Aug 29

For years I struggled with setting rents. Too much under market rents and the properties did not perform as well as they could. Too much over market rents, they sat vacant and do not perform as well as they could. There seems to be a theme developing here. ūüėČ

To succeed you need to know what others are charging for rent in your very specific market. To that end, we spent a lot of my time, my staffs’ time and effort trying to collect comparable rents.

Ten, fifteen years ago our team manually enter details from for rent ads in the local papers, Craigslist, Zillow and anywhere else we found them. Then we would combine that information with city property records, trying to get an accurate view of what the market rent was for a particular unit. This was expensive and annoying.

We tried freelance data collectors through oDesk (now UpWork) to collect and correlate the records. Better, but still costly and the results still were not exactly what I wanted.

Then I saw promise in AI and Machine Learning, using tools like BlockSpring. Better results, but then Craigs and others started blocking automated collection tools.

We went back to manual data collection where we had to and automated what we could.

We were doing the rent surveys once or twice a year due to the hassle and costs. Quarterly would be better to catch trends.

I had looked at Rent-O-Meter in its early days. It seemed promising but had far less data than even our rudimentary data set.

Last October I relooked at Rent-O-Meter. Wow. We have been using it ever since. ¬†They have both a free¬†version and a free trial of the “Pro” version that goes for about $200 per year. ¬†Setting one rent wrong will cost you more than that. You may want to take a look.

Note: while this may sound like an ad for Rent-O-Meter, it is not. ¬†I’m just a happy, paying customer of theirs.

May 22
A lot of PhDs say the same thing we’ve said for years about landlording in general and Section 8 in particular in peer reviewed papers.  Typically we only see those critical of owners, but there are many that accurately explain the dynamics of rental housing.
Here is a excerpt from two.
 
How to attract more landlords to the housing choice voucher program: a case study of landlord outreach efforts Р David P. Varady , Joseph Jaroscak b and Reinout Kleinhans
Our interviews suggest that existing stereotypes of Section 8 (HCVP) landlords as greedy and unconcerned about their tenants are inaccurate. Moreover, our findings provide new support for the classic studies of inner-city landlords cited earlier. Currently, many landlords in the HCVP are themselves experiencing significant financial burdens and risks as they try to deal with the low-income rental market. Tenants exhibiting various forms of problematic behavior, such as drug dealing, substance abuse, and violent crime, exacerbate the problem.
Urban Landlords and the Housing Choice Voucher Program –¬†Prepared for U.S. Department of Housing and Urban Development¬†by¬†The Poverty and Inequality Research Lab Johns Hopkins University Philip Garboden Eva Rosen Meredith Greif Stefanie DeLuca Kathryn Edin
Of small properties with affordable rents (below the regional median), only those without debt service are viable. Only 25 percent of mortgaged properties have positive cash flow (Garboden and Newman, 2012). Taken together, these quantitative analyses and our own findings described in the following suggest that much of the stock is financially precarious, which could theoretically lead to under maintenance, abandonment, and conversion.
June 11th, 2018: The publication is back up on HUD USER at a new address above
Note: this publication has been removed from HUD USER.  I reached out to the authors who said it will be reposted soon, that the removal was to improve the formatting
Mar 11

Follow up to the Milwaukee County Proposal on making Rent Assist a protected housing class.  with a hearing is Monday March 12th, 9:00 AM at the Milwaukee County Courthouse building, Room 201B,  901 North 9th Street,  Milwaukee, WI 53233

My company accepts,  and likes the Rent Assist program.  We also have not found the inspections particularly cumbersome.  In our market we see Rent Assist as a benefit to both owner and tenant.

Yet, I oppose the bill.

  1. Mainly because it attempts to hide the fact that the true reason that people do not get Rent Assist is that Milwaukee County does not provide as many vouchers as there are folks eligible to receive vouchers.If Ms Dimitrijevic wanted to help tenants in need of Rent Assist she would look at her own branch of government and say ’We need to increase the available vouchers.’  If that was her proposal the Association and I would fully support her, as would most tenant advocates.Instead she tries scapegoating owners, making it look like discrimination against voucher holders is the problem.
    Ask Ms Dimitrijevic if there are more applicants than vouchers and how many months or years the Rent Assist waiting list is.The other reasons I oppose this are:
  2. Rent Assist does not allow for month to month occupancies.  Owners are more likely to take a chance on a questionable applicant if they can use a month to month and terminate tenancies that are not working as expected.  If you are a tenant, I’m sure you do not want to live in an apartment next door to a disruptive neighbor and when you complain the owner tells you that this person that is making your apartment less enjoyable has to stay for 11 more months due to a year lease.
  3. Another issue is that per the RA contract an owner must serve both the tenant and the RA agency with notices of default, such as non payment.  This creates an additional opportunity for an eviction for good cause to have problems.
  4. Finally, an owner may have to wait for the first payment.  While not a concern to our company, this is a big problem for mom and pop owners who are often under capitalized.

What the bill actually does.

Supervisor Marina Dimitrijevic, the bill‚Äôs author,¬† states on FaceBook:¬† “This change to the ordinance does not mandate acceptance of certain sources of income rather it makes it illegal to discriminate against tenants based on source of income.‚Ä̬† The bill is worded consistent with her statement.

Currently.

Prospective tenant:¬† ‘Hi, I have a Rent Assist voucher.¬† Will you accept my app?

Landlord:  ’Sorry.  We do not do Rent Assist.’

Prospective tenant:¬† ‚ÄėOkay,¬† There are thousands of other owners that love the program and I am one of a few tenants who are eligible.’ and under her breath says ‘What a donkey’

Result: The tenant does not waste time and possibly money apply for a unit they will not receive.¬† Everyone understands upfront. ¬†And the owner who does not accept the Rent Assist voucher holder loses a ¬†great tenant, and the accompanying revenue,¬† that we end up with. ūüėČ

Image what a terrible experience this will be for the tenant under the new law if they apply with an owner that will not accept Rent Assist vouchers.

Prospective tenant:¬† ‘Hi, I have a Rent Assist voucher.¬† Will you accept my app?

Landlord:¬† ‚ÄėOf course you can apply. I follow all laws.‚Äô

Prospective tenant: ‚ÄėWas my app approved?

Landlord:¬† ‚ÄėWhy yes.¬† You met all my requirements and seem like a wonderful tenant!’

Prospective tenant: ‚ÄėGreat!¬† Here is the Rent Assist app you must sign.‚Äô

Landlord:¬† ‚ÄėSorry.¬† I do not accept Rent Assist, but I did accept you.‚Äô¬† and legally the owner could say ‘By the way, because you are accepted I expect you to take the place or forfeit the earnest money‚Äô

Prospective tenant: ‚ÄėWTF! This is an outrage.

Landlord:¬† ‚ÄėSorry. This is the unintended consequences of¬† Ms, Dimitrijevic‚Äôs law.‚Äô

Result:   Confusion, a terrible experience  and possible negative financial consequences.

Instead of this bill, a true tenant advocate would require that owners disclose in advance of taking an app if they will accept Rent Assist or other programs.  That is what is fair and equitable, not some non discrimination code that will harm and confuse tenants.

Sep 27

Attorney Tristan Pettit, you know, the guy that writes the standard legal forms for Wisconsin Legal Blank, is doing his landlord-tenant Boot Camp again on Saturday, October 7th. There are still a few seats left.

You get a full day of landlord-tenant law training for the price you’ll spend for 30 minutes of attorney time after you make a mistake in this complex area of law,

All the details are at:
http://www.landlordbootcamp2017.com

But the proof of value is I send my staff to Tristan’s Boot Camps.  Even though I know the laws, it is of great value to have staff learn what they need to be concerned about in a different setting than the office.

Aug 27

Seattle recently banned rental property owners from screening prospective tenants for criminal records.

Seattle tries to make this a landlord issue, ‘How dare landlords prohibit criminals from renting. These good people paid the price for their crime and should be free to live anywhere they want after being released from prison!‘ And Seattle’s landlords fell into this political trap, opposing the ordinance from a concerned landlords’ perspective, rather than what it really is – an assault on the¬†rights of the vast majority of Seattleans that are not criminals.

Let’s step back and look at this situation truthfully.

Landlords screen for criminal backgrounds not for their benefit, but rather do so mostly out of concern for the safety and tranquility of their other tenants and neighbors. The selfish motivation of the owners, if you want to call it that, is crime devalues neighborhoods.  But that motivation is beneficial to all in the neighborhood as well as the city itself.

This ordinance may benefit the owners as it will:

  1. Raise rents. Seattle has a housing problem. There simply are not enough units for the population. By forcing owners to accept the ten or fifteen percent of residents that have criminal histories that exceed the HUD guidelines for criminal screening, the city fathers have worsened the housing crisis for the rest of the population seeking decent housing.
  2. Reduce owners civil liability for the bad acts of their tenants. Jimmie ‘the Hacksaw’ Smythe from 201 rapes and murders Ms. Jones in Apt 310.¬† ‘Don’t blame me. I could not screen for his previous twenty years of criminal activities. In fact feel sorry for me, ¬†I now have two vacancies.”
  3. Likewise, owners will no longer be accountable to the municipality for disruptive tenants. ‘Hey, I just rented to the people you told me I had to take.’

In a sad, ironic way, the crime free leasing movement that started in the Pacific Northwest is about to die where it was born. Milwaukee’s Landlord Training Program had its roots in a 1997 Portland program. In fact¬†Washington State passed a Crime-free rental housing program in 2010, a half decade before Wisconsin did.

The motivation behind screening out criminals was to make neighborhoods more stable and more desirable, thereby benefiting the municipality, the residents, and ultimately the property owners.

This screening prohibition is just another case of failed liberal governments harming the very people they purport to help and support.

Sadly, when this ordinance fails, and it will fail, rental owners will face criticism¬†for the increase in crime happening to Seattle’s more affordable neighborhoods. ¬†This time the landlords will be blamed for allowing the very criminals into their units that they were required to under this new ordinance.

Feb 09

For the past couple of years, we have sold out both the spring and fall sessions of Attorney Tristan Pettit’s AASEW Landlord Tenant Law Boot Camp.

It looks like we are on track to do the same for the upcoming February 18th, 2017 Boot Camp.

Last fall I waited too long to sign up my new staff members and could not get them in. I signed up three staff people very early for this one. ūüėČ

You may ask ‚ÄėWhy would Tim pay $537 plus wages to send three people to Boot Camp when he knows the laws so well?‚Äô

The answer is easy: One small mistake or missed opportunity will cost us far more than this. It is important that my folks know the law as WI landlord Tenant Law is not always what a reasonable person would assume it to be. And this is ever evolving, with both new laws, new interpretations by courts and new tricks by tenant advocates*. This is not the first time we’ve sent staff either.

This course is presented by Attorney Tristan Pettit. Tristan’s law practice focuses on landlord-tenant law, he is a current board member of the Apartment Association as well as former president, and drumroll please, he writes all the standard landlord tenant forms for Wisconsin Legal Blank.

If you want to go, now that my seats are secure ;-), you can sign up online or call Joy at the Association 414-276-7378 and reserve a spot.

http://www.landlordbootcamp2017.com

* Most “tenant advocates‚ÄĚ only advocate for tenants that break the rules. This ultimately costs the rest of the good tenants more in increased rents and decreased service or more noise and disruption‚Ķ but this is another story for another day.

Jan 19

The follow-up question:

Thanks Tim,
Can we charge a “general ” application fee to the prospective tenant to cover our office costs to process an application and keep the fee? Other people are doing it. How?
No, the law is clear on this.  If you do not accept the tenant, then all the money collected except for the actual amount you paid for a national bureau credit report, must be refunded.
 
If people are charging a non-refundable application fee in excess of what they paid for a credit report or more than $20, they are in violation of ATCP 134.05 (2)  Some owners try to be clever by calling the earnest money by some other name.  That fails.(See the legal definition of Earnest Money below)
 

However, if the prospective tenant fails to pay the balance and move in, you may retain the earnest money to cover and costs and lost rents you incurred due to their failure to take possession. In fact the prospective tenant could owe a lot more than the earnest deposit. See ATCP 134.05(3)(b) below.

 
Earnest Money is legally defined as:
 
ATCP 134.02¬†(3)‚Äā”Earnest money deposit” means the total of any payments or deposits, however denominated or described, given by a prospective tenant to a landlord in return for the option of entering into a rental agreement in the future, or for having a rental agreement considered by a landlord. “Earnest money deposit” does not include a fee which a landlord charges for a credit check in compliance with¬†s.¬†ATCP 134.05 (3).
The requirements to refund the earnest deposit if the tenant withdraws the app or the landlord rejects the app either explicitly or by nonaction:
 
ATCP 134.05 (2) Refunding or crediting an earnest money deposit.
(a) A landlord who receives an earnest money deposit from a rental applicant shall send the full deposit to the applicant by first-class mail, or shall deliver the full deposit to the applicant, by the end of the next business day after any of the following occurs:
1. The landlord rejects the rental application or refuses to enter into a rental agreement with the applicant.
2. The applicant withdraws the rental application before the landlord accepts that application.
3.¬†The landlord fails to approve the rental application by the end of the third business day after the landlord accepts the applicant’s earnest money deposit, or by a later date to which the tenant agrees in writing. The later date may not be more than 21 calendar days after the landlord accepts the earnest money deposit.
 

Law permitting witholding of Earnet Money for failure to take possession:

 

ATCP 134.05 (3)‚ÄāWithholding an earnest money deposit.

(a) A landlord may withhold from a properly accepted earnest money deposit if the prospective tenant fails to enter into a rental agreement after being approved for tenancy, unless the landlord has significantly altered the rental terms previously disclosed to the tenant.

(b) A landlord may withhold from an earnest money deposit, under par. (a), an amount sufficient to compensate the landlord for actual costs and damages incurred because of the prospective tenant’s failure to enter into a rental agreement. The landlord may not withhold for lost rents unless the landlord has made a reasonable effort to mitigate those losses, as provided under s. 704.29, Stats.

 
Jan 16

A reader asks

[C]an I charge a flat application fee ( $20-25) to prospective tenants that includes the cost of the checking them out, labor etc. in our office, this may not include a credit check. Do I have to give it back if I don’t accept them?

No, you can only charge the actual amount you paid for a national credit bureau report.  Any amount collected above the cost of the credit report must be refunded if the tenant is rejected or applied to the amounts they owe if they are accepted.

For us the cost of the report in minimal (less than ten bucks) and the requirement of the law to provide a copy of the report to the applicant violates our terms of use with the bureau we use, so we do not charge a fee.

We do require a $50 deposit to hold the unit while it is being processed.  If the tenant is accepted the money is applied to their move in money.  If the tenant is rejected, the $50 money order is returned to them.  If they are accepted, but then fail to take the unit and we lose rent because of this, the earnest money is used to offset part of the lost rent they owe under ATCP 134.05 (3).

The law:

ATCP 134.05¬†(4)‚ÄāCredit check fee.
(a)¬†Except as provided under¬†par.¬†(b), a landlord may require a prospective tenant to pay the landlord’s actual cost, up to $20, to obtain a consumer credit report on the prospective tenant from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis. The landlord shall notify the prospective tenant of the charge before requesting the consumer credit report, and shall provide the prospective tenant with a copy of the report.
(b) A landlord may not require a prospective tenant to pay for a consumer credit report under par. (a) if, before the landlord requests a consumer credit report, the prospective tenant provides the landlord with a consumer credit report, from a consumer credit reporting agency that compiles and maintains files on consumers on a nationwide basis that is less than 30 days old.

Note:¬†Paragraph (b) does not prohibit a landlord from obtaining a more current consumer credit check at the landlord’s expense.

ATCP 134.05 (3)‚ÄāWithholding an earnest money deposit.

(a) A landlord may withhold from a properly accepted earnest money deposit if the prospective tenant fails to enter into a rental agreement after being approved for tenancy, unless the landlord has significantly altered the rental terms previously disclosed to the tenant.

(b)¬†A landlord may withhold from an earnest money deposit, under¬†par.¬†(a), an amount sufficient to compensate the landlord for actual costs and damages incurred because of the prospective tenant’s failure to enter into a rental agreement. The landlord may not withhold for lost rents unless the landlord has made a reasonable effort to mitigate those losses, as provided under s.¬†704.29, Stats.

Note:¬†See¬†Pierce v. Norwick,¬†202 Wis. 2d 588¬†(1996), regarding the award of damage claims for failure to comply with provisions of this chapter related to security deposits. The same method of computing a tenant’s damages may apply to violations related to earnest money deposits.
Oct 30

As many of you know I like data. ¬†Okay – maybe “like” is a little weak. ¬†Perhaps its love, or at least a dangerous obsession.

Our industry, at least in regard to small properties, ¬†shies away from meaningful data collection and utilization. ¬†However, you can do so much with¬†the¬†right data – from setting your rents in the¬†sweets spot between charging too little and losing money to charging too much, having your units remain vacant and … losing money. ¬†What is that house you are looking buying at really worth and how much rent can you really expect to receive? In many neighborhoods paying assessed value is paying two to¬†three times what everybody else is paying. ¬†In a few high valued neighborhoods assessed value is a steal. ¬†Ask the listing broker how much rent you can expect and some will tell you the sky.

Lately we’ve been looking at a lot of data points from rents, to evictions, to city orders, to special assessments, to tax assessments in general, to foreclosures and a ton of other interesting¬†things.

For example we are developing an internal¬†tool for suggesting¬†rents that is using for rent ad data, including rent amount as well as other thing such as how long the ad has appeared, how many times in the past two years has the unit been for rent and mashes that up with property data – age, size, assessed value, date of last sale, how many units are owned by that owner and a dozen other metrics. Then combine this data with city order data, eviction data, tax delinquency and foreclosure information for the subject property. ¬†While we haven’t finalized¬†the algorithm, we are getting close.

Another fun project is trying to identify properties that will fail.  We look at when they were purchased, if they are tax delinquent, if they are on the DNS monthly reinspection list, if there are evictions, if the water bills have been placed on the tax roll, etc.

We started doing this with database tools, Python scripts and a lot of manual acquisition. ¬†We’ve found a lot better methods since.

One of the tools we use for data acquisition is import.io. Today I was in San Francisco for their Extract conference. ¬†The theme was “Data Stories Worth Sharing” ¬†There were 600 in attendance, with what appeared to be an equal distribution of data scientists, data analysts, and application developers. Oh and there was one landlord.

I wanted to attend the last two but either the timing was bad or the event was in London, which is quite a trip for a one day conference.  Today was so great I regret not attending the previous events.

If people thought I was a pain in the¬†butt before with my data obsession, I’ll be downright dangerous now. ūüėČ

If you want to play with the tools I play with, another one to look at is Mirador, a data visualization tool developed by Harvard and others primarily for things like Ebla research.  This is a radically cool tool  for seeing patterns in data.  Before that we were only testing patterns against assumptions.  Mirador points out the patterns for you.  

To visualize the results there is Tableau or for the more adventuresome there is a Javascript library D3

I think I should call this “Big data about small properties.”

If you are interested in data and rental hosung and want to talk about this more, drop me an email at Tim@ApartmentsMilwaukee.com

 

 

 

 

Apr 30

Over on the ApartmentAssoc Yahoo Group an owner asks:

I’m wondering if we would be discriminating to look for one person rather than two, whether a couple or whatever…because we are both over 55 and can’t take the noise we’ve taken through the years…even between couples yelling at each other. Do we have to declare the house 55 and older and find someone over 55 for the lower? ¬†I thought I read a post that said if you are living in the other unit in the house you can…?¬†

Seems like Fair Housing question month.

Is this your personal residents?  There is an exemption to the Federal Fair Housing law for owner occupied 1-4 family properties. It is called the Mrs. Murphy exemption.   The exemption does NOT apply in Wisconsin however.  

Wisconsin 106.50 

106.50  Open housing.

(1)‚Äā¬†Intent.¬†It is the intent of this section to render unlawful discrimination in housing. It is the declared policy of this state that all persons shall have an¬†equal opportunity for housing regardless of sex, race, color, sexual orientation, disability, religion, national origin, marital status, family status, status¬†as a victim of domestic abuse, sexual assault, or stalking, lawful source of income, age, or ancestry and it is the duty of the political subdivisions to¬†assist in the orderly prevention or removal of all discrimination in housing through the powers granted under¬†ss.66.0125¬†and¬†66.1011. The legislature¬†hereby extends the state law governing equal housing opportunities to cover single-family residences that are owner-occupied. The legislature finds¬†that the sale and rental of single-family residences constitute a significant portion of the housing business in this state and should be regulated. This¬†section shall be considered an exercise of the police powers of the state for the protection of the welfare, health, peace, dignity, and human rights of¬†the people of this state.

If you do not live in WI here is a good reference to state laws on the ‚ÄúMrs. Murphy‚ÄĚ exemption:

Even under the Federal ‚ÄúMrs.Murphy‚ÄĚ exclusion you are not permitted to advertise an otherwise discriminatory preference, so if you do not qualify under the housing for older persons exemption you could not, lets say, advertise ‚Äėadults only‚Äô or ‚Äėone person only‚Äô. ¬†If you do qualify you can advertise 55 and older.

I could not advise you on the housing for older persons question as it is not a issue that I deal with.  

My assumption is if one unit is vacant you do not meet the standard, but I may be wrong.  I would ask the Division of Equal Rights directly:

https://dwd.wisconsin.gov/dwdsendmail/mailtodwd.aspx

Sub (5m)(g) may offer some relief:

(g) A person may not be held personally liable for monetary damages for a violation of sub. (2), (2m) or (2r) if the person reasonably relied, in good faith, on the application of the exemption under this subsection relating to housing for older persons. For purposes of this paragraph, a person may show reasonable reliance, in good faith, on the application of the exemption under this subsection relating to housing for older persons only if the person shows all of the following:

1. That he or she has no actual knowledge that the housing is not or will not be eligible for the exemption.

2. That the owner of the housing has stated formally, in writing, that the housing complies with the requirements for the exemption.

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