August 1st, 2011
A question was raised on one of the email list I subscribe to:
I need a set of screening criteria to use so I can weed out unpotential renters. Does anyone have a set they use. Also I am in Wisconsin, are their things you can and can not include?
In WI you cannot include any of the “Seven Deadly Sins” i.e. violations of ATCP 134.08. An overview of prohibited WI lease terms can be found here.
A screening criteria is not one size fits all. Rather you must formulate it match your property, the community the property is in (college neighborhoods have a different set of concerns from an upper income condo, which is different from rural farm housing, which is different from lower income urban areas…) , your management style etc.
A properly written and enforced screening criteria can save you some hassle if fair housing questions are raised. A poorly written criteria or one that is not evenly enforced will aggravate your problems if a fair housing complaint is filed.
For example a husband and wife who happen to be the same ethnic background as you apply. Your criteria is income must be 3 times rent. They make $2500 a month and want to rent your $950 three bedroom unit. You like them, they seem like nice people. So you accept their application even though they should earn $2850 to meet the criteria.
A month later a little green man from mars applies. His job with NASA pays $1200 a month. He wants to rent your $500 one bedroom. You say “Sorry, our criteria is income must be three times rent. You would have to make $1500 to qualify” Uncle Martin (the Martian from my favorite Martian) goes to HUD to complain. Through their investigation they uncover that you bent your rules for those applicants that looked and talked like you, but refused to do so for little green people from Mars. You are now facing a much bigger problem than had you had no screening criteria at all.
As to income criteria make certain that you don’t violate fair housing as to lawful sources of income. For example requiring a recent pay stub to document income is troublesome as there are many lawful sources of income that do not provide pay stubs. SSI, W-2, Child Support if applicant wishes to include it, retirement benefits, and many more. You must also include food stamps n.k.a SNAP in any income based criteria.
You can change your criteria at will, however all those screed after the change must be held to the same standards.
Our company’s criteria for rejection includes:
- First time tenants may be required to have a collectable cosigner
- Evictions within past 3 years
- Felony drug or violent crime convictions in 5 years
- Misdemeanor drug or disorderly charges in past 3 years
- Non verifiable income or insufficient income
- Non verifiable rental history or bad reference from any prior landlord
We have debated our criteria with neighborhood groups who would want a one strike and your out policy that would reject someone for having a misdemeanor possession charge twenty years ago, and with tenant advocacy groups that feel Charlie Manson and Attila the Hun both should be accepted. Neither group likes them, but neither could find legal fault with them either.
NOTE: Our criteria would be illegal in Dane County and Madison due to criminal background being a protected class in those communities.
Posted in Filling Vacancies, Tenant Screening | No Comments »
July 6th, 2011
A member writes on ApartmentAssoc@YahooGroups:
I’m curious how many of our members are aggresively buying right now. I just did a quick check of Milwaukee neighborhoods I already own in and there are lots of decent looking properties out there cheap.
You are correct, there are a lot of very cheap properties on the market. The lowest prices I’ve seen in my career (1977 to date) Money is also the cheapest I’ve ever seen. Vacancies are very low as well. The best time ever to buy… perhaps not.
So why aren’t these things flying off the market into the hands of new owners as soon as they are listed?
There are a few reasons.
- If you buy a foreclosure DNS (building inspection) will make you get an occupancy permit. Somehow this always turns into a painfully expensive experience, with you having to do a bunch of things that result in really limited benefit to anyone. We had one occupancy permit that the plumbing inspector made us replace the 1 1/2 drains with 2″. These were clearly original or near original pipes as they were steel with cast iron fittings. So $2200 later the tenant can drain their bathtub 10 seconds faster?
- Another issue for most owners is that it is a cash market today. Many banks will not even accept an offer that includes any financing contingency. If you can’t show you have all the funds in the bank the day you make the offer, oh well take a walk.This is all over the nation.We bought a commercial property in Florida last month. Original asking was 450,000, which was lowered after six months to $395,000. In the month prior to us purchasing the bank had an offer of $375,000 with the bank financing 70%, another offer of $350,000 with a 14 day third party finance contingency also based on a 70% loan. Both offers were rejected. We paid $210,000. So the bank could have gotten $165,000 more if they financed or $140,000 more had they waited 14 days for someone to get a loan commitment.
- Rental housing is harder than its ever been. This, despite some of the best occupancy rates in the last 25 years and as a result, rents that are finally rising a bit. Why?
Cost just keep spiraling out of control. I was talking to a good friend today who has been in the business for twenty years. Neither he nor I could figure out how any owners that have much of a mortgage could survive today.Look at a water bill on a duplex with NO USAGE. Today, it is 131.75 for three months. Add some sewer and water and your quickly up to $300 or $400.
Let’s say you pay $40,000 for the house. You’ll be taxed as though the house was worth $100,000-$140,000 or more. I bought one in 2009 for $20,000. The place was listed with a broker . I never met the seller prior to closing and have never seen him since. I appealed the $112,000 assessment. They lowered it to $104,000, claiming it was not an arm’s length transaction.
Maintenance costs have gone up as well. For example a couple of years ago you replaced one or two smoke detectors at $5 a piece. Today they have to be the more expensive hush units and you have to add a CO detector or two or three. But these are one time costs… right. On an average unit prep we have to replace far more than half the detectors.
- “Smart” economist are say the bottom in our market still is six months to a year away.
Posted in Investing, Strategy | No Comments »
July 5th, 2011
Many of you know how I raved about JOTT.com, a service that allowed you to call in from your cell phone and leave yourself a message. When you returned to your office you had an email with a fairly accurate text of the note you just left yourself.
This was one of the greatest boost to my field effectiveness in years. No more little scraps of paper, no more forgetting something – it was near perfect.
Then Bam! They discontinued the service as of May 3rd. I felt like I lost half of my brain.
Over the weekend I tried a new service. ReQall.com. I like it. In fact I like it a lot. It’s like having the other half of my brain back!
Posted in Office Effectiveness, Strategy | 2 Comments »
May 10th, 2011
Tax assessment appeal period will close on Monday the 16th at 4:45 PM.
You can get paper forms at the Assessor’s office Room 507, City Hall 200 E Wells, by phone at 414-286-3651or via the web by visiting: http://city.milwaukee.gov/assessor
On the bottom of the left hand panel click on “Ask the Assessor’s Office.” Then entire the name of the entity which owns the parcel, if different than your own name.Enter the address of the property, your email address, and in the “Question” box type “please send me an assessment appeal form.” You will get the form back via email, usually within one day.
I recommend all owners who feel their assessed values are above what they could sell today for the assessed value to file a timely objection. Read the rest of this entry »
Posted in Property Taxes | 1 Comment »
April 29th, 2011
Could you sell your property today for cash at the current assessed value? If not then you should consider appealing your assessment.
“An exercise in futility!” you scream, knowing the Board of Review is generally a rubber stamp for the Assessor’s Office. In general that may be the case. However our attorney and a few other smart lawyers believe the current MIlwaukee assessment process may be flawed as the Assessor refuses to factor the impact on values of the massive number of foreclosure, defaults and short sales in many neighborhoods. This raises the potential for a class action suit to remediate an intentionally flawed process. Read the rest of this entry »
Posted in Property Taxes | No Comments »