Rentec Direct - Property Management Software

I have numerous friends and family in the area that I regularly have property management conversations with.  The most popular recurring topics are usually around how long X property has been vacant, or how bad X person’s last tenant was.  The bad stories are always far more fun to tell, or at least more entertaining to listen to, it seems.  It got me thinking though, I rarely have bad tenant stories to talk about, and I never have vacancies longer than a couple weeks.  As such, my fellow landlord’s stories are always far more interesting than mine.  My friends and family always ask how I get so lucky.  Somehow I’m not entirely sure luck has much, if anything, to do with it.  After speaking with fellow landlords, and some of our rental software users I’ve come to the conclusion that the following listings and policies can account for most renter and vacancy issues.

It starts with the listing.  Do your listings set expectations appropriately?  

For instance, if your listing states that you do tenant screening, this immediately weeds out most prospects who know they won’t pass a background check.  Conversely, if there is no mention of screening required everyone who cannot get approved elsewhere is going to apply for your property, only to use your time and energy to ultimately be rejected when you do the background check.

Do you charge an application fee?  Almost every state allows it and it is common practice as it pays for your screening expenses.  If you do, mention the application fee on the listing.  This will weed out all the applicants that can’t afford a small application fee.

Eliminating unqualified tenants at this step saves you the maximum amount of time and money.  Instead of showing the property to unqualified applicants, you can focus on fewer more qualified applicants.

On to the application.  Do you let your applicants cheat?

Whether you do online applications or paper applications, the application should be thorough and ask lots of pertinent questions.  The most basic of questions should include full contact information, SSN (if allowed), birth date, employer, at least 2 most recent landlords, previous rental details, emergency contacts, employment information, and common questions about criminal felonies and bankruptcies.  All this information should also be collected for any additional adults that will be in the home.  A prospective tenant not willing to fill out an application entirely is not a serious renter and grounds for disqualifying the applicant.  Also, if any answers do not match what you pull on the background reports, that is an instant red flag.

Don’t be a pushover.

Do you get phone fishers calling asking about your properties, only to ask before they’ve even seen the property if you will take a lesser amount?  The correct answer to that question any time before an application is returned and the property has been displayed, is always “NO”.  Considering a rent concessions before you’ve met the people and before they’ve seen the property tells the tenant you don’t have much confidence in the property.  This leads to “can I pay rent late again this month”, and “I was really hoping it would be OK if my 12 cousins from out of town could stay just a couple more months..”.   

If however, after you’ve met the tenants, if they have already passed your qualifications and need a concession to close the deal, that is the time to make a concession.

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Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

California has passed a bill (SB 150) now disallows HOA's from changing the rules mid-game on a landlord by restricting rentals within the HOA.  This bill took effect January 1st.

An association which previously has no restrictions on rentals, that attempts to amend the HOA to then restrict the amount or percentage of rentals is now prohibited from doing so.  Such a change in bylaws will have no impact on existing owners unless the existing owners specifically provide their authorization.  The existing owner by default will get grandfathered into the pre-restriction rules.

It however does not protect the next owner of a home in the same association.  If a home is sold, the new HOA rules related to rentals will apply to the new owner and the previous owner must disclose the fact of the restrictions.

I have mixed feeling about this.  My first impression (as a Landlord) makes me think this is great!  If I bought a property in an association as an investment property, and later the association changed the rules which prevented me from renting my investment property that could be catestrophic to my cash flow.  On the other hand, I prefer smaller government and less government interference in my affairs.  An association is a mini-government in itself, and I generally trend towards wanting decisions to be at the smallest and most local form of government possible.  In this particular topic, I think property rights might trump my preference for local government though.

Thoughts?

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Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

More tax increases for property investors. =(  If only our reps would focus on tax reducing measures rather than tax increasing measures. That would make me happy.

I wrote about Google Voice a while back and provided a detailed review of google voice right after it was released to the public.  Time really does fly, as I'm shocked to see that was 3 years ago back in 2009.  Since that time, Google Voice has become a valuable part of mine and many of our client's process.

Here's a complication of great reasons landlords and property managers are using google voice:

1. It's free!  This goes without saying, you can't get much good stuff for free these days; however, google voice continues to be an exception.  You get a free phone number, free online storage, free voicemail, free texts (sms), and free transcription.
2. Documentation.  More than ever, tenants are communicating with landlords via text message.  Most phones do not permanently store text messages, and even those that do stand to risk being lost and that documentation goes away forever.  If you use google voice for your tenant communications, those text messages are stored forever.  Read more on how documentation is a property managers best friend.
3. Privacy.  Many landlords do not want their tenants having their home phone or cell phone numbers.  With google voice, you can provide this number and re-direct it to any phone of your choosing, to ring at your choosing.  Don't want to receive calls from 9pm - 6am, no problem.
4. Multiple destinations.  With google voice you can configure roll-over so if you (or your employee) is not available at one number it tries another, which could even be another person.  This is a fully automatic, and free, way to gain the capabilities of an expensive phone system.
5. Did I mention documentation?  Having a permanent record of voicemails and text messages is critical in todays litigious environment.  Save everything, and google voice makes it really easy for voicemail and text messages.

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Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

I was pleased to read about Wisconsin proposing new rules which are actually in favor of landlords.  It's an increasing problem across the country where cities and counties are passing laws which could harm the very fabric that landlords rely upon to run their business.

Some examples of laws some localities have passed or plan to pass:

1. Prohibits or limits the landlord from obtaining or using various types of information about a tenant or prospective tenant, such as household income, occupation, court records, rental history, and credit information;
2. Limits how far back in time a prospective tenant’s credit information, conviction record, or previous housing may be considered by the landlord; or
3. Prohibits the landlord from showing a rental property to a prospective tenant, or from entering into a rental agreement for a rental property with a prospective tenant, while the current tenant is living there.

These laws proposed in Wisconsin prevents cities, towns, villages and counties within the state from passing their own local ordinances which restrict landlords in the above manners.

Obviously the local governments are attempting to protect tenants; however, it's entirely at the cost of landlords being able to run a business.  Somewhat akin to taking away the ability of a car buyer to be allowed to read reviews on the car before purchasing it.  Requiring them to purchase the car sight unseen, thereby just guessing if it's going to work well for them.

Taking away the very necessary screening tools that landlords need to rely on is a very very bad idea IMHO.  I hope these pro-landlord laws are a trend that continues and is adopted by more states.  I'm not thrilled about my city changing the rules mid-stream on me or my clients which prevent them from being able to run their business effectively.

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Nathan is a member of Rentec Direct who provides rental software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

Was just reading this this morning.  Really makes me wonder if it's a Christmas "gift" to tenants during the Christmas season, or a political maneuver of some sort.  Has anyone experienced them doing this in the past?  Is Fannie going to join in too?

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Freddie Mac announced it has ordered all evictions involving foreclosed occupied single family and 2-4 unit properties that had Freddie Mac mortgages to be suspended from December 19, 2011 to January 2, 2012.

“If the property is occupied, our foreclosure attorneys will suspend the eviction to provide families a greater measure of certainty during the holidays,” said Tracy Mooney, Senior Vice President of Servicing and REO at Freddie Mac.

The suspension will apply only to eviction lockouts related to Freddie Mac-owned REO properties and will not affect other pre- or post-foreclosure processes.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

SOURCE Freddie Mac

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Nathan is a member of Rentec Direct who provides rental software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

As you may or may not recall, depending on how close-knit you are within CPA circles, there was a significant new tax consequence and reporting requirement introduced for landlords within the Small Business Jobs Act and the healthcare reform bill passed in 2010.

This new reporting requirement was introduced to help the IRS better monitor landlord property expenses by requiring a 1099 to be filed for all independent landlords for payments during the year to any vendor or individual exceeding $600.  Examples of 1099 recipients would include: gardeners, landscapers, contractors, property managers and repair services.

Earlier this year with support from Realtors, landlords, and landlord associations such as the NARPM all contacting their representatives to object to this over-reaching reporting requirement;  both Congress and President Obama got the message and decided the filing burden was too great for smaller landlords. The requirement for rental property owners to file 1099's was repealed in May of 2011. The senate voted 87-12 to approve the repeal and it was signed shortly thereafter by Obama.

This is good news for independant landlords, your 2011 taxes just got a lot easier as you do not now have to collect tax information from your vendors, nor report it on the 1099-MISC form as proposed in the Small Business Jobs Act.

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Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

Starting a new property management venture?  There's numerous methods property managers calculate their fees, some more popular than others.  Working with thousands of property managers, I've accumulated the most popular with their upsides and downsides.  Pick your poison or maybe (if regulation allows) create your own.

#1 Flat Rate Fees - Regardless the rental amount being charged or collected, the management fee to handle the property is the same every month.

• Pro:  Easy for everyone to understand
• Pro:  Any software or manual method of accounting can do this easily
• Pro:  Easy to budget for the manager and owner
• Con: May not account for time the property manager spends on non rent related tasks
• Con: Does not automatically re-calculate when/if rent increases or decreases

#2 Percentage of Rent Charged - Depending on the property manager and area, this ranges from 4-15% and often have a minimum and maximum amount specified.  Meaning, if the monthly rent charged is $1000, the management fee is $50 - $150.  This fee may vary based on the number of properties being managed, the number of units in each property, the location and condition of the property, and most importantly, what services are included in the fee.

• Pro:  Also easy for the property manager and owner to understand
• Pro:  The charge typically occurs on the 1st, which is the same day the rent is charged
• Pro:  Generally nets the property manager the most income
• Con: Not allowed in all states, check local guidelines
• Con: Does not account for time the property manager spends on non rent related tasks
• Con: Can cost the owner funds if part or all of a tenant's amount due becomes uncollectable

#3 Percentage of Payments Received - This method may appear similar to #2 at face value; however, differs in that the charge is calculated at the time when rent is received vs when the rent is charged.  Typically this makes little difference to either the property manager or the home owner unless some tenant rent becomes uncollectable.  At the property manager's option this can also include other income such as late fee income, or tenant responsible repair income.

• Pro:  Covers all potential time expenses for the property manager, including unforseen repairs, or poor tenants
• Pro:  Can include other income such as late fees, or repairs which otherwise are not included in #1 or #2
• Con: The most complicated to understand and budget for for both parties
• Con: The fees are generated throughout the month, so it's not one nice clean fee per month.

Perhaps most important when considering your free is to know the going rate for your locale.  Don't over or underprice yourself out of the market.  Check around and see what the other property managers in your area, and surrounding areas, are charging.

There are numerous other fees involved in property management including setup fees, vacancy fees, leasing fees, advertising fees, eviction fees, etc which are not covered above but all generally are in addition to the standard monthly fee discussed here.

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Nathan is a member of Rentec Direct who provides property management software, cc & ach payment processing, and tenant screening for property managers and landlords nationwide.

I think this is a very positive step for making it practical for property managers to accept rent via all retail means, including credit cards.  Previously no discounts or preference could be made by a property manager (merchant) towards any payment method if they accepted VI/MC.  With MC and Disc offering a special interchange rate of 1.1% to property managers and AMEX/VI not, it's now perfectly legit to guide tenants through any means necessary (including discounts) to pay using the cheapest method for the merchant which might be the special MC/Disc rate or via ACH which is a small flat rate costing less than $1 per transaction.  Hopefully this opens up more competition between the credit brands too and ultimately reduces their fees which are pretty insane right now.

A very similar announcement to the one below was announced by MasterCard as well.

In October 2010, Visa announced a settlement with the U.S. Department of Justice (DOJ) and several state attorneys general to resolve antitrust investigations into Visa’s merchant acceptance rules in the United States. On July 20, 2011, the court approved the settlement and entered final judgment in the case. The final judgment is available at www.justice.gov/atr/cases/f273100/273170.pdf. We’re writing to inform you of the changes Visa has made to its rules, effective July 20, 2011, and to describe certain merchant acceptance practices that are now permitted and that may assist you in better managing your costs associated with accepting payment cards. The text of Visa’s revised rules is available at http://usa.visa.com/merchants/operations/op regulations.html.

Visa’s Operating Regulations already allowed merchants to steer customers to other forms of payment and offer discounts to customers who choose to pay with cash, check, or PIN debit. Following the settlement, U.S. Merchants may steer customers to use a particular network brand, such as Visa or MasterCard; to a type of payment card, such as a “non-reward” credit card; or to another preferred form of payment. U.S. Merchants may also encourage a customer who initially presents a Visa card to use a payment card with a different network brand, a different type of payment card, or a different form of payment. Merchants may engage in any of the following steering activities:

• Offering a customer a discount or rebate, including an immediate discount or rebate at the point of sale;
• Offering a free or discounted product;
• Offering a free or discounted or enhanced service;
• Offering the customer an incentive, encouragement or benefit;
• Expressing a preference for the use of a particular brand or type of general purpose card or a particular form of payment;
• Promoting a particular brand or type of general purpose card or a particular form or forms of payment through posted information, through the size, prominence or sequencing of payment choices, or through other communications to a customer;
• Communicating to a customer the reasonably estimated or actual costs incurred by the merchant when a customer uses a particular brand or type of general purpose card or a particular form of payment or the relative costs of using different brands or types of general purpose cards or different forms of payment; or
• Engaging in any other practices substantially equivalent to these.

Visa also revised its rules regarding the size, color, and prominence of the Visa mark displayed at the point of sale for U.S. Merchants. Under Visa’s revised rules, a U.S. Merchant is not required to display the Visa mark in a size as large as other payment marks. U.S.

 
Merchants may promote acceptance brands other than Visa through the size, prominence, or sequencing of payment choices. The rule changes enhance merchants’ ability to manage the costs associated with accepting electronic payments. However, the merchant must continue to respect a cardholder’s ultimate decision to pay with Visa: the settlement does not impact merchants’ existing obligation to accept for payment properly presented Visa cards, including rewards cards. Surcharging of Visa cards and steering among Visa cards based on the issuing bank are not permitted. Merchants must ensure that their steering practices are not performed in a confusing manner.

Acquirers are permitted to provide to their U.S. Merchants or agents information regarding the costs or fees a merchant would incur in accepting a Visa card, including BIN information and other product-identifying data. In addition, Visa’s Product Eligibility
Inquiry Service messages can help merchants electronically identify the card product type. Introduced in 2006, product identification messages give merchants accurate, real-time information at the point of sale about the type of card presented (e.g.,
a reward credit card) for all U.S. consumer and commercial card programs. The same information is also provided in every Visa authorization response message for U.S.-issued cards. Your acquirer can provide more information about electronic identification of
card products.

Acquirers are prohibited from adopting or enforcing rules, agreements, or practices with respect to U.S. Merchants’ acceptance of Visa cards that Visa would be prohibited from adopting or maintaining under the final judgment.

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Nathan is a member of Rentec Direct who provides property management software, cc & ach payment processing, and tenant screening for property managers and landlords nationwide.

What is it that seasoned landlords and property management services know about tenant screening that every property owner should?  This guide will show you how to successfully screen a tenant quickly and accurately and to form an informed decision on which prospective tenants to approve and which to decline, like the pros do.

There are two important traits a seasoned landlord looks for in a prospective tenant.  The ability to pay rent on time and the ability to care for the property.  Absent either of these traits and a tenant can cost a landlord thousands of dollars in damage and lost rent.  Follow these steps for the best chances of inheriting a tenant which complies with both of these important traits.

CREDIT: Credit reports are available to both professional property managers as well as private landlords and costs roughly $10 with the score included.  The credit report gives insight into how well the tenant pays their obligations.

• Credit Scores.  Different credit reporting agencies report scores differently, so basing a decision on a score is not always going to provide the same results across all major credit agencies.  When a FICO score is returned, scores can range from 300 – 850 with 850 being impeccable credit.   If the tenant recently lost their home to short sale or foreclosure, their score might be even lower almost entirely based upon the loss of their home and should be factored in accordingly.
• When a score is included and is near or above 650, generally  you can count on the tenant as a good payer.  It’s still a good idea to review the content of the report to make sure there are no current obligations past due.  The most important gauge as to if a tenant will pay their rent is if they are paying their current obligations such as credit cards.  If current obligations are past due, this is a great indication that the tenant is financially strapped and may not be able to afford rent either.
• Late mortgage payments.  Most property managers provide a special exception when a prospective tenant’s credit history shows late mortgage payments, or a mortgage default.  With the current economic climate and housing market there are a lot of previous homeowners either voluntarily or involuntarily losing their homes back to the bank.  Because these previous homeowners tend to be very positive and responsible renters, and provided other obligations are current, most landlords I have interviewed do not reject prospective tenants based on poor credit from the loss of a home.
• Medical bills.  Another component of a poor credit score can be related to medical bills.  An uninsured person with even a short hospital stay can attain tens to hundreds of thousands of dollars in medical bills in short order.  It’s fairly impractical for most people to pay these bills at the time of visit and as such they can often be turned into collection.   In interviewing numerous landlords, medical bills are often disregarded or lesser regarded when considering a prospective tenant’s credit worthiness.  It is however important to take into consideration the tenant will have a portion of their income going to these bills, likely from garnishment.  This reduces their income to afford rent and could impact your income to rent formula.

CRIMINAL: There are a number of criminal reports available to landlords and property managers.  One of the most popular and easy to obtain is a nationwide criminal history which cost about $9.  This report aggregates criminal data from states nationwide to provide a concise view of the criminal behavior of an applicant nationwide.  Unlike credit data, criminal data is not indexed by social security number.  Instead, criminal data is typically indexed by name and date of birth.  Even still, some jurisdictions have only logged criminal data by name only which makes determining criminal behavior a little more tricky than with credit.  Here are some tips to get the most from your criminal background reports.

• Be certain the name and date of birth (DOB) are correct when ordering your criminal report.  An applicant could accidentally or purposefully mistype their DOB on your application form which could cause a criminal report to appear clean, when it may not be.  The best way to guarantee this information is obtained correctly is to request a copy of a photo id with the application that includes dob.
• Verify address history.  Each criminal record returned will typically list the county or city of the offense.  Many screening vendors will cross-match these entries with an address history report for the applicant, to narrow the results to a manageable list; however, if your vendor provides you a complete list, it can be quite long.  To verify if a criminal record matches your applicant you can order an address history or SSN verification report that includes address history.  If a past address matches a city where the criminal offense took place, it’s a good bet the offense matches the applicant.
• When in doubt, order a more detailed report.  If the national or state-wide report you’ve run is inconclusive, you can order a county report on the applicant which in most cases will be more up to date than a broad report and may include more details to help identify the issue in better detail.

EVICTION: Perhaps the single most important factor when renting to a new tenant is if they have previously been forcefully evicted.  Eviction reports cost a landlord about $10.  There are three primary ways a tenant moves out of their rental.  1) They paid their rent on time and choose to move out voluntarily.  These tenants should not have any eviction history on record.  2) They were required to move out by their landlord (often referred to as “eviction”) for non-payment or other reasons, and did so as requested of the landlord.  This type of “eviction” will not show up on an eviction report because it is a voluntary eviction.  3) They were asked to move out by their landlord, and refused to do so leading the landlord to file for a court ordered eviction and forced removal of the tenant from the property.  This class of tenant will show eviction history on an eviction report.

The reason this eviction report is so vital when screening your next prospective tenant is because if a tenant has a tendency to be required to move out by their landlord and fails to do so without the court and sheriff forcefully removing them from the property, you as a landlord could stand to lose a lot of income catering to this type of tenant.  A court ordered eviction can take at best many weeks, and at worst many months.  All this time you cannot move in a new tenant, and are not collecting rent on the previous tenant amounting to a huge loss.

PERSONAL: The final critical step in screening a tenant is to verify the information they have submitted and interview the prospective tenant.  Much of the information provided on your application can be corroborated via the reports above and the remainder by calling the employers, past landlords, and other references.  If the information on the application does not add up or there is any evidence that the tenant provided invalid information on your application, that is an instant sign of trouble and an instant reason to decline the application.

Meeting and performing background screening on all adults that will reside in the household is an important step often forgotten.  It is normal and allowed in most states to charge a reasonable application fee which will cover your costs to run the combination of all reports above.  One final item which more landlords have said provided them an indication of how well a tenant will care for a property than anything else; look inside their car.  The interior of their vehicle is an excellent indication as to the inside of their house.

SUMMING IT UP: The reports listed above tend to be the most popular and in use by most landlords; however, there are many more reports available to landlords also.  Regardless the reports ordered, be sure to comply with all federal and state laws as well as FCRA (Fair Credit Reporting Act) guidelines.  If in doubt, most areas have local associations of landlords which are happy to help instruct in the legal aspect of screening prospective tenants.  The information above is opinions from many landlords nationwide; however, may not be effective in your particular market.  Define your own criteria and seek local legal assistance if necessary.

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Nathan is a member and user of Rentec Direct property management software.  Visit the Rentec Blog for this article and other property management resources.