Jacob Grant Property Management arranges for regular property management checkups on all properties under management at least 2 times per year.  Go to: Jacob Grant Property Management for more information.  Surveys should include inspection of plumbing, water heater flush, furnace cleanout, and other preventative items.  These items increase the longevity of your home or apartment.

How do we find the proverbial “just right” market rent?

1. Comparable Market Analysis: A market survey that shows the rent on other comparable properties is the most accurate?
2. Consumer Price Index (CPI): “The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.”  This will display the overall ability for renters to pay increased market rents.  Adjusting according to CPI can help, with small increases and small decreases depending on economic conditions, continue to maximize rents.
3. Best of Type Pricing:  In larger multi-family plexes, managers can make small adjustments for the same floor plan.  Examples include updating, a patio, or a top floor apartment.  These tactics can give potential tenants more options and can give owners a substantial increase in rental income.
4. Market Rent Assessment: Once rent is set, tracking can be very valuable.  This can be done with Craigslist Tracker, Google Analytics and internal phone tracking software.  If a particular property is seeing significant traffic but is not getting applications it is likely that market rent is set too high.

If you are a rental owner or a property manager, it is well worth the effort to continually maximize rent without negatively impacting your investment.

Our single-family rental survey, which draws upon feedback from property managers managing an estimated 3% of professionally-managed single-family rental units and REO investors pursuing a single-family rental investment strategy, indicates a continuation of healthy demand trends on behalf of both tenants and investors. An increasingly imbalanced rental market is best evidenced by property managers’ rating renter demand at 84 on a 0-100 scale and rental supply at just 21. Several experienced managers commented that demand is the strongest seen in decades. At the same time, REO investor contacts, who stated that they target unleveraged IRRs averaging 15% and holding periods of 5-7 years, rated investor demand at an equally impressive score of 87 and noted that Fannie Mae’s bulk portfolio sale has generated a lot of excitement as investors “chase” single-family rental investments. In fact, we found investors’ tone to be increasingly mindful of potential risks as greater competition has resulted in compressed yields.

Note that targeted internal rate of return is around 15% with a 5-7 year holding period!  Interestingly, local market conditions are similar, especially with small multi-unit 4 plexes and duplexes.  Increase in renter demand is generally pressuring rents upward, and investors are seeking to take advantage.

Investors and developers can take advantage of Zelman and Associates’ detailed research regarding construction, development, vacancy, and other rental market components.

Jacob Grant Property Management can help you assess similar properties for acquisition with a pro-forma analysis.

1. Rental rates
2. Quality of the asset or condition of the property
3. Expense management
4. Liability exposure

Most of these items are connected and positively or negatively correlated.  For example, raising rent above market will increase value, but the expense of increased vacancy may out-weight the potential benefit.  Another example: reducing maintenance expenses will increase value, but could potentially reduce the quality of the asset and potentially reduce market rent.  There are a few philosophies owners and managers can do to create a plan based on the property.

Rental Rates

Are you shopping competitors?  Are you researching area vacancies and rental prices?  What is vacancy?  Are there any curb appeal items or maintenance items that can be completed to raise rent?

Quality of Asset

Full property assessment should include rating the life on all of the systems of the building.  For example, how long will the siding, roof, windows, cement, etc. last before replacement.  Are any exterior items driving the value of the property down.  Examples include excessive satellite dishes, personal property, quality of landscaping, and personal property.  Do you have an improvement plan to update these systems over the life of your investment.  If items are to be deferred, what is the cash return on the deferment?

Expense Management

Do you have a preventative maintenance plan?  Do you have a plan for updating?  Lack of planning can be the greatest factor in unforeseen and many times unnecessary expenses on a rental property.  Does your turnover process lift expectations for tenants maintaining the property or reduce expectations.  Are you holding the tenant responsible for expenses such as screen replacement and light bulb updating.  These seem like small expenses but tend to add up.

Liability Exposure

What is the likelihood for a loss related to a lawsuit?  Can that likelihood be reduced?  What is the cost/benefit of reducing the exposure?  Liability can be found in many different arenas of managing rental properties.  A few examples include: risk of Fair Housing complaint, property risks such as uneven sidewalks, liability exposure with vendors.  Training programs for leasing staff, sidewalk replacement, and being listed as an “additional insured” on vendor policies are all examples of reducing risk.  The costs could include paying more for vendors, cement replacement cost, and training expense.

Approaching property management as a value adding procedure begins with a philosophical approach.  The philosophy you build can lead decision making.  Using value add principals and thinking about and measuring value additions can greatly improve property values and rents especially over longer periods of time.

Local Idaho Falls Market Update

Locally, we are also seeing upward pressure.  According to the labor department, unemployment is down to 8% across the state.  Costco has made their intentions known that they are planning construct a store in either Idaho Falls or Ammon, Idaho.  As of July, 2011 they were the 6th largest retailer in the United States and the 7th largest retailer in the world.  A typical Costco will employ 200 people.  Our current vacancy rate is 4%.  Other Idaho Falls Property Managers are reporting similar 3.5-5% vacancy rates.

CNN Article

1. Leveraging at low interest rates is a hedge against inflation.
2. Great opportunity to buy real estate at below market prices.
3. You need to have good management.  Jacob Grant Property Management

If you are interested in “Good Property Management,” call 208-522-3138 or email jake@jacobgrant.com

Ada County (Boise Market) is seeing a large pickup in house sales.  Is it likely that this market improvement will spread east into the Idaho Falls market?

Boise News Article

1. Companion animals policies and procedures.
2. Application requirements/guidelines.
3. Risks associated with waiving late fees or other lease non-compliance.

For now we will be taking a little break from the Fair Housing party .