Tuesday, March 4, 2014

6 Fair Housing Violations Every Landlord Should Know and Understand

Whether you’re a new landlord, or professional property manager, knowing and understanding Federal, State and local Fair Housing laws is critical. A small violation of one of these laws could wind you up in court, or even worse, ruin your business. So, we’ve put together a list of common areas where landlords and property managers find themselves violating fair housing laws.
Fair Housing Laws
Fair Housing Laws originated from the Civil Rights Act. These Federal laws make it illegal for property owners/ managers to discriminate on the basis of race, color, religion, national origin, sex, disability or familial status. In addition to Federal fair housing laws, landlords need to be aware of state and local fair housing requirements, which prohibit discrimination based on factors such as source of income and sexual orientation.
Common Violations
1. Tenant Screening
This is one of the most common areas in which fair housing claims arise. Landlords need to ensure that they have a written policy in place for screening and approving prospective tenant applications. Landlords need to outline set guidelines relating to occupancy, availability,screening criteria (credit standards, employment history, past landlord referrals, background check etc). Questions on the application should not ask about physical or mental disabilities, religious background, race or familial status. On the other hand, landlords are allowed to ask questions relating to prior tenant record, evictions, and bankruptcy. The guidelines should always be approved by a lawyer, and strictly adhered to in all situations.
2. Reasonable Accommodation
It is a violation of Fair Housing laws to refuse to make a reasonable accommodation in rules, policies, practices or services when such an accommodation may be necessary to afford a handicapped individual equal opportunity to inhabit a dwelling. The reasonable accommodation must come at the request of the applicant. A landlord must make exceptions to their rules/standards in order to accommodate a resident’s disability. These accommodations should not cause “undue” burden on the landlord. If it does cause an undue burden the landlord may deny the tenant’s application. In the case a reasonable accommodation is deemed to cause an undue burden, the landlord should send an explicit written notification to the resident explaining why. Landlords should always wait for a request of reasonable accommodation. Offering it beforehand could be considered discrimination and grounds for a fair housing claim.
3. Occupancy
Occupancy limits are written different in every city. For example, in Boise Idaho, a maximum of 5 unrelated adults are permitted to share a unit. However, Bend Oregon has no limit. Further, landlords need to be mindful about how they market rental occupancy limits. For example, if a landlord states that they can only rent to a family of four because it is only a 2 bedroom dwelling, they could be discriminating based on familial status. As a result, landlords need to check their local occupancy laws. There are different occupancy limits based on whether or not individuals are related or unrelated, and some cities remove all occupancy restrictions on families. This is an area where due diligence is very important.
Landlord Fair Housing laws
4. Source Income
Landlords need to be mindful that some states have additional state and local fair housing requirements that must be adhered to in addition to federal laws. Currently, in 12 states it is illegal for residential landlords to discriminate against applicants based on source of income. For example, a landlord may not refuse to rent to an individual who’s source of income is unemployment benefits. This is not to be confused with income amount. Landlords are still allowed to deny tenants that don’t make enough money to pay for rent. Typically, a landlord will require applicants to show proof that their income is triple the amount of rent. Make sure to check with an attorney regarding your state’s laws regarding source of income.
5. Marketing Practices
Landlord marketing practices are crucial for finding tenants and filling rental properties. However, landlords need to be mindful that marketing materials should only be used to showcase “property features” and amenities, and not contain content outlining screening requirements. For example, landlords should never post things such as “great for elderly couples” as this could be deemed discriminatory against young single people. Do not make reference to nearby landmarks that may be racial, ethnic or religious in nature, and don’t use location references such as “Hispanic neighborhood”. It is also a good practice to include copy at the end of all marketing materials that indicate compliance with fair housing laws.
Landlords can evict tenants for legitimate reasons such as non-payment of rent or property damage. However, it could be illegal to evict a tenant that has not violated the lease agreement, or it is an unprecedented event. Ask yourself, have you evicted tenants for the same behavior before in the past. Landlords need to make sure that they are applying the same written policies to all residents. Any apparent favor could be construed as discrimination in the courts.
Final Note
Every landlord should be mindful of fair housing laws in every practice they encounter on a day to day basis. Whether that is marketing rental properties, screening applicants, providing accommodations for handicapped individuals or evicting troublesome tenants. Landlords should also develop strict written policies for all operational tasks and apply them equally and consistently to all residents and applicants. Finally, if you’re a landlord, have a lawyer review all your documentation and policies.

Landlord Insurance Policies – Is Your Property Covered?

All property owners need to make sure that they have the right type and amount of insurance for their property. The notion of property insurance gets more complex for landlords, due to the wide variety of insurance policies needed to ensure sufficient coverage. Unfortunately, many landlords elect the cheapest coverage, choosing to pay the lowest premiums possible. Although this may seem like a smart short term decision to save money, what happens when there is a fire or a tenant injures themselves on site. Without the right types of insurance, or enough coverage, such events could be devastating for any property owner.
We’ve put together a short list of rental and tenant insurance policies that every landlord would be smart to consider.
Physical Assets:
This outlines how much coverage you have in case your physical assets are destroyed. This is listed on your policy declarations page. For example, if you have a 3,000 square foot house and it costs $100 per square foot to rebuild, you should have $300,000 in physical asset coverage. The insurance will only cover the structure, not the land. Landlords will also want to calculate the total value of all non-attached structures such as a garage or appliances and then add this to the required coverage amount.
Now, take the above example. If you had a tragic house fire that caused $200,000 in damage, yet you only had $100,000 in coverage, how much would you need to pay? The answer, you’d get $100,000 from the insurance agency, and then you’d be responsible for the other $100,000. As you can imagine, many landlords that opt for cheap plans with low coverage often get burned (no pun intended) in such situations.
Renter’s Insurance:
Landlords should also check and make sure that tenants have a Renter’s Insurance policy in place. This protects tenants from theft, fire and water damage, as well as liability. Another bonus of having renter’s insurance is that any related claims will go against their insurance first, not the landlord’s main policy. Renter’s policies are very affordable, typically ranging from $100-$150 per year.
General Liability Insurance:
This is third-party coverage. Essentially, it reimburses property owners if they have compensated another for their losses. General liability doesn’t cover intentional wrong doings such as arson, but it usually covers negligence and general liability issues. For example, if your tenant’s dog bites your next door neighbor’s child, you’re going to be sued first. If this happens, your liability insurance will pay for a lawyer to defend you in a legal dispute up till the coverage limit. Any additional expenses beyond the coverage limit comes out of the landlord’s pocket.
Another important point to consider is contractor liability insurance. In order to reduce general liability insurance premiums, landlords should require all repairman and outside contractors working on their rental properties to provide proof of adequate liability coverage and worker’s compensation. Even better, require each contractor to have at least one million dollars in liability insurance. Taking this step will ensure maximum protection against liability law suits.
Landlord insurance policies.
Loss of Income Clause:
This clause protects landlords if their property is damaged to the point where it is no longer fit to rent. As we all know, if there are no tenants renting a property, landlords are losing a ton of money. A loss of income clause will cover the income lost during such a period of vacancy up until the coverage limit, while the house is under repairs.
Umbrella Insurance:
Even with all of these different types of insurance, sometimes it isn’t enough. It’s wise for landlords to purchase Umbrella Insurance. This provides property owners with excess liability insurance coverage beyond the limits provided in a general liability policy. Landlords are able to increase their liability coverage in increments of $1,000,000 for $300-$500 per year depending on the provider. Calculate the net worth of you assets in order to make sure you have adequate coverage. If not, invest in an umbrella policy.
Landlords need to sit down periodically (every year) and assess the type and amount of coverage they hold. Don’t fall into the trap of choosing policies with the lowest premiums, especially as your property portfolio expands. In fact, I’d recommend property owners invest in an adequate umbrella policy and take the necessary steps to ensure that all tenants and external contractors have a set amount of liability and renter’s insurance in place.
There are many other forms of insurance that are worthy of discussion in this article. What would you add here?

Starting an LLC separate business entity can reduce risk for real estate investors

Holding commercial or residential real estate property includes assumed risk that must be managed effectively. Landlords can be subjected to many forms of litigation, ranging from personal injury to environmental contamination. Not to mention the inherent financial risk that comes with any form of investment (financial risk exposure typically remains the same with the exception of “non-recourse” loans).  As a result, I recommend that every real estate investor sets up a separate business entity to hold their property portfolio. The entity best suited for real estate is an LLC, as corporations will be subjected to double taxation.
Why Choose an LLC?
An LLC will provide landlords personal liability protection for business debts and claims. This means that if a business cannot pay a creditor – such as a supplier or bank  – the creditor can’t go after an LLC member’s house, car or other personal assets (this will be different for different states.  Idaho residents have approximately 100k in protection on their personal residence, everything after that can be exposed.  This has nothing to do with the LLC though.  The purpose of the LLC is to isolate the risk.  As I mentioned before, investors usually have to assume personal risk in order to borrow money.  There are always exceptions to this rule as is the case with a “nonrecourse” loan). Therefore, LLC members only stand to lose the money they have invested in the separate LLC business entity.
There are some landlords out there that may be considering setting up a separate S or C corporation for their real estate portfolio. I would not recommend this. One of the main reasons real estate investors should avoid S and C corporations is double taxation.
Double Taxation: Corporations receive double taxation on dividends. The corporation pays corporate tax and the individual share-holders will pay taxes on the dividends.  On the other hand, an LLC is a ‘pass-through’ taxation entity – the profits and losses pass through to the owners, who then record them on their personal tax statements. Each LLC member must make quarterly estimated tax payments to the IRS.
Limited Liability Exceptions
As with corporations and other business entities, LLC members are not given absolute protection. Members will not be protected under the following circumstances:
-          Personally injures someone
-          Personally guarantees a loan for a business in which the LLC defaults
-          Fails to deposit employee taxes
-          Reckless actions on behalf of the business
-          Treats LLC as an extension of personal affairs. This is a big one as a court will likely conclude that the LLC doesn’t really exist and that members are conducting business as individuals and will be held personally liable for their actions.
Additionally, members can operate their business in a way that causes a “piercing of the corporate veil”. This means that members of the LLC are not performing the expected actions of an LLC – such as regular member meetings, creating a formal operating agreement, opening a separate business checking account, registering the LLC properly with the state, or obtaining a federal employer ID number.  Piercing the corporate veil will bring personal liability risk. Make sure all official LLC registration requirements are fulfilled and that your internal operating agreement in no way violates LLC code.
LLC Separate Business Entity reduces risk for real estate investors
Multiple LLCs for a Property Portfolio?
Many lawyers and accountants recommend that investors set up a separate LLC for each investment property. Multiple entities prevent liability from one property spilling over to another investment property. For example, a tenant sues you for $600,000 for a claim against house A, which is only worth $500,000. If a landlord was holding all of their properties under a single LLC entity then the additional $100,000 liability could be applied against house B, even if house B had nothing to do with the claim.
On the other hand, if the landlord has a separate LLC set up for each of its properties, the creditor could only go after house A. House B would be protected from any external liability (provided the corporate veil had not been pierced).  The downside of this is several LLCs means taxes and bookkeeping become increasingly complicated.
Another good way to protect property against liabilities is to have comprehensive insurance coverage. This includes general liability insurance, physical assets, renter’s insurance, umbrella insurance, and even an adequate loss of income clause. Insurance can also protect personal assets in the event that the LLC’s protection is ignored.
All real estate investors should consider setting up a separate LLC business entity in order to protect themselves from personal liability. However, limited liability protection is not absolute. If members act in a way that pierces the corporate veil (as mentioned) then the LLC will dilute their limited liability protection. For those investors with multiple property holdings, it is recommended that they set up a separate LLC entity for each property. This will help prevent liability spilling over from one property to another. Finally, reinforce LLC protections with a comprehensive insurance plan that includes at least general liability, asset protection, and added umbrella insurance. It is highly recommended that you also require renter’s insurance for tenants as well as a loss of income clause that will keep you afloat in the event of unforeseen property damage.

New Craigslist Rules Hurt Real Estate Ad Listings

Thanks to recent rule changes to Craigslist’s “housing” and “for sale” sections, property owners are no longer able to post enhanced listings.  This is big news as many landlords and property managers rely on enhanced listings to generate tenant leads.
What changed?
The recent changes may seem minor, but they have had a big impact on the real estate industry. Companies that once relied on Craigslist to generate a steady stream of leads have seen this referral traffic all but disappear.  The changes:
-          Craigslist no longer supports the <img> HTML tag. All images in Craigslist ads must now be uploaded through its native image posting tool. A maximum of 12 images can be posted.
New Craigslist rules have changed the layout of enhanced listing ads
-          No support of <font>, <div>, <table>, and <span> HTML tags.
-          Live linking has been disabled. You will no longer be able to link directly from Craigslist to your website or dedicated rental listing landing page. Now, users must copy and paste the URL into the address bar in their internet browser.
-          Tracking codes have been disabled. Users won’t be able to track which specific ad listings are generating the most leads or conversions on their site.
-          You can no longer set up tables or style the formatting of listing ads. It’s purely text based.
-          No more logos, which will reduce a company’s branding capabilities.
How Should We Respond?
-          Use professional photos. Now that users are no longer able to include slideshows of high quality images, they need to make sure all uploaded images showcase the property’s best amenities. Consider contracting a professional photographer.
-          Include bullet points in your ads so that consumers can easily browse and locate the key amenities of the property. For example:
  • Washer/dryer
  • Off street parking
  • Central air
  • New hardwood floor
-          Clearly mark the URLs in your ad. Don’t bury them in the middle of a paragraph. Clearly explain why users should click on the URL (where they will be taken, and what information they will find). For example, visit our website to see a virtual tour of this apartment. Limit the number of URLs on the page.
-          Publish your pet policy. A study by RentLinx showed that online ads that include a pet policy generate five times more leads than ads that do not include a pet policy.
-          Include a phone number for your leasing office and make it prominent.
-          Capitalize your brand name in the post. This will help increase brand recognition, and likely increase the number of direct traffic leads (those typing a company’s name directly into the address bar).
Craigslist is still a great source of leads for real estate professionals and property managers. The recent changes to the ad listing rules have not changed the way people perceive Craigslist. Many consumers still flock to Craigslist to find rental properties and homes for sale.
Craigslist is still a competitive landscape. So users will need to make sure that they are taking a strategic approach to optimize their ads and make them stand out from the competition. This is more difficult with the newly imposed text-based layout of the listing ads, but still doable. People posting ads will need to make sure they are including high quality images that showcase a property’s key amenities, include a prominent URL that users can copy and paste into their browser, include content in a bulleted format so that content is easily readable, include a pet policy and make the brand name stand out.
Users must remember that Craigslist is still free. Even if ad performance has reduced by 75%, it is still an incredibly cost-effective way for businesses to generate leads and brand awareness.
What other Craigslist workarounds did we miss?

10 Digital Marketing Channels for Property Management and Real Estate Professionals

Every property manager and real estate professional understands the importance of attracting and retaining quality tenants. But, not everyone knows how to do it. In this post we are going to explore the digital marketing channels that will help you generate leads and reduce rental vacancies. In no particular order:
Responsive Website: your website is viewable on desktop, tablet and mobile devices. Today, close to 50% of mobile search is performed with local intent. This means that if you own a website that is not viewable on mobile and tablet devices you are missing out on a ton of online traffic, and conversions. There are two options for building a mobile web presence.
1. Build a single responsive website.
2. Build a dedicated mobile website.
For most property managers and real estate professionals I would recommend building a single responsive website. It is cheaper, and can be done relatively quickly (by a developer) using a responsive web template from a site such as Themeforest.
Search Engine Optimization (SEO): This is the process of optimizing your website to rank high in search engines for targeted keywords. This is a critical element of any digital marketing strategy. Ranking highly for targeted keywords such as “[location] house rentals” and “[location] apartment rentals” will ensure that your website is receiving a steady stream of targeted online traffic – filling the top of the sales funnel. Today’s major search engines (Google, Bing and Yahoo) are using over two hundred on-page and off-site ranking factors in its search algorithms. As a result, it is recommended that property management and real estate professionals consult with a SEO professional.
YouTube: is now the second largest search engine in the world, and is a must for marketing rental properties. Property managers should have a branded YouTube channel set up, and be using video content on rental listing pages to provide virtual tours to prospective tenants. This will increase online conversion rates.
Pinterest/Instagram: visual content is now king. The photo-sharing platform has over 70 million active monthly users. The site allows users to post and re-pin content to topic boards. Property managers can post pictures of rental properties and embed a source link. This way, if a user sees a property they are interested in and clicks on it, they will be taken to the website. Pinterest users are highly engaged, so this is a good channel for generating inbound traffic (leads) to your site.
Google Plus: is now the fastest growing social platform, and critical for local SEO performance. Google is using Google Local Business Listing information to generate its highly coveted “seven pack” of local search results, as seen below:
Property Management Marketing Best Practices
Further, user engagement (+1’s, mentions, number of people adding you to their circles) on the social channel is now one of the leading ranking factors for local SEO. In fact, if a person adds you to one of their circles on Google Plus they will see your website ranking high in search for targeted search terms. This is known as Google Search Plus Your World (SPYW). I will be dedicating a post to this topic shortly.
Facebook: with over one billion users, it’s impossible to look past facebook. This property is crucial for building a brand and managing the tenant relationship. Property managers should provide engaging content to users, such as rental tips and how-to’s, showcase new rental listings, provide valuable local industry information, run contest, giveaways and referral campaigns, demonstrate community involvement, answer questions and keep tenants updated. You can also leverage facebook ads and promoted post to increase reach and content engagement. We’ll dive deeper in a future post.
Pay Per Click (PPC): Reaching the first page of Google is a long term strategy, sometimes taking months, if not years to outrank competitors for highly competitive keywords. As a result, integrating PPC into your digital marketing strategy is recommended. PPC is a great way to generate an immediate presence on the first page of Google for targeted search terms, building brand awareness and increasing inbound leads to your site. When setting up a PPC campaign you will have two ad options:
1. Text ads – these are the ads that you see at the top and side of the search results pages, as seen below.
Property Management marketing
2. Display ads – these are ran through Google’s content network, and usually include images with text overlay. These ads can be placed on targeted sites that are Google partner sites. For example, you could create an ad with a picture of a 2 bedroom apartment rental that is only shown to people living in New York City on the Zillow website, searching for “New York City apartment rentals”. This ensures you are reaching a very targeted audience, increasing CTR and conversions.
Internet Listing Sites: posting rental properties on sites such as Zillow and Trulia is an effective way to get your rentals in front of a large audience.
Craigslist: even with the launch of Craiglist’s new rules, the site is still a great free resource for generating leads.
Email Marketing: Collecting email addresses is a great way to nurture leads. For example, each month we send out an email to current and prospective tenants showcasing new rental listings. If a tenant is close to lease renewal or is actively looking for a rental property we are often able to showcase our properties right when they are ready to convert. Even if they are not actively looking at the time, they might know someone who is, and can share the email with them.
Online Reviews: Encourage residents and landlords to leave reviews on sites such as Yelp, Google Plus (50%) and Bing Local. The quantity, velocity and frequency of online reviews are now a top five local SEO ranking factor. Also, having at least five online Google Plus reviews will make your site eligible to receive rating markup in the seven pack as seen below. This can increase click-through rate in the search engines by as much as 30%. It’s a great way to stand out from your competition. In fact, 70% of consumers consult online reviews before deciding with local business to choose.
Property management marketing
Measure: this is the most important element of any digital marketing strategy. Connecting your site with a free tool such as Google Analytics will allow you to understand on-site user behavior and measure the ROI of your marketing efforts. You can also setup custom goals and tracking events to monitor how many people are viewing rental properties, versus how many actually applied. You can also look at site traffic, referral sources, device preference, conversion rates and a whole lot more.
Leveraging a variety of digital marketing channels is now more important than ever. Building a responsive website is the first step to increasing online traffic and local SEO performance. Incorporating a diverse content mix is also critical for building user engagement and making it easier for leads to convert. In the coming weeks we will be exploring each of these digital channels in greater depth.
If you would like to receive our 10 part email series exploring property management digital marketing best practices please enter your email address in the investment news section in the footer below.

Orange County Real Estate Report February 2014

Orange County Real Estate – Are You Ready For Some Real Estate?

Now that the Super Bowl is over (congratulations to the Seahawks) the real estate market is ready to take off.

Active Inventory  -remain on the lower side
Already this number is starting to tick up day after day, however this is VERY city specific so while some cities may be seeing a dramatic rise in inventory others are still very low. Overall we expect this number to just climb upwards from this point through the summer.


The chart below represents single family homes, town homes & condos for all of Orange County.
orange county real estate report feb 2014.004
Sales Prices - continues to hold firm
Prices seem very committed to holding their gains over the past year and we only expect Orange County Real Estate prices to trend upwards going forwards.
The chart below represents all single family, town homes, and condos in all of Orange County.
orange county real estate report feb 2014.002
Months of Inventory - rose a bit as expected
This rise is really a seasonal factor, expect to see if start to fall over the next few weeks


The chart below represents all single family, town homes, and condos in all of Orange County.
orange county real estate report feb 2014.005
Volume - feel sharply
Let’s chalk this one up to post holiday hangover and pre Super Bowl preparations. This number ought to climb steadily and impressively over the next few weeks.
The chart below represents all single family, town homes, and condos in all of Orange County.
orange county real estate report feb 2014.003
Days to Sell - rises on us yet again 
Another seasonal factor, expect to see this number starting to trend down as the weeks go by.


The chart below represents all single family, town homes, and condos in all of Orange County.
orange county real estate report feb 2014.006
What all this Means to:
Sellers –  The slow days are most likely over for Orange County Real Estate sellers. Traditionally our market really starts to take off after the Super Bowl so expect to see rising volume as more and more people house hunt heading into summer.  If your curious how much your home is worth in this market simply fill out this home valuation request and I will gladly email you your free home value report.
Buyers - Buyers really had a great couple of months but tradition and statistics say that window is closing. If volume rises as expected buyers negotiating strength will erode quickly and price appreciation may price you out of the home of your dreams. So if you have been considering buying it might be best to do it now rather than wait.   If your  thinking about buying feel free to contact me and we can go over what’s going on and what your options are.
For more information or more details on a specific city please contact me direct at 949 599 6860, thanks Sherry
Find out how much your home is worth now with our home value email report

Understanding Orange County Real Estate Statistics

“There are three kinds of lies: lies, damned lies and statistics.”
Mark Twain
Orange County Real Estate statistics and general real estate statistics litter the internet and print publications offering the public some insight into what is going on in the market. The emphasis here is SOME insight. Depending on what information is included & excluded, how the statistics are calculated and most importantly how far removed the analyzer is from the market all affect what assumptions are reached and what numbers are reported.
The first thing to look for is what is actually being calculated in the Orange County real estate statistics you are looking at. All good analysis begins with identifying what you are analyzing, if you see a chart or graph that does not disclose what is being examined then the information will be of limited actual use for you because you can’t decide how relevant that information is to your particular situation. The reason being is the number of options for consideration which include:
  • Single family homes
  • All detached homes (including detached condos)
  • All residential homes including single family townhomes and condos
  • All residential real estate including land and mobile homes
  • All real estate including all residential and all commercial
How the data is calculated is the next factor to consider. Is it an average where the extremes on both ends carry more weight or is it a median which protects you from the extremes contaminating your results. Depending on what your looking out there are times when the average provides a more realistic number, such as days to sell and other times when median provides a more realistic number such as price.
Lastly who is doing the analysis carries a great deal of weight on the usefulness of the information and most important the ultimate conclusions reached through the analysis. The more removed the person is from the trenches of Orange County real estate generally the less valuable their analysis is bound to be simply because they are lacking information you can only acquire working hands on in the market. Statistics are nothing more than a measure of the immediate past and without the working knowledge of what is actually occurring in the market right now the analysis risks missing key aspects of consideration.
Remember always take Orange County real estate statistics with a grain of salt and always keep in mind that real estate is ultimately a hyper local industry so realize that what is a trend overall may not be a trend for your city or neighborhood. If you have any questions about Orange County real estate or real estate statistics feel free to contact me, I am here to help.