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Should I get a home warranty for my Atlanta rental property?

Todd Ortscheid - Friday, June 15, 2018

Video Transcript:

Hi. Todd Ortscheid here with GTL Real Estate. Today I wanted to talk about home warranties. This is a pretty common question we get from everybody we deal with, not just with landlords but also with just homeowners in general who are wondering whether it makes sense for them to get a home warranty for a property that they've just purchased, whether they're going to rent it out or live in it themselves. This is always an important topic. 

So the first thing is, if you're buying a house that you're going to live in, it does make sense to request a home warranty from the seller. That's usually something that you can get thrown in, just to get the deal closed. That's pretty common. Not an unusual thing to get a year or two of home warranty covered by the seller. So that's a good thing to get. It's not costing you anything so that's something we would recommend if you're making an offer on a purchase for a house you're actually going to be living in yourself.

Now it's a different question, though, when you're talking about a rental property because you're not the one that's going to be living there. You're going to be having a tenant that you want to, of course, be a happy tenant, someone that's going to keep renewing their lease to keep your cost down. And so you can keep raising the rent and improving your margins. It's a different story then because you want to make sure that the repairs are getting done to keep that tenant happy. You want to look at these situations differently as to what might make sense for a rental property as compared to an owner-occupied property. 

Generally, we do not recommend that you have a home warranty on a rental property. Now there's a whole bunch of reasons for that. First among them, of course, is just finances. I say it makes sense for you when you buy a property to get the seller to pay for a home warranty, but of course, that's different than you paying for it. When the seller's paying for it, it's no out-of-pocket for you. It's probably not affecting the purchase price of the property at all. You probably got them to throw it in as a sweetener just to get the sale done, so it's not costing you anything.

When it comes to buying it for a rental property though, you're going to be paying for that yourself. So the question is, is it cost effective? And just like any form of insurance or extended warranty on a car, any of those sorts of things, what the insurance company is making money on is the spread between what the cost of the repairs actually are and what they are charging you for your premiums and deductibles. All that money in between there is what they're making their money on. 

By default, what that means is, you're paying more over the long haul for the repairs on your property. You're just spreading it out and paying it in yearly and monthly installments instead paying for it as the actual repairs come up. The other thing is, you're paying for the warranty company's overhead. Obviously they have their expenses since they're a middleman between you and the vendors who are doing the work and they also have their profit margins so they probably want a profit margin somewhere in the 8, 10, 12% range. 

When you're paying your premiums and your deductibles, it's going towards the vendor's cost to fix your property, the warranty company's overhead, and their profit margin. When you add all that up, you're paying a significant premium over what it would have cost you to just pay to have the repairs done yourself. 

Now this can make sense. There are times this actually does makes sense. If you're a homeowner, maybe you're an accidental landlord. You had to move out of town. Maybe you had a military transfer and you had a last-minute move out of town. You couldn't sell your house, you want to rent it out, and you don't have a lot of savings. If you had to do a $3,000 HVAC repair, for example, maybe you don't have enough money in savings to cover that and it would completely wipe you out. So if that's the case, then it does make sense to get the home warranty. 

But that's generally the only time it makes sense to get the home warranty. If you have any way to pay for that repair, whether it's out of a savings account or maybe a 401K loan or whatever the case may be, you're probably better off paying for those repairs yourself as they come along, rather than paying for the home warranty and paying that premium that's going to cover everything for that middleman in the warranty company. So it just doesn't make financial sense. That's the biggest reason that we don't recommend home warranties.

The other thing is, home warranty companies are slow. When we call in a home warranty repair, usually it takes them a couple days to get that scheduled. Then it takes a couple days for the vendor to get out to the house. Then they want a couple days to get parts. So it all starts adding up and by the time it's all said and done, usually a week to two weeks have passed before the repair has actually been accomplished. 

Now in the meantime, as you can imagine, the tenant's not very happy about this. So the tenant has probably been renting apartments or other houses before. They're used to having repairs done in the most part within two, three days. That's about average what it takes to get a repair done when you're not dealing with a warranty company.

So now they rent your house and you have a home warranty and they're seeing that whenever they call in a repair, they have to wait a week to a week and a half to get that fixed. That makes them pretty unhappy because they know as a renter that that shouldn't take that long. The only reason it's doing that is because of this warranty company. 

And, of course, they're also having to deal with calling the warranty company or the warranty company's vendor, they're having to schedule with them. It's not a very easy process like it is if they're just dealing with us and having our vendor go out. 

It's all a situation that comes together to make the tenant very unhappy. Now unhappy tenant, of course, there's two things that go along with that. Number one, an unhappy tenant is more likely than a happy tenant to call in a lot of repairs. So something that a very happy tenant might have overlooked and said that's a minor issue, I'm not going to bother the landlord with that. 

If they're unhappy because of how long it takes repairs to get done, they might say, you know what, I'm going to start calling in every single little issue just to show this landlord. That means even though you're only paying say a $75 deductible for each one of those service calls through your warranty company, you're paying a lot of them because that tenant's calling in every little thing they can think of just to get back at you because of how long it's taking you to get the repairs done. So that adds up.

And then of course the tenant gets angrier and angrier as each one of these repairs takes so long to get done. Then when it gets to the end of their lease, here's the big problem: they don't want to renew. Because they're thinking, I can go down the street and rent a property from another landlord who doesn't use a warranty company and then when I have a repair, it gets done in two or three days. 

That's something you don't want to happen because turnover is your number one cause of lost money in rental properties. It's all about turnover. So if you have tenants leaving frequently then you have vacancies, you have extra repairs, you have leasing fees that you're paying to real estate agents to find you new renters. So all those expenses and that lost revenue add up. 

You hear me say it in these videos all the time. It's all about reducing tenant turnover because that's where all of your costs are. You don't want an angry tenant because they're not going to renew their lease. 

The other thing, of course, is you also have other expenses that come into this. If you're using a management company, most management companies, including us, charge a premium on our management fee to manage a home warranty company just because of how much work it is. The warranty company almost never just sends someone out and makes it a really easy situation. Instead we usually spend hours on the phone trying to get the warranty company to get somebody out there and actually get the work done.

Because of that we have to charge extra for dealing with the warranty company so your management fee gets bumped up. Most management companies will do that. They'll either charge extra on your management fee or they'll charge a premium on each repair. So they might charge you, say, $100 flat fee every time they have to call in a home warranty repair.

Most management companies are doing this in one way or another to make up for all the hassles associated with a warranty company. So that's another increase to your costs. When you start adding all this up, it gets pretty expensive over the long haul to use a home warranty. We definitely don't recommend that.

You might be asking, what are the alternatives then? If I don't use a home warranty, what are the best ways to take care of these repair expenses? There's a couple different ways that we recommend you might do this. The first is, you could just take the money that you would pay the home warranty company and set that aside. You probably got a savings account with your bank where you have your checking account. If you were going to pay $500 for a home warranty, take that $500 instead and put it in that savings account. Then take what your deductibles would be if you were having repair bills, take those and put those into that savings account also.

You can estimate a service call every couple of months on average, so every other month just take that $75 or $100 that you would have paid in deductibles to the warranty company and put that into the savings account. In the long run, this is actually going to net you more money than if you had used the actual warranty company because you're going to end up saving some money. That's one way to do it.

Another way to do it is to just take a percentage of your rent income and just set that aside. This is what I do with my own rental properties. I just take 10% of the rent that comes in on that property and I set it aside to be used for repairs. That's a good estimate of what your repairs over the long haul are going to be. That's another way to do it.

Finally something we could do for you, is we could just escrow the money for you. You could just tell us, increase my escrowed money in my account with the management company by $100 every month, for example. We can just set that money aside in your account to be used if any repairs come up.

Those are a few different ways you can deal with it to make sure you have that money set aside so you're not just paying out a big repair bill on your credit card or whatever it may be when the repair comes along. If that's something you want to do, just talk to us and we can work that out and try to help you out with that.

Bottom line is, you're better off financially without the home warranty and you're definitely better off if it's a rental property, keeping your tenant happy without that home warranty. We strongly recommend that you don't use a home warranty company. If you have any questions and you'd like to talk to us about it you can send us an email at support@gtlrealestate.com and we'd be happy to answer any of those questions for you.


The Lease Renewal Process & Rent Increases

Todd Ortscheid - Monday, June 11, 2018

Hi, Todd Ortscheid here with GTL Real Estate. I wanted to talk this week about the lease renewal process and how we determine what the new monthly rent will be when we do a lease renewal. We have a pretty regimented process for how we do this. We recommend that any landlord do the same. If you're managing your properties yourself, if you don't have a property manager, we still recommend that you follow a similar process to this. You won't have all of the same information available to you that a real estate brokage would. For instance, we have access to the multiple listing service, the MLS. You won't have that, so you won't have quite the information resources that we do, which is one of the reasons we recommend that you do have a property manager, but if you do intend to manage your property yourself, you can still try to get as much information as possible from publicly available sources on the internet to try to follow a similar process. We would recommend that you do that. 

The bottom line is that when you set your rent it should not just be a gut feeling as to what that rent should be. Or it shouldn't just be a set amount that you increase every year all the time no matter what. It should be calculated based on market conditions. And there's a few reasons for that, that we'll go over in a few minutes. But the first thing I want to go over is the actual process that we go through.

So the first thing we do is about three months prior to the tenant's lease expiring we start sending them reminders that their lease is coming up for renewal, because our leases say that two full months prior to the lease expiring the tenant's required to give notice if they don't want to renew. So we make sure we send them reminders of that. We send a 90 day reminder and we send a 75 day reminder, so the tenant gets plenty of notice so they don't forget. 

Next step is once we get to past that 60 days notice where we know that the tenant is staying, our leasing agent who is responsible for that property will go through and start doing a market analysis. So what they're looking at is properties close by. And it varies, what close by means based on what kind of property it is, how far outside of the city it is, that sort of thing. But generally you're trying to find houses within about a half mile that have rented out within the last six to 12 months that are similar in size and the number of bedrooms and bathrooms. Those sorts of things. 

We're looking for those similar houses and we're seeing what they have rented for. We want to make sure that we're always sticking to that fair market rent. And that's very important, which we'll go over here in a second. So they do that analysis and they determine what that rent will be. So let's say the tenant's rent this year was $1000 a month. And the real estate agent determines that the fair market rent right now is $1050. So it's gone up by $50 over the past year.

So what we would do, is we would increase the rent to that $1050. Now let's say for example the fair market rent was calculated at $1125. Our policy is that we cap the increase at 10% per year. The reason we do that is because tenants are more likely to vacate the property if the rent increase is that high. So we don't want to do that because that gets more expensive for the owner than just doing a slightly lower rent increase, because a vacancy is almost always the most expensive thing for the landlord because you have to pay a leasing fee, you've got a period of vacancy, and you got to do repairs. So vacancies always are very expensive. So our goal is always to try to get a renewal if we can. It's better to do a renewal at $1075 a month, for example, than it would be at $1125 if that extra $50 is going to make the tenant leave. So we cap our increases at 10% per year.

So basically if the market analysis that the real estate agent does comes in at 10% or less, then that's what we set the rent at in the new lease. If it comes outs at higher than a 10% increase, then we just set it at a 10% increase that year and we write the lease up and send it to tenant at that level.

Now when we send those reminders to the tenant when we start getting close to their expiration date, those 90 and 75 day reminders, we always tell the tenant their rent could increase up to 10% and to base their decision on that. So the tenant is already aware that their rent is going to be increasing so that they're not caught by surprise and they know how much it can be for when they make that decision as to whether they want to stay or not. Nobody's caught by surprise. Everything is fair to everybody and it makes for a very smooth process that's unlikely to result in a tenant leaving just because they weren't happy with the renewal process or the rent increase. That's a very little likelihood, which is good for the landlord because it makes sure your property stays occupied. 

We send out that lease renewal about five to six weeks prior to the lease expiring. There's plenty of time for the tenant to get that signed before their current lease expires. We send them emails, letters in the actual mail, phone calls, and text messages. We do pretty much everything to remind the tenant to get that signed. So usually they sign it pretty quickly after we send it out. Usually we've got the renewal back before 30 days prior to the existing lease expiring, and you've got that locked in pretty quickly. Now that's not always true. Sometimes tenants, there are some tenants that want to wait until the last minute, but it's very rare that we see that. And you also have a backstop. 

If your tenant is on one of our lease agreements, our lease says that if the tenant doesn't sign the renewal then when they get to the end of their lease, it continues on a month to month basis at a 15% rent increase. So the importance of that is it's a higher increase than they would get if they sign their lease renewal so it's encouraging them to sign a renewal to get them locked in for another year. So we're actively discouraging those month to month leases that are not in your best interest, but at the same time if the tenant doesn't sign the lease, you still have an existing lease agreement with a month to month provision built in with an increase. So the landlord is better off or protected either way. So we've got that locked in on the lease. Which ever way it goes, we've got protections for you, the landlord.

So what's the reason we do this process? Why do we make sure we follow this regimented way of doing rent increases? The reason for that is fair housing issues. We want to make sure that every tenant is treated equally. Everybody's treated just the same as every other tenant that we rent to. And that makes sure that nobody can say that we're discriminating, that we're showing favoritism, that we're treating anybody differently than anybody else. And that protects us and it also protects you as the landlord, because if someone were to claim a fair housing or a discrimination suit, then you'll actually be the first person named on that lawsuit, not just us. 

So it's important that we protect you from that. And using this kind of process sees to it that no one can credibly claim that the rent increase they received was not based on fair market conditions. So that's why we follow that process. That's why we recommend that everybody follow a similar process when setting your lease renewal increases. So make sure you set that down on paper so you have something to show in case there was some sort of discrimination claim. Have a written policy like we do and that's the best way to protect yourself from any sort of problems in the fair housing or discrimination arena. 

If you have any questions, feel free to send us an email at support@gtlrealestate.com. And of course if you don't have a property management company and you want to hire a company that's going to follow this kind of regimented process give us a call to talk to us about managing your property. Our number is 678-648-1244 and we'll be happy to talk to you about that. Thanks.

How Long Should the Term of Your Lease Be?

Todd Ortscheid - Monday, June 4, 2018

Todd Ortscheid here with GTL Real Estate. This week I'd like to talk about the length of your lease. In other words, whether it should be for a short period of time or for longer. These recommendations I'm going to give are universal, whether you're managing your property yourself, or whether you have a property management company managing the property for you. I recommend this for everybody, for all leases.

Our recommendation is that you want all leases to be one year in length. You don't want to do really short term leases, and you don't want to do longer term leases for a few different reasons. The primary reason for that is that all of the benefit of a longterm lease is really going to the tenant. They're getting you locked in. They're getting possession of the property for this guaranteed period of time, and you basically can't get rid of them as long as they keep paying the rent, even if circumstances change in your life.

Let's say you signed a three year lease on a property, and after two years you need to move back in. The only way for you to do that is to pay that tenant a sizable amount of money, give them two months notice, and pay them basically to leave the property early. Because they have possession, that also means if they refuse to leave, the only way you're going to get rid of them is to take them to court and force them out, and you're still going to have to pay that amount of money, and still give them that much notice even if you evict them in that case. The tenant, because they have possession of the property, they have the upper hand. 

On the other hand, let's say the tenant wants to break the lease early. Even if you have a five year lease term thinking you've locked this tenant in for a long period of time, maybe you even have automatic rent increases thinking you've thought ahead to account for all possibiliites, the tenant is still going to skip out and leave you hanging. And the reason for that is it's very difficult for you to chase them down, and hold them accountable for that. In fact, a judge is not going to award you the rest of the three remaining years of that five year lease. They're not going to award you that rent even if you take that tenant to court. They'll only award you for the period of time it was vacant. And that's if you can find the tenant to file a lawsuit against them anyway. 

In this situation with this long term lease, you're getting basically no benefit. The tenant is getting a whole lot of benefit, but you aren't, so right off the bat it doesn't make a whole lot of sense. But it goes beyond that. There's a few other reasons we want to look at that demonstrate why this is a bad deal for you as the landlord.

The first of those is fair market rents. Almost all the time fair market rents are increasing year to year. Now there are certain times in very local markets usually where rents are reducing, but that's pretty rare. Usually even during a recession rents aren't dropping, and that's because the population is not shrinking. The population is always growing, so people always need a place to live. Housing prices may drop because people are renting instead of buying, but sometimes you'll even watch rents go up during a recession. It's very rare to see fair market rents actually decline. What that means is if you're on a long term lease, you're missing out on those rent increases, even if you write into the lease automatic rent increases.

Let's say we did a three year lease today, and we built in three percent rent increases for the next three years. Well, what if the market gets really hot, and the average rent is going up ten percent a year? That's not unheard of. Right now in certain parts of Denver, rents are going up fifteen percent a year. If a landlord had signed a lease with a tenant for three, four, or five years with built in rent increases even of five percent, which would have been considered high several years ago, they're now missing out on all those rent increases that would have been very easy for them to get if they had only done one year leases and upped the rent every year. It's in your best interest to make sure that you're able to increase that rent using fair market rents every single year. And doing a long term lease isn't going to let you do that.

The other reason to consider only doing year leases is because the law is constantly changing, and it's not just statutory law, the laws that legislators are actually passing, it's also case law. When cases go to court, whether it's an eviction case, or maybe it's a lawsuit over repairs, or whatever the case may be, if it gets to state court, a judge will issue a decision, and that becomes precedent. That's case law. Future judges in that same state are going to look to that decision to decide what to do. That means even when the actual written law hasn't changed, frequently the way judges are interpreting it and applying it does change. What we do is we have our attorneys constantly update our leases. And since our attorneys are in court, and constantly seeing what these changing case law standards are, they're in a perfect position to be able to modify this lease for us, as the statutory law and case law changes. It's important to be able to get a tenant on a new lease every year, so you're including all of those changes that keep you protected as the landlord. 

Furthermore, it could just be that you have policies that you want to change in your lease. Maybe you used to have a pet fee of $100 in your lease, but now you want it to be $250. You want to be able to get that tenant on that new lease, so you've got that higher pet fee built in if that tenant decides to get a pet. That's just one example of something that might change. It's not a legal change, it's just a change that you want to make, and you want to make sure that the tenant is on the most recent lease so that that change is in there.

Finally, it's just a better idea from your perspective to be on a current lease agreement. Sometimes we hear landlords say that they're going to only do an initial lease agreement, and then let it lapse into a month-to-month agreement after it expires. You don't want to do that. You always want to have your tenant on a new lease agreement that's actually covering the period of time that you're in, and the reason for that is because judges will favor that. 

An example of why this is important is a case we had last year, where we went to court with a month to month lease. The owner had asked us to do that, and at that time we didn't have a policy against it. We did what the owner asked, and did a month to month lease after the tenant's original lease expired. That tenant subsequently stopped paying the rent, so we had to go to court to evict that tenant. Well, the judge said because it was a month to month lease, instead of an actual written lease covering that period of time, he wasn't going to allow us to have any late fees. He found a precedent buried into some old commercial real estate case that allowed him to do this. If we had had a firm lease agreement, a real lease agreement, that covered that period of time, instead of just a month to month lease after the original lease, then the owner would have gotten several hundred more dollars of late fees that they lost because they were on that month to month lease. That's why we always tell everyone, always be on a current lease, keep it at a one year term, and make sure you're constantly updating that every single year. Don't let it lapse to a month to month lease. Always get a new one signed. 

If you have any questions about any of this, or any comments or anything, please send us an email: support@gtlrealestate.com, and we'll be happy to talk to you. Thanks.

The Importance of Quick Repairs on Your Atlanta Rental Property

Todd Ortscheid - Thursday, May 10, 2018

Hi, Todd Ortscheid here with GTL Real Estate. I wanted to talk a little bit about the importance of speedy maintenance. This is the second time in the last few weeks we've talked about maintenance and repairs. The reason for that is just because it's such an important issue, it's a question that comes up so often, and it's really important from the perspective of both the tenant and the landlord.

There's a lot of reasons why maintenance and repairs and how they're handled are one of the key issues for everybody involved in being a either a landlord, or tenant, why those issues are important. I wanted to cover another subject on that again, which is the speediness of repairs. Occasionally we get a question from one of our clients asking things like, "can you get three or four bids for every repair?" or "Can you call me for approval before ever repair?"

We get those questions occasionally, but not too often, as most of our clients now are generally pretty hands-off. They like that we're a turnkey solution that can take care of all aspects of managing their property without them having to be directly involved. We do occasionally have an owner who wants to be a little bit more hands-on, so I wanted to address why we have the process we do that's so fast in dealing with repairs, and why that's to your benefit as a landlord.

There's many polls that have been done on tenants to try to determine what causes tenant turnover, meaning why do tenants leave one rental property and go to another. It's obvious why a tenant would leave a rental and go to a house that they've purchased. They'd love to be a homeowner, for most people that's part of the American dream, so they want to own house. That's a pretty obvious reason why someone would leave a rental property. In a lot of cases, tenants are leaving one rental house and going to another, and even going from one similar rental house to another, not even upgrading to a bigger place.

Why does that happen so often? The polling answer on that is pretty clear, it's almost always about maintenance. The number one reason the tenants leave one rental to go to another, is that either repairs aren't getting done, or they aren't getting done very fast. The other thing to keep in mind about that is turnover, losing a tenant and having to find a new one, is the number one driver of expenses for a landlord.

There's two components of that. One is the cost of finding a new tenant, which if you have a property management company, that's the fees that you pay that management company to find that tenant, but even if you're doing it yourself, you have your own advertising costs, and your own time, which obviously has a value that you have to spend showing the property, taking phone calls, and everything that goes along with it.

There's that part, but then there's also the aspect of repairs between tenants. If you have a tenant in your property who's there for 10 years let's say, it's very likely that tenant is not going to ask for paint, or carpet, or anything really while they're in that property. As long as the property was in pretty decent shape when they moved in, they're going to stay in that property for all those years, and not really bother you about those cosmetic issues.

When you have a tenant who moves out, new tenants expect properties to be in pretty decent condition when they move in. They expect the paint to be in good condition, the flooring, whether it's carpet, or vinyl panel, whatever it may be, to also be in good condition. That's where those expenses come in, and then you have to go in and touch up at the very least the paint. Sometimes you have to replace that carpet, you have to maybe do some landscaping work. These expense add up.

You could have avoided all those expenses if you kept the same tenant. That turnover is what drives up costs, and that can be thousands of dollars. From a landlord's perspective, it's very important to keep that turnover low, and as we said from the polling, the way to do that is to make sure the repairs get done, and make sure they get done very quickly. That's why our process is that as soon as we get a request, we get that taken care of.

Our maintenance line is 24/7. That means if someone calls on Christmas day at 11 PM, we've got that call center that's taking that phone call and dispatching a vendor to take care of that if it's an emergency. If it's not an emergency, then they'll get someone out the next day as quickly as possible. That's very important obviously for the tenant for obvious reasons, but for less obvious reasons that's very important for you as the landlord, because that's making sure that tenant stays happy, so that they stay in your property.

That's a very important thing to consider. Keeping your costs down by reducing turnover is going to be the number one driver of your profitability as a landlord. That's why we do that, but also it's not just a profitability perspective, it's also just the law. In the states where we do business, landlords are required to do repairs. It's just the way it is, the law doesn't make it a gray area.

If you look at the Georgia landlord tenant handbook for example, it specifically says that even if you put a provision in your lease that says the tenant is responsible for repairs, it says that provision is void. It doesn't make any difference, as far as the courts and lawmakers are concerned, that you have a contract provision that says the tenant is responsible. It is always the landlord's responsibility to do the repairs no matter what. That's why it doesn't really make a whole lot of sense to put delays in the process to call for approvals, get multiple bids, etc. All of that stuff just creates unnecessary delays that's going to drive up your costs.

The vendors we have, we have long-term relationships with them, they've given us deep discounts. We bid out our work in a more general sense to multiple contractors all the time to make sure our vendors are the lowest priced and the best quality. Introducing a bid process into each repair is just creating an unnecessary delay when we already know who the cheapest vendor's going to be. It's just going to make the tenant angry while they wait for that work to get done.

Our process is designed to make the tenant happy, and to make the landlord have a more profitable property over the long run. We recommend this even for landlords who are doing the work themselves, and not having a property management company. If they're managing their own property, make sure you're quick on repairs. That's going to be the number one thing that keeps you profitable, and make sure that you have the best return on your investment. If you have any questions, send us an email at support@gtlrealestate.com, or give us a call at our office, thanks.

Using Online Reviews to Pick a Property Management Company

Todd Ortscheid - Friday, May 4, 2018

Hi, Todd Ortscheid here with GTL Real Estate talking this week about online reviews and how you can best use those to help find a property management company to manage your rental property.

Online reviews, obviously, have gotten pretty popular. Google and Yelp are probably the biggest providers of those but there's also Yellow Pages, Better Business Bureau, and Facebook. There's just a lot of places where you can leave and find online reviews. It's probably something you've become pretty familiar with as you search Google or Bing, just seeing those ratings there by default, because they're on your search listings.

Obviously, these play some part at least in your selection of a management company. So there's a few key things to keep in mind about property management companies that are a bit different than other businesses when you're looking at those ratings. If you're looking for a restaurant or a hotel or some place like that, it's pretty clear that everybody who's rating that restaurant is probably an actual customer of that restaurant, for example. There's not any sort of conflicting interest there.

With a property management company though, it's a lot different because there's two parties for every property that we manage. There's the owner of that property who's our client, that's the person that we actually represent and whose interest we are most concerned with. And then there's the tenant, and the problem with that is that in some cases, the interest of the tenant are directly opposed to the interest of the landlord.

For example, if that tenant doesn't pay their rent on time and they have to be evicted, well, what is that tenant going to do? They're probably going to log on to Google, post a really nasty review of us saying how horrible we are because we dared to tell them that they had to pay their rent or leave if they didn't so they'll leave this horrible one star review and that obviously is gonna weigh down our average.

Any management company that's doing their job is going to have those sorts of reviews. And that's a bit different than a restaurant where everybody who's leaving reviews is their actual customers, it's the people that they're supposed to be working to make happy. That's not always the case with a property management company because we have those competing interests in some cases. Because of that, you have to weigh the reviews a little bit differently. What you're looking for is kind of a sweet spot in those reviews. You wanna make sure you don't have either really low ratings or really high ratings because those could indicate two different problems.

Obviously on the really low side, if somebody's got 2.2, two stars, one star, obviously that's probably indicative of a company that's not making either their tenants or their owner clients happy. Now, that's not necessarily true. There could be circumstances where a property management company is just not asking any of their clients to leave reviews and if that's the case, they're probably not getting very many reviews even if they have a bunch of very happy clients, most people don't go on and leave reviews unless you ask them to do so. They could just have a situation where that's the case.

That's pretty rare nowadays. Most companies are actively asking their clients for reviews so you don't see too much of that. That used to be more common but not so much anymore. So if you see those really low ratings, that's probably an indication of a management company you don't wanna do business with.

On the other hand, there's another red flag raised if there's unrealistically high ratings. So if you see a management company that has 4.5, 4.8, 5.0 stars, and it's not a new management company with just a couple of reviews, then that might be an indication that that company is trying to play both sides. In other words, they're trying to keep the tenant happy even if that's not necessarily in the landlord's best interest and a lot of their clients don't realize that that's what they're doing and they're missing out because of it.

For example, something I see a whole lot on this is management companies waving late fees just because they don't want tenants to post bad reviews of them online for charging those tenants late fees. Now, we share the late fees with our clients so when we charge a tenant a late fee, you're getting half of that money. That's an important thing because if the tenant's paying late and you're missing out paying your mortgage on time, you need that late fee to help you pay the late for your mortgage. It's also just compensation because you deserve your rent on time. If the tenant's not going to pay it on time, you should get something for that.

If a a management company is waving that just so they don't get bad reviews from tenants, that's hurting you and that's just one example. A far more serious example would be a management company who doesn't charge a tenant for damage when they move out of the property. And that can cost you thousands of dollars. But I do hear management company owners sometimes saying, "Well, I'm gonna consider that normal wear and tear because we don't really want that tenant to get too angry, they were threatening to leave bad reviews or go to the Better Business Bureau. We don't really want to do that so we'll go a little bit easy on them" That's a bad thing and it's not only just a bad business decision, it's really a violation of that management company's fiduciary responsibility to you, which is a legal obligation. They represent you, the property owner. They should be taking care of your interest.

If there's a management company you see that has those unrealistically high ratings, that's, I would say, a warning sign. And not always, there could be some management companies who are just managing only very high end properties. And in that case, it's rare to run into a tenant in that range of property who's paying rent late, damaging property. If someone's renting a $4,000 a month unit, they're probably a pretty responsible person who's not going to be doing damage or paying their rent late. So those management companies who appeal to that niche market, they're dealing with a bit of a different situation. But for other companies who are managing standard three bedroom, two bath, typical rental properties, if they're not getting some bad review from tenants here and there, in my opinion, they're not doing their job. They're not representing their clients. So that's something to keep in mind.

You see a management company has three and half, four, 4.2 stars, that's probably the sweet spot you want to look for. That's a management company who's getting those bad tenant reviews when they're doing their job but they're also getting good reviews from their clients. And that's the important thing. So that's the last thing you can do is actually look at those reviews and see who is leaving the bad reviews on a management company's profile. Is it tenants or is it owners? And you can look through and actually read those. If you see a bunch of owners leaving bad reviews, that's a big warning sign. You don't want to see that. But if you see a bunch of tenants saying, "This management company evicted me," or "They charged me a late fee," or "They wouldn't let me have my application fee back when I had a 500 credit score." That's a good indication, that's something that you do want to see a management company doing. If you see those kind of bad reviews, then that lets you know that management company is doing their job and representing your interest.

Keep that in mind when looking for a management company. Obviously, if you're one of our happy clients, please go on to Google or Yelp and leave us a positive review. If there's any reason you can't leave us a positive review, then please let me know and we'll try to work out whatever that issue is. But if you have any questions about how any of this works, what you should look for on reviews, or anything else, you can send me an email at support@gtlrealestate.com. Have a good weekend.

Maintenance and Repairs Commission

Todd Ortscheid - Thursday, April 26, 2018

Todd Ortscheid of #GTLRealEstate talks about why an additional commission is charged on maintenance and repairs over and above the standard monthly management fee.

We manage a broad range of properties, and maintenance and repairs are a huge source of our expenses. We do not really make any profit in overseeing maintenance and repairs, but we do need to cover our costs; so, we thought of going about that in certain ways that are most fair and transparent to everybody. Older and more run-down properties are a much bigger source of the work we do because they require more maintenance and repairs. On the other hand, brand-new houses and properties that are just a few years old do not entail a lot of repair work, so we very rarely need to send vendors to them. We didn’t think that lumping everything into one big management fee that covers everything, including maintenance, would make a lot of sense, because then the owners who don’t really get a lot of maintenance done on their properties are basically subsidizing the owners who get tons of work done on their properties.

We thought it made more sense to break it out. Things that don’t deal with maintenance and repairs like the basic management, rent collection, and evictions are covered by the standard monthly management fee, while maintenance and repairs are charged with a percentage-based commission on top of the invoice amount. That way, the only people who are paying for maintenance and repairs are the ones who require it.

Some management companies do it in other ways. Some charge a flat fee for every maintenance and repair they do. Some management companies do not disclose that they are marking it up, so they will bill you directly from the property management company and won’t ever tell you that they are adding an override percentage on top of that. And a number of companies have an in-house maintenance unit. While some of them will disclose that it is an in-house maintenance company, others will not. They might also give it another name and will not let you know that it is under the same umbrella corporation that owns the management company. So, what they do is they include their commission in the invoice that they charge from the repair company and they get their money that way.

That’s not how we like to go about these things, as it is not a transparent way of doing business. We always tell our clients that there are no hidden fees. Everything we charge you, you know about, and it’s right on the second page of your management agreement for you to look at. We feel that this is the most fair and transparent way of conducting business.

If you have additional questions about this topic, please send us an email to support@gtlrealestate.com. If you require further assistance or want to see our available #HousesforRentinAtlanta or #HousesforRentinDaytonaBeach, give us a call or visit our website. Thank you for watching!

Landlord Inspections

Todd Ortscheid - Friday, April 20, 2018

Todd Ortscheid of GTL Real Estate, talks about landlord inspections that are done with tenants already in place and in the middle of their lease.

While you may be the owner of the property and thus, feel like you should be able to come and go as you please, and to do inspections as often as you'd like, we actually advise against it. There are actually three reasons why you should let a third-party go out there and do the inspections for you:

The first is confrontations with the tenant. This is a very common scenario, often due to disagreements with the tenant concerning late fees, rent increases, or repairs that didn't get done quickly enough for them. It is best to send in a neutral person or home inspector as there are less chances for confrontations.

In line with this, it is best not to conduct the inspections yourself because situations other than heated confrontations could arise, where you find yourself saying things that are against Fair Housing or landlord-tenant laws. This could lead to legal issues that you certainly don't need.

And last, but not the least, to avoid allegations of stealing. If you do an inspection without the tenant present and they come back to find something missing, you could find yourself in a big mess, especially when the tenant decides to bring the police in. It is best to have a company like us or an inspection company who are insured and have attorneys to take care of situations like this.

These are the three things you should keep in mind, in case you are tempted to conduct a home inspection on your own. If you require further assistance, please don't hesitate to call or email us. Thank you for watching!

Upcoming Improvements - Part 2

Todd Ortscheid - Sunday, March 25, 2018

In this video, Todd Ortscheid talks about more upcoming improvements you can expect from #GTLRealEstate.

Among those improvements include educational video blogs and virtual tours, which are basically slideshows of your properties with a voice-over description that talks about the benefits of renting your property. It also comes with an introduction that talks about why tenants should rent from us. These virtual tours have been proven to help rent out properties faster, as the description also includes keywords that will help tenants find your properties faster online. They also give us an edge, especially with millennial renters who want to rent with companies that keep up with the latest in technology.

We will also be doing video inspections of your properties. Rather than just taking pictures, we will be recording high-definition videos that will be used to document move-ins and move-outs. These will definitely help with challenges to the security deposits, as videos are irrefutable proof and will most likely stop tenants from challenging any charges. They will definitely lessen any legal costs you might have over disputes and hold tenants accountable for the condition they leave your properties in.

Please watch out for more videos about our upcoming improvements. If you have further questions about our excellent property management services or want to see our available #AtlantaHomesforRent or our #DaytonaBeachHomesforRent, please don't hesitate to call us.

Key Things to Look For in an Atlanta Property Manager

Todd Ortscheid - Wednesday, March 21, 2018

In this video, Todd Ortscheid of #GTLRealEstate, talks about what you should look for in a property manager, if you are considering hiring one for your rental properties.

While not all property managers are created equal, and certainly not one-size-fits-all, there are certain qualities that all landlords should be looking for in a property management company.

First off, you need to find a company that documents both a move-in and move-out because if there were to be any legal challenges that come up, the company will be able to prove that the tenants are being charged the correct amount in damages. Also, a good company will collect a security deposit, so that the owner has something to use for repairs, should they be necessary.

Second, an application with all the relevant details--social security number, date of birth or a driver's license is important in case we need to go after a tenant to collect what they owe.

It is really important to find a reputable property management company that does what they should be doing, which is first and foremost, is to protect their clients. You should also check out the NARPM website, and check out what the other NARPM members are doing. These are what you should be looking out for when you want to hire a property management company, to make sure your properties will be well taken care of.

If you have further questions on property management or want to see all our available #AtlantaHomesforRent or please don't hesitate to call us. Thanks for watching!

Upcoming Improvements - Part 1

Todd Ortscheid - Sunday, March 18, 2018

In this video, Todd Ortscheid of #GTLRealEstate, talks about the improvements you can expect this year, as well the new things that are coming soon.

These new changes include the new rent money system, which has been emailed to all our clients. This new cash payment system will get us the funds in two business days, as soon as the tenant has paid the rent at any accredited cash payment location. From there, you should get the funds within 2-3 business days. The new system is faster than the old one and this should be a big improvement.

We will also be having new owner portals on our website. It will now be easier to read statements and generate custom reports for certain time frames you are looking for. These will be coming out soon with completely new formats.

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