As some of you may know, Southern California was recently dusted with a bit of snow! As some of you may also know, this is a blog devoted to property management and rental homes in Santa Clarita. So why do I care about a minor snow? Read on my friends!

When it comes to advertising a home, it can help to make people REALLY REALLY want it. Here in Santa Clarita, snow is an extremely rare occurrence. We don’t get to have snowball fights, make snow angels, or watch the flakes blow by the window very often. As a result, when we do get snow it is a fun time to remember!

When we head out to take photos of a listing, we try to capture the home in the best possible way. If it is a sweltering California summer and the home has a pool and spa in the back yard, guess what gets a LOT of attention in our ads? If it is fall and the home has great trees with leaves changing colors, those trees get some serious photographic “real estate”. I am sure that you can see where I am going with this, but if your home comes up for rent in the winter and you can supply us with a charming photo of the home covered in a blanket of snow with Christmas lights shining out across the frozen landscape and smoke drifting lazily from the chimney (flowery descriptions can be nice too), then guess what? I want them!  Obviously you wouldn’t want to include photos of you digging your car out of 6 feet of snow… but if you can create an emotional bond between your home and prospective tenants, then it will be much easier sledding, so to speak, to convert them into actual tenants.

If you can learn to play on the heartstrings of your customers, you will be much better off.  So get out there with your camera and risk frostbite to your extremities Maestro!

I recently read a little quip from a realtor I follow on facebook. He says “Sellers: buyers that are looking in the holidays are SERIOUS!” His point is that this is a great time to list your home for sale because the people who are looking to buy right now aren’t “looky-lou”s. I agree with him. And I will argue that the same goes for the rental market. Anyone currently looking for a rental is serious and many of the people looking right now will be moved into a place before the first of the year.

This year especially. Why? Because if they live in a home that gets foreclosed on they don’t have a choice. And from the looks of things, there will be foreclosures before Christmas. Now, could the federal government introduce or even pass legislation that would stall foreclosures until after the first of the year? Sure. They have certainly done equally drastic things in the past. But if you gamble that they will and they don’t you could lose much more than if gamble that they won’t and they do.

Last week was one of the hottest weeks in our company’s history when we talk about homes renting. We saw a flurry of applications with quick move-ins and many of our clients are now collecting handsome rent checks. Especially those clients who were aggressive with their pricing and presentation of their homes.

Now, I am going to offer a dose of realism. We don’t necessarily anticipate that our December numbers are going to beat our October or November numbers. But I do know this: they won’t be zero. In fact, we already have four homes where the leases have been signed with December move-in dates!

If you have thought about whether to buckle down and get that rental property ready for move-in now or whether to wait and be ready for the first of the year my advice is simple: err on the side of winning. Get it ready now and place it on the market, you might just collect a few thousand dollars more in 2010 and start 2011 with a head start!

Whoa!  As a rental home owner, that is not the headline that I would want to see.  Obviously news like that would be a bit of a shock to ANYONE that relies on an occupied rental unit to meet their monthly financial obligations.  So what could cause such a sudden drop in rental activity?  What could possibly be the root of such depressing news?  The holiday season!

Hopefully for most folks out there, the holiday season conjures up images of eggnog, family gatherings, great food, and other warm fuzziness.  I, for one, love the holiday season and all of the merriment that it brings.  On the other hand, owners of vacant rental properties have a reason to dread this festive time of year.  Why would anyone dread the flurry of fun and activity of the holidays??  To put it simply, no one wants to pack up their home and kids, schedule a move, and ask family members to lend a hand in getting all of their stuff into a new home during that time, thus effectively killing their good times!

The good news is that although the market does slow down just as much as I do after 10 pounds of turkey and cheese ball, there is hope!  This is the time for owners to seize the opportunity to price their rentals aggressively, thus placing their homes at an advantage over the poor fellow who is holding out for top dollar in a declining market.

When it comes to rental homes and rental income, math reigns supreme.  Let’s imagine that you have a home that will rent today for $2,000, but you really really want to hold out for $2,100.  Let’s also imagine that you are fortunate enough to get the asking price after 30 days.  Guess what?  By leaving your home vacant for that month you effectively passed up on $2,000 worth of rent.  As a result, it will take you almost two years with your tenant to make up that difference and break even!  And that is assuming that your tenant doesn’t decide to move at the end of his one year lease after discovering that he can get the same house in the same neighborhood for LESS money.  If that is the case, you can safely assume that the property will have at least another 30 days of vacancy at turn over.  If you haven’t broken even at that point, you have dug yourself even farther into the hole.

Do yourself and your wallet a favor.  When the holidays are around the corner, play it smart!  Then you won’t BE the poor fellow that is so wrapped up in worrying about his overpriced home that he completely misses out on the holiday merriment.  Price your home to move and enjoy your holiday!  Get yourself a prime spot under the mistletoe, and grab a huge glass of that tasty eggnog you market savvy king of the cash flow.

Drink up my friend!  You’ve earned it…

When I speak with new rental property owners, I am often asked if it is better to offer a home that is empty or a home that is furnished.  The short answer is that while there is a market for both types of homes, the market for an empty house is generally much larger.  Lets take a peek and examine the reasons!

The Fully-Furnished Home:

We, as a company, do have experience in dealing with homes that are fully furnished.  In fact, they are furnished right down to an exact number of forks and spoons!  When a tenant moves into these homes, they can literally just arrive with a suitcase of clothing and nothing else.  While that might seem a bit odd for those of us here in Santa Clarita, there are times when that arrangement might be exactly what the doctor ordered.  For example, we often rent these properties to families that are being placed by insurance companies after losing their own homes to disasters like fire, flood, earthquake, etc.  A large part of the demand for a furnished home has to do with location as well!  For example, tourist destinations like Lake Tahoe, Las Vegas, beach towns, and similar places will likely have more success with furnished homes because vacationers looking for vacation rentals generally don’t travel with all of their furniture.  Here in Santa Clarita, we don’t have a high vacationer draw other than Magic Mountain, and those folks generally just stay in a nearby hotel.

The Empty Home:

There are a LOT of great reasons to rent an unfurnished home if at all possible.  For starters, if you are managing your home yourself, it can be very, very tedious to go through the home and try to document the condition and number of every single item that is being left behind.  Is your stuff nice?  What if you leave a $5,000 desk behind and it gets a gnarly scratch across it?  What is it worth now?  Of course, you can always choose to accumulate a lot of cheap furniture just in case someone wants a furnished home, but where do you put it if someone wants the place empty?  I assume you would have to put it in storage…at a cost to yourself.

Obviously this blog is geared more toward rental home owners in Santa Clarita, but the universally applicable truth is that you need to know the market in which your home is located!  If you are in a hot destination area that is constantly packed with tourists, the furnished route may work out great.  If you are in a quieter more family-oriented area, your best bet for landing a renter who wants something fully furnished is to hope for a natural disaster to displace another home owner.* As always, the key to landing a renter quickly is to make sure your home appeals to as many people as possible!  If you were to tell us you HAVE TO rent the home furnished here in Santa Clarita, I would have to say, “prepare to wait a long time!”

*Classic obviously does not condone wishing for the misfortune of others.

It is surprising to me how many preconceived notions there are in the minds of owners and tenants when it comes to utilities and who should pay for them.  In fact, many owners believe that the law requires them to pay for the trash and water at the rental homes that they own!

While I admit that I am not familiar with every tenant law in every state, I do know that here in sunny Santa Clarita, CA an owner is not on the hook for ANY utilities!  In fact… I can think of very, very few people off the top of my head that volunteer to pay for anything but the H.O.A. dues and a gardener or pool guy.  Occasionally the H.O.A. will cover a utility or two as part of the agreement with the owner, but if that isn’t the case, don’t assume that anything is being thrown in for free.

There are several reasons that owners don’t want to pay for their tenant’s utilities.  What if their tenant is fond of 3 hour showers?  What if they prefer to run the air conditioner all day while leaving the windows open?  What about the heater?  What about lights?  What about TVs?  Computer equipment, etc.?  As you can see, if an owner agreed to pay for utility costs, they could potentially be on the hook for hundreds of dollars each month!

For all the tenants out there, the best idea is to ask which if any utilities and services are going to be included before you sign a lease. Especially if you are moving into a new area that may have different rental laws than the area that you currently live in.   Neither party likes to find out that there were assumptions being made that turned out to be inaccurate!

Bogus!  No one likes to have a non-paying tenant squatter.

Did you know that in California, you can’t just wait for a tenant to leave on a grocery run and have the locks swapped out?  If you do, YOU could be in some very hot water with the authorities.  Just like everything else in the Golden State, there are hoops to jump through and obstacles to overcome.  Even when you are clearly in the right!

The first step you should take after deciding to get a non-paying tenant out of a property is to to serve them a little piece of paperwork commonly known as a 3 Day Notice (cue ominous background music).  Here in California, not only do you have to serve the 3 day notice, but you also have to serve it in a certain way!  If you get all the way to court day and the judge finds out that you did not serve the tenant a notice properly, or did not serve them a notice at all, guess what?  You are back to square one my friend!  You get to start all over and get back in line for another shot at a court date in our swamped legal system.

In our effort to help the “do-it-yourselfers” out there, we have made it our mission as a company to ensure that everyone who stumbles across this blog will become better equipped to deal with their rental homes than they were before they found us.  Arrive at court prepared and you will improve your odds of success.  With that goal in mind, here is a copy of the three day notice that Classic uses.  Please feel free to use it and the included instructions if you need them!

3 day notice

Pets…  To truly understand the schism that has widened between the two parties to this debate, you should first take a look at both sides of the argument!  In this post, I will play advocate to both sides in an effort to come to the best possible conclusion.

Let me start with the tenant’s point of view. To many pet owners, their furry little bundle of joy is essentially a member of the family.  Especially here in Southern California where pet shrinks, groomers, and luxury boarding facilities abound!  To these tenants, the thought of giving up their dogs and cats in order to move into a home is absolutely ludicrous!  Often times, they will offer to have us inspect their current home for pet damage, show us photos of “Fluffy”, and swear on the graves of various ancestors…all to convince us that THEIR animal is different.  They can’t understand why anyone would hesitate to rent to them and their pets.

Now let us examine the owner’s point of view. Just about every owner that I have met with has heard some kind of horror story from a friend, neighbor, or family member about a renter/pet situation that went awry.  As soon as they hear that an applicant has a pet, their minds conjure up images of destroyed yards, urine soaked carpets, and smells that will linger for years.  It is just like the media…the happy news doesn’t get reported and spread!  In order for a story to be worth repeating, it has to be shocking or horrific in some way.  As a result, most owners won’t hear about the hundreds of times that we rent to people with pets and have nothing go wrong.

Now for some stats: We estimate conservatively (based Classic’s on hundreds of managed properties), that more than 85 – 90% of renters own some kind of cat or dog.  Here in Santa Clarita, the rental market has become increasingly competitive!  An increase in the number of available properties coupled with an unchanged pool of renters means that if you want to rent your home quickly, you need to appeal to the largest market share that you can.

In conclusion, I would encourage home owners to at least consider the prospect of renting to folks that have pets.  Is it because of some wacky idealistic world that I’ve imagined where people and animals live together in a dreamy rainbow filled wonderland?  Absolutely not.  As a rental home owner, I want to make sure that my home has as little vacancy as possible.  If my home comes up vacant, I don’t want to make a decision that will eliminate all but 10% of potential renters.  For the average home in Santa Clarita, one month of missed rent on a vacant home is about $2,000.  With dough like that on the line, every day counts!  After all, you can use every dime of the tenant’s security deposit to correct pet damage if need be.  In fact, it is completely acceptable to increase the rent for folks with pets, take a larger deposit (make sure you know the legal deposit limits), etc.  There are plenty of ways to safeguard your home and investment from the potential pet carnage!

Always remember…  Less vacancy means more money in your pocket!

“That house was perfect when I lived there!”

*

Ah…  If only I had a nickel for every time we have heard that!

When it comes to renting out your property, there are a couple of things that you should keep in mind when addressing the potential list of repairs that a tenant can generate.  First off, whenever a new occupant takes possession of a property, there are bound to be a few things that they would like corrected.  It is actually pretty surprising how much you can miss while living in a home.  Once a fresh pair of eyeballs arrive on the scene, they tend to be able to spot a lot of things that your brain may just subconsciously gloss over.

Secondly, things that you may not consider to be broken, may be considered to be broken by the rest of the world!  For example, you know that sliding door that you have to lift slightly, while pushing with 5 pounds of pressure, while standing on your head, and jiggling to open?  That probably isn’t going to fly.  How about that garbage disposal that you have squeezed 40 years of service out of?  Sure it still works “perfectly” as long as you don’t attempt to dispose of anything with a hardness above that of Jello.  Guess what?  It isn’t going to fly.

The bottom line is that it is in your best interest to keep your tenants happy!  Happy tenants mean long-term tenants.  Long-term tenants means less vacancy.  Less vacancy means MORE money for you.

Sometimes, the world continues to move and change even when we don’t want it to.  For example, I remember just in MY lifetime when the cost of gas was outrageous  at $1.29 per gallon.  I am sure there are several folks out there who remember when it was even less!  How about home sales?  There was a time when you could expect your home equity to double every 12 months like clockwork!  And now?  Well, you get the idea.

On the flip side, there are some changes that have made life much more convenient and have changed mankind forever!  For example, we complain about the cost of gas but where would we be without our cars?  You think a 2 hour commute to work is bad?  How about a two DAY commute on a horse?  How about the unbelievable medical advances that have been made over the past decade?  Would you rather go to a modern hospital or go to some guy that sticks leaches on your arms to let out the “bad” blood that he thinks is causing your health problems?  Some advances have been great!

In my estimation, the most groundbreaking and life altering invention of my time was the advent of the internet.  Never before has worldwide information been so readily available.  Instead of waiting days or weeks for news about something happening on the other side of the world, we can now have live access through video, social networking sites like Facebook, and more!  Rapid information access has never been this easy!

So how does this relate to companies these days?  As the internet continues to become the primary source of information, successful companies must constantly adapt to, and utilize the web to accomplish their goals!  In your quest to locate a trustworthy property management company or any other company for that matter, you may want to pay close attention to the way they present themselves online.  Is their website easy to use, easy to navigate, and clean-looking?  Or is it out of date, cumbersome to navigate, and unappealing?  Is the content relevant, informative, and well presented?  Or do you have to search hard for the answers you need only to be disappointed by a poorly written, half-hearted attempt at information?

It occurred to me the other day that if a company refuses to adapt to the needs and preferences of today’s market, what other areas have they fallen behind in?  Are they sub-par in the areas of customer service?  Accounting technology?  It certainly makes you think!

Here at Classic, we pay very close attention to the market and the requests of our customers and clients.  Not only does our adaptation of the latest technology make our jobs more streamlined, it also allows us to present the homes that we manage to potential renters in the best possible way!  Being the best property management company in Santa Clarita isn’t an accident!  It takes dedication to our customers, and a willingness to adapt to the ever shifting conditions and demands of the rental market.

The first most asked is “I lost my house, can I still rent through Classic?”. If you missed it, read it here. But this second most asked question is forefront on a lot of people’s minds. Why? Well, let’s see. Home values in Santa Clarita are down about 30-60% depending on the neighborhood and style of home, interest rates as of 4/6/10 are still crazy low, there seems to be a large pool of renters and there seems not to be a large pool of homes. It’s a valid question, “is now the time to buy?”.

Before I attempt to answer this question from my limited bank of knowledge, let me start by saying that this is an OPINION article. Not fact. No proven crystal ball sits on my desk. My track record isn’t staggering one way or the other. So take all of this with a grain of salt. Now, do I think I am right? Of course. Why would I post this if I didn’t? But if I were you, I would use this info as a piece of the overall pie of information keeping in mind that this is a property manager’s point of view (specifically a property manager from Santa Clarita, CA). It is industry and geographically specific and is biased by my knowledge and experience. I would encourage you to get some opinion from other sources as well, say, a financial planner, a mortgage lender or broker, a real estate sales broker, a pessimist, an optimist, etc…

Now, enjoy my opinion. I believe that we are at or very near (within 5%) the bottom of the market in most areas of Santa Clarita. I believe that we will remain here for some time, perhaps a year or more. I could leave it at that, but I am guessing that some engineer out there is going to want to know why and how I came to that conclusion. If that is not you, you can skip the rest of this post.

Here is some of the data that I used:

• In past declining markets, we have not dipped further than we have this time (granted, the reasons are different this time and there is a first time for everything).
• The fed is fighting tooth and nail to keep rates low until the recovery “gains traction”. (I realize that they have stopped their previous actions in the bond market, but I also believe that they are under the “belief” that the private money will show up. Way can go as far down that rabbit hole as you would like).
• I believe that we have seen the worst of unemployment in Santa Clarita (this is one with which I encounter the most disagreement, partly because it is perhaps the most subjective. Bottom line, this is my perception.) Again, we may hover at this unemployment level for a while, but I think we will not likely dip noticeably lower.
• For the buyer with a down payment of 10-20%, the PITI (principal, interest, taxes, and insurance) payments are darn near the same as the rent for a comparable property in most places.

Now, let’s assume that you assume my above assumptions are correct. What would you conclude? I can at least tell you what I conclude. I conclude that this is probably a good time to purchase an investment property in Santa Clarita and will likely remain so for a year or more. Could I be wrong? Well, I guess it’s possible. Okay, I’ll be honest. It’s not big of a stretch. If rates climb quickly, monthly payments will remain the same if the purchase prices dip which can make investors cringe. If unemployment takes a nasty turn in Santa Clarita, rents will dip which will pull sales prices down. (Oh, did I tell you that I believe rents sometimes drive purchase prices, not vice versa?) Honestly, there are probably lots of other factors that could make my answers wrong, but this is my post, so I get to post my opinion. You can post yours in the comments.