While San Diego experienced the 3rd most severe rental rate decline (according to the Wall Street Journal) in the beginning of 2010, there is reason to believe that the rental market will stabilize in 2011. A projected increase in hiring across San Diego’s military and bio-tech sectors should provide a favorable boost to the rental market. The following links further analyze the rental market in San Diego and provide some guidance on navigating the market ahead.

• BizSanDiego provides a list of San Diego’s bio-tech companies — many of these companies will likely see an uptick in hiring and could be a potential source of new tenants as they help to relocate new hires.
• The unemployment rate in San Diego appears to have leveled off after a significant increase. This graph is a good economic indicator and gives a sense of how the recession has affected the area.
• There is definitely reason to be optimistic — according to this article the rental market in San Diego county should outperform the rest of southern California.
• We’re talking about sunny San Diego — who wouldn’t want to live by the beach? Mission beach is one of San Diego’s most spectacular and desirable rental markets.

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It comes as no surprise that the rental market has changed significantly along with the volatile economy of recent years. While some areas have weathered the financial storm better than others, landlords in many regions have found themselves in a market with new rules and considerations. Though things are looking up (according to an April 2010 article in The Wall Street Journal, apartment rents rose during the first quarter of 2010 for the first time following five consecutive quarters of decline), some areas have found themselves in a market that is nonetheless different than it was before. Over the next few weeks, we’ll look at some areas that have experienced market changes and examine some strategies for navigating the new markets that have emerged. First up, sunny San Diego.

According to WSJ, San Diego came in third (behind Portland, OR and Las Vegas, NV) for the steepest rent decline at the beginning of 2010. WSJ attributes the decline in this area to “ … an uptick in home-buying activity, particularly… from first-time buyers and investors.”

When given the choice between doling out rental income every month and having the opportunity to make a long-term investment, most will choose the latter option whenever possible. And although the home loan process is currently more selective and arduous than it has been in recent history, the fact remains that the increased number of foreclosures and home deals makes it possible for new buyers who find themselves in stable job situations to enter the homeowner market.

According to the San Diego Union-Tribune, though, there is good news to be had in the rental market. As compared to other regions, San Diego has experienced a relatively stable job market over the past few years (which also contributes to the rise in home sales) and, with a heavy emphasis on the military and biotech sectors, San Diego is “ … serving as a bellweather for improved apartment conditions … [the military and biotech sectors] promise to buoy the region in the next year and keep rents from falling further.” These comparatively healthy industries and a projected increase in hiring rates mean that San Diego landlords can expect to see improved conditions in 2011, as opposed to the recent slump.

The relatively healthy military and biotech sectors offer up good opportunities for stabilizing (and bettering) the rental market. Some tips? Market your vacancies to real estate companies that specialize in clients re-locating for jobs; target your advertising efforts to local web sites, print publications, and local haunts that military and biotech professionals are likely to frequent; and, while you’re waiting for the market to hit its stride in 2011, offer up incentives to bring new tenants in the door. Further good news, according to WSJ, is that renters are staying put for longer than they have in recent history (for an average of 19 months as opposed to an average of 14 months before)—so a bit of a short-term loss may well be a savvy investment in expediting a better long-term future for your rental property.

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Your property management career will go a lot farther and will be much more lucrative if you are able to keep vacancy rates as low as possible. Chances are your tenants have friends, family members, or colleagues in the area of your property who may be looking for similar units — they are resource that you should take advantage of when looking for prospective tenants. A tenant referral program can be a very effective method to this end. The links below can get your tenant referral program off on the right foot.

• If you manage an expensive or more upscale property, don’t shy away from a tenant referral program. This article proves that they can be successful, as well as lucrative.
• You should think about distributing fliers, posting bulletins, or updating your website with information about your tenant referral program.
• Remember, referral incentives don’t have to be all about money. Incentives such as flat screen televisions and parking passes for your property may be just what it takes to get a referral out of one of your tenants.
• In addition to a tenant referral program, you may also want to consider lease renewal incentives as another method of keeping your units occupied.



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Let’s face it – keeping vacancy rates as low as possible is any property manager’s first priority. With the economy in its current state, this is truer than ever before.  We’ve written several articles in the past on combating a lousy rental market with strategies like lease renewal incentives and cross-promoting with local businesses. This week we are offering just another tool aimed at keeping vacancy rates low – a tenant referral program.

Tenant Referral Incentives – How Much is Enough?
By far the most common type of tenant referral program involves offering current tenants a monetary incentive to refer a new friend, family member, or colleague to their community – the current tenant is then paid for their referral when the referred tenant signs a lease.  Although monetary incentives can come in all sizes, one of the most commonly used programs offers $100 per tenant successfully referred. It’s important to note that if you go the monetary route, incentives should match your tenant demographic – we recommend starting with an incentive that is about 20% of one month’s rent. That being said, some of the most successful referral programs actually occur in more high-end properties. A wealthy person in a high-end property may be more motivated to refer a friend for a $1000 incentive than a less well-off person would be for a $100 incentive.

Get Creative with Your Program
You know your property better than anybody else. In order to achieve the highest adoption of your tenant referral program, it’s very important to implement a program designed specifically for your unique property. This may require a little outside-the-box thinking: Are you going to offer incentives to only current tenants, or to the general public? Will incentives be paid out on a per tenant basis or a per unit filled basis? Perhaps even more interesting are the array of incentives that you can offer. In lieu of monetary compensation we’ve seen programs that offer incentives ranging from flat-screen televisions to parking spots. We even found a program that offers referred tenants 20% reduced rent for 90 days if they lose their job. Talk about recession proofing a lease!

A Word of Caution
Tenant referral programs can be a very slippery slope depending on the tenant make-up in your building. Always consider the history of the tenants who will be referring new tenants to you. If a current tenant is frequently late with their rent or has been the subject of several noise complaints, the tenant that they refer to you may act similarly. You must make sure that you are abiding by the Fair Housing Act, so if you have some major problem tenants it may be best to not offer a tenant referral program – you might find yourself with more of the same.

While offering monetary incentives or luxuries like flat-screen televisions and parking spots may seem out of your reach in this economy, you need to think about the income to be gained rather than the money spent. Ultimately a newly signed lease will almost always bring in much more money than a few hundred dollars paid out in incentives.

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Any renovations that you decide to make to your property should be based on sound business decisions. After all, if you are opening up your wallet to better your property you want to make sure that you see an ample return on your investment. These links will help you make an informed decision regarding potential renovations.

• One of the best ways to ensure that the return on your renovations is as high as possible is to have trusted, reliable contractors perform the work for you. Having a short list of contractors with whom you have developed a relationship is the best way to know that the work being performed is of good quality and priced reasonably.
• No matter how much due diligence you give your renovation, it can still feel like a gamble. CNN Money provides some great data on the most common home renovations and the return you can expect from them, based on national averages.
• Here is another good resource — TLC’s article on the Top 5 Ways to Add Value to Your Home, even in a down economy.
• We are particularly in favor of any renovations that could be considered “green.” But are these renovations as worthwhile from a cost/benefit standpoint? This interesting article explores sustainable renovations in further detail.

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Determining when the time has come to do renovations on your rental property is a process that requires good judgment and a careful analysis of your goals. Depending upon your situation, renovation time may occur before you ever even move tenants into your property or, alternatively, it may be one of the final things you do before selling your investment property. Following are a few key questions to consider when contemplating a renovation.

Would I want to live here myself?
While you don’t have to outfit every rental you manage like a luxury penthouse complete with every amenity imaginable, it is important to make your rental units as comfortable and livable as possible for tenants. Upon purchasing a rental property (and every few years thereafter), look around your rental unit and ask yourself: Is this somewhere I would want to live? If the answer is no, it’s time to start taking a serious look around at what features could stand changes or improvements. The better condition your rental units are in, the more quality tenants you will attract. And the better quality tenants you attract, the better care they will take of your units. Good tenants are a key element to consistently maintaining the value of your rental property.

How do I stack up with the competition?
If you are looking to sell your investment property at any point in the near future, you should make yourself familiar with comparable properties in your area. In real estate, sale prices are determined in large part by “comps”—properties that are similar to yours in terms of size, location, and amenities. Knowing what value these comps command will give you a good idea of where you stand. Let’s say, for example, that a comparable property in your neighborhood recently sold for your target sales price. Take a careful look at that property and then realistically compare it to your own, asking yourself how you stack up. Remember, this involves more than just a comparable number of bedrooms and baths. If, for example, the comp property features units with renovated kitchens, while yours does not, and all other factors are fairly equal, chances are your property will command less on the sales market. In order to meet the competition and bring up your price, it may be time to consider renovations to your units’ kitchens to bring them up to the competition’s level.

What is the cost/benefit ratio of renovations?
With the previous scenario in mind, though, remember that it’s important to consider cost/benefit ratios when it comes to renovations. To determine this, speaking with both a trusted contractor and real estate professional is recommended. Let’s say, for example, that you speak with a contractor about potentially renovating the kitchens in all of your rental units and learn that this will cost approximately $35,000 total. You then speak with a real estate agent who determines that updating the kitchens in the rental units will bolster the property’s overall sales price by approximately $37,000. Is this cost/benefit ratio worth it in the long run or is it best to go with the lowered projected sales price your property currently demands? Consider such questions carefully before embarking on renovations.

Every landlord wants their rental property to be in the best shape possible at all times. But before embarking on a costly renovation, it’s important to consider your goals, the market, and the expected financial impact of any given renovation.

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With the economy in its current state, real estate commissions can be hard to come by — at the very least they can be more unpredictable than you’d like. As a result, many real estate agents have found that diversifying their industry skills into the property management arena can provide them with a more steady source of income. Afterall, when the housing market is slumping the rental market will often pick up some of the slack. Check out these links to help transition your move to property management.

• Even though most realtors have a huge jump-start in terms of industry knowledge, property management requires a new set of skills. Check out this useful site with information on property management certifications and educational resources.
• While those big commissions in real estate can be a rush, anyone moving into property management should have a grasp on the compensation to be earned in both fields. Check out the US national average compensation for real estate agents according to salary.com.
• Now take a look at the US national average compensation for residential property managers, again according to salary.com.
• Check out Buildium’s Facebook page to see what our customers are saying about their own moves between the real estate and property management arenas.

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With the economy in its current state, real estate commissions can be hard to come by — at the very least they can be more unpredictable than you’d like. As a result, many real estate agents have found that diversifying their industry skills into the property management arena can provide them with a more steady source of income. Afterall, when the housing market is slumping the rental market will often pick up some of the slack. Check out these links to help transition your move to property management.

• Even though most realtors have a huge jump-start in terms of industry knowledge, property management requires a new set of skills. Check out this useful site with information on property management certifications and educational resources.
• While those big commissions in real estate can be a rush, anyone moving into property management should have a grasp on the compensation to be earned in both fields. Check out the US national average compensation for real estate agents according to salary.com.
• Now take a look at the US national average compensation for residential property managers, again according to salary.com.
• Check out Buildium’s Facebook page to see what our customers are saying about their own moves between the real estate and property management arenas.

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Anyone who has made a career in real estate knows that the market is always changing. There’s no arguing the fact that real estate professionals must have the ability to accept that while there are times of feast, there are also times of famine. But even when buyers are hard to come by, opportunities for income generation exist. And one of those opportunities is property management.

Adapting to change.
It’s not news at this point: Over the past couple of years, the real estate market has taken a huge hit. With foreclosures running rampant, loan qualification processes that can be difficult at best, and severe job losses across the nation, successful real estate transactions have been hard to come by. Even successful transactions now require far more time and effort than they once did.

While things are slowly beginning to turn around, the real estate market is cyclical — we will at some point see it dip again. This is why it’s so important for real estate agents to have a back-up plan when times get rough. Property management offers realtors a great way to remain in the field and put their skills to use, even when the market is down.

Steady income.
No matter what, people will always need shelter. Particularly during economic climates like that of the past couple years, home sales may go down, but renting goes up, with all of the displaced former home owners looking for new places to lay their heads.

No matter what field you’re in, it’s always smart to go where the business is. While home sale commissions may represent larger sums of money, commissions are also unpredictable. Rental income, on the other hand, offers smaller but steady sums over time, no matter what the economy may look like. While vacancy rates certainly may go up in difficult economic times, the rental market will never dry up completely. And unlike real estate, it’s not commission-based — property managers have the advantage of knowing where and when their next check will come.

More bang for your buck.
In a time when real estate transactions take more time and effort than ever before (and sometimes don’t work out in the long-run even at that), property management offers a less labor-intensive means of earning a living. Sure, property management isn’t a breeze, but it’s more straightforward than wheeling and dealing with lenders and navigating short sales.

Particularly in difficult economic times, property management allows realtors to remain in their field, even when home transactions are lean. At times like this, the relative steadiness and predictability of property management becomes highly desirable for real estate agents that generally deal with sales in more predictable economic environments.

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Having noisy, disruptive, or otherwise disrespectful neighbors can be a major hassle, both for property owners/managers and tenants alike. Worst of all, a bad neighbor scenario could drive down your rent and retention rates. So what can you do? Check out these links to help you better avoid problematic neighbors and more effectively resolve disputes.

• This article on dealing with nightmare neighbors offers some great advice, including defining “nuisance” and the “level of nuisance” a neighbor may be causing.
• MSN Real Estate offers a great article on 9 tips for dealing with nuisance neighbors – check it out!
• Christopher Moore’s book summary offers valuable advice on practical strategies for resolving conflicts – these strategies can easily be applied to neighbor issues.
• Our previous blog post regarding dealing with illegal activity on your rental property contains a lot of valuable insight that could also be applied to your neighbors, should you think illegal activity is going on next door.

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