The Official AppFolio Blog

We’re on the road in May, so come out and meet with us at one of our meetups this month:

• Denver, CO (May 17)
• Arlington, TX (May 21)
• Hackensack, NJ (May 21)

Join us for a fun, casual, and complimentary lunch. At our meetups, we’ll cover AppFolio best practices, and you’ll also be able to network with your property management peers. We’d love to see you there.

Here are some other exciting trade shows and conferences coming up in May, as well, that you might want to check out:

NARPM Central Regional Conference
The National Association of Residential Property Managers will be holding their Central Regional Conference on May 23-24 at the Hilton Chicago in Chicago, IL. There will be opportunities for networking, education, workshops, and guest speakers. The conference will feature courses in Risk Management, Habitability Standards and Maintenance, and Ethics. There will also be a session on the Leadership Tool Box and a Vendor Reception. More information.

GreenPearl’s Multifamily Events
Over 400 multifamily investors, owners, developers, financiers, and other industry leaders will be in attendance at the Marcus and Millichap Multifamily Forum on May 31^st at the Kellogg Conference Center in Washington, D.C. The forum will be focusing on the growing development of multifamily properties in the Mid-Atlantic region. There will be special emphasis on trends in rents and operations, government effects on the real estate market as well as discussions on value-add redevelopment and other high-yield investment opportunities. Former Washington D.C. mayor Tony Williams, now the Chief Executive Officer of Federal City Council, will be the keynote speaker. More information.

For a complete list of upcoming events, check out our Events Calendar.

You’re faced with a vacant unit and someone has responded to your website or online ad. You’re anxious to close a deal.

Not so fast.

As tempting as it is to quickly sign up this prospective renter, you shouldn’t shortcut your due diligence process. Spend the time now to determine if this person is right for your unit, rather than dealing with potentially more serious problems down the road.

To start, here are five questions you should ask first of the prospective tenant:

1. Why are you moving?
   Legitimate reasons include needing more room or changing jobs. Answers like being evicted or inability to get along with a landlord or neighbors obviously raises concerns. Request references from a former landlord. Their current landlord may not be as forthcoming since they may be more interested in having the tenant leave. A former landlord will be more open to discussing their behavior and the reasons for leaving their unit.
2. What is your employment status?
   You want to know their monthly income to ensure they can afford your unit. A good rule of thumb is that income should be 2.5 to 3 times your rent. Ask them for an employer reference to provide documentation from their employer to verify their salary and job stability.
3. How is your credit?
   You need them to agree in writing to a credit and background check. This will help you determine their overall debt situation and their payment history. If they fail to agree to those requests, you should eliminate them from consideration. You should also ask if they are prepared to pay the security deposit and first month’s rent up front.
4. Who will be living in the apartment?
   You shouldn’t allow more than two people per bedroom. Obviously the fewer people, the less wear and tear and less chance of possible disruptive behavior that could affect your other tenants. If you have a no pet policy, you should clarify that at this point.
5. Do you have any questions?
   Now is a good time to allow your prospective tenant the chance to ask questions about the unit, the neighborhood or any other concerns they might have. Your goal is to acquire a long-term tenant, so if there is something that could stand in the way, it’s best to address it now.

Tenant screening services, which are integrated with web-based property management software packages like those offered by AppFolio, can help you find the right tenant. Conducting a thorough investigation can be time consuming, but if you end up with the right tenant, the time will have been well spent.

With our co-hosts Grace Hill and IREM, we hosted a informative webinar titled “Secrets of Successful Property Management Companies” featuring David Meit, President and CEO of Oculus Realty, LLC.

David is a fantastic presenter and this webinar was packed with several tips and ideas of ways you can improve the overall success of your property management business. David believes that reputation and experience is what it takes to be a successful company and you need to live and breathe the firm you are working for.

In an audience poll, we found out that 40% of our audience is not currently involved in local trades associations! One or many takeaways from this webinar was how important relationship building is and how essential it is to network inside and outside of your industry.

Below is the recorded version of the webinar and the presentation slides that David agreed to share with participants so they had access to all of the great content.

Don’t miss out on our next complimentary webinar, Multifamily Trends & Predictions from Axiometrics. Click here to register.

Video

Slides

Q&A

Any suggestions or guidance on finding a PR firm that is affordable?
It’s important to network and network outside of your industry. Find out were the marketing people are going and show up and you’ll meet all of the PR people – and start building those relationships.

In your presentation you mentioned providing iPhones and iPads to your staff, can you explain how you approach that?
Everybody on our Managements staff has iPhones in order to easily communicate. All of the service requests are also delivered to them via their phone and that’s an important tool that helps us always know what’s going on. Our property managers have iPads and one of the reasons we went with AppFolio is because we were looking for Property Management software that we could run on our iPads – we can be in a residents apartment, look up there account, run a report, send a email. Do all the things via mobile because if our managers are in our offices we aren’t doing our job.

Energy efficiency and going green continue to be focal points of property owners. While there are clearly environmental benefits to more efficient use of natural resources, there are also significant dollar savings you can realize by improving the energy efficiency of your properties.

A good first step is to have an energy audit performed by a trained professional. The cost of such an audit can usually be easily recouped by implementing a few of the recommendations it yields.

Weatherization
A common recommendation suggests a simple weatherproofing plan. One Department of Energy study estimated the average cost of such work to be $2,500. The savings from such projects were 2.2 times what was spent on weatherization.

Added Insulation
A more extensive project involves adding insulation. Energy Saving Trust (EST) estimates that one third of a home’s heat can escape through non-insulated exterior walls. In a wood frame wall, loose fill and foam is normally blown into the cavities through holes that have been drilled in the exterior walls. Filling the cavity prevents heat loss and can dramatically reduce heating and cooling costs.

Window Replacement
It’s estimated that another third of a home’s total energy is lost through windows and doors. Single pane windows are least efficient, but installing double or triple pain windows increases the insulation factor significantly.

Heating And Cooling Equipment Upgrades
Older heating and cooling units can result in serious energy loss. While newer equipment has energy efficiency ratings in the high 90 percentile, older units operate in the 30-40% range. While replacing the units can be expensive, the return on investment can be relatively quick considering today’s cost of energy. There are also significant tax credits that are available to help reduce the cost of installation.

Go Paperless
This is often overlooked, but reducing your reliance on paper in managing your business is not only good for the environment but it can also significantly lower your operating costs.

By using the latest in property management software like that offered by AppFolio, you can eliminate the cost of expensive ink cartridges, pricey
bank checks, postage and stationery paper. The use of web-based technology also allows property managers to greatly increase their business productivity. In a recent survey conducted by National Association of Residential Property Managers (NARPM) and AppFolio, 48% of respondents said they use web-based property management software. Fifty percent of property managers accept online rent payments and 41% report using an owners’ portal to communicate with owners and post statements and documentation, both of which can save on the cost of paper.

Whether you implement large or small projects, there are dollars to be saved through energy efficiency initiatives.

According to the latest Bureau of Labor and Statistics Report, the rent index is rising at an annualized rate of 3.6%. Is it time to raise your rents?

Probably. But generating increased rental income without suffering significant tenant loss can be a tough balancing act. It doesn’t have to be if you follow these common sense ABC’s.

Assess
Step one is to do your homework on two fronts: the current rental market in your area and the value of your specific tenants. Ask these questions as you develop your plan.

• Market – How do your current rates compare to other similar properties? If you have generally higher rates already, do the amenities you provide justify the difference? What is the demand for rental units? What are the current vacancy rates? What are you personally seeing for requests for rental units? Should you increase rates only on units more in demand than others (one bedroom vs. two bedroom, for example)?
• Tenants  – When was the last time you raised rents? Which of your tenants are most valuable? Are you willing to risk losing them? Would you consider excluding these high-value tenants from the increase to ensure that you keep them?

Back Up
Once you’ve announced your increase, be prepared to address negative feedback with legitimate justification for your action.

Understandable reasons include increased property taxes and fees, higher utility costs, and an increase in janitorial, repair and maintenance costs. You might also be planning capital improvement projects for the property that will enhance your tenants’ living spaces.

Also note the length of time since the last increase, especially if you haven’t raised rents for an extended period.

Communicate
This is the most important component of your plan. No tenant is happy with a rent increase, but you can reduce the potential conflict with clear, professional communication.

Make sure you adhere to the specified advance notice requirements in your leases. Announce the increase in a typed notice on company letterhead using concise, understandable language. Consider including some of the backup justification to address complaints before they occur.

Finally, no one likes surprises. Plan ahead for your next increase by building it into your leases. You can tie increases to a generally accepted measurement like the consumer price index to make them more predictable. This gives your tenants significant notice and allows them to budget for the increase well in advance.

Raising rents can be stressful both for you and your tenants. Following a structured process will allow you to get through it successfully.

We hosted a fantastic webinar today with Grace Hill, featuring Nadeen Green, Senior Counsel from For Rent Media Solutions and co-presenter, Doug Chasick, “The Apartment Doctor.” The webinar was so popular that we reached our maximum attendance!

Nadeen and Doug covered many great topics on the evolving and expanding issues related to Fair Housing. Executives and managers learned what to look for as they ensure compliance across their organization.

Here’s the recorded webinar and the presentation slides so that you can reference this great content at your convenience.

Click here to register for our next webinar, Secrets Of Successful Property Management Companies, featuring industry expert David Meit.

Video

Slides

Q&A
Could it be a violation of the federal fair housing laws to have a community that will only rent to individuals 21 and over?
Some states protect “age” and depending on how they define that – old, young, any age – there it could be a problem. Because of the familial status protection, those 21 and over folks would have to be accepted even if they have children in all states.

What happens if we have a current resident whom is hoarding. Can they be asked to leave because of this?
No, a resident cannot be asked to leave because of hoarding, no more than a resident could be asked to leave because they are hearing impaired. If the condition of the premises becomes a risk to the resident or neighbors, then there is a duty on the part of the landlord to engage in an interactive dialogue with the hoarder and institute a plan for remedial activity. Note that this dialogue and plan execution could take days if not weeks or even months.

Are there requirements that must be considered by the local ordinance or codes when considering exotic type animals?
If it is against the law/code to have certain animals, then it is not reasonable to require the landlord to accept such. The person with an exotic service animal would have to see if a waiver is possible from the authorities and if that does happen, then the landlord would likely need to accept such.

If a resident informs you they have MCS (Mulitple Chemical Sensitivity), do you take it at face value? Do you have a right to ask for documentation?
Since they have disclosed the nature of the disability (which an applicant/prospect/resident is never required to do), and since it is not a visible disability, confirming that should be reasonable.

Is there a list of illnesses that are considered disabilities under Fair housing?
This is the definition from the HUD.gov website:
“Federal laws define a person with a disability as “Any person who has a physical or mental impairment that substantially limits one or more major life activities; has a record of such impairment; or is regarded as having such an impairment.”

In general, a physical or mental impairment includes hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex, and mental retardation that substantially limits one or more major life activities. Major life activities include walking, talking, hearing, seeing, breathing, learning, performing manual tasks, and caring for oneself.”

The environmental benefits to “going green” are well known. For rental property owners and managers there are also significant costs savings to be realized, as well. Here are some areas in which you might consider making green investments and saving money.

Electricity Savings

• Consider tinting windows and planting shade trees. Trees on the east and west facing surfaces of your buildings will help reduce indoor temperatures in the summer. In more northern areas, the leaves will fall in the winter allowing the sun to help warm the buildings’ interiors. In addition, there are now auto-tinting windows that act like variable shading sunglasses that adjust with the sun. Some manufacturers estimate that this can save up to 40% in energy costs.
• Energy efficient appliances. According to the Natural Resources Defense Council, energy efficiency standards in appliances have saved about $2,000 per household while cutting electricity use 5% and reducing pollution levels by over 2%. The NRDC projects that to double over the next 20 years. This type of investment doesn’t have to be undertaken all at once. As older appliances wear out, simply replace them with more energy efficient models.
• Exterior lighting. A smart investment that will pay off almost immediately is to replace your exterior lighting with more energy efficient Compact Fluorescent light bulbs (CFL). It’s been estimated that CFLs use at least two-thirds less energy than standard incandescent bulbs for the same amount of light. They also can last up to 10 times longer, which can quickly offset the higher purchase price.

Recycling/Waste Removal Savings
Investing in a convenient, well-lit recycling center that makes recycling easy for your tenants provides two benefits. First, it makes your property more attractive to the environmentally conscious tenant. Second, many waste management companies will offer reduced rates to clients who provide recyclables pre-sorted.

Water Conservation

• Weather-based lawn watering systems. These systems can sense when it has rained and will automatically regulate how much water your lawns require to stay green. Converting from a standard watering cycling system can result in nearly 20% savings. Many local water agencies offer rebates to purchase such systems.
• Low-flow showerheads. The key metric here is “gallons per minute” (GPM). It’s estimated that replacing a standard 2.5 gpm shower head with a low-flow 1.5 gpm will result in significant water and cost savings.

Paperless Management System
Integrated property management software is another important investment you should make. Using such software eliminates the cost of paper and ink resulting in considerable savings in time, money and energy. This investment has the added benefits of offering your tenants the convenience of online payment and communication while lowering your administrative costs.

Making investments to “go green” can help you both in attracting new tenants who care about the environment while at the same time reducing your overall costs.

Stories abound of how neighbors who barely knew each other bonded after living through a crisis like Hurricane Sandy, the NYC blackout in 1965 or New England’s Blizzard of ’78.

No doubt you have tenants in your buildings who lack significant relationships with other people in your complex. You don’t have to wait for Mother Nature to provide a unifying event to generate a sense of community among your tenants. Through pervasive social media outlets, you can help bring people together now.

There are several reasons why such community building is important, including:

• Residents who make friends will become more attached and are more likely to continue to rent with you.
• By interacting with your tenants, you can stay on top of what is happening at your property. You will hear about and can deal with issues before they get out of control.
• You can track your reputation and learn firsthand how your tenants feel about the property.
• You become more relevant to today’s “wired” renter.

Much of your property management marketing focuses on getting you in front of prospective customers looking to lease your units. By setting up an online community, you can place added concentration on keeping your existing tenants, as well, by helping them form bonds that will encourage them to stay with you.

Here are a few tips to help you get started.

Expand your online presence. You likely already have a website to market your vacancies and are using property management software to help your tenants pay their rent and interact with you online. Now it’s time for the next step. As a start, you can set up Facebook and Pinterest pages and establish a Twitter account.

According to a Google 2012 survey, 51% of people that participate in social networks are between the ages of 25-44, a prime renter demographic. More than 60% of those who use these sites are women. CNBC reports that more and more, women are driving the rental market, as well. “Women are getting married later, having kids later and out of wedlock, all prompting them to seek the convenience of large, full-service rental apartment buildings, “ reports CNBC’s Diana Olick.

Stay interactive. Once you’ve set up your community, encourage tenants to join and participate. There are many ways to keep people engaged, including:

• Posting pictures of happenings at your complex and in the neighborhood.
• Making announcements of upcoming community events.
• Posting notices of upcoming maintenance schedules, water or power shutoffs.
• Seeking feedback from tenants on the complex and any questions they may have.
• Encouraging personal updates by tenants.

Adding a sense of community through online networks can enhance the day-to-day living experience of your tenants. In the long run, that will also benefit you.

Leonard P. Baron, MBA, is a long time residential real estate owner and provides commercial real estate consulting at LPB Services. His insights have been referenced in respectable media organizations, such as USA Today, the Wall Street Journal, and MSNBC. Leonard is a graduate of the Marshall School of Business MBA program at the University of Southern California. His interview below provides invaluable advice to potential property owners.

What sparked your interest in real estate?
I’ve always been involved in real estate. From my parents being real estate agents and part time investors, to taking on real estate audits at Deloitte & Touche and Freddie Mac, to working for developers and homebuilders, to now consulting to real estate owners. I really enjoy it, and I love kicking the tires of a good piece of dirt.

What is your number one piece of advice to a new property manager?
Educate yourself fully on the process, work for other property managers first, use technology to make your life easier, and always treat the tenants with respect.

How and when should a property manager make the decision to buy another piece of property?
An investor should buy properties that are low risk, meaning, properties that are in good shape. Property managers and potential property owners should pencil out their real estate deal to make sure it is a fair deal. They should also make sure to do all the other due diligence needed to buy a nice, safe piece of property.

What are the biggest challenges facing property owners in 2013?
2013 is no different from any other year in the history of real estate ownership. Real estate ownership is hard work, it’s time consuming, and there are real and present risks.  But it can be a great long-term wealth building tool, if you make smart purchase decisions. Those things apply to every property owners and every piece of property someone owns, and those items will never change.

How do you see the market changing in 2014?
I don’t predict the future, but hopefully on the long road to a value recovery.

In addition to real estate, what are your other interests?
Running, airplanes, teaching, WWII, enjoying life

What is your last piece of advice?
Real estate if the largest, most expensive, and riskiest purchase most of us will ever make. Experienced buyers do the hard work to protect themselves, and you should too.