By Matt Donnelly, Buildium, Boston, MA

I spoke with a property manager the other week who was lamenting the tight profit margins he said he was forced to accept in order to get more business from property owners. He was interested in property management software as one way to cut costs and boost margins, which is a great solution. But are there other ways for property managers to cut costs in addition to increased automation.

One of them is forming or joining a property management cooperative. The idea is simple: Bring together a group of property managers in your area with common needs — trash pickup, maintenance, etc. — and pool their negotiating power to get lower costs for products and services.

That idea is the brainstorm of CCA Global Partners, which has found a niche implementing cooperatives in many different industries. Now they’re turning their attention to property management, creating INNOVIA.

“The purpose of INNOVIA is to bring together property management firms from across the U.S. so the aggregation of goods and services can be achieved at a much greater discount than by doing it on your own,” Justin Gargiolo, senior vice president and director of corporate operations for Great North Property Management in Boston, told the New England Real Estate Journal.

The savings can be substantial. Gargiolo elaborates:

As one of the 12 founding members of INNOVIA (and growing) we’ve already achieved 12% saving on our trash hauling costs and have seen the opportunity for 10-12% savings in energy procurement (gas/electric). We expect to see additional savings opportunities in office products, insurance, mortgages, pest control, and flooring, among many others.

He adds that there are already plans to let rental owners benefit from cooperative purchasing as well.

Do you have experience with property management cooperatives? How could you benefit from joining one? What are the risks? Please share your experiences in the comments section below.

By Jo-Anne Oliveri, ireviloution intelligence, Brisbane, Australia

I get asked this question a lot: “What’s the best way to build my rent roll?” I always reply, “What are your business’ goals for growth?”

There are two viable methods for building your rent roll – organic growth and acquisition. But, truth is, choosing a method requires you to consider which best aligns with your business’ growth strategy and can successfully achieve your goals. There’s a catch – whatever method you choose must be strategically planned, implemented, and managed in order for it to effectively build your rent roll and achieve your goals.

Organic growth

Consider organic growth. This method builds your rent roll through inquiries generated from planned marketing activities. In order to strategically plan, implement, and manage this method, you must understand your market area. Understanding your market area means knowing its statistics, such as the potential number of properties that make up the market area. Knowing such statistics gives you the ability to plan the number of properties that can be gained, average weekly rent of these properties, and projected growth horizon. This method also requires a team that can effectively manage gained properties and retain business.

What are the advantages and disadvantages of organic growth? Does it align with your business’ growth strategy and goals?

Pros:

• More cost effective than acquisition
• You charge fees in accordance with your own fee schedule
• You accept managements and property owners that match your criteria
• You don’t end up with managements that another agency has poorly managed
• Property owners are nurtured and managed by your agency’s policies and processes
• Managed growth, therefore managed retention

Cons:

• Takes longer to build your rent roll
• Requires more patience, planning, and marketing investment
• Requires outlay for resources and team members prior to income converting to profits

Acquisition

Now consider acquisition. This method builds your rent roll as you purchase other agencies’ rent rolls. Many principals use this method if their rent roll is experiencing slow growth. But, just like organic growth, acquisition requires investment, being the agreed amount for the value of the business on offer. You build your rent roll through acquisition by dealing with a broker who lists rent rolls for sale.

Once again, you must consider whether acquisition aligns with your business’ growth strategy and goals by weighing up its pros and cons.

Pros:

• Builds cash flow quickly
• Potential to increase income and asset value by increasing properties’ rental rates
• Potential to increase income and asset value by increasing and/or introducing further fees
• Further builds brand awareness and agency profile in market area

Cons:

• Fees can be low and inconsistent
• Extra charges can be low, non-existent, or inconsistent
• Property owners can be loyal to the previous agency and/or property manager
• Properties could be poor quality, placing extra pressure on your team
• Managements could be properties you would otherwise never choose to manage
• A poor rent roll purchase could damage your agency’s brand and reputation
• It takes a long time to gain a return on the investment

Which method should you use?

As you can see, neither method — organic growth or acquisition — is perfect, but what’s also clear is that either method can effectively build your rent roll. The key is to consider which method best aligns with your current growth strategy and goals then strategically plan, implement, and manage your chosen method to successfully build your rent roll. Keep in mind, the solution may in fact be to use a combination of both methods. It just depends on your business’ current situation, what you want to achieve, and when you want to achieve it – that should lead you to the how.

How are you building your rent rolls? Please share your experiences in the comments below.

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

Years ago we all saw that movie about Facebook and how it took off when the founder had the thought that you could advertise your relationship status on “The Facebook.” Are you single? Dating a couple folks? Or in a relationship? (Colin McCarthy is in a relationship, a married relationship, with another Facebook user). It’s all about the relationships, people!  It’s not what you know, it’s who you know.

It’s not that you did anything wrong, it’s that you hired someone who did something wrong. Wait, what? What did you just say? Did you just say I can be liable for what my girlfriend, I mean my wife, did? No, I said you can be liable even though you did not do anything wrong, because you are in a special relationship with someone.

And when I say you, I mean the landlord. And when I say special, I do not mean romantic.  Ordinarily the law in California will not impose a duty on the landlord (or anyone for that matter) for the wrongful acts or omissions of someone else, absent a “special relationship.” For example, once your little children reach the “age of majority” (18 years), what they do, legally, most of the time can’t be tagged to you. But if there is a special relationship with the adult child (a history of custody and ability to control said adult child due to violent tendencies), there might be a duty to certain third parties.

A special relationship really is just the judge’s way of attaching liability to a deep-pocketed defendant if there are circumstances that warrant it.  Such a special relationship will make more sense when a person (or entity) works at the behest of (or on behalf of) another to accomplish that other’s work. A big factor in this relationship liability attachment is, as discussed above, control. But it is not determinative. What is determinative is whether public policy reasons (from those Rowland factors discussed a long time ago) merit the attachment of liability. Is the plaintiff severely harmed? Is there some moral culpability to the defendant’s conduct? Is it foreseeable to be harmed in such circumstances? Is there insurance?

The courts mesh these factors together in relationship cases and apply “vicarious liability” in cases “where the interests of justice demand it.”*  This is a broad phrase and a discretionary brush with which the court interpreting it has many options. We’ll discuss some scenarios in the next few blog posts in which landlords have to deal with the demanding justice of vicarious liability.

*Roberts v. Craig, 124 Cal. App. 2d 202, 208 (1954)

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submission do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

By Matt Donnelly, Buildium, Boston, MA

If your tenants don’t own pets, they’re in the minority. That’s the finding of a new Apartments.com survey, in which a full 75% of renters said they owned one or more pets. That’s up a staggering 32% since last year. Most of these pets are cats and dogs, with fish trailing behind at 6%. (Sorry, Nemo.)

Curiously, only 63% of renters who own pets said they were required to put down a pet deposit. The most common deposit was $200+.

What’s possibly more interesting is that 58% of renters who don’t own a pet still sought out pet-friendly buildings. They want to live near pet owners. Of those renters surveyed in 2013, 78% said they lived in pet-friendly buildings, up from 59% in 2012.

The trends are clear: More renters are owning pets, and more renters without pets are warming to the idea of living near them. Add to this the fact that 65% of pet-owning renters said they had some problems finding pet-friendly rentals, and it seems clear that having pet-friendly units could put your property at a competitive advantage. Put another way, if you’re not allowing pets, you’re turning away a large subset of renters.

Are the risks of allowing renters’ pets greater than the rewards? Do you allow pets in your units? Why or why not? Share your experiences in the comments section below.

(Note: The dog featured in the photo belongs to Buildium’s own Ian Pirro.)

By Matt Donnelly, Buildium, Boston, MA

Low mortgage rates aren’t enough to tempt some young people to buy a home. Instead, they’re opting to rent one.

In Memphis, for example, property management companies like Lubin Property Management LLC and Renshaw Property Management are seeing big growth in single family rental homes.

“Young home renters have been our biggest area of growth,” Ryan Lubin of Lubin Property Management LLC told The Daily News in Memphis. “Even with mortgage rates low, we are seeing more demand for rentals from the 23 to 35 age group than any other group.”

Why the trend? Some experts are citing high student loan debt, while others point to macroeconomic uncertainties. Another reason young people prefer to rent a home instead of buying one is that they want to live in an area first.

In many areas of the country, investors are buying and rehabbing single-family homes that they turn around and rent out in order to meet the surging demand. This is big business — a $10 billion business, reports Bloomberg Businessweek.

According to new research by IBISWorld, property managers stand to benefit from this home rental trend:

Private equity firms and other large investors typically do not directly manage the day-to-day operations of the houses they buy. Instead, they outsource property upkeep and tenant relations to property managers, who currently derive about 63.8% of their revenue from the residential market. However, this market largely comprises the management of multifamily apartment buildings, rather than single-family homes; as such, these operators will shift slightly toward managing groups of homes, opening up a niche service segment for some property managers.

IBSIWorld projects 6.0% revenue growth for the property management industry in 2013 due to the wider U.S. housing recovery.

If you’re a property manager, have you seen increased demand for professional management of single family rental homes? Please share your story in the comments below.

By Matt Donnelly, Buildium, Boston, MA

If you’re a property manager, how can you encourage your tenants to support local businesses? Create a rewards card.

This is the approach taken by LLC Property Management, based in Los Angeles and Dallas. They offer each tenant a card they can use to get discounts at local shops. The tenant saves money and local shop owners get more business.

“Tenants usually save about 5-10% with each purchase. For example, every time they shop at their local markets or grocery stores, they can show their LLC Rewards card and receive the discount,” says Stefanie LaRue of LLC Property Management. “Dollar stores are very popular too. The vendors appreciate us directing local business their way, and the tenant’s savings adds up over time to where they truly value being a part of the program. They never leave home without their cards.”

This is just one of many ways that property managers can add value for their tenants. For example, Gallagher & Lindsey Property Management, based in Alameda and the East San Francisco Bay Area of California, rewards some long-term tenants (12 months or more) with a cash rebate that can be applied when those tenants buy a home through Gallagher & Lindsey REALTORS.

Another example comes from the Barrington Group, which manages properties in Ohio, Michigan, Indiana, Georgia, and Florida. It has created a Residents Reward program in which tenants are rewarded with points for doing things such as paying their rent on time, helping orient new tenants or donating to a local soup kitchen. The points can be exchanged for apartment upgrades such as granite countertops, new carpeting or custom painting. The objective is to increase tenant loyalty, foster a feeling of community and ultimately reduce turnover.

There are numerous other rewards programs offered by property management companies. What programs does your company offer to your tenants?

By Matt Donnelly, Buildium, Boston, MA

Think of an English butler, and your thoughts probably turn to a devoted servant willing to do whatever it takes to make his employer happy.

Apply that same idea to property management, and you have what new UK-based property management company London Management Company is calling “butler” service. By “butler” service, they mean providing uncompromising one-stop service to tenants and property owners. London Property Management is convinced there’s a need in the UK property management market for world-class service, implying that it’s now lacking.

What can you as a property manager do to provide “butler” service to your tenants and property owners? Here are a few ideas:

• Put the tenants first: You might have lots of other things to do, but you should always strive to reply to tenant emails quickly and pick up the phone if you get a call.

• Sweat the small stuff: Sometimes it’s the small things that mean the most to tenants. You don’t always have to resort to grand gestures. Are there any small requests you can take care of today that will brighten your tenants’ day?

• Think of ways to make your tenants’ lives easier: What about online bill payment? How about letting them log maintenance requests online?

• Be innovative: What about giving your tenants “shrinking” lease payments if they consistently pay on time? How about offering a rewards card with discounts from local merchants?

• Invest in upkeep: If your units are looking their age, it might be time to invest in some upgrades. Don’t let repairs wait — take care of them quickly, and your tenants will notice.

Customer service — or the lack thereof — can be the difference between happy, lease-renewing tenants and a merry-go-round of empty units or new tenants. Which would you rather have?

Now it’s your turn. What do you do to provide “butler” service to your tenants? Please leave a comment below to continue the discussion.

By Brooke McDonald, VSM Real Estate, St. Paul, MN

Last time, in “How to Renovate Older Rental Properties,” I discussed the best way to get old properties ready to rent. Now I want to discuss ways to show your older property.

So how do you show her off in style? Here are a few tips:

• Target the right profile. Choose the right audience. You have to find people who can picture themselves living in your property– whether for the price or its characteristics – and who will find beauty in its age.  If it’s an older apartment or home, perhaps targeting young, prosperous families is not the right move.

• Tug at their heartstrings. People who appreciate the music, movies and stories of bygone days typically have an emotional connection with bygone eras. Tap into the emotional connection buyers have by referencing the property’s nostalgic qualities, its value, and yes, its charm and character. Everything vintage has experienced a distinct surge in popularity – play with this fascination with old things.

• For youngsters, appeal to their desire to be unique. Older properties are often one-of-a-kind. If you have younger renters tantalized by updated models and stainless steel, assure them of the uniqueness of an older property. The crown moldings, intricate wood plaster, claw foot tub and gigantic trees in the backyard are simply not something they’ll find in a newer property. Highlight how special these details are, and make sure to point out little details like this on the walk-through.

• Show ‘em old can be cool. Property managers take varying approaches to presenting older homes in an appealing light, using words like unique, sophisticated, or quaint, words adults may value and older souls can appreciate but words which young buyers may read as outdated, irrelevant, or ancient. Try using some new, bold descriptors to market this property. What about sassy? Who says old can’t be sassy?

• Remove their doubts quickly. Realize they’re afraid the property is going to fall down in a year and provide a detailed record of updates, fixes, and repairs. If everything has been serviced recently, your renters will sleep much easier knowing the property isn’t dying – it’s just old.

When you have an aesthetically appealing, clean property with a great story on your hands, marketing it well just means helping renters reframe old in their heads. Show them the possibilities of the property, and assure them that even an old property will still provide plenty of enjoyment.

Older properties have always got a chance in the rental beauty pageant. They may be old, but they can still win your heart over.

By Matt Donnelly, Buildium, Boston, MA

Property management software isn’t just for the big guys. It’s for any landlords or property managers who want less stress, more free time…and a growing business.

Most property management software runs in the cloud, which is just a fancy way of saying you don’t have to install anything — just go online and log in to access your information at any time and in any place. Think of property management software as a personal assistant that’s, well, not a person.

More than just managing your properties, property management software is designed to make your life easier. It’s designed to help you easily perform those routine tasks like collecting rent payments and handling maintenance requests. It also lets you maintain records and run reports, which are always helpful at tax time!

Death by spreadsheets

I know what you might be thinking: I’ve managed my properties on paper or in Excel for years, so why should I use property management software?

It’s a good question. This takes us into a discussion of the benefits of property management software.

Only half joking, one landlord once quipped, “Without property management software, I would actually have to work.” While property management software can’t automate every aspect of property management, it can be an affordable and simple solution where property managers and landlords can manage properties, accounting and marketing all in one place — anywhere, anytime and on any device.

Let’s look at some of those property management tasks you might be having trouble with and see how property management software can ease your pain in each area.

• Doing the books: What would your life be like without having to manually update Excel spreadsheets? With property management software, you can get a complete financial picture for your properties and owners. Track income and expenses, and run key financial reports on demand.

• Payments: Imagine the tenant in 3C claims he gave you his rent check, but you have no record of it. It takes precious time to deal with the resulting hassle. But with property management software, you can allow tenants and association owners to make payments online, via EFT or credit card. And you can pay your bills online too. Trips to the bank will be a thing of the past.

• Maintenance requests: If the tenant’s dog chews through the fence, you don’t need to get called at one o’clock in the morning. With property management software, you can accept and respond to maintenance requests online 24/7. You get instant notification of the request, an easy way to assign tasks to your maintenance staff, status updates and a clear paper trail in case your tenant with a peckish pet gets litigious.

• Access to your information: Property management software is going mobile, so all the features are available to you and your tenants 24/7 on PCs, phones and tablets. No longer do you have to drag around your laptop and find a Wi-Fi hotspot in order to check on maintenance requests, rental applications or rental payments. Spend more of your time meeting with tenants and growing your business.

• Advertise for and screen for new tenants: Many property management software options will allow you to largely automate the process of advertising vacancies to sites like Craigslist or Zillow, handle rental applications and even facilitate background checks. Then, once the applicant becomes a tenant, the property management software will let you manage that relationship so it benefits both you and your tenants. You can also save your ads to use whenever you have more vacancies.

Depending on the property management software you use, you might have access to other time-saving features, including the ability to run credit and background checks, file tax forms and even outsource mailings.

It’s also easier than you think. Property management software companies spend a lot of time listening to their customers (people like you). They know you have an extremely busy job with no time to dedicate to learning a product. That’s why most of the software is designed so you don’t even need a product manual. Support is always there to help you out along the way and make sure that you are being as efficient as you can possibly be.

Do you use property management software? How has it helped you? Please share a comment below.

By Brooke McDonald, VSM Real Estate, St. Paul, MN

The unique nature of older properties makes renting them out a bit of a challenge. While newer homes and apartments boast modern conveniences, older properties sing charming songs from an earlier era. They just don’t build ‘em like that anymore, the old fogies mourn. There’s truth to it: People are truly not able to recreate the age and qualities of an older home, unless you take the expensive route and custom build and design a home.

The challenge of preparing old properties for market fits the analogy of a beauty pageant like a glove (an old-fashioned Grandma glove, no less). Not only is your contestant up against the fierce competition of the newly-remodeled-three-car-garage-whirlpool-tub crowd, but her charm and character need to make a fast impression.

Most real estate agents and property owners emphasize that the most important marketing strategy is to foresee common buyer objections and address concerns with renting an older property. What can you do to showcase your elderly gem’s best qualities and minimize any concerns from cautious renters?

The best of old and new

Old homes are stereotypically smelly and dark, with out-of-date appliances, peeling paint and dirty carpet. Property owners may be tempted to scrap it all and invest heavily in renovations. The key, however, is to retain the character and uniqueness your old property boasts but equip it for modern living as best you can. Conducting a deep clean, ensuring the working order of major home systems and making small renovations will go a long way to beautifying your old property.

• Make sure it looks good on the outside. Eliminate a new renter’s concern that the property is falling apart by making any big property renovations that must take place – like a new roof, chimney repairs, new windows, new siding, etc.

• Check mechanical systems (water supply lines, drain lines, heating system, circuits, etc.). Make sure everything’s working like it should so that renters do not worry that something will break in the middle of the night.

• Update ancient appliances. Ensure that everything works, and buy new appliances to replace near-death ones. Consider consulting a designer to make sure you choose appliances consistent with the home’s character.

• Freshen up the bathrooms and kitchen. These rooms sell a house. New coats of paint, new hardware on the cabinets, and perhaps new countertops or mirrors all go a long way in maintaining the charm and loveliness of the property. Nobody likes the look of kitchens or bathrooms that are in disrepair, dark or dingy. You can update these without a huge investment. For the showing, set out new towels, soap and flowers.

• Know the story. Time permitting, take a look at the history books, old newspaper articles and library archives. Having interesting tidbits on hand to share with your potential renters will help people value the property more. It’s not a bad idea to create some marketing materials specifically for telling the story. Often, older properties are located in areas with rich history and great ambiance.

• Have a property inspection done. Do this before renters show up in order to give relief to suspicious prospects who think a big bad issue will crop up at any moment.

Once you have your older property all spruced up, it’s time to show it to potential renters. What are the secrets to showing an older rental property? That’s the topic of, “How to Show Older Rental Properties,” my next blog post.