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Old homes are stereotypically smelly and dark, with out-of-date appliances, peeling paint and dirty carpet.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.

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

So in American Horror Story, after some certain traumatic events occur and the building’s history is uncovered, the protagonists STILL don’t move out of the house. The writers are nuanced enough to know that the audience will ask the question “Why do they not move out now?” So they actually attack this head on. Money problems prevent both an immediate move-out and obstruct a potential sale. So because I like to think I am still more nuanced than the newly nuanced writers, I counter with: “Why don’t you just rent the place out?”

Somebody could move in and you could get paid for it. Not only will you get paid rent, you will also be removed from liability for injuries to third parties entering on the premises, the thinking goes. Well, the first part would be true. The second part — non-liability of an owner not in possession — is not as clear.

We know from our previous entries that possession and control are big factors in imposing liability. An absent landlord is not necessarily in possession, and may or may not have control. The law we know trends to basic duty of care obligations. The out-of-possession owner must act as a reasonably prudent person in similar circumstances.

They have to do those things that they can do to prevent injury, such as inspect the premises as permitted by the lease or between renters. You may be relieved while out of possession if there was no opportunity to inspect for new dangers. If the danger was added or formed after you left and you did not know or have the opportunity to inspect, there is a strong argument for relief. The defense is probably stronger in a commercial setting owing to the sophisticated nature of the tenant, the stronger lease language regarding duties, and an inability or obligation to inspect when a sophisticated commercial tenant is installed and alters the property.

In residential or commercial leases, the California courts have set forth their factors for determining the existence of a duty. These harken back to our very first discussions and the “Rowland” factors, for any of you paying attention. The factors are “likelihood of injury, the probable seriousness of such injury, the burden of reducing or avoiding the risk, and his degree of control over the risk-creating defect.”* All of this assumes the out-of-possession lessor knew or could have known about such risk-creating defects. If he did, the essence is, was there potential for serious injury and if so, could the out-of-possession owner get in there and fix the situation?

Perhaps because this area was not so clear, the ever-so-clever American Horror Story writers avoided the rental idea. Maybe they knew all about this.

*Brennan v. Cockrell Invest., Inc., 35 Cal. App. 3d 796, 801 (1973)

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 Salvatore J. Friscia, San Diego Premier Property Management, San Diego, CA

The landlord won’t make timely repairs, the common area laundry room is a mess, or the management company never answers their phones. Three very common complaints found online from renters regarding their experience with property management companies across the country. In the past, potential applicants would only discover these complaints by either word of mouth, knowing someone in the complex, or worse, once it’s too late and they were already experiencing issues first hand. Well, social media has certainly changed that, and with a click of a mouse (or should I say the pressing of a finger against the touch screen), past and present tenants can now comment on their rental experience. Power sites such as Yelp, Kudzu, Angie’s List, and of course Facebook and Twitter, are open forums respected by many that allow reviews, dialogue, and comments that in some cases can have lasting and serious consequences whether good or bad to the property management company against which they are levied. This form of feedback and review seems fair and useful in helping determine which property management companies have built better tenant relations. But should tenants beware when posting something less flattering or even downright negative regarding their experience with a property management company?

Just recently a woman, Helen Maslona of Chicago, was sued over her posting of a negative online review about a contractor on a leading online review website. These types of lawsuits are becoming more common and are referred to as SLAPP lawsuits (Strategic Lawsuits Against Public Participation). As many as 27 states have Anti-SLAPP laws, but many don’t and leave unsuspecting reviewers vulnerable to backlash from their comment or review. If you plan on making comments or reviews, it is suggested that you take a few things into consideration to protect yourself and also offer the best online review to the public.

1) Tell the truth about the experience.
2) Comment with the intent to help others benefit from your review.
3) Stay clear of vulgarities, heavy opinions, and accusations.

If you do find yourself posting a negative review, allow the property management company to respond and hopefully clear up the misunderstanding. Most reputable companies will try to accommodate their tenants and preserve their online reputation. In kind, make sure you follow up that negative comment with an update showing the resolution. Just remember that reviews on social media sites are both necessary and important but can have consequences, so be careful what you post out there.

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

There’s been an awful lot of discussion around this blog regarding a landlord’s liability for personal injuries and property damage occasioned to tenants and third parties. It would seem like the landlord is exposed in all manner of fronts for all manner of different circumstances. Appearances notwithstanding, the blog readers will know that the issue of notice, control, and an opportunity to remedy are all important in California in determining whether a landlord owes a duty to protect someone from injury. If they do, more forward-planning readers might be thinking: “Well I’ll just protect myself by inserting a clause in my lease agreement that waives the tenant’s rights against me.” There are two problems with that.

The first is that in California, any such language is prohibited by statute (Civil Code §1953) and public policy. The statute provides that unless the lease is presented to the lessee before she takes possession of the property, any provision in a lease which purports to waive the lessor’s liability to the landlord for breach of a duty which leads to personal injury or property damage is void. This might suggest that if you show the lease agreement before the tenant takes possession, you might be able to work around it. Not so. Case law takes this exception away in the case of residential leases. The public policy behind it is that housing is important and difficult to come by, so a person should not be forced to waive these rights just to get a great apartment. So in California, you cannot require your tenant to waive the right to sue you for these types of injuries.

The second problem is that any such release would not inure to the landlord’s benefit regarding those other third parties who visit your tenant and get injured. The landlord still has to protect them from potentially dangerous conditions of which he is or should be aware, over which he has control, and over which he has an opportunity to exert that control. If he does, he should fix the problem, warn about it, or do something to prevent injury or damage to that third person.

It is always best to get counsel to review a lease agreement or draft it for you so that the agreement puts into effect those things you need to be in effect, does not have unnecessary verbiage (such as a clause referenced above), and which clearly spells out each party’s responsibilities, obligations, and rights under the agreement. A good lawyer can help the landlord or the tenant get what each needs. I recommend employing one.

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submissions 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 Linda Day Harrison, theBrokerList, Chicago, IL

Sorry folks, but the answer is: it depends! I know you hate that answer, but here’s why it does really depend!

Engineer/Maintenance Staff: The number-one issue for any property manager to evaluate is whether or not there are on-site engineers or maintenance, or if they are in close proximity to the property. As far as what makes it really painful to be off-site, not having on-site maintenance or even a handyman can make or break the assignment. The worst case is to have no on-site maintenance and no on-site manager or leasing agent. This is generally accepted in the smaller properties where this expense is absolutely cost-prohibitive. The rule of thumb would be anything smaller than 20 units. Anything larger than 20 units and you need to consider extremely accessible, outsourced maintenance or a live-in superintendent of some type. It will always be to your advantage to have someone on-site to be a body when there is a service request or a vacant unit to lease. A single vacant unit can gobble up tons of labor in driving back and forth for showings. Also, it is not a good idea to make any prospective tenant wait to see a unit. In leasing, you have to be there to get the job done when the prospect wants to lease. That is probably why so many small properties are self-managed or the owner actually lives there!

For properties of 50 units and up, the following need to be considered as well:

Size of property, or economy of scale: The property has to justify the expense. It’s that simple! If the property is not large enough, it doesn’t make sense. However, it depends. For instance, if the property is located in a place where there’s a need for a hands-on manager or leasing agent due to vacancy, then on-site can be justified. Also, if the property has the income to justify it or projects that warrant it, such as major capital improvements or a lease-up, it would also make sense. The bottom line is that there are various tests of common sense with respect to on-site versus off-site.

Another example is a client that owned a portfolio of multi-family properties and a handful of commercial properties as well. We needed to create a suburban location, so it made sense for our firm to house some of our staff on-site. Now a small building has on-site management and the company was able to land a nice-sized portfolio!

Vacant Units or Space Available: When it comes to a lease-up, there is no doubt that being on-site is a great advantage to the success of the leasing. If the property has an abundance of empty apartments or vacant office space, put on-site people there! There is no sense driving back and forth for showings and if you are leasing; there’s nothing like being there to respond to showings instantly. The same holds true for all property types if the configuration of the property warrants your team to be housed, even temporarily. Do not let the leasing suffer because of this important point.

Outlots and Outbuildings: Some properties have extra buildings or extra land that is underutilized. If that’s the case, it’s a wise idea to determine the cost benefit analysis of housing on-site leasing or management. If you can purchase or lease a mobile office, why not be there for the customers during the lease-up or construction?

Geographic Strategy: When getting calls for new business, always consider the geographic proximity of your staff and the drive time between properties. There are many considerations to make when it comes to distance. Many property types do not warrant any on-site presence. For instance, single tenant net lease, industrial, and many retail properties fall into this category. These tenant profiles are independent business models that do not require on-site services or assistance. It is a different world from the multi-story, multi-tenant properties, and these facilities don’t have as many moving parts. Always consider the economics of staff travel too. It may not make economic sense to spend a lot of time driving back and forth, so be sure you resolve as many issues as possible if you are off-site. For instance, ask one of the on-site tenants to be a key holder. Provide a secure lock box and have that tenant provide the lock box to inspectors, utility companies, or other authorized personnel. It’s bad business to make people wait or to delay work or respond slowly to power failures because there is no one on-site to permit access to mechanical rooms.  Think through the practicality of visiting those sites for inspections and emergency response needs. Off-site can work nicely if you plan and strategize the outcomes of the worst-case scenarios. Always strategize those what-ifs so you don’t waste precious staff time. Remember, an off-site office should not pose a disadvantage to anyone; if it does, there is something very wrong.

With today’s speed of information, via the Internet, the use of cell phones, iPads, Google docs, and connectivity to video, there should be ample ways to provide property coverage without adding more overhead, while also providing fast service.

Economics of Property Management: It’s customary for a property management company to want to provide the best possible management and the highest level of service. For the most part, being able to set up an on-site office inside a vacant unit or vacant area within the property is the most ideal. In those cases, the cost of the overhead of that office and the related salaries are the expense of the property. For that reason, many owners opt to avoid having on-site labor that is exclusively borne by their property. Another way to structure this arrangement is to permit the use of the vacant unit to the management company and enjoy the benefit of an on-site staff, but permit that on-site team to manage more than one property from that location. This can be problematic, however, if the property owner doesn’t understand how this really works. What this means is that other business is conducted from their site; however, they are not paying the full freight of the salaries. If the property owner totally understands the trade of bodies on-site vs. the loss of income, on a prorated basis, it can be a tremendous advantage and a real win-win for everyone. Many residential properties are clustered in neighborhoods, so grouping a team and permitting them to work from one location can make economic sense.

Hybrid of On-site and Off-site: The best situation is that your next property management assignment is large enough to warrant an on-site management and leasing team. It’s a clearly defined and exclusive arrangement whereby the property owner absorbs the cost of the salaries and the overhead of the office. It’s the same cost the property owner would incur if you were not an outsourced third-party management agent. However, it’s not always possible, and since most property owners are not financially able to absorb the full-time salary of a property manager and/or leasing agent, we as management companies need to share and outsource our labor over multiple clients, and if there’s leasing involved, we must stress the vital importance of having folks on-site, even if only during leasing season. In those cases, we are housed off-site and on-site! The point is we have to make it work for the property, as it always depends in property management, and it should be evaluated on a property-by-property basis.

By Linda Day Harrison, theBrokerList, Chicago, IL

The answer is yes and no. Newsletters are a vital connecting point between you and your building occupants — that is, if you do a newsletter. As a property manager, I always felt compelled to reach out to and keep in touch with occupants and tell them what we were doing in and around the property. The newsletter also served as a simple way to provide them with information about the area, property, or anything at all pertinent to their involvement in the community.

I would feel incomplete if I were not able to reach those customers and share something with them at least monthly. My attitude was that customers needed to be kept informed in some way.

The trick is to make sure the message is short and to the point. Everyone is inundated with so much to read and follow and keep up with. We have work, family, church, hobbies, and where we live and work, all trying to grab our attention. All of these groups want to send us messages, and it’s hard to keep up.

As a property manager or leasing agent, we have to walk in our customers’ shoes and understand what works and what doesn’t. Times are changing for all of us in property management, and newsletters have been such a big part of our operations and marketing, and way to reach our customers. For many, the newsletter is a longstanding part of a resident or tenant retention program.

So are newsletters old news today? Or are there ways to improve on this long tradition of resident and tenant communication? What is the best way to get our customers to read those important messages we send, and is the old-fashioned paper newsletter obsolete?

I think the term newsletter is old news, but I still believe communication that is consistent and effective remains vital. It’s not a good idea to think what works at one property works at all properties. Why? Because the profile of a customer changes from property to property and in different markets. In some markets, the single-page, slip-under-the-door newsletter may still be viable, while in other markets or properties a Tweet, Facebook post, or blog post may do the trick. Today the sky is the limit on how to deliver the communication. But you can’t assume that everyone has high-speed Internet, and you can’t assume that everyone has a computer either!

When making the decision on newsletters and communication, the first thing to consider is your customer profile. Do your customers use the Internet? That sounds like a crazy question, but many communities that are active-living or over-55 communities may require a hybrid approach. Communities of families, students, and under-55 profiles are likely more accepting of Internet communication. Again, depending on the profile, you need to decide what communication works best.

For instance, if the property has entry points or common areas where messages can be posted or where flat panel television screens can be installed, live, up-to-the-minute communication is most effective. If you have elevator lobbies, those are the most ideal locations to install flat panels that can provide timely communications to all residents or tenants. No matter what age, most folks appreciate knowing what is going on, and the entry area is the most appropriate location to post a communication to your customer! How it looks or how it is delivered will depend on budget, physical limitation, aesthetics, and manpower.

As far as using these technologies, it is important that your database programs have fields set up to collect all of these touch points. For instance, be sure there are e-mail, Twitter, Facebook, and cell phone numbers collected on all resident profiles. With a cell phone, you can also send text messages. Text messages are an effective way to communicate as well.

If you set up a system of collecting these methods, and you keep it up to date, pushing messages out can be very effective. Now the message can include a hyperlink that takes the customer to a blog, or it can be a message in itself. Either way, it is still relevant to communicate with customers and make sure the communication is effective. Do you have a plan today for communicating to your customers? Are you currently collecting e-mail addresses, Twitter, Facebook, and cell numbers? If not, I suggest you start. At least you can collect the data so you are ready to convert your paper newsletter to an online and electronic message in the future. Once you are ready, it will be ready for you!

As far as using online, digital options, websites, blogs, Tweets, e-mails, texting, and Facebook can all be used today for both brief communications and timely messages that communicate important announcement or updates to your customers. The great thing about websites and blogs is that your customers can be added to an e-mail distribution list, and those messages can go out to all via automation each time an update is posted. WordPress, for example, has built-in tools that provide subscribers. The process would be added to your move-in of each new customer. When you add the lease, you also add their e-mail address to your distribution list. The resident will get an e-mail that permits them to accept the opt-in as a subscriber. It would be part of the orientation to the property to educate the new customer on how you communicate so they are aware.

Twitter is much more advanced technology and is not ready to be used on a widespread basis today, but hopefully someday it gains more use with the masses. If the group is a student profile, Twitter can be used to push messages out.

The bottom line is that the concept of a “newsletter” is not about the physical document or blog, but about communicating to your customer. You should reach your customers in some way, shape, or form, and today the choices are unlimited. Do not ignore this vital piece of your marketing program.

A guest post by Gabriel Knight, Mortgage Fit, Chicago, IL

It’s no secret that the still-sputtering economy has made it a rough go for property managers. After all, one of their primary responsibilities is making sure that rental properties are rented, and with still so many unemployed and underemployed folks out there, renting has become a real problem – the pool of eligible renters is shrinking.

But while things are tough for the property managers out there, it pales in comparison to the hardships that potential renters are facing. Keep in mind that many prospective tenants were homeowners before the recession came along and forced them into short sales, default, and foreclosure. These people have little rental experience or history, if any, so property managers have to question whether or not they’ll be able to pay their rent. Ironic, given that these people once managed to pay a mortgage every month.

Many of these potential renters are dealing with bad credit because of tough decisions they were forced to make regarding their homes. Often they are considered higher risks, so they face tougher standards, higher deposits, or rejected applications.

While there isn’t much property managers can do beyond waiting for the economy to stabilize, there are things potential tenants can do to better their chances of approval. For one, having pay stubs from a current job can show that your employment is ongoing and steady. And a reference from a former landlord, if you have one, helps as well. You can also run a free credit check on yourself through various online services so that you have an idea of what the landlord is going to see when they pull your report, and you can explain any extenuating circumstances that drove your FICO score down.

Of course, the best policy is to have first and last month’s rent and a security deposit ready for the property manager. That probably goes without saying, but ultimately that’s what the property manager is going to look for if they give you a shot. Potential tenants can also check with their local government’s Housing and Urban Development (HUD) department for expert advice.

Renting these days is hard, but not impossible. Preparation is key!

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

In a recent notice received by our legal counsel addressing this very issue, apparently if you own rental property in California the scary answer is yes! The great state of California is widely known as a pro-tenant state when it comes to tenant-landlord related issues. Many cities such as San Francisco and Los Angeles are saddled with pockets of rent controlled areas making investment opportunities less attractive. They also have unfavorable statewide eviction laws that allow deadbeat tenants to continue residing in properties months after defaulting on rental payments.

So this should come as no surprise that according to state law if the tenant is licensed by the California State Department of Social Services (DSS) it only takes a thirty day written notice of their intent to legally start and operate a day care center without the permission of the landlord if the total number of children under care, including the children of the tenant, is limited to six. In fact, permission from the landlord is only necessary if the tenant chooses to increase the total number of children under care to eight. The licensed provider does need to have adequate insurance or be bonded. They must simply provide each parent, in writing, a notice that states the landlord’s insurance will not cover any issues should they arise – how reassuring. In fact, the landlord’s only recourse is that they can require the tenant to increase the security deposit to the maximum allowed by law. This is two times the rental rate if unfurnished and three times if furnished. The landlord is unfairly burdened with extra cost including, but not limited to, increased fees in liability coverage, out of pocket expenses for extra precautions to limit potential dangerous issues, and increased potential for additional wear and tear on the subject property. Most strikingly, the landlord loses control of determining if they approve or disapprove of this type of rental relationship. If they act by refusing to renew the rental agreement they run the risk of inviting a retaliation lawsuit from the tenant! This brings me to ponder a couple of questions, has the state overreached in providing this tenant right and does that seem like a fair exchange for the landlords?

By Carla Toebe, New Century Realty, Kennewick, WA

If you have decided to delve into the world of property management then the banking procedures will be a bit more involved than simply having a bank account, making your deposits and payments, and balancing the register at the end of the month. I want to stress that every state’s laws are different. Much of what I talk about in this article relates to the best practices specific to the state of Washington.

The first rule of business is to establish a trust account with your commercial bank. Oddly enough, once you have sat through the session to get this going, do some telephone banking and ask the representative what kind of account you have set up to make sure it was actually set up as a trust account. Just because they tell you that it is a trust account doesn’t mean it is. You have to follow up to make sure that the personal banker did their job correctly. You could find out the hard way that this account was never in fact a trust even if you were told it was. If it isn’t a trust then it will not be protected from potential seizure in the event of bankruptcy or other issues with separate personal or business accounts. Do your due diligence and don’t rely on the initial set up.

Additionally, you should not have any business operating funds coming into or out of this trust account. The account should only have tenant money or client money. All this money should be attached to a property. You must pay out a monthly commission as stipulated by all management agreements at least once monthly. The checks should also state that it is a property management trust account and the leases should state where and what bank the security deposits are held. If the owner of the property is holding the security deposit then you should hold back rental income in order to keep the security deposit in your trust because you are responsible for that deposit while you are managing the property.

The security deposits may be kept in the same account as the rental income but if you have many units with the same owner then it is advisable to get a separate interest bearing trust account and another trust account for the rental income. If you are dealing with multiple owners that do not have a large number of properties then it is better to get a combined account for both rental income and security deposits. If you have an interest bearing account you should be transferring the interest each month into the regular trust account as interest income to the owner. You will need to transfer the security deposit into the regular trust account before you can pay the owner any money from the refund due to charges as well.

If you keep a combined account, all the security deposits held on account as stated on the balance sheet and the rent roll must match the security deposit liability and the cash in the register must match the accumulation of all the owner balances plus the security deposits. You must balance the rent roll with the balance sheet and the register with the bank statement each month. Failure to do so could put you out of compliance with the state and if you are not in balance each month it could be a serious problem.

There should be two places for receipts, the computerized accounting system and the handwritten deposit ticket for all the payments. Copies of all checks should be kept, whether carbon or photocopied. Copies of duplicate deposit receipts should also be kept once the funds are deposited.

It is always a good idea to write a detailed process and policy for your property management banking to show that you are practicing due diligence with other people’s money held in trust. This way anyone who handles the trust account is fully knowledgeable and accountable about the importance of practicing all the state law requirements.

The rules, regulations, and customary practices vary wildly across the country. As I mentioned above, these are some of the best practices for Washington. For example, in Washington it is O.K. to comingle rent and security deposits in the same bank account, however it’s a big no-no in Massachusetts, and in California it’s customary for rental owners to hang onto the security deposit. Also remember that rules about reporting vary from state to state, i.e. if it’s not customary to get a full month’s rent as security, then your rent roll won’t tie to security deposit liability.

Clients put their trust in property managers and believe that they are doing the right thing. The way you handle your banking will solidify this trust with both clients and tenants, thus keeping you out of trouble!

Editor Note: If you’d like to contribute an article about your state’s best banking practices, please send an email to Justin@buildium.com