on hard copy mailings. Depending on your tenant demographic, even if you are on a primarily electronic system, posting bulletins may still be a necessary step.

Determining which will work best for you
Not sure which communication method is best for you? Go straight to the source for input—your tenants. Ask them what their preferred method of receiving information is (you can even do this at the time of move-in by having them check their preferred option off of a list at the same time they fill out the rest of their paperwork). Once you’ve received this feedback you can either go with the majority or, if your bandwidth allows, set up electronic and hardcopy mailing lists, placing tenants on their preferred option as specified. Particularly if you opt to use both a hardcopy and electronic system, remember that while it’s important to make sure your tenants have a mode of receiving information efficiently, you also need to make sure the process is as simple as possible for yourself. After all, you don’t want to spend all your time distributing information to tenants through every communication channel possible.

Having a selection of communication options is great, but remember to use them wisely. Whether you’re using an electronic or paper system, any type of communication will simply become white noise if you’re constantly deluging tenants with information. Post all the information you want on your website (where tenants can actively go to seek out information), but send only important, must-know information out actively. This way, tenants will know that when they receive an email or a hard copy bulletin from you, it’s something they should pay attention to, taking any appropriate action as quickly as possible.

When it comes to selecting an investment property, there are a few issues that every landlord must take into account. No matter how wonderful a property is or how eager you are to invest, never make a property investment without carefully evaluating the following items on your property investment checklist.

1. Calculate your profitability.
Although determining the likely profitability of an investment property may seem like a given, you might be surprised how many investors find themselves in a losing situation simply because they fail to do the math. Before buying an investment property at any price point, be sure you carefully determine how much rental income you are likely to generate on an annual basis. Weigh this against not only your mortgage and property taxes, but also all of the other costs that are likely to occur over the course of a year, such as advertising vacancies and doing general repairs and maintenance.

When calculating these costs, be conservative when estimating income and err towards over-estimating your outgoing expenses. You want to make sure you have enough wiggle room in your profit margins to afford your investment property payments no matter what unforeseen events may unfold in a given year.

About.com’s real estate business page offers some great calculation tools that will help you calculate your risk based on several different variables.

2. Get inside renters’ minds.
Sure, you’re the one who’s purchasing the investment property but never forget that you are purchasing it for the purpose of renting it out to tenants. Which means that while you obviously have to make a pragmatic investment decision, you also have to think like a renter. Take a long hard look at exactly what sort of properties seem to be the most desirable in your area. Evaluate things like number of bedrooms, location, square footage, and other amenities. Knowing what renters want ahead of time helps guarantee that you won’t struggle to fill vacancies or be forced to settle for less desirable tenants later down the line.

3. Think long-term.
Will this property still be good a few years down the line? Remember, when it comes to investments, you’re not only investing in your financial well-being—you’re also investing in your future. Which is why it’s so important to take a good, hard look at long-term trends in areas you are considering. Look at city and county records to see how the neighborhood you’re looking at buying into is trending. Have properties been increasing or decreasing in value over the past five or ten years? How about crime rates? Has the demographic remained stable over the past decade or has it evolved (for instance, are residents generally shifting from families to young, single occupants)?

While no one can predict the future, much can be learned from the past. Make sure that you know exactly what direction the neighborhood you’re thinking about buying is headed.

Checking these few items off your Property Investment Checklist can make all the difference between a good investment and a bad one.