Apartment Forms

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

For property management companies, the month of January signals a time to prepare and issue year end statements to their clients for tax preparation purposes. Consequently, each January the IRS requires that any taxpayers who have made payments in excess of $600 to workers that are not considered employees must prepare Form 1099 – Miscellaneous Income. Property management companies are also federally required to file Form 1099 for their clients regarding rental income received throughout the year. In addition, copies of this completed form must be provided to the IRS. The IRS compares the payments shown on the information returns with each recipient’s income tax return to determine whether the payments were reported as income and done so properly.

Property Managers or Landlords and Tenants should perform a joint inspection of the rental property or rental unit before the tenant moves in. The objective of the inspection is to

a. identify and document the condition of the property
b. check the conditions of the appliances, security systems, heating, air conditioning systems
c. identify common areas
d. identify service areas such as trash, recycling,  newspaper delivery, mail box, club house and pool
e. provide information on utilities such as water, electricity, telephone and cable services

At the end of the inspection, Property Managers or Landlords and Tenants should review the check list and sign each page. Property Managers or Landlords should retain the original check list and provide a copy to the tenant. The check list should be updated as repairs are made to the unit, including what and when the repairs were performed. Both the parties should initial any changes to the original check list.
When the tenant moves out, this checklist serves as evidence as to why property management company, landlord or property manager can withhold all or part of a security deposit.

Though the acquisition of renters’ insurance is ultimately your tenants’ responsibility, as a landlord it’s important that you have an understanding of what it is and why it’s important, both for your own well-being and for your tenants’.

Your tenants should be aware that in the case of a destructive event at your property (fire, natural disaster, theft, etc.), existing property insurance will only protect your actual property. In other words, tenants’ possessions and personal belongings are not covered.  In addition to protecting their personal items, renters’ insurance also helps protect tenants in the case that a visitor is injured due to their negligence while in their unit. For example, if  a tenant’s dog bites a visitor, renters’ insurance will protect the tenant.

Some property managers build a clause into their lease stating that renters are obligated to purchase renters’ insurance for the duration of their occupancy. Whether or not you choose to include this sort of stipulation in your own lease depends upon your personal preference and, also, state and local laws.

If there’s one document in property management that simply has to reviewed (and updated as necessary) on a regular basis, it’s your lease. This is, after all, the document that will ultimately determine your rights and protect your best interests when it comes to issues both big and small.  Because you’re dealing with a host of rules and regulations on the federal, state, and local levels, it’s imperative that you not only adjust your lease as necessary when laws change, but also that you’re in compliance and protected on all three fronts.

If you’re not proficient in legalese, chances are reviewing your lease (and, moreover, identifying those elements that need to be changed) is a daunting endeavor at best. Following are some tips and best practices for keeping your lease up-to-date and your best interests protected on an ongoing basis.

Hiring Legal Counsel
Yes, this can be a somewhat expensive option. However, consider the fact that a water-tight lease can potentially spare you legal costs of a far more unpleasant variety in the future and additionally saves you a ton of time (as compared to reviewing and revising a lease on your own). Suddenly, the cost of hiring a legal professional to review your lease becomes a far more appealing option. If you do choose to take this route and don’t already have a trusted lawyer in your contact base, talk with real estate and property management professionals for references to proven lawyers that specialize in such matters.

Ugh... the dreaded Market Surveys!  Am I the only one that feels this way?  Our company’s policy is to do a minimum of two each year, although I have read that in some markets it is recommended to do it on a monthly basis.  Don't get me wrong, I know the market is continually changing on a day to day basis, and I do see the need for Market Surveys but it still does not make me enjoy doing them nonetheless. Thank goodness for the internet which saves me a lot of time to accomplish these daunting Market Surveys... but you can't find the real answers until you actually make contact with the other properties.  You know the questions I'm referring to, "what's your occupancy?", "Running any specials?", "How's your traffic been?”  You know the questions that rarely come with an honest response.  If I didn’t have a sense of humor, this could become very frustrating. 

During my several years of apartment management I have classified the four types of answers that I receive when doing my, oh so important Market Survey.  Now, please use caution there is excessive use of sarcasm to come.

The first one entitled and never convincing, "Oh... we are fully occupied... 100%" gets me every time.  In fact if I had a quarter for every time one of my competitors told me that they are 100% occupied I would never have to do a market survey again because I would be sitting on the beach with a Mojito in my hand!  In fact, no matter what time of year there are always a few properties that will claim they are 100% occupied even though we know for a fact they are not.  So, if this is you, please note you really aren’t fooling anyone.

Then you have the "blame it on my home office policy".  I know you are familiar with this one…where the leasing consultant claims that they cannot give out that information per their home office.  Would you not assume in this economy that their home office would want them to be forthcoming with this information?  What could honestly happen if their manager answered a few simple questions, perhaps something good could come out of it, perhaps rentals through referrals?  Has that home office never heard of the old stand-by, "I'll scratch your back if you scratch mine?" Perhaps they should, as a manager of a property that does not have two bedroom units but does receive A LOT of calls for them, I could always use one more property to refer them to. 

Then you have my favorite one, "Oh wow... you know I'm really busy right now... much too busy to answer those three simple questions that you have, in fact I probably could have just answered them in less time then what is taking me to say this long drawn out sentence but I really just don't want to tell you because if I sound like I'm busy you may perceive it as me actually being busy".  If this is you, then I don’t know if there is hope for you… maybe you should request an assistant from home office if you are THAT busy and do not foresee yourself not being busy within the next 365 days for a call back.

And of course my least favorite one, “the way too honest property manager”, we all know this one.  The one that a five minute phone call turns into a therapy session discussing everything from the economy to their inability to retain residents.  As you stay on the line, comforting the unknown person on the other line in hopes that you talk them down from the ledge that you feel almost responsible for pushing them towards, you begin to realize you are not qualified for this added responsibility and begin to agree with everything they say in the mere hope that someone will walk into their office and finally rent.

Time is of the essence in the property management business. Let’s face it, there are just never enough hours in the day to get everything accomplished. So, for many, the notion of taking time out for training and other sorts of continued education (whether it be about real estate rules and regulations or maintenance tasks) seems like a nice idea, but also completely unrealistic.

When considering such matters, though, it’s important to apply a bit of foresight to the decision-making process. Following are just a few examples of common property management scenarios where spending time up front might just save you a whole lot of time (and sometimes money) in the long-run.

Computer and Software Training
Incorporating financial and record-keeping software into your property management program can save you a ton of time in the long run, whittling formerly drawn-out tasks such as rent collection, payment recording, and maintenance tracking down to just a few clicks of the mouse. But installing new property management software and learning how to navigate it can be a daunting prospect. Taking time to learn the ins and outs of navigating office software that automates tasks and keeps electronic records is always time well spent. You’ll literally save yourself hundreds of hours down the line.

For my previous blog regarding negotiating apartment lease renewal rates, Johnny shared his strategy for the renewal letter, which included listing out the previous rental rate, the current market rate, and the new renewal rate, which was in between the first two.  His letter listed them out clearly to the reader (rather than mixed into a paragraph), and is a great example of anchoring the new rate relative to the higher market rate.

So what is price anchoring?  You see price anchoring every day through sales - the price of a product or service is initially listed at, let's say, $30 and then discounted to $20.  That $30 serves as the "anchor" to show the customer exactly how much they are saving.  If they just showed $20 as the price immediately, it may or may not be perceived as a good price to the customer.  A good example is how the iPhone was price anchored to an extremely high price tag initially, so that when discounts were applied it had much more of an impact on sales.

The problem with renewal rates, as Johnny pointed out, is that the "anchor" is what the resident is currently paying for their apartment.  If they are paying $900 for their apartment and you raise them $20 per month, it is a worse deal relative to their anchor price.  In other words, all they see is that they are having to pay more for the same apartment.

My poor apartment community...  It often gets the blunt response of my blogs because it's just so available and easy.  I really don't mean to pick on it, as I can tell it is definitely making strides, but I just can't ignore what they place on my door or email me. 

Yesterday, I received an email from my community hoping for resident referrals.  The concept is great, as resident referrals can be a great source of leads.  However, after reading this email, I almost came away less impressed with my community than I was before reading it!  For your reading pleasure: