Real Estate Investing 101

New Arizona Immigration Law and Landlords

The controversial Arizona Immigration Law may or may not take effect. However, it is prudent landlords know how the law could effect them. We turned to landlord tenant attorney Andy Hull to get some insight. Below is Andy’s perspective on the subject. If you have any questions, Andy is the man to ask. Just send him an email at: hull@doctorevictor.com.

Some controversial immigration legislation as everyone knows most recently was passed into law. In looking at the new law from a landlords perspective there appears to be only a few sections of the law that property managers and/or landlords should be aware of. This article will cover briefly the sections that you should be concerned with.

Under Article 8, Enforcement of Immigration Laws, A.R.S. § 11-1051, the new law states that law enforcement can identify anyone suspected of illegal immigrant status. The law enforcement officer, without a warrant, may arrest a person if the officer has probable cause to believe that the person has committed any public offense that makes the person removable from the United States. In other words, the officers could be responding to a normal police call on your property but yet have the authority to stop your residents and ask to see their documentation that entitles them to be in the country. They can also verify any claim of residence subject to a judicial order issued pursuant to a civil or criminal proceeding in our state.

Another section that applies potentially to landlords is A.R.S § 13-2929, Unlawful Transporting, Moving, Concealing, Harboring or Shielding of Unlawful Aliens. The statute is somewhat vague in that it says that it is unlawful for a person who is in the violation of a criminal offense to conceal, harbor or shield or attempt to conceal, harbor or shield an alien from detection in anyplace in this state. This would include any buildings or any means of transportation. If the individual knows or recklessly disregards the fact that the alien has come to, has entered or remains in the United States or encourages or induces an alien to come in and reside in this state, they would be subject to being guilty of a Class 1 Misdemeanor and subject to a fine of at least $1000.00. If the violation involves 10 or more illegal aliens it then becomes a felony and the fine is $1000.00 per each alien that is involved. The statute doesn’t say that it is illegal to rent to individuals, but the implication seems to be that the landlord should have a rental criteria in place that requires proof of the resident being in the state legally.

Also related is A.R.S. § 23-214, that requires after December 31, 2007, every employer, after hiring an employee, shall verify the eligibility of the employee through the E-Verify program and shall keep a record of the verification for the duration of the employee’s employment or at least three years whichever is longer.

Whether or not the new law will stand the test of it being Constitutional remains to be seen. However at this point in time all landlords should at least be aware of the above sections.

Best to you and keep safe out there.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

How to Reduce and Deal With Criminal Acts By Tenants

Crime and criminal acts by tenants is a growing problem for landlords. Meth labs, distribution of drugs, and other unsavory activities cause damage and can create a myriad of problems for a landlord or property manager.

One of the full-time property managers in our brokerage, Martha Zabala, gave me a copy of an addendum she uses with her rental agreements. Martha has a reputation for being a tough, yet fair property manager who likes to cross all the "t's" and dot all the "i's". Thus, it comes as no surprise she is ahead of the curve on a problem that is likely to get worse until the economy heals a bit.

Martha says this document has helped execute quick evictions on tenants who violate its conditions and makes those who have evil plans think twice before renting your property.

Below is a link to the "Crime Free Addendum to the Rental Agreement" she uses. You'll want to run it by your attorney to adjust it to conform with laws and code in your state and city. This particular document was drawn up for use in Arizona and the language and references are those of Arizona.

Download CRIME FREE ADDENDUM TQ RENTAL AGREEMENT.doc (19.5K)

We hope this information helps keep your real estate investments safe and happy.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

Section 8 Housing and the Benefits to Landlords In Arizona

Section 8 Housing is one of the rental vehicles available to landlords. In our opinion, it has received an unwarranted bad reputation. Many feel the program will bring bad tenants and problems when in fact, most landlords who utilize the program are happy.

The city of Phoenix Housing Department, the largest provider of Section 8 housing in Arizona, have a web site dedicated to information about this program. Among the many topics are the benefits to landlords that we have summarized below.

There are several benefits to landlords who participate in the Section 8 Housing Choice Voucher (HCV) program, from free advertising for your unit to annual inspections of your property.  There are no fees or charges assessed to property owners for services provided under the Section 8 HCV program.  Also, there is no application process required for potential landlords.

The Housing Department does require that all owners joining the Section 8 HCV program register their property with the Maricopa County Assessor’s Office Residential Rental Registration program.  The Housing Department also encourages certification of properties in the Phoenix Police Department’s Crime Free Multi-Housing program.

 

How the Section 8 Housing Choice Voucher Program Works

The Section 8 Housing Choice Voucher (HCV) program provides assistance, in the form of a Voucher, to qualified families, seniors and persons with disabilities for rental units chosen by the tenant in the private market.

The city of Phoenix Housing Department provides monthly payments directly to participating property owners to offset the cost difference between tenant payments and unit rent.  Tenant rent payment amounts are determined based on their adjusted income.  Program applicants may choose from a variety of housing options including apartments, condos, duplexes, single-family homes and townhouses.

 

We encourage interested landlords to talk with the appropriate people in the City of their interest. If you have properties in the Phoenix area, you can visit the City's section 8 housing web site for more information.

 

We are planning a meetup.com group meeting in March that will focus on Section 8 housing in the Phoenix area. Visit our meetup.com group page for meeting announcements.

 

Best wishes for success

 

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

November Rent Rates Fall Slightly In Phoenix Area

According to rentBits, a rental search engine for apartments and rental homes, the average rental rates for Phoenix have seen a slight decrease November over October. Collectively, across all bedrooms (3,541 listings), the average rental rates has decreased from $788 in October to $786 in November.

"Demand for rentals in Phoenix has not caught up with supply." says Dan Daugherty, CEO of rentBits. "This is putting slight downward pressure on the rental rates in this area."

In most other cities across the US, rental rates for apartments are seeing a slight decrease for the year. Much of this is due to a decrease in demand. Many renters for apartments are either moving into a single family home rental, moving back in with Family or sharing rooms with friends. This transitional period has put downward pressure on most apartment rental rates.

Source: http://rentbits.com/rb/t/rental-rates/phoenix-arizona

Hope you have a great weekend…

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Visit our other blogs and sites:

Search for Homes in Phoenix... an incredible property search site
Short-Sale-Phoenix.com… Info site for short sales in Phoenix
Urban Life … the downtown and central Phoenix real estate Blog

How Do I Determine Rent Rates For My Vacant Home?

The question of how to determine rent rates comes up often, especially in a market as saturated as the Greater Phoenix area. You could gaze into a crystal ball for the answer or read at few ideas we've collected over the years. Your choice.

Ask The Vacating Tenant:
Your current tenant can be a wealth of information. Tenants often know the market better than landlords. They often have friends who are renters in the area and probably monitor the rent rates in the neighborhood.

Knowledge is Afoot:
Walk the neighborhood. You'd be amazed how much you can learn by walking around the area your place is located. Rental signs on other properties often have amounts and certainly a phone number you can call. If people are outside working on cars, playing and such you can ask them what rents are like in the area... don't wear fine duds unless it is appropriate for the area.

Keep Your Comps Relevant:
Some people use apartment rates to determine single family home prices and visa versa. They are not the same animal. At the same time, it can help give you a sense of the competition.

Is Your  Phone Ringing:
A silent phone is often the sign of too high a price. Be proactive and lower the price in small increments often until you start getting calls.

Greedy Can Kill Over Time:
Turnover is one of the biggest causes of lost cash flow... unless you get the tenant from hell you Craig's Lists all your cabinets, appliances and such. If  a tenant feels he or she is paying way above market value they will not stay long. They'll shop around and find a better deal. Since loss of rent, turnover repairs and marketing are costly, you may want to balance those costs in our rental rates. In a competitive market you may not want to do annual rent increases. This may be tough for the old timers who are used to 3 - 5 percent increases each year but we're not in Kansas anymore Dorothy.

Check Online Comps:
Craig's List and Rent.com can give you insight into current market values. Stop at your local grocery store too and pick up  a few of the rent magazines. This is something you should do every 3-4 months so you keep your pulse on neighborhood values. If rents have dropped in your area substantially, you may want to lower the rate to encourage your tenant to stay another year or two. Remember to keep you eye on the long term value of renters who stay with you for many years.

Know Thy Neighborhood Property Managers:
Do you know any property managers in the area. sure they might be the competition and they also can be invaluable help. A cup of java or a happy hour toast can be just the right thing to nurture a relationship.

We hope these ideas are helpful to you. Keeping your investment rented with quality tenants is the name of the game and proper pricing plays a major role.

Best to you,

Landlords... Make sure You Conduct a Move-in & Move-out inspection

Most landlords know the importance of conducting move-in and move-out inspections. Some who are new to the business may not and will likely learn the hard way.

The inspection, with documentation is extremely important for all parties. If a problem erupts it will be a battle of he said, she said and landlords often loose in court.

The move-in, move-out inspection is relatively simple. the landlord and tenant walk the property and the tenant notes any items he or she feel are broken, damaged, missing, in need of repair and such. A move-in/move-out form should be used. Several such documents can be found on the internet and downloaded for free or a small fee. In addition, it is considered wise to take pictures and/or video of the premises as well. We'll talk more about that below.

We are told it is important the tenant fill out the form so there is no question of impropriety. They should also sign and date the form. This form is used prior to occupancy and at the end of the lease agreement and can be used by both parties to establish pre-exiting conditions and/or damage during occupancy.

Attorney Andy Hull says the following about using the form:

In an attempt to avoid being sued, or at least to properly defend any lawsuit regarding the deposit, the landlord should always have the move-in/move-out inspection form, the names of the individuals who did the move in/move out inspection, and the supporting documentation (invoices, photographs, vendor statements, etc.)

Today, many landlords take video during the move-in and move-out inspections as a way to document the condition of the property. We are told it is important to date stamp the video and show the property address and unit number at the beginning and end.

Some say the inspection is a CYA thing. We disagree. We feel it is intended to create a clear understanding between parties regarding the condition of the home or apartment. Thus, performing a thorough inspection is simply prudent.

If you have more questions about this process, we recommend you talk to a competent attorney who specializes in landlord/tenant law. In Arizona, we really like the people at Andy Hull's firm and have found them to be quite helpful. They can be reached at 602-230-0088.

We hope this post has been helpful and we truly appreciate you visiting Real Estate Investing 101. Come back often as we update this site on a regular basis.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

 

 

Common Mistakes Landlords and Investors are Making on Rentals

I was interviewed by Melissa Blasius at News Channel 12 a couple days ago and asked to discuss common mistakes we see investors make as they enter the rental market.

We are seeing a number of issues with many new investor/landlords. The most common are:

• Failure to conduct background screening of potential tenants.
• Many landlords are waiving security and pet deposits.
• Few investors write a business and marketing plan. They don't treat the project like a business.
• Some investors do not have sufficient cash reserves to cover non-occupied times or necessary repairs. We recommend 6 months of operating capital. Do not use credit cards for this.
• Many underestimate hold times on property. In the current market, close to 10 years may be necessary to reap optimum rewards.
• A lot of landlords do not realize it can take 3-5 months to find a good tenant in the current market. Vacancy periods are long right now due to the large number of available homes. Turnover is high as well.

The interview was part of the ten o'clock news program and carried as a news article on AZCentral.com. Below is the video feed for the interview. Hope you enjoy it.

Gene Urban & Ron Urban
The Urban Team at Realty Executives
602-234-5777

Landlords... Do You Know Your Fair Housing Law? Violations are a serious offense.

We just attended a fair housingseminar our brokerage sponsored. It reminded us that we have not talked about this on Real Estate Investing 101. Our bad.

The fair housing act was signed into law by President Johnson back in 1968 and has been amended a few times since. Fundamentally, the law prohibits discrimination against people buying, selling, renting and financing housing based on a number of criteria. We will be focusing on the rental side of the law in Arizona, however, Fair Housing is a Federal Act and applies to all States.

The Arizona Attorney General's office oversees violations to the Fair Housing Act. Below is a summary of the Act and some of the considerations a landlord needs to understand.

When based on race, color, sex, religion, national origin, familial status or disability, the following actions by housing providers or professionals are prohibited under the Fair Housing Act:

• Refusing to show, rent or sell a house, lot, or apartment.
• Refusing to negotiate the rental or sale of a house, lot, or apartment.
• Charging more to buy or rent a house, lot, or apartment.
• Requesting a larger security deposit.
• Telling a person that the property is no longer for sale or rent when it really is.
• Advertising that a certain type of person is wanted to sell or rent the property.
• Denying services that are available to others.
• Insisting that a family live in a designated area.
• Denying access or use of the facility or service that is normally available with occupancy of a property.
• Telling owners or renters to move because the neighborhood is being integrated by minorities.
• Suggesting that a person move to a specific area or property.
• Refusing to permit reasonable accommodations for assistive aides, assistive animals, parking, or physical modifications to existing properties.
• Failing or refusing to provide wheelchair accessible housing in new construction of multifamily dwellings (i.e., accessible environmental controls, accessible routes into and through the dwelling, usable bathrooms, etc.).
• Engaging in retaliation or intimidation against a person who complains about housing discrimination.
• Harassment such as racial and sexual slurs or threats.

As you can see, there are a number of ways a landlord can violate fair housing and this list is just the beginning. A.G. Goddard says most violation are due to ignorance of the law or simply not understanding its applications. We recommend landlords take continuing education classes to better understand the law and learn about specific case studies.

In Arizona, housing providers who would like to attend a free training on the Fair Housing Act and their responsibilities and rights under the law may contact Joy Johnson, Fair Housing and Technical Assistance Coordinator, (602) 771-1026. Other States offer similar courses for your edification.

Failure to comply with fair housing laws can come with stiff penalties. Below is a partial list:

• Civil Action fines up to $11,500 for the first offense and up to $50,000 for repeated offenses
• Unlimited punitive damages if the case proceeds to federal court
• Compensation for actual damages, including humiliation, mental distress, and loss of housing opportunities.
  

We've included a link to the HUD web site page on the Fair Housing Act for your reading pleasure.

Happy studying...

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

Don't forget to take a look at our sister site, Urban Life, where we focus on downtown and central Phoenix.

The above information is provided as educational and does not constitute legal advise. Legal questions should always be addressed to a qualified legal professional.

Urban Team Hosts Sucessful Real Estate Investor Seminar & Discussion

Just a quick post on last night's Arizona residential real estate investor panel discussion. First, let us thank all those who came to the gathering. It wasn't a huge crowd, just the right number to have valuable discourse.

Gene Urban led things off with an update on the Greater Phoenix residential real estate market. The focus was on REOs and short sales. The fundamental market shift has been diminishing bank-owned listings with  a rise in short sale listings and actual closed transactions.

If you've read our blogs for a while, you know we have not been big fans of short sales. The odds of closing escrow have been pretty miserable and there are a lot of variables. That said, we are looking at them a bit more favorably. Many of the banks have finally gotten their act together on short sale transactions and more are closing escrow. There are still a lot of loose ends and concerns,  but the odds of closing escrow are much better and may be worth the hassle.

The stats on closed short sale transactions for the Greater Phoenix market are very interesting. During the first three months of 2009 only 1527 short sales made it through the bumpy process to completion. However, this past month, July 2009,  1304 short sales were reported "Sold" on ARMLS... that's a big performance shift.

Next up on the panel was Jennifer Ridenour, a ten year veteran of property management. She talked about the current state of the rental market. Her main topics were tenant acquisition and retention.

One area of concern is amateur landlords who are taking tenants without background checks and waiving part or all deposits. This puts a lot of pressure on the pros who have learned better. Oh well... the times are a changing. She recommends continuing tenant screening and perhaps be more open to tenants whose credit issues are primarily foreclosure related.

Tenant retention was another topic. Landlords are having to be more accommodating than in times past. A little honey helps keep happy tenants. We wrote a blog post on this topic a few weeks back you may want to take a look at...how to reduce vacancy rates on rental properties. 

Judy Giel with MetLife Home Loans was next up and talked about changes in lending practices. The focus of her talk was on condo loans. Last March Fannie Mae changed the loan guild lines on condos and FHA has fallen in with the tougher standards. The most problematic area has to do with HOA's. Fannie Mae won't buy loans on condos where over 15% of the homeowners in a complex are behind on HOA dues. As you can imagine, a lot of properties have more than 15% of the home owners behind on their dues.

Judy's take on the condo market is that loan aquisition will continue to  be difficult, resulting in a softening of condo sector. Cash investors may be able to pick up some incredible deals in Q4 2009 and into 2010. She advises very strong due-dilligence on HOAs.

The evening ended with a general Q & A session. A lot of good questions and answers where shared.

Best to you our loyal readers... we appreciate the time you spend with us.

Ron Urban & Gene Urban
The Urban Team at Realty Executives
602-234-5777

What To Do With Personal Property Abandoned By a Tenant... ARS 33-1370

The question of what to do with property left behind by a tenant comes up pretty often. ARS 33-1370 of the Arizona Residential Landlord Tenant Law is quite specific. A wise landlord should know this legislation and follow it fully. We've provided the step by step procedures outlined in this legislation for your review.

If you have specific questions, we advise you contact an attorney who specialized in landlord/tenant law or send us an email and we'll have it reviewed by one of our legal friends.  Happy reading.

ARS 33-1370
D. After the landlord has retaken possession of the dwelling unit, the landlord may store the tenant's personal possessions in the unoccupied dwelling unit that was abandoned by the tenant, in any other available unit or any storage space owned by the landlord or off the premises if a dwelling unit or storage space is not available. The landlord shall notify the tenant of the location of the personal property in the same manner prescribed in subsection A of this section. E. The landlord shall hold the tenant's personal property for a period of ten days after the landlord's declaration of abandonment. The landlord shall use reasonable care in holding the tenant's personal property. If the landlord holds the property for this period and the tenant makes no reasonable effort to recover it, the landlord may sell the property, retain the proceeds and apply them toward the tenant's outstanding rent or other costs which are covered in the lease agreement or otherwise provided for in title 33, chapter 10 or title 12, chapter 8 and have been incurred by the landlord due to the tenant's abandonment. Any excess proceeds shall be mailed to the tenant at the tenant's last known address. A tenant does not have any right of access to that property until the actual removal and storage costs have been paid in full, except that the tenant may obtain clothing and the tools, apparatus and books of a trade or profession and any identification or financial documents, including all those related to the tenant's immigration status, employment status, public assistance or medical care. If provided by a written rental agreement, the landlord may destroy or otherwise dispose of some or all of the property if the landlord reasonably determines that the value of the property is so low that the cost of moving, storage and conducting a public sale exceeds the amount that would be realized from the sale. F. For a period of twelve months after the sale the landlord shall: 1. Keep adequate records of the outstanding and unpaid rent and the sale of the tenant's personal property. 2. Hold any excess proceeds which have been returned as undeliverable for the benefit of the tenant. G. If the tenant notifies the landlord in writing on or before the date the landlord sells or otherwise disposes of the personal property that the tenant intends to remove the personal property from the dwelling unit or the place of safekeeping, the tenant has five days to reclaim the personal property. To reclaim the personal property the tenant must only pay the landlord for the cost of removal and storage for the period the tenant's personal property remained in the landlord's safekeeping.

H. In this section "abandonment" means either the absence of the tenant from the dwelling unit, without notice to the landlord for at least seven days, if rent for the dwelling unit is outstanding and unpaid for ten days and there is no reasonable evidence other than the presence of the tenant's personal property that the tenant is occupying the residence or the absence of the tenant for at least five days, if the rent for the dwelling unit is outstanding and unpaid for five days and none of the tenant's personal property is in the dwelling unit.

Once again, we hope this helps you be a more successful landlord.

Ron Urban & Gene Urban
The Urban Team at Realty Executives