Tenant Placement and Property Management

Transcription

1 Tenant Placement and Property Management What do Strongbrook guarantee with regards to property rehab, rent readiness, tenant placement, etc? We make no guarantees, but we do everything in our power to deliver the highest quality rehab for the lowest costs, and the best possible tenants as quickly as possible. What is the average time for tenant placement? The average for 2011 was 32 days, but tenant placement can take as long as 6 months. To be prepared for the worst case scenario, investors should have savings to cover six months worth of vacancies; principle, interest, taxes, and insurance payments. May I use my own Property Manager? You are welcome to use your own property manager, but you may experience higher fees. You may also have more uncertainty regarding tenant placement, and whether or not those tenants will be qualified. Property management companies that are not associated with Strongbrook REIC and Strongbrook Property Management will not fall under our communication umbrella, and we may not be able to assist you in holding them accountable for their job in working on your homes. How often do I need to interact with the Property Manager? Very little. Since we are in touch with your property managers on a regular basis, we should always know what is happening with your property. Even though no Strongbrook company receives any fees for assisting with your property managers, we stay involved in order to ensure a great investment experience for our clients. You can choose to interact with your property managers as often as you feel necessary, and we recommend you do so at least once a month. How often does the Property Management Company send me a check? You will receive rent checks on a monthly basis, as long as your tenants are consistently paying, and paying on time. Most people elect to have them deposited

2 directly into their bank account. How long should properties be held before selling them? The strategy will vary from client to client, and will be dependent on a client s goals. The decision will also be driven by market conditions. Client Services Coordinators stay abreast of market conditions through our real estate acquisition teams, and advise their clients based on their game plan when selling may be appropriate. Does Strongbrook do all the property management? Strongbrook owns Strongbrook Property Management, which manages properties that we own as a company, and certain properties owned by a few of our owners. It does not handle any accounts for our clients, nor does it receive any fees from property managers who handle client accounts. It monitors and receives reports on each client owned property on a regular basis, and makes sure the property managers are contacting our clients and providing premium service. In addition to having a genuine interest in the performance of each house we assist our clients in purchasing, this provides data to use in targeting the best areas and homes for future purchases. I just bought a house and one of the appliances broke, what should I do? Contact your property manager immediately. They will be able to assist you in possibly making a warranty claim or replacing it altogether. Should I purchase a home warranty? Yes. A home warranty will cover a variety of items, and will give you some additional peace of mind year to year in the event of major system or appliance failure. How much does a home warranty usually cost, and what do they usually cover? Home warranties will typically cover air conditioning and heating systems, plumbing systems, water heaters, electrical systems, and built in kitchen appliances. Home warranties usually run around $425 a year.

3 How long does the typical home warranty last? It lasts one year, and then you can choose to purchase another from year to year. Does Strongbrook sell home warranties? We do not sell home warranties, but we work with companies that do, and we can assist you in contacting them. How do your property managers estimate expected rent for a given property? Our property managers are the ones who will be renting the home for you, as they do hundreds of others in the areas you will be buying in. These property managers make assessments using rental comps from properties on their rent roles, as well as other properties in the area not on their rent roles. You are receiving a projection from the same property manager who will be managing your home, with expertise in that specific market. It is important to note, however, that the rent assessment projected at the time the property packet is created may change between packet creation and closing. How does the property management communication/relationship work? At least one week before closing, the Strongbrook REIC agent s the property address to the Property Management Company (PMC) along with all of the client s contact information (name the property will be vested in, mailing address, phone, , etc ), plus any other pertinent info at that time. Once the PMC has the client s information, they will contact the client. The PMC then sends the Real Property Management Agreement (already signed by us) and a W9, back to Strongbrook REIC, which the Strongbrook REIC agent has the client sign at closing. The Strongbrook REIC agent then s the PMC the signed documents and confirms the actual closing date (so the PMC can accurately pro rate the rent). At that point Strongbrook REIC maintains regular communication with the property managers about your property.

4 What are the current average property management statistics for Phoenix and Las Vegas? Phoenix Averages: Length of Property Management Agreement: 1 3 yrs Tenure of Each Tenant: 2 years (initial lease is for one year. However, many tenants end up renewing their lease for an additional year). Vacancy Period: days Actual Rent Amt (Avg): $945 Monthly Management Fee: 8% Marketing Fee: Varies. $250 MLS marketing fee/or subject to clients request. Lease/Set up Fee: 50% of first month s rent + $200 one time set up fee. Lease Renewal: 20% 25% of first s month rent Operating Amount: $250 $400 Reserve for Maintenance and Repairs: $250 $300 Residential Rental Registration (City/State): $10 $20 HOA Fees: $20 $80 per month Cancellation of PMA: $0, 30 days notice Misc Fees: (Re key, utility set up, statutory agent): $100 $250 Fees Property Manager Collects: (Application fee, Returned Checks, Notice Fee, Late Fee) $ 100 $250 Initial Rehab Cost to Buyer: $2,600 Rehab Costs Between Tenancies: This varies depending on what type of damages (if any) the previous tenant caused. Carpet cleaning is around $175 (average). Housekeeping/full clean $180 (average). Yard clean up $100 (average). Tenant Security Deposit: One month s rent. Pet Deposit Amount: $100 $250 non refundable (per pet) Percentage of Tenant Payments Received on Time: 50% pay by the 1 st, 90% pay by the 5 th (this is with no grace period).

5 Percentage of Tenants Evicted for Non payment or Other Reasons: 5% Average time to evict: 30 days Average cost to evict: $190 lawyer fees Las Vegas Averages: Length of Property Management Agreement: 1 2 yrs Tenure of Each Tenant: 2 years (initial lease is for one year. However, many tenants end up renewing their lease for an additional year). Vacancy Period: days. Actual Rent Amt (Avg): $1,094 Monthly Management Fee: 8% Marketing Fee: Varies. $250 MLS marketing fee/or subject to clients request. Lease/Set up Fee: $500 leasing fee and $250 one time set up fee. Lease Renewal: $100 flat fee Operating Amount: $300 $400 Reserve for Maintenance and Repairs: $100 $200 HOA Fees: $20 $100 per month Cancellation of PMA: $0 $100, 30 days notice Misc Fees: (Re key, utility set up, statutory agent): $100 $250 Fees Property Manager Collects: (Application fee, Returned Checks, Notice Fee, Late Fee) $ 100 $250 Initial Rehab Cost to Buyer: $2,300 Rehab Costs Between Tenancies: This varies depending on what type of damages (if any) the previous tenant caused. Handyman items and general cleaning approximately $200 $400. Tenant Security Deposit: One month s rent + key deposit ($50) + cleaning deposit ($150) Pet Deposit Amount: $250 non refundable (per pet)

6 Percentage of Tenant Payments Received on Time: 90% pay by the 5 th. Percentage of Tenants Evicted for Non payment or Other Reasons: 5% Average time to evict: 30 days Average cost to evict: $150 $190 lawyer fees What is Compassionate Financing? Compassionate Financing acts as a way to maximize the profitability of a property, while simultaneously providing a way to help families become homeowners. This program is similar to rent to own, with the true goal of transferring title to the tenant, making them the official purchaser and owner of your home. Strongbrook REIC teaches clients how to achieve this by working with the tenant starting in the very first month. Part of the education you receive from Strongbrook REIC is how to assist your tenants with credit repair, budgeting, and even mortgage education that can help them achieve their dream of home ownership. Tenants will come to understand the responsibilities that come with this as you work with them right from the beginning, and Strongbrook REIC shows you how. It requires the tenant to have a down payment of $3,000 $10,000, and gives them the immediate benefits of home ownership. They can paint, hang pictures, tend the yard, and even become responsible for repairs the home may require. In turn, the owner helps the tenant build equity in the home, that will pass to the tenant once the tenant chooses to purchase the home, meaning the tenant turned homeowner has some built in equity. Typically the homeowner will assist his/her tenant in repairing their credit, learning about home ownership, and budgeting, and work closely with them on the way towards the tenant being able to officially purchase the home. Tenants will typically occupy the property for 2 5 years before they purchase. This translates to a conscientious long term tenant that will take care of the property, will likely pay on time, and is willing to give big down payments to the owner in order to make the arrangement work. The owner receives the down payment up front, may receive cash flow along the way, and because of the nature of the arrangement, can avoid realtor fees upon sale of the property to the tenant, thus making Compassionate Financing less of a headache, and potentially more profitable than a traditional rental.

7 Is Compassionate Financing used in Hot Markets, Local Markets, or both? The Southwest market has some of the strongest rental markets in the country, which makes it attractive for long term tenancies. In addition, since home values are currently so low and could rise very quickly, we are hesitant to advise clients to lock themselves to a future purchase price that may be low. However if your strategy is to buy local you should consider using Compassionate Financing. Select your tenants carefully, though, since the volatile and tight credit market could make it difficult for them to qualify to purchase the home in 2 3 years, and you could be doing them a disservice. It is still an important element to the Strongbrook REIC model, but the timing is not right in the Southwest markets to utilize the Compassionate Financing program. When should I use Compassionate Financing? Compassionate Financing will usually be used when you are buying in your home market, and will be used in the Southwest markets once rebuild costs comes back in line with sales prices. What help does Strongbrook offer the tenant of my Compassionate Financing house to help them qualify for the purchase? We teach you how to help your tenants learn the benefits and merits of homeownership, and the steps that will be required to get them there. We will also provide a pre qualification for them so you can help them create a strategy to organize their credit and financial lives to qualify to buy your home within months. We also have a library of on demand education courses that your tenants can view. Does Strongbrook help me find tenants for the Compassionate Financing program? If a client chooses to use the Compassionate Financing Program, the client is responsible for locating the tenants. Strongbrook REIC provides extensive education that teaches all aspects of how to market, when to market, where to market etc. Your Client Services Coordinator will also provide individualized coaching on all aspects of transacting real estate, including finding tenants. We are happy to help you review potential tenants and help you determine which tenants to choose, but you are ultimately responsible for marketing and finding them.

8 How is the minimum purchase price set for a Compassionate Financing tenant? When the Compassionate Financing program is used, the owner of the home (the Strongbrook REIC Client) can set the minimum purchase price, and be as flexible as they would like. Different economic conditions may require different strategies. As our clients go through the Compassionate Financing process, their Client Services Coordinator works with them to help determine the best course. Does Strongbrook have the legal documents I will need, such as Lease Agreements, Option Agreements, etc.? Yes. Before using these contracts we recommend conferring with legal counsel to make sure the contracts do not need to be altered for your specific state, county, or city. We provide two contracts that are designed to be used together. The first is a traditional rental contract with some language specific to the purchase option should the tenant choose to exercise that option. The second contract piggybacks with the lease contract once a tenant submits their request to purchase your home. This second contract outlines the purchase option consideration that can be awarded to the client upon purchase of the property. Are the legal documents state specific? The contracts are not state specific, and as such should be taken to a lawyer with expertise in contracts, real estate, and ordinances specific to the market you want to use the contracts in Strongbrook Direct, LLC: FAQs Tenant Placement and Property Management: rev