Fast Company blogger Seth Kahan wrote a great peice earlier this fall about the community re-engagement to restore marvin Gaye Park in Washington DC. the Power of a Park. It had formerly fallen into disrepair and been overrun by drug users and dealers, earning the nickname "needle park".
It's an interesting read, and made me think about Seattle, where we have been on a new park development binge for several years. Parks are great, but to the point of the article, in addition to just creating net new greenspace, how many parks do we have that have become eyesores and hotbeds for criminal activity after hours? I know of 5 or 6 off hand that are in such condition- and with some community involvement could be recovered not just to provide safe enjoyable greenspace we like so much, but could become catalysts for the commnities around them, to provide neighborhood engagement and a source of garss roots community revitalization.
Check out the article and let me know your reaction.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
One of the major points in the panel discussions of the WMFHA 2010 Annual Economic Forecast (see my earlier blog entry on that topic) was that the economic recovery is going to be challenged by slow job growth; with a fairly diverse employment base, Seattle has the opportunity to compete to attract the pool of existing employers and jobs that exist today, and will grow as part of the recovery. Mike Scott of Dupree-Scott Apartment Advisors on the panel made the valid point that Seattle needs to get serious about leveraging this opportunity. And a few weeks ago, we got some help from two sources- in Forbes magazine's annual "best states for business" rankings, Washington moved from third place to second, and Washington, D.C.-based Tax Foundation ranked Washington No. 9 on its 2010 State Business Tax Climate Index.
Particularly with the recent Boeing 787 storyline, Washington's visibility on these lists may be a big help in competing for the first wave of post-recession job creation, and Richard Davis offers a good analysis of this in a recent Puget Sound Business Journal article.
Forbes' rankings carries solid credibility and always generates media buzz that can help drive business development efforts. Mr Davis offers a reasonable critique that while Northwest area residents usually consider Seattle to have a very high quality of life for intangibles such as natural surroundings and recreational opportunities, index lists such as these can't easily quantify those, while labor costs, heavy business regulation and a higher than average cost of living are factored in (although often overlooked as a deterrent to new businesses by local organizations).
So, whether you agree with their methods or outcomes, the lists generate interest, and ideally lead investors and entrepreneurs to take a closer look at Washington
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About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
In the last installments of this Rental Guide series, we talked about making the list of what you must have (vs. what you'd merely like to have- or can't live with) as the beginning of your rental home search, and finding a rental home based on your budget. One part of this to consider carefully is renters insurance- it's relatively inexpensive (it is not uncommon to see policies with premiums that are less than $20 a month) and can be excellent protection. As a tenant, renter's insurance assures you that you're protected against the damage or loss of personal property when you rent an apartment or house. Your landlord may have insurance that protects the physical building in which you reside, but this insurance will not cover your personal property. In fact, it's not at all uncommon for landlords to require the purchase of renters insurance prior to renting or leasing. This is prudent for both the renter and the landlord, protecting both from the possibility of lawsuit by alleviating each other's respective liability.
In determining whether or not you need renters insurance, the questions you need to ask yourself are:
How much would it cost to replace my belongings if they were damaged or stolen?
Can I afford to replace them?
Depending on your answers, renters insurance may be an easy choice, providing you with the protection you need. Either way, it's reassuring to have the peace of mind that comes from being protected.
Things to also consider before purchasing rental insurance:
How Much Coverage do I need? - The amount of renters insurance you choose will have the biggest impact on price of coverage. It is important to insure against all of your property. Remember, you're not just insuring against theft. In the case of a fire, for example, you could lose everything.
Deductible - The amount of the deductible premium that you're willing to pay will have a major impact on the premium costs. The higher the deductible, the lower the cost of home renters insurance.
Actual Cash Value (ACV) - Type of coverage that will pay for what the item was actually worth at the time of loss. This basic coverage payout is determined by the cost to replace, minus depreciation.
Replacement Cost - Type of coverage that will provide for the actual replacement value of the item with no deduction for depreciation. Although replacement cost coverage comes at an additional premium, it's usually worth the relatively small increase in cost.
Here are a few ways to save on renters insurance. Many insurers will offer discounts, if you have some of the following:
Monitored fire or burglar alarms
Fire extinguishers
Sprinkler systems
Dead bolts on all exterior doors
Auto insurance with that provider
If you own a dog, however, it may add to your premium. Due to liability issues, some insurers won't even offer insurance if certain dog breeds are owned (but landlords also won't generally permit them on the property either).
Other items to consider are:
Flood and Earthquake protection is not commonly included on rental insurance policies. If you live in an area where these natural disasters are more common, you may want to purchase an additional rider.
Liability coverage is most often a standard feature with renters insurance. This can prove invaluable in case of an accident, such as a slip or fall by a guest. It provides protection against legal claims that you may be obligated to pay, such as injury, sickness and death. It is, however, limited to the amount of liability coverage provided by your policy.
In order to avoid any disputes with your insurance company, it's recommended that you take an inventory of your personal items before purchasing rental insurance. This can be done by video taping or photographing each room of your house. It is important to keep all receipts for any major purchases, as well. The above should be kept offsite, in a fireproof safe or safety deposit box.
Fortunately, renters insurance is relatively inexpensive. If you're looking for cheap renters insurance, it is not uncommon to see policies with premiums that are less than $20 a month. And, thanks to the internet, you can get a competitive online renters insurance quote with relative ease. Always make sure to go with a reputable renters insurance company when choosing a policy to eliminate any surprises should the unfortunate need arise.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
I just returned from the Washington Apartment Outlook panel, "Perspectives and Projections for 2010" hosted by the Washington Multifamily Housing Association, and can share some interesting items discussed there. Speakers were Rob McKenna, Washington State Attorney General; Matthew Gardner, of Gardner Economics in Seattle, and Mike Scott, of Dupree Scott Apartment Advisors in Seattle.
How we got here
Rob McKenna gave a detailed yet compelling background on the factors contributing to the housing market crash, going back to 2005. Among them are the .com stock bubble, which sent trillions of dollars out of the stock market and into the real estate market. Combined with sustained low interest rates and well intentioned federal policies increase homeownership, both broadly and among lower and middle income consumers, it became a perfect storm creating high demand to drive up exponentially. We all know the results over the past 2 years as this crashed, people lost houses, consumer spending dried up, and businesses began failing or cutting back dramatically.
But the question on everyone's mind wasn't the history review, it was "when will the recovery be here?"
The Recovery- it's on its way
All three panel speakers concurred on this, each from their own perspective. Mckenna noted that the recovery will require consumer "de-leveraging", that is, spending less on credit and paying existing credit down, and Gardner in fact showed data that consumer use of revolving credit has been decreasing since June of 2008. He also pointed out that Federal stimulus spending will continue to increase through 2010, which will help, although at some point inflation becomes a concern, as well as what will drive spending and demand after the stimulus runs out. Presumably it will be from consumers as business spending and jobs pick back up, and Gardner expects the Seattle job market to begin recovery in the 4th quarter of this year (not significantly until 2010 however), with technology, life sciences and philanthropy being the strongest areas. Mike Scott made what I thought was an excellent point, that this region needs to be aggressive about landing- and keeping- new jobs and businesses. We seem to take our relative strength as a region for granted- but could greatly increase our fortunes in this recovery with more focused attention on driving economic growth. Gardner also showed an interesting graph of job creation and loss over the full decade- which showed that in total, the US is at the same level as we were in 2000- we essentially haven't created any news jobs in 10 years. So, Seattle needs to get serious about competing for the pool of employers and jobs out there.
McKenna wrapped up this topic with a discussion around policy work & market policing that is underway to support the recovery and resolve the structural issues that contributed to it (very much in his role as an Attorney General of course), which include pushing for faster turnaround on loan modifications, monitoring the reverse mortgages market to eliminate harmful practices, and aggressively fighting foreclosure rescue scams.
What about the Seattle Rental Market
This was the second most pressing question on everyone's mind. Current vacancy rates in the region sits at 6% in-city, 9% gross (which includes projects recently finished and still in lease-up, which will compete with properties already on the market in the near term). This is up from 4-4.5% 2 years ago. Add to this 2,000 new units (these figures are all 5+unit developments, so don't include smaller properties and single family) still scheduled to come on the market through 2009, 3,700 in 2010 and 2,000 in 2012 and 2013 (although these are planned, whether they get financed and built is a huge open question). So, that's 9,700 net new units onto the local market over the next 4 years. So, this will continue to be a softening impact on rents.
Before we panic, however, demographic forecasts seem pretty bright. Historically, the US has maintained a fairly stable 65/35 own/rent ratio (65% of households rent, which 65% own). Since about 2003, this has grown to 69/31, however, with the adjustment in the housing market, this is beginning to return to normal, so there are 4% of households returning to the rental market over the next few years. Also, the baby boom and echo boom demographics remain the fastest growing segments of the population, both of which are primarily rental households. Mike Scott showed data that in Seattle, the 20-34 year old demographic in Seattle will grow by 14,000 per year through 2014, including inflow population to the region. So, that's 70,000 net new potential renters who will need those 9,700+ new units. So, even with new developments and properties to fill the gap, I got the strong sense that we will see higher demand for rental units as these two market forces continue to adjust (and if they do so as forecast).
Key takeaways
The vibe among the panel speakers and the audience was optimistic, although not celebratory. I think that's because it seems to be getting better, but with no certain timeframe or milestones within the next couple years. This doesn't seem to be a recovery with a silver bullet- there are many fronts that are being tackled, and as a result, it will be slower that we are used to. Consensus was that 2010 will continue to see relief over 2009, but how much and how soon seemed to be open issues. Our guidance at RD House remains to be a vigilant knowledge of the market and comparable properties, aggressively solicit renewals, focus on effective marketing of units, and exploit every opportunity to help owners decrease operating costs.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
Years ago when I bought my first house, the yard was a bit of a mess and I spent many weekends trimming, digging, cutting, removing and planting all sorts of things to try and get into a reasonable shape. There was one particular pine tree along a side fence that at first I didn't pay much attention to- I didn't really know what to do with it, so I just left it and never thought much about it. One day when showing off some of my hard work to a neighbor, she saw that tree and told me excitedly that it was a Christmas tree that children of the former owner had planted years ago- apparently a live tree the family had enjoyed one holiday and then transferred to the yard. After learning this, the tree became somewhat of a cherished landmark in the yard- I left it right where it was, and whenever I looked at it I wondered what that Christmas was like for them, and what treasures the children had opened underneath the tree on Christmas morning. I hope the tree is still there today, still bringing history forward into that yard.
That bit of history really got me thinking about that house in a new way. When I moved in it was a 1927 fixer upper that I delighted in updating, anxious to put a new face on the worn surfaces. But the Christmas tree in the yard made me realize that families over many years had lived important parts of their lives there, and had carried away special memories that were intertwined with important events they lived out right there in the same rooms I now lived in. It gave me a new respect for the history of the house, which I never forgot, and which I felt somehow connected to as I lived important parts of my life there.
Something similar happened the other day in our office at RD House. We'd recently put a beautiful old updated craftsman home on the market for rent, when we got the following email from someone who had driven past the house:
This house on 16th Ave NE was my Grandmother's house from about 1962 until the late 1980's. My father lived there also after he and my mother divorced in 1970. His room was the one in the basement. What a flashback. I was home in Seattle visiting when I drove by the house to reminisce and saw your sign. Whoever did the addition and remodel did an excellent job and I'm happy to see the original parts of the house looking almost exactly the same. Thanks for a walk down memory lane. I can still remember the cookie jar she kept on the counter.
What a treat to have received this from someone with a living memory of the home! It's a great reminder to us that we're really in the people business- the homes we advertise, show, and manage will hold memories for years to come from the people who live in them. They aren't just structures- they are where our tenants have Thanksgivings, graduations, anniversaries, new beginnings, holidays, and milestone celebrations with their families. It's nice to keep this perspective as we go through the day to day parts of our jobs as property managers.
Take a minute to share this with us- the original listing video we did for that property is here. See if you can smell fresh baked cookies as you watch it:
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
The theme of momentum has come up in my world lately. At first I didn't realize it was a theme- I was just getting from one day to the next, managing one situation or another as best I could. But when I had a chance to reflect about the course our summer season had taken - both personally and at RD House, I began seeing isolated events link together into this theme of momentum, and I think it allows a good perspective on things.
We all know how a bad day unravels itself- it's as if inexplicably anything you touch turns into a firedrill. Like spilling your coffee on your best shirt in the morning, then leaving your mobile phone at home, being late to your first appointment- and on the day goes, almost as if it's a runaway train and there's no use trying to turn it around. Momentum. Good days happen the same way don't they? Maybe you read an article in the morning paper that makes you feel positive or confident, when you get to your favorite coffee shop, your "buy 10 get the next one free" card is full and you don't have to pay for your morning joe, your favorite parking spot is waiting for you, and on it goes..momentum.
It's interesting isn't it? Here's the epiphany I had though. I think we can actually direct- or change- our momentum if we really focus on it. By making a conscious decision to stop, assess where we are, where we're headed, and how we want to direct our efforts- you can literally change your life's momentum, whether for an hour, a day, or for something bigger.
Case in point. This year has obviously been a rollercoaster in the property management, and the real estate market as a whole. Our renewals, move-out's and new business weren't on any kind of predictable pattern, so we had to be extra flexible and nimble. In June, a number of factors came together that started increasing the vacant inventory of units we had for rent. With the economy not turning around as soon as some had hoped, no one seemed to be moving, no matter how we tried to change up our advertising, the phones weren't ringing with prospective tenants like we thought they would be. It all seemed gloomy and overwhelming. One Friday morning our broker, Ricky D, called us into a meeting, and just gave us an old fashioned rally speech. Yes things weren't happening as we'd planned, he said, but we're going to make them happen. Do more open houses, get more creative with your ads, talk to more people, find more sources of information- go, go, go. If you ever watch the Bravo TV show "Project Runway", it was like one of those moments when Tim Gunn is out of things to suggest and just advises the contestants in exasperation to "just...make it work, people!". In other words, stop focusing on what's not working, and focus on making it work. Momentum.
And guess what? That very day was when things started to pick up. We did a renewed focus on open houses that weekend, changed up all our ads to throw conventionalism out and creativity on (one 19th floor loft was billed as "Batmans Gotham City Hideaway"), the phones started to ring, and we never looked back. Since the beginning of July, we've rented 23 units, and are back to our average days on market of 22 days for unit rentals. Momentum.
Yes, it can seem impossible to change the direction of things sometimes, and I'm saying there aren't things entirely out of our control. But we can decide how we react to them, and where to focus our efforts in relation to them. It's a lot like Oprah's definition of Luck, which is "preparation combined with opportunity", which I think is so well put. If you don't prepare for things to turn around, you won't change your momentum as easily when the opportunity to do so arises.
You will always have bad days- and good days, for sure. But when things start to spiral downhill, try stopping, reflecting and be aware of what's happening. Change your momentum. If all else fails, you can laugh about the fact that nothing is going to go right today, and focus on how you're going to start out again tomorrow.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
Because I work in property management and blog a lot about property management topics, I'm constantly immersed in articles and daily experiences about the subject. But some things are so common in my practice that it's easy to forget that what's second nature to me is always going to be new and insightful to someone new to the subject. Don't get me wrong, I'm not trying to blow my own horn, but bear with me. Recently I saw an article, 8 pitfalls for new landlords, which summarizes several really great points that I've written about before in various forms- and that I talk about with property owners literally every day in my work. It was great to see the information with fresh eyes, but it also reminded me that the best basic knowledge is not only universal, but that it's good to remember that it's always new- and useful- to someone else.
I actually think the article is written in too much of an alarmist "watch out" tone, and would reframe the information as "what you should know" as opposed to seeing it as "pitfalls", but that's just my frame of reference after 12 years in the business. Either way, it's information that every landlord should take time to understand. I'd summarize it like this:
Run a rental as a business, not a hobby. Renting out your home is a business, and by becoming a landlord, you have to be cognizant of tax, insurance, and local landlord tenant law matters. A rental is considered an investment property, which has different tax implications than a primary residence; rents collected are considered business income and must be reported to the Internal Revenue Service. On the flip side, certain repairs and upkeep, in addition to mortgage interest, can be deducted as business expenses. Consult your CPA for advice on rental property income and expenses. Your property insurance is also handled differently for a rental, and you'll need to let you provider know that you're renting it out. Finally, a host of federal, state and local regulations cover the rights and responsibilities of both tenants and landlords, and rental properties need to adhere to these (more on this below).
It's well worth hiring a professional property manager. This sounds like a pitch from me, but even this article points out that experts recommend talking to - and preferably hiring - a property familiar with the business of effectively managing residential property. Try linking to the local affiliates of the National Association of Residential Property Managers to find a property manager. Property managers with a professional affiliation such as this have sound expertise in the local rental market, advertising, tenant screening and lease management, and can easily save you as much or more than their fees by renting your property faster and managing it more effectively than you may be able to on your own. To make this more meaningful to owners, I always use the "what would you do if your tenants suddenly stopped paying rent" scenario. Independent owners tell me they usually would a)panic, b)try to figure out what their options are, or c)panic. Property managers know exactly how to avoid this in the first place, and how to handle it if it should happen, as well as a myriad of other situations like repairs and maintenance, pets, etc.
Don't confuse 'rent' with 'mortgage'. It's easy to assume the rent should cover the mortgage since it's what you paid to live there, right? The two aren't related, and it's the most common misperception new landlords have, say property managers in the article. The mortgage is an agreement you made with the bank based on the sum of the loan, the percentage you put down, your credit history and the market valuation of the property at the time of sale, none of which factor into determining rent, which is entirely driven by local market competition and conditions- supply and demand, basically. A mortgage and a rent also buy different things- a mortgage pays for an investment, while rent pays for a roof for a specific period of time with none of the financial or tax benefits of ownership.
Don't skip background and credit checks. I don't like to be cynical, but bringing in a renter just isn't like sharing a cab with someone. I always use the "Nice girl from Wichita" analogy, because who doesn't like someone like that? Sometimes, however, "from Wichita" turns out to be "running from creditors and not able to hold down a job". It's just good practice to always screen for credit, criminal and rental history, even when someone seems nice enough to have coffee with. When entrusting what's likely your biggest financial asset to a stranger, the rule is this: screen, screen, screen. Managers say you want to know whether an applicant has been evicted in the past; whether he has a history of criminal behavior that could jeopardize you, your neighbors or your property; and whether s/he earns enough to cover the rent and living expenses.
Handshake agreements don't mean anything. I've always lived by the rule that "if it isn't in writing, it doesn't exist". A written lease is always a must, and it must cover every detail of the rental agreement. Who pays for the utilities, who is responsible for mowing the grass, when is rent due, and what happens if it's ever late, how many people can live in the home, and how many cars can they park outside? It's all got to be in writing or someone will always have misunderstood expectations.
Don't skip needed updates to your home. Just because it will be a rental, don't think that it doesn't need to show really well. It may seem counterintuitive to upgrade things for a renter, but the fact is that nice homes attract nice renters. "If you don't have a well-maintained home, you're going to get the tenants who don't maintain a home," say experts in the article . "A majority of tenants want a nice place to stay, and they're going to keep it up. There are a lot of excellent people who rent for years and years and they take excellent care of the property."
Federal, state and local requirements, including Landlord-Tenant law are important. As an owner in your own home, you're kind of free to take as many risks as you want. With tenants, however, you become responsible for their safety, at least as it relates to the property -things like structural damage and environmental hazards (radon, carbon monoxide, lead paint, mold), and you have to take reasonable measures to respond to renters' concerns about unsafe conditions, even neighbors' suspicions of potential criminal activity on your property, say experts. This is an area that a professional property can really give you peace of mind, since they are licensed, well versed in the various requirements, and can navigate such issues effectively.
Plan your work then work your plan. In other words, don't try shortcuts on the above once you've decided to rent and how to go about it. Be conservative when anticipating how long it will take to rent and what the rents, and costs, might be. Markets are fluid, but it's better to have a solid plan and stick to it than to get nervous and rent hastily without screening or a written lease.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
In the last installment of this Rental Guide series, we talked about making the list of what you must have (vs. what you'd merely like to have- or can't live with) as the beginning of your rental home search. Once you have a list of the location and features you need, you're ready to find a rental home based on your budget. A good rule for this is that your total monthly income (before taxes, etc) should be about 3 times your monthly rent. Or, looking at the another way, your rent should be no more than about one third of your monthly income. Banks and property managers use this as a qualification formula for mortgages and rentals, so you'll be a step ahead to plan based on this.
It's important to make sure your monthly rent fits comfortably within your income, since housing expenses such as rent are usually your highest monthly expenditure. But also consider things like utilities, furnishings, and other costs which may be higher or lower based on the location and features you identified. It's no use having a large view condo if you can't buy groceries and have no furniture from which to enjoy that view.
Start by making a list of your monthly income and expenses. It doesn't have to be complicated, you can make a list with two columns, money coming in and money going out.
Monthly Income
Income sources may include:
After tax salary, wages and tips from your job
Interest from savings or other accounts.
Alimony
Be sure to account for taxes, retirement savings and other withheld amounts. Include expendable income only.
Monthly Expenses
Organize your monthly expenses by dividing them into the following categories:
Tip:Rent will usually be the highest expense, usually around 30% of income. Other targets for estimating your expenses are food, (8-15%), clothing (5%) and entertainment and recreation (5-10%).
Fixed Expenses
These are regular payments that you pay every month. These include things such as:
Rent
Utilities, telephone, cell phone, internet and cable
Car Payments, including insurance and maintenance
Debt payments (loans, credit cards)
Medical and Dental insurance and all regular medical costs such as medication or physical therapy
Savings (how much you put aside for the long term or rainy day fund)
Renters Insurance, which covers your personal belongings in the event of fire or theft
Transportation (gas, bus and train fares, etc)
Food
School and child care
Gym or exercise costs
Optional or variable expenses
These items are things you pay for on a non-regular basis, but can still be tracked and should be included in your budget. Look through your checking transactions, ATM withdrawals and credit card statements to identify when and where you tend to spend money on these types of things, which include:
Entertainment (movies, concerts, nights out)
Restaurants
Recreation (weekend activities)
Vacations
Furniture
Clothing
The balancing act
Once you have your list completed with fixed and optional expenses, compare your expenses with your income. A good rule is to have your expenses be at least 10% less than your income so you can have some wiggle room.
If your budget does not come out balanced, you'll have to reexamine your expenses and figure out where you can make cuts. Take a look at your optional items, (most likely your entertainment and recreation expenses) and stick to your new budget!
Rental Budget Constrained?
When examining your largest expense, rent, you may find that your rental budget is constrained. It is better to find this out before you start looking at apartments than on the first of the month. Go back and re-examine your "must-have" features, and see which of these you can actually move to "nice to have's", I'll bet you find some additional savings to be had.
Also, be sure to check to see how much you are going to be expected to pay up front. Some apartments require first and last month's rent and a security deposit. Make sure that this up front expense won't leave you in the hole.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
I'm sure many of you have had the same experience that I have lately- lamenting that not only is my favorite shop on the corner closed, but so are several others in the same building and many more businesses around the city. Here in Seattle it's a bit unnerving as I see all of the "For Lease" and "Closed" signs in shop and business windows- in fact it feels eerily like walking through a graveyard looking at headstones.
Do you remember that horrible Tsuanami in Thailand several years back, when witnesses all said "the sea just disappeared" before the giant wave struck? Well, a sea of businesses have disappeared, and according to some, the giant tsunami wave that is about to hit is the wave of commercial real estate foreclosures, which could do to our already weak economy what that wave did to the seaside villages.
According to a recent article in the Wall Street Journal, Federal Reserve and Treasury officials are working to prevent the commercial real estate sector from "delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat". At issue is the downturn in commercial business that is beginning to drive property foreclosures- the delinquency rate in July for commercial loans rose to 3.14%, more than six times the level a year earlier. Just like what happened the past couple years in residential real estate, banks lent commercial owners money on the assumption that occupancy and rents of their office buildings, hotels, stores or other commercial property would keep rising, which hasn't happened as a result of the recession, and owners are beginning to struggle making payments as vacancies increase. Nor can owners refinance easily, by the end of 2012, the WSJ article predicts that $153 billion in loans are coming due, and close to $100 billion of that will face difficulty getting refinanced. Until now, banks have been able to manage commercial real estate losses by extending debt when it has matured, because the underlying properties were generating enough cash to pay debt service. Unlike the residential market, banks have had an incentive to refinance commercial loans because accounting standards for these have enabled them to avoid marking the value of the loans down.
In a related New York Times piece, author Terry Pristin notes that "even though industry lobbyists were able to persuade Congress to extend a loan program aimed at prodding the stalled securitization market back to life, several analysts said it was unlikely to head off a spate of defaults, foreclosures and bankruptcies that could surpass the devastating real estate crash of the early 1990s. It will prop up a few deals, but you can't stop the wave that's coming", the article quotes from Peter Hauspurg, the chief executive of Eastern Consolidated, a New York brokerage firm.
Some experts point to this as somewhat of an expected trend, as commercial real estate often follows residential downturns during a recession, as job losses and business cutbacks sink demand; however, what we're navigating has been no ordinary recession, and with the job market recovery yet to be clear, this commercial downturn could be just extraordinary.
So if you find a "For Lease" sign in the door of your local donut shop in the morning, don't expect a new one to replace it anytime soon. In fact, in this current economy, you're better off hanging on to that $1.50 anyway.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
...and how an 8% management quote turned into an 11% total management cost
As a property manager, we spend a lot of time educating owners about our specific value to them as a professional resource with sound expertise. So it was...I'll say ironic, when we found ourselves square in the middle of a great lesson, courtesy of a property management company we ourselves hired in San Antonio, in the real costs that can accrue to an owner when this expertise may be lacking. What our experience provided was the opportunity to truly see the issue from an owners perspective, and a rare chance to analyze the actual out of pocket costs, in detail, that can result from a lack of sound management practices.
Owning residential rentals and operating them profitably can take nerves of steel and an unwavering focus on running all of the different aspects right- every time. There are a lot of moving parts that need to run well; 3 critical aspects, and how can cost you money when they aren't run properly, are:
•· Solid market knowledge and aggressive advertising, with excellent advertising plans and leasing performance, ensures that units are priced optimally and vacancies are kept to an absolute minimum. If a property manager doesn't market your property aggressively, it will sit vacant longer, which costs you lost rents. In our case, after 6 weeks without hearing from the property manager, we found that he couldn't give us a clear answer as to how many showings had been done, what people's feedback on likes and dislikes with the unit was (which would have been very useful in addressing any needed changes to make the unit more appealing), or how long he felt the unit would be on the market before a renter was secured. As it turns out, in San Antonio, the property manager rarely shows their own properties directly- they rely on listing rentals in MLS and having other agents find, show and close interested tenants. Thus, they do little direct advertising, and aren't involved in the majority of inquiries or showings with interested tenants. As a result, the unit was vacant for a full 2 months, during which the property manager had no real sense of how well the unit was showing or what the overall response was. Over the course of the 4 years, with 3 turnovers per unit (we have 2 of them), this added up to about $895.00 in additional vacancy due to longer time on market than if the property manager had been more aggressive and directly engaged in marketing the units
•· Consistent, legal and assertive execution of lease terms, to protect the owner, the tenant and minimize cost and disruption to the physical maintenance, as well as the financial operation of the property. We had several maintenance issues which the property manager never investigated, but which they paid for repairs and charged us the cost. One was a damaged garage door over the weekend a tenant moved in. Obvious to the casual observer was that the tenant had backed into the door with their moving truck. We understand accidents happen, and would have been willing to perhaps split the cost with the tenant, however the property manager insisted that it was caused by "nearby construction crews" and charged us the entire $350.00 repair bill. In another case, the property manager failed to call for approval to make a $432.00 repair to repair the sprinkler system in the front yard- which is maintained by the HOA. Another cost we had to cover, but shouldn't have had to.
•· Hidden fees. The property manager we hired charged a 10% "service fee" on top of all vendor repair invoices. It didn't seem like a big deal at the time we signed the contract, but over 4 years (and the above unnecessary charges), this added about $320.00 in direct costs. A good property manager with hawkish attention to repair and maintenance issues, and keen oversight of vendor, HOA and tenant responsibility and performance in this regard, shouldn't be incented to drive commissions from repair and maintenance invoices. Our property manager also had a "fine print" clause upon contract termination that future management fees for leases in effect would be due through those lease terms, which added a whopping $912.00 in costs when we terminated the contract. This type of assessment against future rents isn't even legal in most states, but is apparently standard in Texas.
All up, the above items, based on the practices our property manager employed, cost us $2,969.00 over the 4 years they managed our properties. While we thought we were getting an 8% management rate with them, these costs actually raised the total management cost by an additional 3.7%, totaling 11.7% in management costs.
So how can you be sure you select a reputable property manager, to avoid issues like these?
•· Check their professional affiliations. NARPM (National Association of Residential Property Managers) is the largest, and membership with them ensures that the property manager adheres to standard best practices, ongoing education and certification, and a national code of ethics. If a property manager doesn't belong to this, it's worth inquiring why.
•· Check their local affiliations and involvement. Here in Seattle we have several property management associations, chambers of commerce, and other community organizations. Participation in these shows that a property manager is interested in running the business professionally, and is willing to engage, learn, and improve business practices in conjunction with other business owners (and that they may have things to share with other owners as well).
•· Ask a lot of questions, and think through typical scenarios with them. "How do potential tenants reach you to see available properties", "what are the steps that occur when a maintenance issue arises", and a detail of fees are all good starting points.
•· Look at the properties they manage. This is a very easy way to tell a lot about a property management company. Get a list of available properties they are advertising, and drive by them. Do they appear well maintained? Are they as advertised (views, location, etc)? These types of details reveal the detail with which they run the business, and how they will manage your property.
And even if everything is running perfectly, you'll still have the occasional unexpected issue that has to be dealt with (water heaters burst on holidays more than any other time, for some unknown reason), but that should be the exception, not the rule.
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About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
About RD House Real Estate and Property Management: We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.
We all know how a bad day unravels itself- it's as if inexplicably anything you touch turns into a firedrill. Like spilling your coffee on your best shirt in the morning, then leaving your mobile phone at home, being late to your first appointment- and on the day goes, almost as if it's a runaway train and there's no use trying to turn it around. Momentum. Good days happen the same way don't they? Maybe you read an article in the morning paper that makes you feel positive or confident, when you get to your favorite coffee shop, your "buy 10 get the next one free" card is full and you don't have to pay for your morning joe, your favorite parking spot is waiting for you, and on it goes..momentum. 
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