Real Estate Investing 101

Landlords Have Questions and We have Answers to FAQ

2011-06-01T14:26:45-07:00

If you have been or currently are a landlord you know a lot of questions come up. As they say, tenants do the strangest things and sometimes they are not pleasant.

When things turn a bit south, we turn to Andy Hull for answers. Andy is a well known and respected landlord attorney in the Phoenix area and his counsel is highly sought. Some questions pop up more often than others and we've collected a few of them, with Andy's answers, for your review and entertainment.

If you have questions of your own, Andy's team is there for you with quality answers that can only come from someone who has lived in the landord/tenant law trenches for many decades. Here is a link to Andy Hull's website.

FREQUENTLY ASKED LANDLORD QUESTIONS & ANSWERS FROM ATTORNEY ANDY HULL

I thought I would share some of the daily types of phone calls we receive at the office. Hopefully some of these legal questions will be items that come up in your daily dealings with your tenants and will be helpful.

Question: We did an initial walk-through after the lease ended and signed off on the walk-through agreement. We subsequently found additional damages that were not apparent when we did the initial walk-through. Can we charge for these?

Answer: You can always amend your Security Deposit Disposition Statement and send that to your tenants’ last known address with the new accounting of their damages or deposit refund.

Question: We have a tenant who we have served a 5 Day Nonpayment of Rent Notice, and the tenant still owes part of their deposit. The tenant recently moved in an unauthorized occupant with a Pit Bull. What is the best way to handled this?

Answer: You can serve multiple notices, so I would serve a 5-day Notice for Nonpayment of Rent and a 10-day Noncompliance Notice for unauthorized occupants and for having a prohibited dog breed. (We have previously advised to serve a 5-day Health and Safety Noncompliance Notice for the prohibited dog breed, but have found that certain Judges are wary of issuing an eviction Judgment on such a notice unless the dog has actually attacked somebody or another dog)

Question: Can we charge taxes on late charges?

Answer: Yes, you can charge tax on any income that you receive.

Question: We want to make our tenants give us a 60-day Notice to Move. Are we limited by state law that says a 30-day Notice must be given?

Answer: No, the state law says you must give at least a 30-day Notice to Vacate. Many landlords have gone to a requirement of a 60-day Notice to be received prior to periodic rental due date.

Question: Can we require our tenants to have renters’ insurance?

Answer: Yes. This is no different than renting a commercial space for your business. The landlord can always make a condition of the lease a requirement that the tenant maintain and provide proof of renters’ insurance.

Question: We had a spouse of a military man living at our complex and she has given us Notice that she is going to vacate so she can live with her husband. Does the military law apply to this?

Answer: Yes. The law applies to dependents of those in the military and they can terminate the lease with the 30-day Notice.

Question: We sent a tenant a 30-day Notice of Non-renewal for their month-to-month tenancy on March 3rd to be out April 3rd. Is this correct?

Answer: No. If the rent is due on the first, the 30-day Notice would have to have been received prior to the first to be effective for the end of that month. Your Notice of March 3rd would not be up until April 30, 2008. You should send a “corrected” notice notifying your tenant of the correct date.

Question: We charge one application fee for a married couple to run their credit but we charge individual application fees for non-married roommates. Is this in violation of the Fair Housing Act?

Answer: Probably not. You are treating everyone the same and there is really no evidence that you are discriminating against one of the protected classes. A marriage license binds the two married tenants as one community entity.

Question: Some guests of our residents did some criminal damage at our property. The resident was not present when this took place. Can we do an Immediate Eviction?

Answer: No. You must be able to prove that the resident knew or should have known the guests were going to do the criminal damage or that the resident participated in it. You can probably only serve the tenant a 5-day Health and Safety Noncompliance Notice that these guests are no longer authorized to visit or be on the property.

Question: We have a policy that we do not accept third-party checks. However, we have students whose parents pay the rent. Can we accept the parents’ rent check?

Answer: Yes, but I would do an Addendum to your Lease wherein you and the resident agree that the parents will be paying the rent, and you may wish to make the parents a co-signer or guarantor on the lease.

How to Calculate NOI on Investment Property

2010-05-24T17:21:16-07:00

Net operating income or NOI is one of the basic calculations used to to determine CAP rate and viability of an investment property. We have a page on Real Estate Investing 101 dedicated to the various real estate investment calculations. Now we are adding a nifty NOI calculator.

We found a NOI calculator on a site we were visiting and wanted to pass a link on to our readers. The NOI calculator can be used for single or multi-family real estate and has input boxes for most of the common costs. If you don’t see a box for a cost you are including, just put it is an unused box. Make sure and look at how the input box is calculated though. Some items are %’s, some are annual costs and others are monthly.

Here is a link to the NOI calculator.

Best to you,

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

Tales of The Strange Things Tenants Can Do.

2010-05-13T09:42:00-07:00

We have another story for our ongoing “strange and funny things tenants do” series. It was provided by Andy Hull, the well known Phoenix landlord tenant attorney. If you need legal help with an eviction or other landlord/tenant problems, Andy and his group would be happy to help. Just go to www.doctorevictor.com.

This week’s story:

One of our clients sent over an immediate eviction for threatening a vendor and a child with harm. When asked what evidence they will have for trial, the client sent over a CD of a conversation their tenant had with a cable company. The rambling 26 minute conversation included the tenant identifying herself and her Apartment number just prior to threatening to stalk the employee, blow up the phones, wrap the cable cord around her child’s neck until she was dead and enough colorful profanity to make this attorney blush. Needless to say that the tenant violated the Landlord Tenant Act.

Best to all of you and hope you have a great day.

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

By the way, if we can help you with your real estate investments in the Greater Phoenix market, please let us know. Your success is our biggest reward.

New Arizona Immigration Law and Landlords

2010-05-11T09:32:00-07:00

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

New Real Estate Investors Be Careful

2010-05-10T09:57:39-07:00

We've been getting a lot of calls from people new to real estate investing. Many are well informed and have realistic goals while others are relying on information that is just plain wrong.

It is important, if you want to be successful, to obtain as much "real" data and information as possible. Often this is hard to obtain because the person providing the info has something to gain if you buy a rental property from them and ethics are not the bedrock of their business practice.

As an example, I received a call this past week from someone who was told by a developer that one bedroom units in the Scottsdale area rent for $900.00 to $1200.00 per month. My gut told me this was not probable... maybe two or three bedroom units but not one. I check the ARMLS stats since February 1st 2010 and found most of the 1 bedroom condos in mid to north Scottsdale rented in the $700.00 range and none over $900.00/month. I am not saying the real estate developer was lying, heaven knows that has never been done, yet the facts do not support the claim.

The moral of this tale is to be careful and do your own due diligence. If someone promises you something, get it in writing. Learn how to perform market analysis or hire someone whose motivation is your success, not his or her pocketbook. Also, success is in the details. Forgetting to include expenses such as vacancy periods, marketing costs, maintenance, HOA fees, taxes, management costs and such can ruin a good day.

As they used to say on a TV cop show... be careful out there.

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

Rental Property and City Sales Taxes

2010-05-03T11:06:26-07:00

Many cities in the Greater Phoenix market are going after landlords for failure to pay sales tax on their rental properties. As a landlord, you are required to have your rental properties descinated as such in the tax records.

Valley cities, in an effort to find tax revenues, are combing information sources to find homes incorrectly identified as owner occupied when in fact they are rentals. Lnadlords may have to pay back taxes, fines and such when caught.

A recent article in the Arizona Republic talks about how Valley cities are taking action. Here is a link to the article for your edification.

The vaious Valley cities have different rules for landlords reporting rental properties, so you would be well advised to check with the tax officials in the city where your properties lie and make adjustments as required.

Best to you,

The Urban Team... your investment home real estate team.

Greater Phoenix Rental Market Showing Strength

2010-02-26T13:46:49-07:00

I was in a workshop with Cromford Report guru Mike Orr a couple days ago. He mentioned ARMLS data shows strength in the Greater Phoenix rental market. Specifically, he said the active rental listings during 2009 hovered between 8000 & 9500 rental listings. Today’s ARMLS numbers for all types of rentals popped up at 6339.

Mind you, not all rentals are on ARMLS. Many rentals are advertised using other media, yet I believe the ARMLS numbers show a trend. I have put called into AZCentral.com and Rent.com to see if they have similar figures. When I get them I’ll update this post.

In the meantime, let’s look at some ARMLS single family home rental numbers; The data is pretty telling. The table below shows the number of active rental listings as of this post, as well as the number of signed contracts year-to-date in 2010.

NOTE: ALL DATA IS FOR SINGLE FAMILY HOMES ONLY.

City	# of Active SFH Rental Listings on 2/26/2010	Signed SFH Rental Contracts Jan/Feb 2010
Valley Wide	3352	3263
Phoenix	670	668
Chandler	142	266
Glendale	136	177
Peoria	143	156
Anthem	51	71
Scottsdale	623	280

As you can see, the number of active listings is about 50% of the signed contracts numbers. This indicates the inventory is turning over approximately every 2 months.

Chandler and Anthem are showing great strength with the inventory turn over in the 1 month range while Scottsdale is relatively sluggish with a turnover rate of approximately 4 months.

Provided that the ARMLS numbers represent a general market trend, landlords are seeing good news for the future. Add to this the number of home owners being displaced by foreclosure or short sales and the 2010 rental market is looking good.

If you would like us to run this data report for you, we’d be delighted. We can provide results by city or zip code.

Best to you,

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

Information is deemed reliable, but not guaranteed. Data provided by ARMLS.

How to Reduce and Deal With Criminal Acts By Tenants

2010-02-11T11:08:52-07:00

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