Fair Housing Lawsuit in Idaho
16 Feb 2012 | No Comments | posted by jacobgrant | in Rental Owner
A fair housing court case was settled by a jury last week in Coeur d’ Alene, Idaho. The jury found that property managers had discriminated against a person with a mental health disability.
The Property Manager’s Misstep
In this story, a prospective tenant called a property manager and reported that she had a service animal to accommodate a disability. The property manager reported that she was required to pay an additional security deposit for the service animal. Fair Housing laws define that a security deposit for a service animal is illegal. People with disabilities have a right to “reasonable accommodation.” Allowing a service animal without a security deposit has been defined as a reasonable accommodation by the law. This can be a frustrating and damaging rule for property managers and owners. The difficulty is two fold. Many disabilities are not easily observable such as depression or anxiety disorders. The second difficulty includes prospective tenants taking advantage of the system. In essence, if a prospective tenant wants to have a 200 pound bull mastiff puppy in a one bedroom apartment and doesn’t want to pay for it, all he/she has to do is “get a note,” and the owner is required to expose him/herself to the risk of the “service” animal causing major damage.
Significance of the Suit
This is a precedent setting lawsuit in which a jury found that a person with disability has a right to accommodation. An emotional support service animal has been found to be a reasonable accommodation. If you are a property owner or property manager and you do charge an additional security deposit for a service animal you are exposing yourself to unnecessary risk and you are breaking the law.
There are Protections for the Investor
The best defense for a Fair Housing violation is education. Property managers and owners are allotted certain rights. For example, property managers can request “proof of disability,” but they cannot ask what the disability is. There are many specific rules that Fair Housing has defined that managers or owners can and cannot do.
Not Knowing is Not a Defense: Manager Owner Training
There is a free fair housing training in Idaho Falls on April 26th, 2012 at the Red Lion Hotel. Richard Mabbut from Fair Housing has graciously agreed to address the local property managers, real estate agents and owners from 9am until 12 noon. If you are interested in attending SIGN UP because there is limited seating. If you have a specific question you can always call Intermountain Fair Housing in Boise, Idaho and ask (208)-383-0715.
For more information on how Jacob Grant Property Management can reduce your risk for liability for Fair Housing violations call 208-522-3138 or email support@jacobgrant.com
Property Maintenance
12 Feb 2012 | No Comments | posted by jacobgrant | in Property Maintenance, Rental Owner
A major part of managing properties is managing maintenance. If buying a property, special attention needs to be paid to deferred maintenance. Deferred maintenance are repair items that property owners or managers put off repairing. While this can improve cashflow, if not managed correctly, it can create a “surprise” expense. Other items include capital expenditure items such as roof and siding. Finally, there is day to day upkeep.
What Does Property Maintenance Cost?
While average maintenance costs in Idaho Falls and Rexburg hover around $.27/ft annually, there are many factors that impact these costs. This research article, completed back in the 90s, can still be used to generalize regarding factors property managers and rental owners need to be aware of, that impact maintenance expense.
Research Findings
Unsurprisingly, this research on 137 residential rental properties in South Carolina found that the following impact maintenance costs: property age, tenant turnover, higher rents, multi-unit owners, size of the complex (smaller complexes cost more to maintain/sqft). The turnover cost was especially notable. If property managers or owners double turnover, they can expect an 18% increase in maintenance expense!!! Do you have a line item in your budget for tenant retention? To help see the cost of turnover, this table, from Multi Family Insider, can help you calculate what a turnover costs.
Your Tenant is Your Customer
Maintenance is unavoidable. Deferring maintenance is typically a short term solution with long term detriment. However many factors contribute to the cost per square foot. Individuals managing rental property can especially reduce expenses by reducing turnover. This justifies reduced rent rates for long term renters, and other incentives and programs designed to retain your tenant. Your Tenant Is Your Customer!
What is a Pro Forma Analysis?
6 Feb 2012 | No Comments | posted by jacobgrant | in Rental Owner
A Pro Forma Analysis is a tool businesses use to project financial data. Authors at ehow.com say “A pro forma analysis is an analytical projection of the potential financial position of a company based on a review of historical information.” Whoa! That sounds complicated. No…You probably already do it to some level if you participate in the management of your residential investment property. Using analysis tools like the a pro forma analysis helps owners of rental properties re-frame the way they think about rental properties. This tool helps investors treat their rental property like an investment, and helps reduce “emotional” decision making.
Description of a Pro Forma Analysis
A pro forma analysis very simply projects all income and expenses on a rental property. Step one is to assess how much income your rental can produce. There are many ways to assess market rent, but the simplest is to research what comparable rentals are renting for.
Step 2 is to honestly project day to day expenses. Day to day expenses on the simplest level include: maintenance, grounds keeping, management, utilities, vacancy, cleaning, and taxes, insurance, and mortgage.
Step 3 is to honestly project capital expenses. Capital expenses include siding, windows, roofing, flooring, painting, appliances, and other items that only need to be purchased every few years. A reserve fund needs to be set up for replacement. For example, a rental owner projects that the roof needs to be replaced in 10 years. The cost of the replacement is $5000 (assume no change over 10 years) and owner divides the cost over 10 years so the cost is $83/month. Rental owner decides to set up a reserve account and put $83/month in that account so at the end of 10 years he has enough to pay for the roof. Depending on the time line of your investment some items may not need to be factored in, but will affect overall value.
Purpose of Pro Forma Analysis
An effective pro forma analysis helps you treat your rental property(ies) as a business. Other purposes might include:
- Analyze a rental property before you purchase.
- Assess and reduce expense items.
- Maximize rental income.
Data drives growth!
For an example of a simple single family home pro-forma analysis or if you would like a free pro forma analysis on your rental property click here.
