http://www.dsnews.com/articles/homeownership-and-vacancy-rates-drop-2012-01-31

Management Advisory Services

That’s where a team of specialized facilities management specialists from the Real Estate & Construction field divisions come in as PM’s (Project Managers) and ORM’s (Owner’s Representatives). It is imperative that an advisor has had their own “boots on the ground” and understand FM (Facilities Management) from all perspectives. This knowledge includes the creation of a system of integrated reporting and process management to efficiently and cost-effectively manage real estate assets from one centralized location. The advisor that understands the management side of the day-to-day operations (including owner, corporate, site, vendor perspectives), as well as the process of implementing more efficient systems, is successfully able to act as a liaison to alleviate an organization’s unnecessary costs, time and labor.

Important to attain advisory assistance in:

•  Owner’s Representation
• Project Management
• Asset/Property/Facilities Management
• Capital Asset Programs & Scheduling
• Vendor Contracts & Review
• Property Inspections
• Productivity & Performance Review/Measurements
• Training/Vetting Key Staff
• Budgets & Financial Analysis
• Software Implentation & Reporting Customization

Why would vetting, bidding and attaining national vendor contracts be beneficial to an organization? Simply stated, many of the same repairs across a region for a multitude of locations can be negotiated based on bidding from several vendors. This important process can offer reduced expenses for a larger volume of locations, with a standardized repair cost.

Why would software implementation make a difference in how we manage our organization’s work orders since we don’t own the assets? When realizing the number of steps and human intervention required when a repair is needed at a location, using a work order software program takes unnecessary human contact out and alleviates extra labor, time and delay in completing repairs. Not to mention costs incurred that may be the landord’s responsibility.

Why is it important for Quality Control procedures to be implemented for basic repairs to some of our locations? In many cases, the repair was not completed properly, which can lead to future repair costs that could have been alleviated by a knowledgeable inspection at completion of the initial work order. And for many of our clients a national service contract with negotiated, standarized rates cover a multitude of costs making budgeting and forecasting more accurate and easily applied.

When your organization is overwhelmed with the daily tasks for basic work order and maintenance of a high volume of assets it is challenging and almost impossible to find the time or the clear overview to create better processes and procedures to alleviate costs and labor and reducing the annual budget. That is where a consulting team is key.

MONEY Magazine) — Most of the news lately about real estate has been dismal: Home prices are swooning, foreclosures ballooning.

There is, however, one bright spot: the rental market, where demand is up and rents are rising. That’s partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.

As with many investments, the best time to get in is when most others are sitting on the sidelines. To figure out whether you can benefit by investing in rental property, here’s what you need to know.

THE CASE FOR BUYING NOW

Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more. Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010, to $1,320 a month.

You’ll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors.

Send The Help Desk your real estate questions.

If you can hang on that long, you’ve got a good shot at solid gains, especially if you’re financing the home purchase. “Whereas leverage is dangerous when buying stocks, it can be a good long-term strategy with real estate,” notes real estate investor and Columbia University adjunct finance professor Marshall Sonenshine.

The big catch: “Can you afford to hold the property that long and not need the equity for your kid’s college fund?” says Sonenshine. Or whatever other pressing need might crop up.

You’ll also face some tough financing rules. Most banks now require a down payment of at least 20% to 25% and evidence you have enough cash to cover six months’ worth of mortgage, tax, and insurance payments.

HOW TO FIND A GOOD DEAL

Investment real estate is like produce: It’s best bought locally. “Buy something you can get to in 10 minutes,” says Seattle real estate investor Bill Snyder.

Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters.

Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants.

10 Best cities to buy a rental property

And while prices on multifamily dwellings haven’t dropped as much as they have on single-family homes, don’t ignore plexes: Intake from a few rents instead of just one will boost your cash flow; a single vacancy won’t hurt as much; and you could benefit from economies of scale for things like appliances and painting. But stick to buildings with four units or fewer to avoid stricter financing requirements, such as a bigger down payment and higher mortgage rates.

Once you’ve identified candidates, crunch the numbers. The goal: to make sure your rental income will at least cover your loan payments, plus a 20% cushion to handle repairs, vacancies, and property management.

To figure out what you’ll garner in rent, ask sellers for recent leases, says Snyder, and double-check their numbers by perusing sites like Rentometer and Craigslist for similar rentals in the neighborhood.

Assume your mortgage rate will be at least a half-point higher than rates on owner-occupied properties. Factor in insurance and property taxes, and bank on a 5% vacancy rate. Otherwise, “one empty month can kill you,” says Ellie Berlin, a broker with Houlihan Lawrence in Larchmont, N.Y.

KNOW WHAT YOU’RE IN FOR

Brush up on your people skills: Owning rentals also means responding to tenant complaints, like the 2 a.m. phone call about a broken toilet. Want to palm off the grunt work? You can hire a handyman (around $45 an hour) or a management company (8% to 10% of monthly income plus a half-month’s rent for filling vacancies), but the luxury will eat into cash flow.

To find your own tenants, creative ads on Craigslist are your best bet. Run credit and reference checks (National Tenant Network, at ntnonline.com, can help). And invest in small touches to make your place stand out, such as cool lighting fixtures or antique door hardware. Those will pay off when it’s time to sell too.  

http://money.cnn.com/2011/08/30/real_estate/rental_property_investing.moneymag/index.htm?iid=SF_BN_River

#1 reason – Location

#2 reason – Community Appearance

#3 reason – Apartment Features

#4 reason -Rental Rate

#5 reason – Community Management

Reasons #2, #4 & #5 are easily remedied with International Luxury’s Property Management Consulting to analyze and strategically offer plans to immediately make changes, thereby, increasing resident renewal percentages, and reducing unnecessary turnover costs  and vacancy losses.

Intent Declines According to Kingsley Associates Q2 2011 Survey

Kingsley Associates Releases 2nd Quarter Apartment Industry Trends

SAN FRANCISCO, Aug 30, 2011 (BUSINESS WIRE) — Apartment residents’ likelihood of lease renewal continued a downward trend for the four quarters ending on June 30, 2011, according to Kingsley Associates’ multifamily resident survey results. During this period, 61.4 percent of residents surveyed indicated they “probably” or “definitely” would renew their lease. After peaking at 65.0 percent in the middle of 2010, this figure has declined steadily.

The trend suggests that residents are beginning to react to the revenue optimizing practices associated with the past year’s low apartment vacancy rates. “We’ve heard from our clients that they are managing for value, not just retention,” comments John Falco, principal, Kingsley Associates’ Atlanta office. “They are monitoring resident feedback extremely closely, but at the same time, they’re capitalizing on a favorable market.”

New York and Chicago lead major markets in resident renewal intent. In New York, 78.9 percent of surveyed renters indicated intent to renew, many of them influenced by the city’s famous rent control policies. Next in line was Chicago, where 65.8 percent of residents plan to renew. Also in Chicago, 85.8 percent of residents called their overall satisfaction level either “good” or “excellent.” This compares to 76.0 percent nationally.

Among residents likely to renew, location was cited as a factor by 73.4 percent, followed by community appearance at 45.2 percent and apartment features/finishes at 44.5 percent. And, while rental rate was the most frequently cited factor by residents unlikely to renew (43.0 percent), community management (24.9 percent) was as important as apartment features/finishes (24.3 percent). These and other findings are available in Kingsley Associates’ Q2 2011 Multifamily Trends.

Kingsley Associates surveys in excess of 1 million apartment units annually on behalf of its clients. The findings outlined above are based on survey responses received between July 1, 2010 and June 30, 2011.

SOURCE: Kingsley Associates, Business Wire  http://www.marketwatch.com/story/resident-renewal-intent-declines-according-to-kingsley-associates-q2-2011-survey-2011-08-30

The items that are imperative in property management are:

1)  Property Management Software – choosing not only the right software, but proper training and integration is key.  Many landlords assume that if they own a smaller portfolio of properties they may not require the same program as a larger apartment community.  But in most cases, that is not always the case.  For example, if you own 35 separate properties versus 350 units the need for software processing for rental payments, tenant work order submission, individual property income and expense tracking, lease renewals/expirations are all of the same level of importance whether 35 of them or 350 of them.  IF these items are not properly tracked, it can lead to losses.  But the main challenge is the labor portion of management will increase if these items are not automated through proper software.

2)  Property Management Expertise - a team who understands the steps and challenges of property management. Most realtors are not versed in manangement.  Their main priority and specializations are normally in sales.  Not only are they normally compensated based on commission, but they are not set up with infrastructure to maintain the accounts.  Because the management is a time when profit levels can decrease without warning and at a rapid pace, many landlords do not realize how imperative this period is and lose sight of what they need to do to maintain their investment.

3)  Properly written Contracts, Leases, Notices – many landlords do not use the proper paperwork to protect themselves from poorly drafted lease agreements.  Most state laws are geared to protect the renter and if a lease agreement does not discuss, in detail, the landlord’s rules, regulations, policies, they may not be protected from a renter not abiding by them.

4)  Tenant Criteria & Screening Policy – It is beyond imperative that a landlord create a list of criteria of what they require in a quality renter.  This will offer higher probability that the renter will pay on time and will also take good care of the property.  The screening process is also a step that many landlords skip.  During this time they usually allow the real estate person who is acquiring the renter to approve the prospect.  This is not a good policy.  The real estate person is being compensated based on the renter taking possession, so they do not have a stake in whether the renter is qualified.  The screening process must include credit history, background and criminal check nationally, current employment verification with enough monthly income to cover the rent (min 3x income of one month’s rent) and past rental or mortgage history.  During the current economic period this is not as simple as just looking at a credit score.  It is important to spend the time to look at the whole picture. 

For example, a prospective renter may have lost a job and been out of work, which affected their credit scores.  So a landlord should look closely at the time line of the credit and if scores were satisfactory before the job lose and again at the current time when renter acquired a new job that gives better idea of their ability to be a quality renter.  If they show a stable living currently, this potential renter should at least be considered.

5)  Resident retention program – Many landlords do not even know what this means.  If you have a quality renter it is in the landlord’s best interest to have them continue on for additional years as their lease expires.  In order to insure their quality renters will choose to renew over and over a landlord must offer good “customer service.”  Customer service includes responding in a practical manner to tenant repair requests, questions, etc.  Communication is the key.  A landlord will incur unnecessary costs if they have to turnover a rental to a new renter every year.  These expenses include turnkey cleaning, painting, carpet cleaning, and not to mention, loss of rent during vacancy between rentals and realtor commissions.

Whether you own 1 or 4,000 rentals it is imperative to realize why a property management team with expertise and the infrastructure to maintain your investment and your renter to alleviate losses and unnecessary costs.  Sometimes in thinking you can save the property management costs to allow a professional to do what they are trained to do, in the end, is more costly.