PROPERTY OWNERS

BY MICHELLE GAMBLE

The property ownership and investment industry have gone through a lot of changes in the last few years, some of which have been driven by the pandemic. When asked what are current concerns for 2023, many of the same answers seemed to commonly top the list. The following responses were provided by some of the top experts on the subject.

Renters Paying Rent On Time

Without question, every property owner cited rent payments as the number one worry. “My first concern when renting to renters is: ‘Will they pay the rent on time each month?’ No property owners want to go through evictions – they’re expensive and time-consuming,” said Brian Davis, a property owner and founder at SparkRental.com.

Davis continued by highlighting some of his solutions. “Aggressive renter screening helps, going beyond pulling credit reports to calling employers and former property owners. As much as it helps to speak with their current property owner/ manager, make sure you also speak with at least one former property owner as well. Current property owners have a vested interest and may give a glowing recommendation just to get rid of a bad renter. If you have any doubts or questions about a renter making every single payment on time, pass on them and wait for a renter you have full confidence will pay.”

Property owners can also put an eviction clause in their contracts; however, make sure to follow all of the rules and regulations required in your region.

Owners can also set up management systems designed to encourage on-time payments. Property owners need to utilize technology such as property management software or rent collection tools. These tools will help improve their processes and decrease overhead costs. “To manage this, owners can implement systems such as automatic payments and reminders to ensure that renters remain on track with their payments,” said Henffrey M. Muthama, head of marketing at LedAsk. Further, owners who offer online payments need to make the systems user friendly so that renters don’t get frustrated and rent payments become difficult to make. The course of least resistance encourages on-time payments.

“One potential solution is to require rental payments by direct deposit, which provides a secure and reliable way for the property owner to receive payments on time,” said Alex Capozzolo, co-founder of SD House Guys. “The property owner can also set up automated reminders or payment schedules to ensure that payment deadlines are met. Additionally, the property owner can require all renters to set up automatic payments so that their rent is paid automatically each month.”

Also, consider going to monthly leases versus annual ones. “If and when issues do arise, you can simply choose not to renew the lease and immediately start eviction proceedings if required,” added Melanie Hartmann, owner of Creo Home Buyers based in Maryland.

Property owners might even want to consider providing incentives. “An easy solution to this problem is to offer early payment discounts,” said Scott Rubzin, CEO of Tiffany Property Investments LLC. “You need to give renters an incentive to pay on time. An early bird discount works best here. Knock $50 off the rent if a renter pays on time. In no time, every renter will hear about this – and they’ll all flock with their payments.”

Property Damage

Property owners need to protect their investments and ensure insurance coverage is adequate. “Property damage from natural disasters and renters can be costly,” reported Value Penguin in an article titled “Estimated $29.4 Billion in Property Damage from Severe Weather Not Covered by Insurance in Past 5 Years” by Maggie Davis. “Between 2017 and 2021, severe weather caused $121.4 billion in property damages in the U.S. That averages to $940 per household and business. We estimate that more than three-quarters (75.8%) of these weather-related damages were covered by insurance, for a total of $92.0 billion. That leaves an estimated $29.4 billion not covered by property insurance.” (For more information on natural disaster property damage, refer to the article in this issue titled “Preventing Property Damage.”)

In terms of renters damaging property, proactive steps taken right from the beginning of rental relationships will mitigate future problems. “A good practice is to require renters to pay a security deposit upon move-in, and this can be used to cover any damage that may occur during the renter’s stay,” said Capozzolo. “The property owner can also conduct regular inspections of the rental and document any existing damage in order to have a record should any disputes arise. Furthermore, the property owner can include clear clauses in their lease agreement that outlines expectations for renter behavior with regard to caring for the property.”

“Owners should create a detailed checklist of the property’s condition upon move-in and move-out to make sure that it is kept in good condition throughout the entire renter agreement,” said Muthama.

“I want renters who will treat it like their own property, with kid gloves,” added Davis. “If they have a pet, I charge both a pet deposit and monthly pet rent. Pets put more wear and tear on properties, period. I also include protective clauses in my lease agreement. For example, I require renters to put felt pads on the feet of all their furniture to reduce damage to my flooring. I prohibit renters from mounting TVs on the wall. In single-family homes, I require them to replace the air filter every three months, and I do semi-annual inspections to check these things as well as to look for any needed repairs or maintenance.

“Property owners should also try to ‘renter-proof’ the property itself as much as possible,” continued Davis. “That includes using more robust flooring, such as luxury vinyl tile or bamboo flooring as appropriate, rather than hardwood or carpets. I mount all towel racks and other hooks into studs, so they can handle a lot of weight. I install door stoppers behind all doors. Expect renters to treat your property poorly, and take every precaution to prevent them from damaging it.”

Maintenance

Property owners expect renters to take good care of their properties and maintain them in a safe and orderly condition. However, not all maintenance goes to the renter. Owners have to provide ongoing maintenance for things like HVAC, plumbing, appliances, and structural issues that pose safety hazards that are unrelated to renter wear and tear, but rather decay and breakage. Legal issues arise when property owners fail to maintain what falls under their purview of responsibility.

Maintenance needs to be engendered through good renter relations. Make it clear to renters that it’s expected that they report maintenance issues through whatever system has been set up to do so. “Renters not reporting serious issues that can lead to more costly repairs, such as a small leak in the basement,” said Melanie Hartmann, owner of Creo Home Buyers 2. “One way to mitigate this is to have frequent walk-throughs of your rental properties. You can choose to do monthly, quarterly, or twice yearly checks on your properties.”

“As a property owner, you should ask the renter to set aside a fixed deposit that would be used to take care of and conduct maintenance around the property,” said Eli Pasternak, a licensed real estate agent and investor at Liberty Housing Buying Group. “This way, you can ensure that your house stays neat and tidy.”

Renter Nuisance

Another concern involves renter disturbances. Property owners worry that their renters may not be respectful of the noise limits in place. Noise (e.g., loud music, parties, yelling) can disrupt entire complexes and even neighborhood peace. Property owners can reduce this liability by doing some preliminary management. “Check the history of the occupants and find out whether they have had similar issues in the past,” advised Carter Crowley of CB Home Solutions.

“The property owner can include a clause in the lease agreement that outlines acceptable noise levels and specific restrictions or requirements, such as quiet hours after 10 p.m.,” said Capozzolo. “Additionally, the property owner can clearly communicate any expectations for renter behavior with regard to noise levels and provide educational materials to renters about how to be respectful of their neighbor’s noise limits. Moreover, the property owner should also encourage renters to report any noise issues they hear from their neighbors in order to ensure that these are addressed quickly and effectively.”

It’s important to address renter conflicts as well. During the pandemic many people began working from home and have remained remote workers. This situation gives rise to more potential renter disputes among neighbors. “Renter conflicts in multiunit apartments are not entirely avoidable,” said David Bitton, co-founder and CMO at Doorloop, a property management software company. “These conflicts likely increased during the lockdowns when everybody was staying at home. However, these conflicts can be avoided if renters clearly understand expectations around noise and pets and, thus, the right to a quiet environment and habitability. These expectations must also be enumerated in the lease agreement.”

Issues From The Pandemic

The pandemic has impacted the property industry and changed owner’s and operator’s lists of concerns. Health and safety consideration are top priorities among owners and operators.

“Not only are they worried about finding renters who will be able to pay their rent, but they are also concerned with the safety of their renters, especially with cases of the virus still rising,” said Muthama. “Property owners must now take precautions to ensure that the property and its occupants are protected from potential spread of the virus. This includes implementing measures such as contactless checkin, deep cleaning between tenancies, and providing renters with access to additional resources such as hand sanitizer and masks.”

Moving Forward

Overall, the solution for most problems and concerns seems to be a well-thought-out, air-tight lease agreement. While it’s not the cure-all for every property management issue, it certainly provides a place to start. Legally speaking the same principle applies. If property managers have solid lease agreements and do thorough renter screening, the majority of issues can be effectively prevented.