One of the biggest challenges I see with investment property owners is making sure they have enough cash reserves on hand for their building. Buildings age and systems wear out and need to be replaced. A new roof can suddenly set you back $30,000 - do you have that in your cash reserve fund available when you need it? I suggest you set aside at least 3-5% of your gross revenues as a Capital Reserve Fund. Most bank underwriters will require at least 2 or 3% allocation toward Capital Reserves when reviewing the Income and Expenses of an Apartment Building. One of the Apartment Portfolios we manage has a CMBS (Commercial Mortgage Backed Security) mortgage on it that requires $1,500/month to be put into an escrow account (that they manage) for Capital Reserves. We can only draw it out AFTER we prove that the capital improvements have been done (they send out an inspector to verify). Recently, the elevator went out at one of the properties we manage. Suddenly the owner was looking at needing a new elevator for $50,000 or at least spend $17,000 to get it working again, but it will still probably have some problems. The building inspectors don't like it when things in a building are not functioning as intended (nor do your tenants). Please make sure you have enough cash reserves available for your building. I would be happy to discuss with you how to develop a capital reserve plan for your property so you can plan the cash reserve needs to ensure long term success with your investment.
Blog
20 Tips to Managing Your Property The Right Way
1. Screen Tenants. The worse thing that happens to a landlord is tenants who don't pay their rent and destroy your property while they are there.
2. Advertise in Craigslist and other local publications. You want to keep the phone ringing when you have a vacancy.
3. Be responsive when you get an inquiry for the apartment. Call them back right away.
4. Ask a few screening questions on the phone such as: a) why are you moving? b) how is your credit? c) explain your income requirements and then ask, do you make three times the rent each month as your gross income?
5. If you know a prospective tenant will not qualify, don't waste your time and theirs showing them the apartment. Just politely explain that since they do not meet the income or credit requirements, they would mostly likely not be approved.
6. Show the apartment during the day (especially if the power is not on) for maximum light. Open the window blinds (unless the view is not pretty) to get maximum light.
7. Maintain Your Property in Good Condition. Keeping the property up will attract and keep great tenants who care about your property as if it was their own (Pride of Ownership).
8. Aggressively Collect Your Rent. Post a 3-day notice to Pay Rent or Quit right after the grace period allowed under your lease. If not paid within those three days (or an agreed upon payment arrangement is made with your tenant in writing), then begin the eviction process. You can always stop the eviction process if the tenant comes up with all the money and shows an ability to continue paying the rent going forward.
9. Hold yourself and your Tenants accountable to the lease agreement. Since are you providing clean and safe housing to your tenant and maintaining it in proper order per your lease agreement, you should expect that your tenant also holds up their end of the contract. If they violate other areas of the agreement notify them in writing that they have violated their lease which could be grounds for eviction. If that doesn't solve the problem, then issue a 72 hour notice to cure violation or quit.
10. Treat your Tenants Well. Your tenants should be treated the way you want to be treated. Be respectful of their home and privacy - always post a 24 hour notice before showing up at their door (unless it is an emergency). They are your customers paying your salary. Treat them as your best customer (even if they are screaming at you).
11. Meet the Building Inspector at the Property - if you can personally be there, or have the right person at your Management Company represent you to make a good impression on the building inspector. Make sure you understand anything they are asking you to do and get it done on time prior to their next inspection.
12. Walk through every unit at least once every 6 months - check Smoke and Carbon Monoxide detectors, look for leaks, or any unsanitary living conditions.
13. Fix everything when it breaks. The longer you wait, the worse it will get.
14. Upgrade as much as you can. By upgrading your property, you may be surprised at the much higher rents you can demand. It's good for you, good for your property value, good for the neighborhood and good for your tenants.
15. Go Green. Aways look for ways you can save energy consumption which will also save you money. There are many government incentives that make these upgrades feasible and even profitable to you, the owner. Putting in Energy Efficient Windows, Lighting, HVAC Systems can put really big dollars back in your pocket every month while also reducing your carbon footprint. Care about the planet and its resources that you and your buildings consume.
16. Reconcile your Bank Statement every month. Stay on top of your accounting (or hire an expert Property Management Company) to ensure that all the rent revenue is properly tracked by tenant and expenses are all properly categorized. If you can use a Property Management software such as Yardi or Rent Manager, you will be ahead of the game.
17. Get Great Vendors and Pay them on a timely basis. Your contractors, suppliers, handymen, etc rely on getting paid from you so they can cover their expenses and feed their families. Treat them right so they will be sure to deliver superior service to you. If they don't provide superior service, find someone else who will.
18. Take photos of the apartment before someone moves in AND after they move out. Save the photos in your property management software (Yardi allows you to attach photos to each tenant's file), or on your computer and back up your computer! Make sure you go over the Inventory Check list with the new tenant when they move in. They need to mark down anything they see wrong with the apartment when they move in so they will not get charged for it when they move out.
19. Process Security Deposits timely - Know your local laws regarding walking through the apartment with a tenant just prior to them moving out. Many areas require you to let the tenant know what damage you plan to hold them responsible for and give them an opportunity to fix the damage properly using your approved vendors (or reputable licensed contractors).
20. Have a short term and long term plan for your property and check how you are doing at least once a year. Make sure your Property Management company knows what your long term strategy is for the property so they can manage it appropriately. You will make different decisions about which fixture to buy or which improvement to make depending on if you plan to keep the property long term or sell it within five years. Make sure rent increases are done at least annually or as often allowed by law so that you keep the rents at market rates (or as close to market rates as possible if you are in a rent controlled market).
Downtown LA
I'm like a kid in a candy store when I'm in Downtown Los Angeles. I grew up in Southern California and I remember what Downtown used to be like. It was a mess. The only reason a guy like me would head down there was for traffic court… not that I ever got a speeding ticket in my life.
Now, Downtown is like my playground. I actually feel like a kid headed to recess when I'm on my way there. The amount of vision and commitment that has gone into Staples Center, LA Live, Nokia Theater, the Grand Avenue Project, Disney Hall, Grand Park… it's just beautiful.
I'm a fan of Manhattan and Downtown LA is starting to have a little of that metropolitan feel. But LA is different too. It's warm, most of the year. You can stand on one corner and be in four unique cultural influences simultaneously. In one city block you can find food from around the globe, visit galleries with unique visions, see architecture that spans generations, and discover new shops from ambitious entrepreneurs.
There are currently over seventy-five major development projects happening in Downtown right now.
The football stadium is coming. Seven new hotels are going into construction. Over 5,000 new apartments and condo's are being built. It's a crucible of creativity, a hotbed for progress,
Getting the Adaptive Reuse Ordinance passed in 1999 was the first big step in reinventing downtown. The whole "Live, Work, Play" movement kicked off and dozens of classic, undernourished buildings were converted to mixed use with a primary focus on housing.
Have you been Downtown recently and seen some of the incredible work people are doing? Like most of LA, it's beauty is on the inside, behind closed and unmarked doors.
I remember getting a tour inside Disney Hall before the doors opened to the public and feeling my heart racing, my blood pumping, because I was so excited about such a groundbreaking asset becoming a permanent part of the Downtown skyline.
I'll update this page frequently with my latest crush on Downtown LA, and with snippets of my vision for this vibrant, pulsing heart of our home.
I'd also love to hear from you. What do you love about Downtown? (No haters, please.)