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New Keyless Smart Locks

Todd Ortscheid - Monday, August 6, 2018

Video Transcript:

Hi. Todd Ortscheid here with GTL Real Estate. This week, talking about a new product that we're starting to put on our vacant properties that we think is going to save our owner-clients quite a bit of money, make things easier for our tenants, make it easier to rent the properties out, which obviously will get you better revenue and reduce your losses from vacancy periods. So we think this is a good, new program all around. It will even benefit you, as the property owner, even if you stop renting the property. This will be something good for you.

Basically, what it all centers around is lock changes. We always have to change the locks at a property between tenants or when the property just starts being rented out because the tenant has to have an expectation of safety and privacy. So we can't have keys floating around out there, even from the property owner, where somebody else can get in the property while they're living there. The only keys that there are for the property has to be the keys that the tenant has and the keys that we have in our office that are in a locked cabinet in a locked room with a keypad entry. It's basically impossible for anybody to get to those keys, except for our staff and our approved vendors who have to schedule that ahead of time so we know who it is.

As I said, there's a keypad when someone goes into that room, so we know who it was that took the keys. It's all a very important thing for the security of the tenant and their expectation of privacy, and obviously reducing your liability and ours, of course, in case the tenant was to claim that someone came into their house and stole something or sexually harassed them. There are all sorts of things that go on out there that you want to make sure that you protect yourselves against. So one of the ways we do that is making sure that there aren't extra keys floating around.

So we have to change those locks. Of course, that's a very expensive thing to do if you're constantly changing locks to your property. That starts to add up, especially if your property, you happen to be getting a new tenant every year just because of where your property is or the condition it's in or whatever the case may be. If you're getting new tenants every year, you're changing those locks every single year, and that's eating into your first month's rent every single time you get a new tenant. So if there's a way to eliminate that expense, that'll save you, as the landlord, a lot of money in the long run.

A lot of you have probably heard of smart locks. These are basically internet-connected locks that you can change the code on or unlock at any time. Up until now, you have to have those locks connected to WiFi, to the local internet at your house, so it wasn't really possible to do anything with smart locks at a rental property because there's no internet there while a tenant isn't occupying the property, or if the power is disconnected for some reason, if a tenant abandons a property or something like that. So, we weren't able to use smart locks before.

Thankfully, that's now been fixed. Now, companies are starting to produce smart locks that are Bluetooth enabled. The lock is able to be used even when a tenant isn't occupying the property, even when there's no internet service connected to the house, the lock can still be accessed via Bluetooth. So what we're going to do is start using these when we do lock changes at houses. Here is one of the locks, right here. You can't see it very well, but basically, down here is the lock cylinder and there's a keypad up here where the tenant can punch in the code, or the person, the vendor, who wants to get into the house, or our staff. Whoever it may be. Or, later on when you move back into the house, if that's what you do, then this will still be there for you. You can just punch in your code and get into the property without a key.

The reason this is so beneficial to you as a landlord is, the code on this can be changed at any time. So we don't have to hand out a physical key. We still have a physical key in our office, behind lock and key of course, just like the current ones. It's a master key that we can use. But as far as the tenants, there are no keys floating around out there. We're not handing out a key to the tenant when they move into the house. Instead what we're doing is, we're assigning them a code, or they can select a code. They can also use an app on their phone.

The beauty of Bluetooth is that just like many of you probably have keyless entry cars where, when you walk up to your car, it just automatically unlocks because it senses the key in your pocket. This will basically work the same way. If a tenant installs the app and pays the, I believe it's $2 a month for the service, then they never have to use a key. If they've got the Bluetooth app on their phone, they just walk up to their front door and it will unlock for them.

The other benefit of these locks is they are automatic locking. So, there is a sensor that is attached to the side of the door that senses when the door has been closed after it's been opened. When that happens, it waits about 30 seconds, and then it automatically locks. So it's great for security, it's great for showing the property. When your property is vacant, if someone views the property, and let's say a real estate agent goes out and shows that property, a lot of times, frankly they forget to lock the front door. Not our agents, of course. We're very careful about this, but frequently if another agent from another brokerage is not used to showing property, doesn't do a whole lot of real estate work, they might forget that front door, and then your property is just open for anybody to walk in.

This solves that problem because it will lock itself as soon as that door is closed after a few seconds. So it automatically locks. The real benefit of this, of course, is you're not paying for lock changes anymore. So what will that save you? The average lock change right now is costing about $150, so obviously, the first one of these is going to cost more, because the lock, itself costs about $150. So what you'll pay is for that, plus the service of the locksmith to install the lock. But then that's it basically forever. The only thing you'll have to do after that point is to replace the batteries, which your tenant will be doing most of the time when it's occupied. So it eliminates the problem of lock changes.

Now, when the property switches over from one tenant to another, we just log into the computer or even on our phone while we're out at the house, change the code to a new code for the new tenant, and now the old tenant isn't able to access the property anymore. So it eliminates all of your future cost for lock changes. So it basically saves you $150 on every tenant turnover from now on. So it's a big saver for you in the long run, just a little bit of extra money on the front end to buy the actual Bluetooth lock that has to be installed. But after that, no more lock changes, so it's a big benefit for you as the landlord.

It's also a big benefit as far as getting the property rented. It's something we can advertise. We can tell people the house has smart locks. Tenants love that, especially younger tenants. Millennials come to appreciate the convenience. They don't like to have to deal with keys or anything else. If they can just walk up to their door and it opens, that's a selling point. So being technologically advanced, it's helped us a lot with our automated lock boxes, it's helped us rent properties much quicker. Now, with the automated Bluetooth locks actually installed in the doors, we think we'll even make that even better.

So, that's going to be a big improvement. We think a lot of you will save some money and get shorter turnover times on your properties. So, this will be going live, but we're not going to install it in every property all at once. What we're going to do is install them as the properties become vacant, or as we add new properties. So when we take on a new property, it will get this lock. Or, if we have a turnover where there's a vacancy between tenants, we'll install these locks at that point, when we have to change the locks anyway. So it'll take a few years before every property we manage actually has these locks on, but whenever your property is vacant, that's when that'll get taken care of, and we think this will be a big improvement for everybody.

If you have any questions about this, please just send us an email. Support@gtlrealestate.com is always how you can reach us. We'll be happy to answer any questions about it. Thanks.

New Pet Damage Guarantee Program

Todd Ortscheid - Monday, July 30, 2018


Video Transcript:

Hi, Todd Ortscheid here with GTL Real Estate. This week I'm going to talk about a new program that we have that's going to be for all of our clients called the Pet Damage Guarantee Program. Basically what this program will do is it will eliminate the problem that so many of our clients have of worrying about pets from their renters causing damage to their properties, and we'll get into, in a few minutes here, how exactly we're going to do that.

First thing I wanted to do was talk about why it's important to allow tenants to have pets, because this is a common question we have. We have so many of our clients right now who aren't allowing pets in their properties and it's really costing them a lot, and I'll explain that here in a second, but eliminating that worry about pet damage, we think, will make sure that every landlord is able to offer their property available for pets, which should eliminate some of these problems. 

So, what are some of the problems that are created when you don't want to allow pets in your rental property? The first thing is about half of all tenants have pets. Some studies say a little bit more than half, but we're basically looking at at least half of tenants have some sort of pet, whether it's a dog or a cat, a parrot whatever it may be. Pretty much everybody has a dog or a cat in that group, but not necessarily. So it's about half of the available tenant pool. So when you have your property listed for rent, half of the people out there that might be interested in renting your property have pets. So if you advertise that the property isn't available for people with pets, basically you're eliminating half of the available people that you could place in that property. And we already turn away about two thirds of the people who apply to rent properties, because of their credit score or eviction history or whatever the case may be. That means if you're eliminating half of the remaining people you're down to a very small group of people who could actually rent your property. 

This is why, for those of you who don't allow pets in your properties, this is why you see they usually stay on the market longer. We usually tell people that our average rental time is about two weeks, 14 days, and that's true as an average, but the people who allow pets usually see their properties rent much more quickly because there's just a much bigger group of people that they are able to rent to. So, allowing pets at your property is a very important thing to getting it rented as quickly as possible and to the best tenant possible. 

The other issue is keeping tenants, which as we talk about on these videos all the time. Reducing tenant turnover is the most important thing you can do to reduce your cost and to maximize your profits. So you want to make sure your tenants stay. So how does that apply to pets? Well, think for a second. You place a tenant in a property, they don't have any pets. They've got a small child, that child starts to grow up. She wants a dog. So, now the family wants to get a dog but their landlord doesn't allow pets. So what that tenant's going to do is they're going to put in their notice to vacate. They're going to move and they're going to go to a property that allows pets. So even once you get tenants in your property after you've had a difficult time finding one that doesn't have a pet, then they're going to later leave because now they want to get a pet. So that's a problem as far as keeping your turnover down, which is the main way for you to maximize your profits in this business. So that's another reason that you want to make sure that you allow pets in your property. 

Finally, it's bordering on a fair housing issue. When you tell a certain group of people that they're allowed to have pets and another group of people that they're not you're opening yourself up to liability risk. Even when it's not discriminatory in any way, when it's just based on what the landlord wants in their property as far as these landlords allow pets, these landlords don't. When you have a tenant that comes through and says, "Well I see that you rented this property over here to these people and they were allowed to have pets, but the same company, GTL, is renting out this property over here and I have pets and they're telling me I'm not allowed to have pets". 

So that creates a perception problem where someone could feel that they're being discriminated against even if that's not what's going on, so that always creates a liability problem because even if you're not discriminating you can still get law suits from people claiming that you are. So the fewer things that you're doing where you're having different rules for different tenants, we harp on this a lot in these videos is making sure we have the same rules across the board for every tenant. So that's another important reason to just allow pets in every property to avoid those sorts of problems. 

So how are we going to deal with this? We're going to guarantee your property against damage. So what we're going to do is we're going to say that up to $3,000 worth of damage if that damage is caused by a pet, we will cover that out of our own money at GTL. So basically we will go out and we will get our vendor to fix that damage whether it's chewed up trim work around the doors or windows. It could be damaged floors, torn up linoleum, whatever it may be we would get that fixed up to a maximum of $3,000. And we've never seen damage anywhere approaching $3,000 from a pet so at $3,000 you could even replace a lot of carpet. There's a lot of things you can do with that sort of coverage. So, we'll guarantee no damage from pets up to that $3,000 limit. We'll get that fixed if that happens. 

So you're probably asking, "Well how can you do this"? And the way we're going to do that, right now we charge tenants pet rent and that pet rent goes to you as the landlord. What we've heard from a lot of you, this doesn't make you feel better. The $25 a month that you get from a cat and then that cat urinates all over the carpet and the carpet has to be replaced, that $500 that you got over two years, excuse me $600 you got over two years just isn't enough to cover fixing that damage. So you know, that pet rent isn't really making you feel any better about allowing pets in your property. So what we'll do is we can pool all of that money, since we have so many properties with so many pets. We can charge that pet rent. The pet rent goes to us to pool altogether so we can have a big group of money to use for those rare, but they come up, big repairs from pets. So if there is one property that has $2,000 worth of carpet that needs to be replaced that individual land lord wouldn't have received enough pet rent to cover that. But if the pet rent is coming to GTL Real Estate and we're pooling all that money together then all the good pets they don't have any damage so that's going to help cover all the properties that do have the damage. 

So, basically you're just losing the $25 a month pet rent, that will go to us so that we can provide the guarantee against damage to your property. We think most owners will be much happier with that because most of the people we spoke to they didn't really think the $25 a month in pet rent was really helping them that much. That didn't make people decide to rent their property to people with pets. That didn't make them feel more confident that they didn't have to worry about pet damage. So we think doing it this way will make it a lot better and now you have that guarantee that if there is damage we'll just pay to fix it. 

Now there are a couple of exceptions to how this works. Service animals, emotional support animals, therapy animals, things like seeing eye dogs, dogs to help people with Post Traumatic Stress Disorder. Those are covered under federal law. They're protected under fair housing laws so you're not allowed to charge admin fees, pet rent, any of that sort of thing for people that have those kind of service animals. So they aren't considered pets. Actually, under the law they are considered service animals, or emotional support animals, or there's different names for them depending on what function they serve, but they're not pets. So we can't consider them a pet, and generally they're very well behaved animals anyways, so you don't have to worry about them causing damage. But they would not be something that would be covered under the program because we can't collect any money for those animals. Just like right now if you have a pet, or excuse me, an animal that's in one of your rental properties that is a service animal you're not getting any pet rent for that right now either. Just because it's illegal to do that. 

So, obviously those situations if someone has a service animal that's not part of the program because that's not considered a pet. But again, the odds of that service animal actually causing damage to your property anyway are nil. It's next to nothing. 

Also, unapproved pets. If a tenant is not approved to have a pet in the property and they haven't been paying pet rent then obviously if that dog or cat or whatever it was, was brought in by the tenant without approval and caused damage that wouldn't be covered, of course, because we hadn't been collecting the pet fees for that. However, what we're going to do in that case is right now we charge the tenant what's called liquidated damages, which means they pay a fixed $250 if we catch them with an unapproved pet. 

The way we're going to change that is we're going to make it where instead of just that fixed $250, they're going to have to pay everything they would have paid if they had told us about the pet from the beginning of their lease. So if they've been in the property for 12 months, and it's a pet that we determine is a high risk pet that we might charge a higher pet rent on, then they might have to pay $700 once we catch them with that unapproved animal. Including their upfront fee and their monthly fees. So it's to their benefit to let us know ahead of time otherwise they're going to get this big bill that's going to come all due all at once. So that way we'll make sure that no matter what, we're getting that money so that we're able to provide you that guarantee against damage and there's no incentive for the tenant to try to hide the pet. They're gonna have to pay one way or another. They're either going to pay monthly or they're going to pay when we do the inspection and we catch them with the unapproved pet. So we'll make sure that that doesn't happen anymore. Where we don't have to worry about unapproved pets. 

So basically when we go live with this, we're going to go live with this next week. Basically at the beginning of August 2018 we're going to roll every property into this so every property will become a pets available property, because no owner has to worry about pet damage anymore. It's all guaranteed by us so there's no reason for anybody to worry about their property being damaged. So we'll activate every property as a pet available property. That'll make sure you can get your property rented as quickly as possible. Make sure you keep your tenants and avoid any sort of liability problems. Any sort of accusations of not treating people fairly. And you'll also get the benefit of that $3,000 pet guarantee in case there actually is any damage to your property. We'll return it back to its original condition. 

So if you have any questions about the new program or want to comment on it, please send us an email at support@GTLrealestate.com but we think everybody's going to be very happy with the new program, but if you have any questions just let us know. Thanks!

Home Delivery of HVAC Filters - New Program!

Todd Ortscheid - Friday, July 20, 2018


Video Transcript:

Hi, Todd Ortscheid here with GTL Real Estate, talking about filters this week, HVAC filters for your air conditioning and furnace systems. It's a question we get quite a bit from owners about how they can make sure that the tenants are actually replacing the filters at the house because a lot of owners understand, rightfully so, that this is a big expense if you don't get these changed. 

If the filters don't get swapped out, you can end up with a lot of problems with your HVAC system. It creates about a 15% increase in your annual expenses when measured over long periods of time for repairs on your system. It cuts off a few years of life, about three years or so of the life of the unit gets cut off if those filters aren't being regularly changed. So it's a big expense because obviously this is a pretty expensive system, so it's a big source of additional unnecessary expenses if those filters aren't being changed. So it's important to make sure that the tenants are doing that.

Now our leases have always had this requirement. They've always said that tenants are required to replace the filter every 90 days, but of course it's pretty much impossible to enforce this, at least in a cost effective way without raising your management fee. About the only way we could do that right now would be to send an inspector in to every property every 90 days to take a look to see if they've replaced those filters. And that's just cost prohibitive. Nobody would want their management fees to go up to cover that sort of expense. 

So thankfully we found another solution, and that's a program called FilterEasy, and you might have seen them on the internet or heard them on the radio. It's a company that basically does a subscription-based filter service. It's basically the Netflix of HVAC filters. So they send a filter on a set schedule out to the house and it's a custom filter. The subscription is set for the size of the filter that goes in your unit at your house, and it's even if you have multiple filters. So if you have four different units at your house, if you've got a large house, then they'll send four filters, each one of them the correct size for that unit, and it'll get sent out to your house on a regular schedule.

We've got it set up at 90 days, which is what our leases are set up at, so they just automatically send that out so the tenant gets that filter. It's a big box that arrives on their front doorstep. It's got our logo on it so they know that it's from us even though it's actually being sent from FilterEasy. It's got our logo on it, which is a nice reminder to them that this is a requirement in their lease, that they need to swap it out. But just actually getting that filter show upon their doorstep instead of them having to go out to Home Depot or Lowe's and buy it themselves, is basically what's needed to get them to actually swap it out.

FilterEasy has found in about 90% of the filters are getting swapped out on the regular schedule it's supposed to when you actually send the filter to the tenant using their system. So that's a big improvement. Right now it's probably closer to 20%, and we know this because of our third party inspections that happen once a year. Those inspectors are checking those filters, and a large percentage of the time the filter hasn't been changed, and we're charging the tenant to replace it. The problem is that inspection only happens once or twice a year depending on what the owner has selected. 

So it's not getting checked anywhere near as much as it needs to. So with this program with FilterEasy, the filter will now automatically get sent to the tenant every 90 days. They'll get that reminder to swap it out, and again according to FilterEasy, about 90% of them are getting swapped out when that is taking place. Now there's still the backstop of the third party inspection, so the good thing about the FilterEasy filter is when they're doing them for property management companies like us, they're putting a date stamp that the filter expires right on the side of the filter. 

So when our inspector goes in to look every year, or every six months if you selected that in your management agreement, then he'll look at that expiration date on the side of that filter, and he'll see whether the filter is expired. If it is, that means the tenant hasn't been replacing the filter like they're supposed to, and we're going to have a provision in our lease agreements now that charges the tenant basically liquidated damages to make up for the increase in HVAC repair bills that you can expect as a result of them not changing their filter out.

So now that we have that expiration date on there and it's not just an inspector's, you know, eye trying to figure out whether the filter's been replaced or not just by looking at the amount of dust in it. Now we actually have that date, and it makes it real easy to enforce. The inspector will snap a picture of the date on the side of that filter showing it was expired, and we can charge that tenant liquidated damages and that will go to you to help offset any expenses you have for your HVAC repair bills.

But again, like I said, this should only happen about 10% of the time because once the filters get sent to the tenant on a regular basis, they should be swapping them out, and we're pretty confident that's going to happen.

Now, you're probably asking how much is this going to cost me, and the answer is nothing. This is all going to be charged to the tenant. So the tenant is already responsible for replacing their filters anyway. That's already in their existing lease. So as each new lease gets signed for new tenants and for renewals, there'll be a new provision in that lease that says that the tenant is going to pay for this FilterEasy program. That's basically just an administrative fee that gets tacked onto their monthly rent, so that they're basically reimbursing us, the management company, for buying that filter through FilterEasy. They just get billed that on a monthly basis, even though the filter only gets sent out every 90 days. It's just easier to do it monthly. So they'll be covering the cost of that filter, just like they're supposed to be doing now buying it themselves, but now it'll be on a subscription basis and it'll just happen automatically.

So we think this is going to be a much better system. it's going to make it far more likely that the filters are going to be replaced, and it should save you about 15% on your HVAC system repair bills which will be a nice improvement. Best of all, it's at no cost to you.

Now the only exception to that no cost to you part is for the filters that are in locations where the tenant can't get to. So some of you have, and it's very few houses we manage, but there are a few of them where the HVAC system is in a crawl space under the house or it's in an inaccessible attic where the tenant can't get to from their unit in some multi-unit buildings.

In those cases, a solution that FilterEasy has been able to come up with is that we can replace the actual cool air returns inside the house with a special kind of cool air return that actually takes a filter right there at the vent instead of at the actual unit. So we'll be able to make it so the tenant can replace those filters even in those units that they're unable to access. 

The only downside to this is there is the up-front cost of replacing that vent, that cool air return vent. It's a small cost, basically just a service call plus a few dollars for the materials for the new vent. Not an expensive thing. You'll basically get that savings back real quickly in the reduced HVAC repair bills that you'll pay.

But again, this only applies to a small number of units anyway that have crawl spaces or just inaccessible HVAC systems. So not many of you will have to deal with that anyway, but there are a few of you that will have that expense of replacing those vents, so just wanted to let you know about that ahead of time. And that'll only be done at the time of a new tenant being placed or of a lease renewal, when they go active with the new FilterEasy system.

So every one of the units that we manage will be on this system within the next year. It'll be done as each renewal comes up, or as each vacancy happens. So within a year, you should be on this new system. You'll know that your property is being better taken care of because the tenant will be getting these filters, so we think that'll be a big improvement both for you and for the convenience of the tenant since they won't have to go out and buy these filters anymore or worry about getting charged for not replacing them. So all around, it's a win-win for everybody. 

We think it's a good system. We've spoken to a lot of other property management companies in other states that have implemented this. They've all been very happy with it, and they say their clients and their tenants have also been very happy with it. We think it should be a good system for everybody.

If you have any questions about it, please send us an email at support@GTLrealestate.com and we'll be happy to answer any of those questions. We'll talk to you next time.

Renting with Section 8

Todd Ortscheid - Wednesday, July 11, 2018


Video Transcript:


Hi, Todd Ortscheid here with GTL Real Estate. This week I wanted to talk about a little bit about Section 8 tenants. This is a common question we get from both landlords and from tenants about whether we rent to Section 8 tenants and what we think about the program. 

As a general rule, we've got nothing against the tenants who are receiving Section 8 assistance. In our experience, most of the tenants are great. They take good care of the property. They're responsible tenants like anybody else. Of course there's a few bad apples here and there, but that's the case with tenants who aren't receiving Section 8 assistance, also. That's nothing special for that class of tenant.

The problem doesn't really come in with the tenants. The problem with Section 8 is the housing authority. When you're renting to a Section 8 tenant, you're not just dealing with that tenant. There's also a middleman involved, which is the city or the county housing authority that is basically dispensing the money that the government is providing for that tenant's housing assistance. 

They cut the check to you for however much assistance they offer that tenant. Sometimes they're paying the tenant's whole rent. Sometimes they're just paying a portion of it. Sometimes they're providing utility assistance. It just depends on the individual situation, how much money that tenant makes. Various factors goes into how they decide what that tenant receives, but they're basically acting as a middleman in this situation, to be that dispenser of that money for that assistance. They think that gives them special rights to tell you what to do.

If you want to rent to that Section 8 tenant that they're providing that assistance to, they make you submit to an inspection of your property that they conduct with their vendor, where they make determinations about what they think you have to do to your property.

They also have you sign what's called a Housing Assistance Program Agreement. Basically, it acts as a pseudo lease that overrides your normal lease agreement. There's a lot of provisions in that HAP agreement that restrict your rights as a landlord and place all sorts of additional burdens on you.

For example, you have to submit that property not just to that initial inspection but to yearly inspections. That inspector is going to come in, and he's going to tell you what you need to do to your house. 

Let's say you've had this Section 8 tenant in your house for a couple of years. The inspector comes out for the inspection, and he decides the carpet needs to be replaced in his opinion. Well, you go out and you look at the house. The carpet seems fine to you. You just think it needs a professional cleaning, which your lease says is the tenant's responsibility to do and which state law doesn't say that it's a landlord responsibility. There's no requirement in state law for you to replace carpet in the house. But the Housing Authority's inspector is telling you you have to do it. 

Furthermore, they're telling you in their notice that if you don't do it, they're going to cut off their payments assisting the tenant. Now you've got a tenant that's been in the house for a couple of years. It's a good tenant. They haven't done anything wrong, but the housing authority is telling you, spend $4,000 for this unnecessary repair just so you can keep this tenant and their housing assistance coming in from the government. If you don't do that, we're going to cut off the money, and most likely, the tenant is not going to be able to pay.

Obviously, this creates a bad situation. Because of this, we don't like to deal with housing authorities. This is just one example of the problems we have. Other issues are the housing authority is in no hurry to pay you. We usually receive checks from housing authorities around the 10th of the month, sometimes the 7th or 8th, but even that is completely unreasonable. Our leases say the rent is due on the first of the month, and it's late if it's not paid by the 2nd. Even landlords that are a little more lenient say that there's a late fee after the 5th, but the housing authority doesn't care. They're going to pay when they're going to pay, and they're going to tell you you can't charge the tenant a late fee for them getting the rent to you late.

You're left in a situation as a landlord, where you're basically having your rights as a property owner and as a landlord infringed. The housing authority's basically deciding what your rights are. They don't care what state law says. It doesn't matter to them. They're just setting their own rules, and you have to abide by them if you want to keep getting that rent.

For that reason, our policy as a company is we won't sign those HAP agreements, those Housing Assistance Payment agreements. We just won't sign them. We won't enter into a separate third party agreement with a housing authority. 

What we say is we're more than happy to rent to a Section 8 tenant, but the housing authority's going to have to pay that rent on the tenant's behalf without us entering into a third party agreement. We're not going to let the housing authority do their own inspection. We do our own inspections. We comply with state law. If that's not good enough for the housing authority, then we're not going to accept their agreement. We're just not going to have anything to do with that.

We don't have a policy that we won't rent to Section 8 tenants. We're happy to accept a Section 8 tenant, but the housing authority has to go by our lease. They have to follow our procedures. They have to go by state law. They can't be doing their own thing with their own agreement.

If the housing authority is going to insist upon that, then we can't rent to that tenant, or at least we can't rent to that tenant under that HAP agreement. The tenant can rent the property on their own without that Housing Assistance Program if they qualify using all of our normal criteria, but we will not take part in a program that requires us to enter into a third party agreement that restricts our rights and the rights of the landlord beyond what the state law already is.

That's basically our policy on Section 8. That's the reason that we have that policy. We recommend that landlords follow the same sort of policy if they're not having their property managed through a property management company just so you don't end up in these situations where a local housing authority is trying to impose their will upon you as the property owner.

Just some things to keep in mind if you're thinking about renting Section 8. If you have any questions about any of this, send us an email at support@gtlrealestate.com. If you need any help managing your property, of course, let us know. We'd be happy to talk to you.

Periodic Interior Inspections of Your Atlanta Rental Property

Todd Ortscheid - Friday, June 29, 2018


Video Transcript

Hi, Todd Ortscheid, CEO of GTL Real Estate, talking this week about interior inspections of your rental property, and this goes beyond just move in and move out inspections. We'll talk about that in a different video. This is talking about the periodic inspections. The inspections while the tenant is in the property. We do these on different time schedules depending on what the landlord prefers. So, our standard schedule is we do this about ninety days before a lease expires. So, that's the default that's in your management agreement unless you've signed up for optional inspections to do that more often. 

Sometimes some of our clients like to do inspections more often than that. We generally only recommend it no more than twice year. We can go to three times a year, if you absolutely want to, but we generally recommend not doing it more than twice, just to make sure that your tenant doesn't feel that it's an intrusion of their privacy. As we always talk about in these videos, it's always important to make sure the tenant is happy so they renew their lease because that's the best way to keep your costs down. So, we generally don't recommend doing more than twice a year just because some tenants don't really care for that. They think it's too intrusive, but two times a year is reasonable. So, if you'd like to do that, if you'd like to upgrade just let us know. 

For most of you, you are on the once a year plan which is fine. That does give us good opportunity to check out the condition of the property, not too long before the lease is renewed, or the if the tenant is going to be vacating it gives us a good idea of the condition of the property ahead of time so we know what it looks like before they vacate. And that also gives us the opportunity to let that tenant know, here are the items that you need to take care of before you move out in order for you to get your security deposit back, which encourages them to get those items taken care of. So, that is our default. 

About three months prior to move out we do that inspection. Now like I said, if you do other inspections, six months or whatever, we also do those. But, the way we do these inspections no matter what schedule you're on, is we use a third party inspection company, and that's all they do is rental property inspections to be specific. They don't do new home inspections. They don't do inspections for house sales. All they specialize in is rental property inspections, and that's really the reason that we use them is because this is their bread and butter. This is what they know inside and out and they have a perfect process put together for this. A whole lot of management companies are going to this kind of model and the reason we did is because we just found the inspection to be far superior to anything that we saw any management company doing including us. 

When we were doing them ourselves, we did a lot more than most management companies did. We did quarterly drive by inspections as well as the move in and the move outs and we were doing interior inspections when owners requested them. But it still, even when we bought special software for it, we could never get the quality of that inspection to the same level that a company that does nothing but rental property inspections does. So, that's the reason we went to that company, and there's several other advantages to that, that I kind of wanted to go over to talk about why it's best to use that third party inspector. 

In addition to the quality of the inspection, let's say there a situation on move out where the tenant claims that they were charged for something that it wasn't fair for them to be charged for. That it was damaged, that was normal wear and tear for example. Now if we have a third party inspection that was done right before they moved out by this professional inspection vendor, we can always take that to that tenant and say here's a report, this is an independent unbiased third party. They put on the top of this report that this is a major item to look at, this is a damage to the property and that's how the inspection company does it. 

On the first few pages of the report, they have the items that are damaged. So, you can go right to that and see it very easily. So, we can show that to that tenant and say this isn't our judgment, this isn't the landlord's judgment, this is the judgment of a professional inspector. So, it really short circuits a lot of those disputes. So, it never gets to a court case. It never gets to a formal dispute. They look at that report and they say, alright, there's a third party professional who's determined this, so there's probably not much I can do to fight this. 

Now if it does get to court, you know let's say it does get to that point, tenant files a lawsuit, they get really mad over being charged for something on move out, and we have to go to court to defend it, then we have that inspection report that we can turn in to the judge and say here's our evidence. And since it's coming from a third party and a professional inspection vendor, and not just us, which the judge might look at us as biased because we're representing you as the landlord, then that carries a lot more weight. 

The judge will look at that and say not only does the landlord think this, not only does their property management company think this charge is justified, but this third party who has no vested interest, they're just getting paid to perform the inspection no matter what the outcome of the inspection is, they say that this charge is legit, that carries a lot of weight. But, even if that itself isn't enough, the inspection isn't enough, the inspection vendor, the actual person who did the inspection will show up in court to assist us. They will actually give testimony and talk about their inspection on the witness stand. So, that really carries a lot of weight. When the actual inspector is there, and can be examined, and cross examined, and questioned by the judge, that means everything. So, that's a very key part of having the third party inspector. 

Another advantage is that the inspector actually carries certain things with them on their truck. So, they have pretty much every filter size for your air conditioning system they've got stocked on the truck. They've got batteries for your smoke detectors, door stops, smoke detectors, CO2 detectors, all that stuff is carried on the truck. So, if they get to the property, and they're doing an inspection, and they find that there's two bad smoke detectors, they can replace those right then and there, and that really reduces your liability. Let's say that we did an inspection, we found two bad smoke detectors and we had to send a service request out to a vendor to come fix that, to replace those. And let's say it took that vendor a week, and let's say there was a fire in that intervening week, that's liability not just for us, but also for the landlord. So, by getting that done immediately right when the inspector is there, that's a big risk reduction, and it's just good service for the tenant too. So, they're not having multiple people show up at the property in order to get something done. 

Now checking those HVAC filters saves you money also. Because if that filter is dirty when they get there and they check it, they'll change it, and then they'll charge the tenant to reimburse you for that cost and replacing those filters saves you money in the long term on your HVAC system. It'll usually add a few years to the longevity of your system. So, that's also an added benefit they're making sure those filters are changed by that tenant. 

Now of course there is a a charge for this. The inspection company has to make some money. So, the inspection costs generally about a hundred dollars. It can vary somewhat depending on the location of the property, if it's really far out in a rural area they might add fifteen, twenty dollars to that just for a trip fee, but for most of you it's about a hundred dollars. So, it's not a very expensive item. It's well worth it especially just once a year. In return for that you're getting a fifty page report with about a hundred pictures. It's very detailed, it's not just photos, it's also descriptions of any items that they found that were a problem. They're checking for the presence of pets and they make notation of that on the report. It's just a very detailed report that you'll receive for a very low price. 

So, we think it's well worth it. Since we've been doing this for about a year now, we've spoken to a lot of you and we've gotten very good feedback on it. We've had I believe only about three or four landlords decided to opt out after seeing the quality of the report and that's out of four hundred and something. So, obviously it's gone over very well. Our experience with it has been excellent, we think it's a great way to go.

So, we recommend this not only for our clients, but also if you're just an individual landlord out there, call up an inspection company. You won't be able to hire this company because they cater only to property management companies, but you could call a home inspector and have them go out. It'll be more expensive, you're an individual landlord so you are taking on some extra expenses there that you don't get those cost savings from using a property manager, but you want to get those benefits of having that third party. 

So, try to find a property inspector to do that or better yet hire a management company and then you'll have somebody taking care of this for you. And ask that management company you know, when you're interviewing management companies ask them, do you use a third party inspector, and use that as something to judge the management company to decide whether they're looking out for your best interests and whether that's the best company to hire. Better yet give us a call or send us an email and we'll be happy to talk to you about managing your property and taking care of all this for you. If you have any questions about anything, just send us an email at support@gtlrealestate.com or you can give us a call at 678-648-1244. Thanks.

Rent Guarantee Program

Todd Ortscheid - Monday, June 25, 2018


Transcript:


Hi, Todd Ortscheid here, CEO of GTL Real Estate. This week I wanted to talk about one of our special programs that we offer to our clients, the Rent Collection Guarantee Program, the RCGP. Many of you are already signed up with this program. It's worked out very well for some of you. Maybe some of you just aren't aware of it, or maybe you're a new client, and you just are thinking about whether to do this. So I wanted to provide a, sort of a high-level overview of how the program works, and then talk about who it might be a good idea to sign up for, and who really doesn't need the program, and then let you know how you can go about signing up for it if you'd like.

First, just kind of an overview of how the program works. The basics are, you pay a monthly fee, or you can pay it yearly for a discount, to buy into the program, basically. So for most of you, for the average rent of the properties we do, it's usually about $29 a month, or $290 a year if you pay for the yearly option. That's for the average rent. Now, if you go up to more expensive properties with higher rents, then that price goes up a little bit. But for most of our properties, it's $29 a month.

You pay that to buy in, and that gets you protection in case your tenant doesn't pay the rent. And the way that works is, let's say the tenant, their rent is due on the first, which is the case with the vast majority of the properties we manage. All of the ones on our standard lease, the rent is always due on the first of the month. So with the RCGP, if the rent hasn't been paid by 10 days after the due date, which in this case would be the 11th, then we actually pay you that rent out of our own pocket, out of GTL Real Estate's operating account. You'll get your rent even if the tenant hasn't paid it.

Then what we do, of course, is we go about our normal process of trying to collect from the tenant. And if we get that money from them, which we normally do, they end up paying up later in the month, then that money just goes back to pay us back for that rent. But if we don't, or if the tenant doesn't pay and we have to go through an eviction process, then you're covered for up to four months of rent that we will pay you while we're trying to both get that tenant removed from the property, get them evicted, and also to find a replacement tenant. 

The average eviction process usually takes about six weeks, and you've got four months of protection under the program. So, there's lots of time built in there. Now theoretically, you could have a very unusual case, with lots of unusual legal motions, and bankruptcies, and all that kind of stuff. Theoretically, it is possible that an eviction could take longer than four months. But we've never seen one go that long, so it's very rare. In the vast majority of cases, you'll have more than enough protection with the four months that the program provides you.

That's how the program works. So, who is this a good idea to, which one of you would probably be best to sign up for this? And who doesn't need it? Because I'll just be honest. A lot of you don't need the program, doesn't make a whole lot of sense for you. I'm happy to sign you up, and if that's what you want to do, then we're happy to do that. But for a whole lot of you, you don't need the program. So we'll just be honest about that up front. But there are some people who really do benefit from this. It's really two groups of people that we really recommend buy in to this optional program. 

The first group would be people who are just very risk averse. If you're the kind of person who doesn't do very well investing in the stock market, if you buy into a stock and you're constantly worried about what it's doing that day, you're always checking your stock quotes, wanting to see whether it's gone up or down, and it gives you a lot of anxiety, then you're the kind of person who's probably, just has that personality type where it would be very difficult if a tenant didn't pay the rent. It would probably preoccupy your thoughts, you might lose sleep. For those kind of people, then it's a good program to buy into. And that's probably about half the people.

Most people are divided into two different groups. Either they're very risk averse, or they're not really bothered by that kind of risk it all. And it's about evenly split. So, about half the people would really have difficulty if their tenant wasn't paying. It would really bother them. So if you're in that group, then it might make sense for you to sign up for the program, just to give you that peace of mind so you just don't have to worry about whether the tenant's gonna pay the rent or not.

On the other hand, if you're someone like me, if you're somebody who doesn't worry about your stock investments, you put that money in there, and then you could just let it sit there for 40 years with never checking the quotes and it just wouldn't bother you, that kind of risk just doesn't really interfere with your daily life, then it's probably not the kind of program you would need. So, don't waste your money, is basically, what I would say.

Now, there is another group of people that really benefit from this kind of program, and that would be the owners who don't really have the money set aside if the tenant didn't pay. A lot of these are the same people that would fit into the first category, because it's an issue of, it would give them anxiety if the tenant wasn't paying. So it's usually the same group of people. But some people are very risk tolerant, but they just don't have the money set aside if the tenant didn't pay the rent. If that's the case for you, usually, this is people who are accidental landlords, as we say, people who didn't intentionally buy investment property, but rather, who moved out of town for a military or a job transfer, and just happened to become a landlord.

A lot of those people just don't have the cash reserves set aside, because they didn't do this intentionally. They didn't intend to be a landlord, it just kind of happened. So they didn't have that money set aside in a savings account in case these sorts of things came up. So if a tenant didn't pay the rent for three months while an eviction process was going through, they would be in a difficult situation. They could be having to put expenses on credit cards, or take out a loan, and it would be a difficult situation for them. So, if that applies to you, then this would probably be a good program for you because it provides that guarantee that that rent is going to be there even if the tenant doesn't pay it.

If you fall into either of those two categories, we definitely recommend the program for you. It's really easy to sign up. We have a special website set up just for it. If you go to rentprotection.gtlrealestate.com, then there's a form there you can fill out. It's a real simple form. And that'll submit your information to us with a request to join the program. And then we just send you out a simple one-page contract. You sign that, and that gets you enrolled in the program. And we just start automatically deducting the monthly fee from your rent income. If you want to pay it yearly, you can let us know that, also, on that form that you fill out, and then we'll do it with the yearly amount. And that gives you a bit of a discount, there, if you pay for the year up front.

So, it's real simple, again, rentprotection.gtlrealestate.com. And that can get you signed up. If you have any questions about the program, you can send us an email at support@gtlrealestate.com. We'll be happy to answer those questions for you, and get you enrolled in the program if that's what you'd like to do. Thanks.

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.

Thanks. 

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.


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