So here we are in the middle of July. Friends, family and co-workers are taking vacation and going to fun and interesting places. It would be a shame to end a great trip by coming home to a nasty surprise… running water dripping through your ceiling. Can you imagine how shocking and a little scary that would be? We have people on our team that have experienced that first hand, and it is no fun at all.
All you have to do to make sure this doesn’t happen is turn off the main water supply to your home before you leave for an extended period of time.
Also, be sure to turn your hot water heater to the “vacation” setting or turn it down to a lower setting. That way, you won’t risk damage to your hot water heater if the water level gets low, and you will also save money by not having to keep the water as hot while you are away.
First, you have to find where the main water line comes into your home. Usually, this is located in the basement along an exterior wall and enters your house close to ground level. You will see a pipe coming in and either a round, turn-type shutoff or a straight, lever-type shutoff. (See the pictures below for examples of both types.) All you have to do is make sure either type is turned from the open position to the closed position, and you have shut off all water to your house.
Our friends at Sage Restoration shared with us recently the three most common types of water damage they see:
Be sure to avoid this potential problem at the end of a great vacation by turning off the main water supply to your house before you leave!
By Paul Branton, Director of Investor Services for Home Rental Services
To make this experience a bit more fun, lets breakdown this sentence:
Hey Bill, Do you remember that time I used $100k in OPM to do a BRRR, hit the 1% rule and make an 18% Cash-on-Cash return? Wow, that sure was a great deal!
Okay, so clearly there were a few words/phrases in there that are unfamiliar to those outside of the world of real estate investing. Here are some definitions for these commonly used terms.
“OPM” or “Other People’s Money”
This is pretty much what it sounds like. The concept of using borrowing opportunities to leverage capital for investing. In other words, borrow money to use as investment capital. This works well when interest rates are low, like they’ve been for the past few years.
See the difference between using cash or leveraging OPM in the cash on the cash return example below.
“BRRR” or “Buy-Renovate-Rent-Refinance”
This is a method that is commonly practiced in “Buy/Hold” investing where you BUY a property with cash, RENOVATE the property to increase its value, RENT the home to a tenant and REFINANCE to get back all of your purchase and renovation funds.
The “1% Rule”
This is an often used “target” for the ratio of money invested vs. the rental rate. For example, if I purchase and renovate a property with a total cost of $150,000, the 1% rule would say that I should look to get $1,500/month in rent.
It will depend on the market and asset class that you are investing in, as to how easy or difficult this ratio is to achieve. The percentage will usually be lower for investments in a better market or asset class. (Lower risk = Lower rate of return.)
This is a percentage that is calculated based on the annual before tax cash flow or Net Operating Income (NOI) as compared to the total amount of capital invested.
As an example, if you were to invest $150,000 in cash to purchase a property that produces $18,000/year after expenses, the Cash on Cash return would be 12%. ($18,000 / $150,000) In this same example, if you leveraged “OPM” and only put 20% down, you would be investing $30,000 with the potential for a greater “CoC” return.
That being said, you must factor in the added expense of the debt service payment on the $120,000 you financed. To do this, you would take the $18,000 and reduce it by the annual mortgage payments of lets say, $10,000. This leaves you with a NOI of $8,000 and gives you a return of 26%. ($8,000 / $30,000)
If you’ve made it this far, I hope that you’ve learned something new! Or at least understand some of the abbreviations that get thrown around. If you want to learn more, look for my next post where we will break down the following sentence:
Hey Suzy, check out this turn-key deal! I can get a cap rate of 8%, maybe 9% if I do a few things to force appreciation; would you be open to doing a JV with me on this deal?
By Oretta Croushore, Property Manager for Home Rental Services
Move-in appointments are one of my favorite parts of my job as property manager. It’s one of the only times I get a chance to meet our renters face to face. I love having the chance to shake their hands and put a face to the voice on the phone or behind the emails.
Let’s face it, moving is stressful.
I don’t care how you do it. We have renters who are moving across town and those who are moving across the country. I’m chatty and curious by nature, so this is like a mini Barbara Walters moment for me. I love to hear their stories. I recently moved in a couple who were moved to Kansas City from Kentucky by the military. They were married just a few short months before. Knowing they were going to move, they had not even opened most of their wedding gifts.
I was thrilled to think of these newlyweds starting their lives as a married couple in one of “our” houses. I don’t think I will ever forget the very large family who came to the move in appointment! We must have looked like a clown car unloading as we all filed out of the conference room after the move-in appointment. The kids were a delight though… It’s such a treat to hear them excited about their new house.
Our conference room has a beautiful view of College and Metcalf, and the office tends to be peaceful. I know the people I’m meeting with have been running from here to there trying to get everything ready for the past several weeks. Sometimes, they’ve even driven straight in from out of state to meet with me. When they walk into our beautiful conference room, and let out a little sigh, I feel like we’re already making them feel at home.
The Move In Bag
Once all the business is done and I’ve handed over keys, I have one more surprise for the renters. The move in bag! This is a reusable bag with the Home Rental Services logo on the front. I tell them it’s a goody bag with a few things to get them through the first few days in their new home. There’s some toilet paper, paper towels, hand soap, cookies, candy, pens, a chip clip, and popcorn. We also like to include local restaurant guides.
A lot of thought has gone into what we put in the bags. We wanted things which are portable, economical, and useful. The reaction is always so appreciative and often excited. There’s been talk of having these bags left at the house for when the renters arrive. However, the property managers enjoy the experience so much, we refused to give it up.
Move Out Boxes
The move in bags have been so successful, that we decided to implement move out boxes. These are delivered by the leasing agents when they go to the house for the walk-through at relisting time. We make no rash decisions at Home Rental Services. We spend a lot of time thinking about the right things to put into these boxes. The idea was they would be things to help the renter get the house ready for inspection and to help their move. We created a few documents to help walk the renters through the move out process and the reconciliation of the security deposit.
We’ve learned over the years there are a lot of questions at move-out. We included a checklist of things to remember to address before they leave. Are there burned out light bulbs? Have you mowed the yard for the last time? Is the furnace filter clean? These reminders benefit everyone (and help keep turn costs lower.) There’s a small roll of packing tape and a Magic Eraser as well as some candy in the box. We want to send our renters off onto their next chapter with as much care and consideration as we did when welcoming them to their new home.
It’s the little things that make all the difference in a relationship. Move-in and move-out gifts are good ways to show our clients that we really care about them!
By Paul Branton, Director of Investor Services for Home Rental Services
We recently had a client ask us if we were confident that we could place a new tenant at a rate that they had received three years ago. The amount they were asking for was 11% higher than what the current tenants were paying. To answer this question of pricing and confidence, we had to review the overall “health” of the property.
A couple of quick lessons to observe from this situation:
Just because your home leased previously for a certain amount, does not mean that it will lease at that same rate in today’s market.
The costs associated with turnover and vacancy can easily wipe out almost any rate increase.
DO NOT ignore your properties marketing/leasing history.
What to learn from the lessons above:
While it is true that the home leased at a higher rate three years ago… It’s not an accurate indicator of what the home will bring today. The market conditions and competition are constantly changing. We must always look at the math behind the risk/reward scenario.
In this example, the owner would need to lease his home with less than 30 days vacancy and NO turn costs in order for his 11% rate increase to get him ahead financially. Is that realistic? The answer for this property is: No. The answer might be yes in a different market or for a different property. However, we know the leasing history on this property and it typically takes over 30 days to place a qualified tenant.
In review of this homes leasing history and condition in relation to the comps, we advised the owner to renew his tenants at a 3% rate increase vs. taking the risks associated with the 11% higher rate.
Ultimately, the odds of the owner breaking even or losing money was more likely if he tried to obtain that higher rental rate. And our owner was really happy that we outlined all the details so that he could make a more informed decision.
On a quarterly basis, we host a Breakfast of Champions for our vendors. It’s an opportunity for them to network and get to know each other while having breakfast. We also bring in a speaker with the goal of providing education and thought provoking content that our vendors can use in their businesses.
This month, we were excited to have Jeff DeWolf speak to us about Leadership and Job Satisfaction. If you check out his profile on LinkedIn, you will see that he calls himself a Job Happiness Fanatic. Jeff talked about the correlation between job happiness and leadership. He made a strong case that they are directly related. The better the leadership, the happier the employees.
Here are the top six things that define strong leaders.
Communication – Strong communication includes clarity of direction, opportunity for input and the level of information flow between groups.
Relationships – Relationships are the glue that holds teams together when times get tough. It’s important to foster a teamwork mentality. It’s human nature to want to be accepted in groups.
Growth – Most people want to be making forward progress in their personal and professional lives. So making progress towards their professional goals and responsibilities is important.
Fairness – It’s incredibly important that employees feel treated fairly. This means no special treatment and consistent policy administration. It also applies to compensation for the work being done.
Accountability – When employees understand what is expected of them, and why, they are usually more committed and accountable for their results. A good leader will hold their team accountable, but this can backfire without the “what” and “why”.
Trust – Jeff defined this as confidence in management’s abilities and intentions. He also made a point that when there is trust, employees will have freedom to express ideas (professionally of course) without repercussions. Good leaders are focused on an employee’s best interests over personal gain.
Have you heard a leadership talk with good points? Any other traits that you think are exhibited by strong leaders? We’d love to hear from you!
One of our goals in writing blog posts every week is to provide useful education. We recently saw an excellent article on BiggerPockets.com that talked about “What to do when your tenant drives through the living room?” BiggerPockets.com is a website devoted to helping real estate investors.
Paul, our Director of Investor Services, checks articles on BiggerPockets.com every day, looking for helpful information for our investment community. We’ve learned a lot from the articles we’ve read and conversations we’ve had related to BiggerPockets.com.
In this article, Nathan Miller talks about the real world scenario where one of his tenants accidentally drove a car into the living room of their rental property. It was a 16 year old child and an unfortunate mistake. Nathan goes on to talk about the steps he followed to figure out what needed to happen next.
Three Steps to Take when a Tenant Causes Property Damage
- Talk to your tenants.
- Call your insurance provider.
- Contact your tenant’s insurance provider.
We liked this approach for a few reasons:
Communication is key whenever there is a situation. Talking with your tenants to understand what happened gives you the opportunity to set the tone. If they’ve been good tenants for a long time, it could be an opportunity to demonstrate that you are all in this together as you work towards fixing the problem. It would be understandable if you were upset and nervous about the damage… but talking with your tenant while in that frame of mind probably wouldn’t be helpful.
Calling your insurance provider is a great next step. You want your insurance provider to know there has been an event that could result in a claim. In this case, the tenant’s auto insurance provider would be responsible for covering the damages, but what if the driver was not insured? This story might also be a good reminder to double check with your provider that you have the appropriate coverage in place for a rental property. If you haven’t done so in a few years, we encourage you to call your agent for a quick review.
Finally, contacting your tenant’s insurance provider in a timely manner is the next step. This should happen as soon as possible once you’ve been made aware of a problem involving damage to your property.
We’ve never had a tenant drive a car into a property we manage. Knock on wood. But we thought it might be helpful to share it with anyone that owns an investment property because it makes you think about, “what if?” Making sure you have the right insurance in place before you have a problem could save you many thousands of dollars due to a claim that isn’t covered.
By Paul Branton, Director of Investor Services for Home Rental Services
It really is. :) For a multitude of reasons…
The lights. The music. The cookies. The candy. The parties. The decorations. The traditions. There’s just so much fun packed into this tiny window of time we refer to as “The Holidays.”
Here is a sampling of the decorations at the HRS office. A couple of weeks ago, we think some elves snuck in and had a party… dancing on the ceiling style.
In the spirit of tradition, we recently gathered the team together for our annual Christmas dinner party. As always, we had a wonderful time with Kandy as our gracious host! (Don’t even think about clearing your plate.) This year, the party was attended by some for the very first time, and others for the seventeenth time!
No matter your tenure though, it was certainly “no holds barred” when it came time for the gift exchange.
Ah, the gift exchange. Now this is fun! Anyone who wants to participate in the exchange, brings a wrapped “useful” gift valued at around $25. We proceed in numerical order opening a gift from the pile or “stealing” an already opened gift. The open gifts can only be “stolen” twice and then that gift belongs to the third owner. It can get to be quite entertaining… especially when a first time attendee steals a hand warmer/phone charger gift from the boss. (I think there’s an unwritten rule about doing that… Oops!)
While you spend time with your family and friends at the end of 2017, remember that it’s more important to bring your presence than it is to bring presents. It’s not about what’s under the tree that really matters, it’s who surrounds it.
We hope that you experience much Joy and Peace in this season; The Most Wonderful Time of the Year!
By Oretta Croushore, Assistant Property Manager for Home Rental Services, talking about the recent client appreciation event where we gave away tons of pies!
My family takes an annual trip to Branson for Thanksgiving. We rent a condo so we can balance eating out and cooking at home. We spend at least one evening at Silver Dollar City, but also balance that with some down time.
Last year, I was working a job where the stress was high and the appreciation was low. I was looking forward to decompressing on our Thanksgiving trip even more than normal. I spent the long weekend thinking about how it was time to take the bull by the horns and make the changes I needed to make. I came back from the trip feeling refreshed.
I woke up Monday morning with a feeling of dread. I knew all this released tension would come flooding back as soon as I walked into the office. I stayed in bed a little longer and glanced at my emails. There was an email about a job posting at Home Rental Services. I started to read through the description and started to get excited. I read over the qualifications and realized this was written just for me! I sent my resume in right then and there.
In a few days, I received an email telling me my resume had been opened four times. “This is a good sign” the email robot said. A good sign you say? Maybe I should check these people out a little closer. Surely, there’s a catch.
I started some good old fashioned Google stalking. “Ok Google, tell me about these folks at Home Rental Services. Are they some fly-by-night company? Do they beat their employees? Do they use baby seals for rugs?” The answer was a resounding NO on all accounts. A woman-owned company who has been around a long time is what I first discovered.
I stalked over several days, wanting to know more. Then, I found a blog post about a pie party they had just thrown for their owners. The post was written wonderfully. I could tell the person who wrote it was not beaten at all. In fact, I could tell she was proud to work for Home Rental Services. Proud! I almost cried because I knew that this is where I needed to be. “I want to work for a company that does pie parties!”
I found another blog about their trip to shop for KVC kids. The whole team seemed to be there. They even had pictures and everyone was smiling. I think they might even like each other. “I wish they would call already,” I thought to myself.
Well, call they did. Though the waiting was hard, I felt even stronger in my hunches about HRS. They were taking their time to find the right fit. When the call came, Kandy asked “Would you like to come work for Home Rental?” I tried to cover the lump in my throat when I blurted “More than you know!” I applied between Thanksgiving and Christmas and started the last day of February in 2017.
Fast forward a year. I was mingling with owners and handing out pies at the 2017 client appreciation pie party… just like the one I had read about. A little voice in my head giggled as it said, “you’re working for a company who has a pie party!”
I’m truly thankful for this door which opened, the people I’ve met, the things I’m learning, and the pies we get to share with our clients.
Friends, it’s that time of year again. There is no time more fitting to say Thank You than right now… Happy Thanksgiving! Whether you’re an owner, a renter, a vendor, friends or family, we appreciate each and every one of you. Thank you for being an important part of making 2017 another successful year.
On Monday next week, we’re going shopping for gifts for KVC children… something we do every year as a fun way to give back. We will be doing another blog post about that event in the next couple of weeks.
Have you started shopping for gifts yet? If you didn’t know, dealnews.com is an excellent resource for finding great deals online. And if you love to shop on Amazon.com, be sure to check out camelcamelcamel.com. Camel lists the most popular things being bought on Amazon.com, and is a great source of inspiration for gifts! If you are looking for an easy way to give back while shopping at Amazon.com… be sure to use smile.amazon.com.
We thought it might be a good idea to share this list of top 10 things to consider for having a safe holiday season in your home:
1. Inspect electrical decorations for damage before use.
2. Don’t overload electrical outlets.
3. Never connect more than three strings of incandescent lights together.
4. Keep live trees fresh in your home by watering daily.
5. Use battery-operated candles.
6. Keep combustibles at least three feet from heat sources.
7. Protect cords from damage.
8. Check decorations for a certification label.
9. Stay in the kitchen when something is cooking.
10. Turn off, unplug, and extinguish all decorations when going to sleep or leaving the house.
Have a safe, happy and warm Thanksgiving!
By Paul Branton, Director of Investor Services for Home Rental Services talking about the recent trip to the NARPM® convention in Florida.
Just a few weeks ago, Caitlin, Kandy and I traveled to Florida to go to the 29th annual convention and trade show for the National Association of Residential Property Managers (NARPM®). The theme of the convention this year was “Engineered for your Success!” and it was held in Orlando at one of the largest hotels I’ve ever visited, the Rosen Shingle Creek.
We’re Committed to NARPM
This marks the second conference that I’ve attended, the sixth for Caitlin and the TWENTY-THIRD for Kandy.
Home Rental Services has been a member of NARPM since 1991. We continue to receive value nearly every day from the relationships, educational opportunities and member designations.
The biggest takeaways from the 2017 NARPM conference:
- We implemented additional screening criteria to ensure we remain compliant with Fair Housing Regulations.
- We added a feature to our website that allows prospective owners to receive a Free Rental Analysis report.
To see our Free Rental Analysis report system in action, click the screenshot below and enter a rental address. In less than an hour, you will receive a detailed rental report with comps in your inbox!
Quotable quotes from the keynote speakers:
- “If you’re not failing often, you aren’t trying enough.”
– Scott Steinberg
- “If you don’t have a crystal ball, perhaps it’s time to get some brass ones.”
– Troy Hazard
- “Do we want to be tools of our tools, or let our tools be our tools?”
– Curt Steinhorst
While we didn’t have quite enough time to make it to Disney World, I at least got to see this Topiary of Mickey Mouse!
In closing, we highly encourage you to make sure when selecting a property manager, that they are members of NARPM®. Why? NARPM promotes a high standard of business ethics, professionalism and fair housing practice. The Association also certifies its members in the standards and practices of the residential property management industry and promotes continuing professional education.