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hi this is Tom sedlak general manager of 33rd company property management thank you so much for taking some time out of your busy day to watch this video on residential rental properties and on property management this video will answer the question for you what is the rental market all about it will introduce you to the rental market to rental properties and investment properties and how to maximize your returns with the assets that you have in this five-part video on property management we're going to talk about all sorts of things relevant to residential rental properties number one how do we screen tenants including how to find considerate responsible adults who will take care of your property year in year out we'll talk about tax benefits which are significant you can depreciate your home and get a significant annual tax break for your rental properties we'll talk about marketing your property 33rd company has some of the best marketing available when it comes to residential rental properties we'll also talk about Lisa's what does the least look like how do you make sure you have a landlord friendly lease that will protect you and your property we'll talk about maintenance the episodic non-recurring and tenant requested maintenance that does happen from time to time and how do we handle it we'll also talk about managing tenants will also talk about the pet decision and how it affects your cash flow move-ins move outs and transitions damages should they occur at the end of a tendency and how we reconcile them and lastly we'll talk about how do we keep that home in top condition and ready to rent at the end of every lease thirty-third company has been around since 1993 we are a rock-solid management company and one of only 50 crmc residential management companies nationally we work with investors CPAs tax attorneys accountants and many individual homeowners who cannot sell their homes and want to convert them into and properties in fact we managed well over 100 million dollars worth of residential rental properties every day and we have the talent and experience needed to take good care of your largest asset the benefits of owning rental properties of course are excellent they include tax benefits current income equity build up long-term appreciation and immediate cash flow and we can help turn your liability into one of your greatest assets so sit back relax and enjoy the video and I think you'll come away much better educated about what the rental market is all about and what thirty third company can do to help you okay let's start with our first topic on screening tenants probably one of the most critical things that a management company can do for you as you will find out in part 2 of this video series there are a lot of tax benefits with rental properties but not having good tenants can take a lot of wind out of your sails with regard to your overall return thirty-third company takes tenant screening very seriously and in fact our results show it in 2010 we had no evictions at all on any of our managed rental properties and typically we have less than five evictions annually across the board on well over 100 million dollars of managed residential real estate how do we get there good consistent screening we first start by requiring that every adult 18 years or older it doesn't matter whether they're married or not they each have to fill out a rental application detailing all of their personal information including credit income and criminal history then each adult 18 years or older doesn't matter whether they're married or not we screen them we look for two-year rental history homeowner history we do a full landlord reference check the income level to qualify for the home is three times the rent in other words if the rent for a typical single family home is fifteen hundred dollars a month each individual adult has to make forty five hundred dollars a month in income in order to qualify the only exception we make is if they're married or they commingle their finances jointly then they're allowed to share their joint income to qualify for that income standard but if they're unrelated adults they each have to make forty five hundred dollars in gross monthly income because if a roommate leaves during the tenancy the other one has to be able to pay so that's a very important distinction our occupancy standards allow for a maximum of two people per bedroom so if we have a three-bedroom home for instance the maximum safe occupancy that we would allow during the tenancy would be six people two people per bedroom we also don't want to lease to more than three unrelated adults this is an investment property for you it's a market rate property it's not a rent share situation where none of the adults can individually qualify for the rent we want to make sure that you don't dilute the responsibility of the lease too much amongst too many unrelated people this is a very good standard that we use to make sure that the tenants are each vested in taking good care of the property during the tenancy the next thing we do is we pull their credit report for each individual adult we look at their full experience and we perform a discrepancy based screen we're not a lazy property management company we're not just going to say 6 50 and above approved 649 and below denied that's a terrible way to screen for tendency what we want to do is look at the discrepancies how many discrepancies do they have are there any trends in their discrepancies we look at all their payment history and their credit report how many issues do they have in their credit report other any NSF's for instance PL write-offs bankruptcies foreclosures we're going to look at all those things in the credit report because again we want to make sure that not only can they pay today but will they pay tomorrow and the next month and so on and are they fundamentally responsible so that they're going to be taking care of the home as well during the tenancy we'll also look at some things like their utility bills are they paying their basic utility bills on time if they're not going to pay their water bill on time it's probably a given that they're not going to be taking care of the home or changing their furnace filter or mowing the yard on a regular basis so again those are things that 33rd company can look at to make sure again we have the most responsible and considerate adults possible for your rental home you're extending credit when you're renting a home and screening for credit is a critical component of the overall process we also perform a comprehensive criminal check on each adult applicant we do a full local state and national criminal archive check a sex offender database check and a meth lab database check to make sure we have responsible individuals we don't want to hand the keys to your home over to someone that has a criminal record in fact we check every criminal database possible to make sure we only have the best tenants available with no criminal backgrounds that's the most important thing we do to make sure we found those most considerate and responsible adults for your home once we fully screened the tenants we can make limited exceptions to our screening criteria in limited circumstances exceptions may be made only for isolated credit or income issues and they'll never be made for criminal issues we would generally offer an exception provided there's a qualified cosigner for the lease if we do recommend an exception it'll also only be extended by mutual consent between the property owner and thirty-third company because it's the owner who will be taking on some additional risk and of course thirty-third company will be managing that additional risk for you we will never unilaterally deviate from the screening guidelines unless by mutual consent between thirty third company and the property owner so how would we mitigate risk for an exception generally if a parent or other responsible adult can cosign the lease for a residential home that's an acceptable way to mitigate an isolated issue we can also do a corporate lease in the case of an employee moving as part of a job relocation for an income discrepancy an example justifying an exception would be if we have for instance two unrelated adults both applying for the same home and one of them meets the necessary income requirement but the other one does not that's a fairly common situation the adult who doesn't meet the income requirement would need to have a qualified cosigner this is acceptable as long as the applicant's credit is fine and there is no criminal activity so that would be a prudent mitigated mitigation method in order to minimize the risk and allow the tendency to go forward for a credit problem we can also mitigate isolated events as long as the income requirement is met and there's no criminal record an example in this case would be a medical issue a potential client would call us up for instance and say oh we love the house oh my god get out of my way great home one small problem we've got a little bit of a problem with our credit there's a gap or cap in their medical insurance family emergency three hundred thousand dollars worth a chemo later the only way out for them bankruptcy sure enough when we pull their credit report Oh yep there it is 18 months ago bankruptcy from all of their medical bills their medical bills are discharged in bankruptcy but all their other bills paid and paid on time hey these are responsible adults they got tripped up in a life event they have no criminal record and their income is great they were just tripped up with this life emergency due to the medical issue as long as we recommend and the owner agrees an exception again could be made typically using a cosigner again this is another example in which a cosigner can be used to mitigate the issue and help these individuals as they try to rebuild their good name and their good credit also there are some benefits they probably won't be buying a home for several years so there's a good chance you will also have a long term tenant in place which means less turnover longer tendency and also it will increase your net overall cash flow this would be a win-win situation for both the tenant and the owner by finding a good tenant from the start it will lead to a multi-year tendency that will not have any turnover or vacancy and one that requires fewer leasing fees and advertising and that's the perfect stable tendency for a residential situation now with regards to rent collection 33rd company has a policy we generally don't allow tenants to pay rent directly all of our tenants through their lease agreement are required to sign up for ACH automatic direct debit right from their checking or savings account so on the first day of every month the rent comes out automatically this adds a discipline in the rent collection process it's a convenience for the renters but also for the owners because we also do automatic ACH distributions for the owners even a cosigner is required to sign an ACH form from his or her savings account so the cosigner would be responsible additionally for rent NSF charges repairs damages late fees you name it for the entire duration of tenancy and once they fill out their ACH form if we ever have an issue with collecting from a tenant and we're unable to collect the rent we can just simply debit the co-signers account hit the send button and we'll have the same day ACH draft coming right from the co-signers bank account that'll add stability and predictability to your cash flow obviously as an owner with an expensive asset and additional financial obligations like mortgages and taxes that you have to pay you want to make sure you've got stable cash flow in fact you want to make sure that you've got the most predictable rent payments coming in on a very regular basis you need to make sure that you're in the best possible situation and that's what 33rd company can do for you we structure leases so that you'll have the maximum probability of being paid on a regular and consistent basis once thirty-third company has found good responsible applicants for your property if they wish to commit in the home they first have to fill out what we call a pre lease deposit form and pay a pre lease deposit which is typically one month's rent we will not take the home off the market until we receive a pre lease deposit which is non-refundable as long as they're screened and that takes about 24 to 48 hours sometimes tenants can and do change their minds maybe they find a house in another city that's closer to work and they want to back out of their application or their pre lease agreement well guess what if they do that the pre lease deposit is non-refundable this money then would go to the owner you because now we've taken the home off the market and now we have to repost it advertise it show it could be another 30 days before we find another tenant with a pre lease deposit you're going to be protected you won't find yourself in a negative cash flow situation just because the tenant abruptly change their mind you won't have an extended vacancy or costs because the tenant has backed out after committing to the property initially so as you can see a pre lease deposit is a great tool we use to make sure that the tenant is committed and vested moving forward and they've got some skin in the game before we actually take the home off the market obviously this money goes to you and as I mentioned it happens very infrequently thanks so much for listening to this video on tenant screening we hope you can now better understand and appreciate all the work that a good property management does for you every day in screening and vetting applicants to make sure you've got the most responsible and considerate adults possible for your most valuable asset you