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Worse than Drug Dealers?

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA What do you call 50,000 lawyers at the bottom of the sea? “A good start.” No doubt many of you have heard this joke or a variant. Well I am a lawyer and I am here to tell you that I am also a human being. I have a wife. I have three children. I have the same hopes and dreams for them and myself as you do for you and your family. These jokes are insensitive, unkind, and hurtful. What do you have when a lawyer is buried up to his neck in sand? “Not enough sand.” Hey! Now wait a minute. No one seems to like lawyers. Especially those who have done well for themselves. Entrepreneurs and business persons, who frequently excel in the world of business often lament the presence of lawyers. “Lawyers only take my hard-earned money,” is a common refrain. “Lawyers add no value, all they do is slow me down,” is another. Why does California have the most lawyers and New Jersey have the most toxic waste dumps? “New Jersey got to pick first.” Why I never. It is also true that not a lot of people like landlords and real estate developers. Ever hear the one about the tour group in Egypt? The tour guide is describing a crypt within a pyramid. “This crypt is over a 1000 years old. It has not been touched, altered or upgraded in any manner in those 1000......
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Should I Allow Tenants to Make Unit Upgrades?

Every now and then, a tenant offers to make repairs to the unit he’s living in. Often, such offers are made in exchange for rent (in other words, the cost of the repairs is deducted from the monthly rental rate). In other instances, the tenant simply wants certain upgrades in his unit (a new paint job, removed carpet, etc.) and offers to do them himself. The argument for this is that the tenant can enjoy a place that “feels like home” and you reap the rewards of these upgrades once the tenant vacates the unit. Clearly, there can be benefits to this sort of situation: You receive property upgrades at a reduced (or negated) cost, and your tenant gets to customize the unit to his own preferences. Unfortunately, though, there can also be some pitfalls. All too often in these scenarios, tenants are not qualified to complete these upgrades or updates up to par. The result is unfinished or sub par work that ultimately becomes your responsibility to rectify. Not only this, but such deals can also result in sticky financial situations and—in extreme situations—legal problems. Let’s say that one of your long-time tenants wants to repaint his living room from the standard white all of your units are painted in to a more colorful rustic red. You agree that the color would suit the space well and tell your tenant can deduct the price of paint and labor from his next rent payment. When the first of the next month......
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A Quick Guide to Keeping Property Management Records

Keeping records on hand is important for a number of financial and legal reasons. Just because you’ve paid off an account or a tenant has vacated a unit, it doesn’t mean that you’ll never have cause to deal with these vendors or individuals again. Whether it’s for taxes, future loan applications, or legal issues down the line, you always want to be sure you have access to the information you need at any future point. Following are a few things to keep in mind about keeping records. What kind of records do I need to hang on to? As a business owner you will want to hang on to records that pertain to: Personnel Tenants Financial transactions (both payments received and payments made) Property-related information (both your properties and your clients) Insurance Legal documentation Audit documentation How long should I keep records for? The answer is: It depends. While the default answer for this question tends to be “seven years,” that is only the case in certain instances. Different types of records should be kept for different periods of time. Standard time periods include one year, three years, seven years, and, in some cases, permanently. As it relates specifically to property management, you will want to keep the following information for these specific periods of time: One Year Employee applications Purchase orders Meeting minutes Three Years Banking records Expired insurance policies Correspondence (with clients, tenants, real estate agencies, vendors, etc.) Internal audits Seven Years Accident reports/claims Accounts payable ledgers Accounts receivable......
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Strategies for Selecting an Effective Multifamily Utility Billing Services Provider

If you own or manage multifamily residential units--apartments, condominiums, student housing, affordable housing, manufactured homes, or military housing--you are probably involved in utility billing in some fashion.  Utility expenses for these types of properties can be substantial so most owners look for effective ways to manage these costs. The Master-Metered Complex Predicament It's common for multi-tenant commercial and multi-residential properties to be "master-metered."  Master-metered properties receive a single utility bill that includes consumption for several tenants.  The problem with master-metered properties is that there's no way to bill tenants for their actual usage. This has led owners to use different methods to divide utility bills so that they can recoup the tenants' share of the overall utility expense.  In fact, transitioning a multifamily complex from owner-paid utilities to tenant-paid utilities can be one of the fastest ways to boost net operating income (NOI). Utility billing is usually managed in two ways: Internally by owners and property managers Externally by a third party utility billing service provider. While some owners prefer to manage utility billing "in-house," billing providers have invested extensively in software tools and technologies to streamline the process so that it is efficient, affordable, and well-supported.  Multifamily utility billing is a task that can successfully be outsourced, saving property owners and managers significant time, effort, and money. Choose A Billing Provider Wisely As with any outsourced service, you'll want to pick a provider carefully.  Common industry problems include: Inaccurate and late resident bills Unresponsive customer service for residents and m......
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Using Smartphones for Property Management

As smartphones rapidly flood the market, businesses are increasingly looking for ways to bring their companies and processes mobile. Androids, iPhones, and Blackberries all allow users to perform a variety of processes straight from their mobile phones by incorporating functionality that was primarily limited to PCs just a few years ago. Though there is conflicting information out there regarding the degree to which smartphones have permeated the market (Nielson estimates that one out of every two Americans will own a smartphone by the end of 2011 while Forrester Research estimated that only 17 percent of Americans had smartphones in September 2010), there’s still no denying that mobile is the wave of the future. It’s important to at least begin thinking about how this technology will ultimately fit into your business plan. When it comes to apps, the sky’s the limit. You can build an app that will allow potential tenants to search your rental listings. Or, alternatively, you can build an app for tenants (this makes more sense for larger property management companies) to communicate with you, find information, file requests, or even make payments. According to BusinessInsider.com, when deciding to build an app, it’s important to consider three main questions: What is the key benefit I want users to get from using this app? What other apps exist that are competitive and why will mine be different? What is this app going to do for my business? For some ideas on how property managers are already using apps, be sure......
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Staff Versus Software for Property Management

There’s no doubt about it—of all the business problems you could potentially have, being too busy is certainly not a bad option. However, being too busy can become a problem if you lack the bandwidth to stay on top of things. If you consistently find yourself putting off certain tasks or letting them fall through the cracks altogether, it’s time to make some changes. Being overloaded can result in a slip in the quality of the service you provide or oversights, both of which may guarantee you’re not so busy for long. The obvious answer to too much work is bringing more hands on deck. But, of course, just because you’re busy doesn’t necessarily mean you have the budget to hire additional employees. Property management software may give you the extra help you need at a lower cost than an additional salary. Multi-tasking Functionality One of the great benefits of property management software is that it essentially acts as an office generalist. For example, hiring extra staff to take care of accounting work may alleviate that workload, but that same person can’t necessarily take on other tasks such as advertising. Modern property management software, on the other hand, handles a diverse variety of functions. It does accounting, allows tenants to make rent payments online, provides an advertising platform, runs credit and criminal checks, creates reports, and keeps records. Cost-effective Investment Property management software requires only a nominal investment when compared to hiring new staff and adding an additional salary to your......
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A Small Group Of Tenants May Be Doubling Your Multifamily Utility Costs. Find out what you can do about it

When utilities are included in an apartment complex's rent, some tenants are naturally going to consume more than others.  High utility users, even if they represent a small group of tenants, can substantially increase costs. Since these cost increases are effectively hidden in the rent, those residents who use utilities responsibly subsidize those who don't.  A question to consider then is how much are high users increasing utility expenses?  Does it make financial sense for an owner to include utilities or bill tenants directly?  If an owner does decide to transition away from the utilities included model, what options are available? The Challenge of a Master-Metered Multifamily Complex An owner is most likely to include utilities in the rent when his multifamily complex is master-metered for water, gas, or electricity.  The drawback of a master-metered community is that there's no way to tell how much of a given utility each resident is using.  If I'm one of those residents who runs the heat continually, lets a broken toilet flapper leak without reporting it, or keeps the air conditioning on even when I'm not home, it's my neighbors who pick up most of the tab.  The usual feedback loop that links the amount I pay, to the amount I consume, is missing.  Without this feedback loop, I'm more likely to consume carelessly. As we're about to see, careless or abusive consumption can raise multifamily utility expenses as much as 70%! The RUBS Example Assume you own a 150 unit complex, each ......
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Choosing the Right Business Entity for Your Property Management Business

The business entity you choose for your property management company will affect you in very real ways—especially when it comes to taxation and financial and legal liability. This is a big decision and one that you may want to make with the assistance of your accountant or attorney. Following are the four business entities most commonly used by property management companies and some basic information about each. Sole Proprietor The title of this business designation pretty much says it all—a sole proprietorship is a business owned by one individual. Unlike more complex options, sole proprietorships do not have to be legally registered with the state you do business in. Rather, a sole proprietorship’s existence is solely based on the fact that you’ve gone into business. In other words, it’s simple and free to set up. Sounds too easy, right? Well, there is a drawback. Because you are one and the same with your business, business gains and losses are filed on your personal tax forms and, most notably, you are liable for the business, both financially and legally. Partnership A partnership is much like a sole proprietorship, but it involves two or more owners. As with a sole proprietorship, no paperwork or registration is required—you are simply in business. Again, partners claim their share of business income on personal tax forms and are held liable for the business’ financial and legal claims. Limited Liability Company (LLC) LLCs are a bit more complex to set up than sole proprietorships or partnerships, with......
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Property Management Blogs

Industry-related blogs are a great way to pick up expert tips, tricks, and insider knowledge quickly and for free. But, of course, there are a lot of blogs out there. Since you only have so much time in the day to surf the web, here’s a quick run-down of five property management-related blogs you should be reading. Marketing and More Property management veteran Mike Brewer, who runs the M Brewer Group blog, is one of the most seasoned and consistent bloggers in the industry. While his blog focuses in large part on marketing, you’ll also find various additional industry topics included as well. Brewer has his fingers on the pulse of current industry conversations, so this blog is a great place to stop by to get a quick gauge of what’s currently being discussed by industry professionals. Cyber Consultant With Behind the Leasing Desk, Seattle-based property management consultant Heather Blume provides readers with musings on the industry and insights on how to up your property management game.  On her blog, Heather writes about everything from staff-related training class excerpts to tips for greening up your property. With quick, snappy reads, this blog is a great place to pick up a mish-mash of ideas to help you better your own business, including everything from tenant retention to customer service. Property Renovations Though Brownstoner.com’s Renovation Blog is Brooklyn-based, property managers from everywhere can learn a lot from the site’s home renovation section. If you’re the type that likes to take on projects—or if......
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The Value of Tenant Forums

As a property manager, you have a great resource that shouldn’t go untapped right at your fingertips: your tenants. For as well as you know your property, most property managers don’t actually live on-site. Because of this, your tenants are more qualified than anyone else to provide insights into potentially beneficial changes, improvements, and upgrades that can make your property more appealing—and perhaps even more valuable. You can solicit information from tenants in a number of ways: through an old-fashioned suggestion box either on-site or at your property management office, through an online form, or through a questionnaire for tenants to fill out upon move-out (or at any other point during their residency at your property, for that matter). In addition to all this, when it comes to encouraging tenants to share their thoughts and suggestions, property managers may want to consider taking a cue from condo associations. Hosting forums on an annual or bi-annual basis for tenants to submit ideas for changes and/or to vote on potential changes you are considering rolling out at your property is a great way to not only receive important feedback, but also to bring tenants together to brainstorm and share ideas that you may have never even considered. Though you have the ultimate say about what does or does not happen at your rental property, receiving this sort of organic feedback can lead you in the right direction, providing a lot of insight into what tenants do and do not want to see happen......
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