Key Components of Quality Property Management

Mike: Hey everyone, it’s Mike Hambright from FlipNerd.com. Welcome back for another exciting Expert Interview show, where I interview awesome guests from across the real estate investing industry to help you learn and inspire you, and hopefully teach you a thing or two.
For today’s show, I’m joined by Kevin Ortner, he’s the President and CEO of Renters Warehouse, one of the fastest growing property management companies in America, where they manage over 10,000 properties nationwide through their professional landlords.
And generally speaking, other than maybe for Kevin, property management is one of those things that real estate investors kind of love to hate. It’s bitter-sweet, it’s got to be done, it’s a necessary evil. But I think you’re going to find today that Kevin has a lot of things to teach us about doing this right, the importance of quality property management. So whether you choose to manage your own rentals or not, there is a considerable amount of things that you need to do right. And if you do them wrong, it’s going to cost you a lot of money.
So today Kevin is going to share all the critical things that you need to do well in property management, whether you do them yourself or whether you outsource that to someone else.
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Hey Kevin, welcome to the show.
Kevin: Thanks for having me, Mike.
Mike: Yeah, glad to see you. And before we get started, I want to learn a little bit more about you and then maybe you can just tell us a little bit about Renters Warehouse. I know you guys are adding offices all over the country. I know a number of people that are using you for property management in a lot of markets. But maybe you could start by telling us your background and how you found your way to where you are today.
Kevin: Yeah, absolutely. So I’ve been a real estate enthusiast and really a hobby investor for really since I was probably 18 and graduated from high school. And in fact when I went to college, I moved from Minneapolis, Minnesota where I am today, down to Phoenix, Arizona, Tempe, went to Arizona State and bought my first rental. And I was to move into, but I rented all other rooms to my buddies, and so I was able to live rent-free through college by buying it and charging enough rent through everyone else. So that was kind of my first foray into investing, so to speak.
But I also . . . I had another passion which was flying, and I ended up, actually after I graduated college, became a corporate pilot and flew corporate jets all over the country and that was a fantastic experience. But on the side I was always dabbling in real estate, buying properties. I really loved it. And in fact while I was still flying, I actually started the first Renters Warehouse franchise in Phoenix, Arizona, kind of ran that, got that going on the side the same time as I was financed.
Good thing I did. Six months later I found myself out of a job during the recession, the real estate downturn. The company I was flying for went bankrupt, and I found myself laid off, looking for work. And since I’d gotten involved with Renters Warehouse on a franchise level, talked to Brenton Hayden, our then founder, and he said, “This is perfect, I need some help growing this business, come work with me.” That was six-and-a-half years ago, it was just him and I in an office, we managed about a hundred properties.
And fast-forward today, we’ve got a team of 250-300 people across the country, 29 offices, most of them franchises, but also manage here locally in our Twin Cities office in Minnesota, about 6,000 homes and 12,000 homes nationwide. So we’ve gone from nothing to quite the force in property management over the last six years.
Mike: And it’s interesting too because there’s been this movement of franchise-type offices and stuff that are running which is historically not too different from just regular real estate investors, a lot of mom and pops. And there’s a lot of kind of organization and systems coming into an industry that historically really doesn’t have a lot of that, right?
Kevin: Yeah, absolutely. Property managing, you can find them all over the place and a lot of folks do it as a job or kind of as a hobby or as a favor, and believe it or not, in today’s world there’s still a lot of folks doing it on spreadsheets or back of napkins or paper and by pen.
And what we’ve done different, what we’ve tried to do different, being a couple of young guys growing this business, was really making a technology-enabled business. We use a lot of technology to assist us. In fact we own some of our own proprietary technology for the listing, advertising and rental side of the business. A lot of property management software we use it on the other side.
And so we just really use that technology to also manage a lot of properties in one office very efficiently with very fewer people than before, but still be able to provide a fantastic experience for our clients and our homeowners. It’s kind of taking an old industry to kind of catch it up with what we’re doing today.
Mike: I think hopefully what’s going to come clear today, I have rental properties, I don’t manage them myself. And I just don’t understand why, unless you’re in that business, why you would want to do that. There’s a bunch of stuff that I don’t do because I’m not an expert at it. And I think hopefully today, some of what you’re going to teach us is the things that are really important that have to be done right.
And I think what a lot of people forget about, that manage their own rentals, especially if you just have a couple and is your opportunity cost, of your time, what it really costs you, if it takes you two weeks to turn a property around instead of two days. And just all those things that ultimately cost you as a property owner, money. And I think a lot of times people kind of forget that, oh yeah, I’m not as effective on that, I’m not as effective on that, I’m not as effective on that, and all of a sudden if you’re like, I don’t want to pay a property manager 8% or 10% or whatever that number might be.
But if you could really kind of lay out these things, it’s probably costing you more to do it yourself in a lot of cases for a lot of smaller investors, than it is to just partner with somebody who knows what they’re doing.
Kevin: It’s a matter of where you want to focus your time. And at Renters Warehouse we charge flat fee for our management or $80 a month which turns out to be $2.63 a day. That’s like less than your Starbucks cup of coffee, right? And it is affordable at the end of the day, and we’re going to get into this I think later today in the show, but it’s really important to look at, how long is it going to take me to do something, how well can I do it, versus if I hire a professional to do it. It’s just like trying to draw up your own legal paperwork or give yourself the flu shot. Some things you want to outsource.
So that’s really [inaudible 00:07:35] kind of putting the grand picture around it. Using your talents. A lot of our people who own real estates or own multiple homes and allow themselves to have investment property, got there because they’re good at something and they’re able to make a good living doing something else. Focus on that, continue to do . . .
Mike: Absolutely. So let’s talk a little bit about, we’re going to kind of go through a list here of things that a really important, that are outside of the obvious of finding the tenant and collecting rent. But those are some things we’ll talk about. But why don’t you get us started on what are the most important things in terms of property management? Again, whether people want to do it themselves or not, just it has to be done. So let’s go through that list.
Kevin: It all starts with the tenant. And just like you mentioned, a lot of people think, I’m obviously going to need to find a tenant. But it comes down to, you have to find a quality tenant. I know way too people who are trying to do it on your own, or even some of our clients we work with, that want to take the first tenant that comes their way.
As being licensed in the business and things like that, we’ve got a lot of future responsibility to our clients to let them know what’s happening on their property, present applicants to them and often times we’ll say, “This may not be the best one, but this is the person who applied [inaudible 00:08:46] situation.” And they’re like, “Well, I’m glad I got somebody, let’s just take him.” Well, let’s look back at the situation and see what’s going on.
So that’s really typical. One is, take your time and do your research. And it’s important to do thorough background screens of people, actually run a background check. I run into still today many investors who go off that gut feeling. And maybe sometimes gut plays into things. But it’s really important to actually run a background check on somebody, find out what their credit history is, their income verification, things that you think really seem intuitive.
But a lot of people get caught up in the moment of “I really need to get my house rented out because it’s vacant and I’m not making the rent, I’ve got a mortgage payment. I need to put somebody in there.” But really trying to jump in and just throw anyone in or a family in, is going to cause you much more heartache down the road when you have to go through maybe an eviction process or get them out of the house and then re-rent it and fix it up.
So very important to really make sure you take your time, do quality screening. Whether you’re doing it yourself or you’re using property management for that, make sure they’re well vetted and they’re good candidates for your home, because somebody who’s maybe great for your house isn’t great for someone else’s home and everyone’s got different situations. So really it does start there, because everything else we’re going to talk about next becomes so much easier. But it really starts with finding quality tenants and really do a thorough job screening them.
Mike: Can you maybe share a couple of things that you should look for, that maybe are not totally obvious, and maybe even share some insights into how important credit or bad credit is. Because you and I probably both know, and I don’t know what your stance is, so I don’t know what you’re going to say on this, this is like a softball. Is that sometimes there’s people that have horrible credit because something happened, but they have great earnings. They can pay, they just have something in the past. I don’t know what your stance is. But maybe to share a couple of things that are important that aren’t like overly obvious to people that are listening.
Kevin: That’s actually a really good question because people ask this all the time and it used to be even more prevalent a couple of years ago when we had so many people come out of the foreclosure situations and the short sale situations. And what I’d like to do is make sure my background reports don’t just give me a credit score. It actually gives us the full credit report. Because that allows us to know why the score is what it is.
There’s a big difference between somebody who maybe went through a foreclosure or a short sale the last couple of years and has a bad credit score, versus someone who has never paid a bill on time in their life, [inaudible 00:11:03] credit score.
And so this was really a big deal two, three, four years ago when we’d have wonderful families, wonderful people, or would see wonderful people apply for a home, run their background, run their credit, find out they maybe have about 500 credit score, 450 credit score. But being able to look at the report, showing that, you know what, they paid everything on time, their whole credit history, but they went through this foreclosure situation.
So being able to learn what it was and so many great people and with great intentions and great financial ability got put in that spot through a tough loan or changing payment or they had to relocate, they couldn’t sell their home, whatever the reason might be.
And those are actually some of the greatest tenants because those people really honestly they’d like to be homeowners. They probably want to be a homeowner again. I found they generally take great care of the property, they never really called, and they wanted to move into a property, live there for five years, rebuild their financial life and move on. [inaudible 00:11:57].
So that’s an example of something that might not stick right out at people.
Mike: And it could be somebody that they couldn’t afford that $300,000 house mortgage, but they can afford the $150,000 house rent. Sometimes you’ve got to take that into consideration too, right?
Kevin: Exactly. So kind of being able to really dig into that credit report is important and so that’s why it’s such a great question and just really getting a feel for what exactly the situation is. To your point there’s people who maybe make $15,000 a month, $20,000 a month that had a business venture go bad. As a small business person myself, there’s plenty of things that we have to personally guarantee and if something happens or goes bad, I’m going to certainly have bad credit. But perhaps you have something else that you’re still on your feet. And so it’s really important to really dig in and understand that person’s situation.
And on the flip side, you might have someone with fantastic credit, doesn’t make a lot of money, they just never really actually had to pay a bill much before and so they never had the opportunity to be late. And so I always tell people, there’s no blueprint to a well qualified tenant. It’s really case-by-case. And sometimes we get it wrong.
And I’ve had police officers we’ve placed in houses write us bad checks and I’ve had NBA basketball stars tear up the place, or not be able to pay the rent or whatever. Where you’re like, man, this is a slam dunk deal, great person, great income, this, that and the other, on the other hand it doesn’t work out, versus someone that, I don’t really recommend taking too many chances on people. But if you say, this looks like it’s going to work out pretty good and they’re the best people.
So it’s really about an individual case-by-case situation, understanding where they’re coming from and again, really digging into that due diligence, not just doing a brief, quick look.
Mike: And you mentioned criminal background stuff. Maybe just share a couple of thoughts on that as well.
Kevin: So we do full criminal background checks, everything from local, state, county and federal search records. Now, the trick with those is some counties and states actually don’t report to the electronic databases, and often times you might need to call in, and it’s really physically impossible to call every county in the country and say, “Hey, do you report, do you not, did this person ever live there and was there a crime committed?”
So in the past, we’ve run a very detailed and thorough background on folks and later we find out maybe something that didn’t come up. So it’s important to remember that one, maybe not everything is going to always come up. But it’s important to do that thorough check, and again understand what the situation is. I just had an applicant actually for one of my personal properties that one of my agents sent to me. And here’s this guy, he had a property damage charge and something else. That you would kind of look at normally and say, “I’m not really into that property damage, they’re moving into my house.”
But when you dig into it, and I got an explanation from him, you look at the dates, coincides with when he was in college, turns out he might have been a typical college student, maybe drinking a little bit too much, and caused himself some problems that now he has to live with forever. And seems like he’s looking at the last 10 years of his life and his financial situation and what’s going on, that makes sense.
So again, it’s important to really not just do maybe a state scan and just [inaudible 00:14:58], but really find a background check provider that will do that local, state, county, national search so you can get all those records. And then again really look at what those are. And everybody has different tolerance levels they’ll deal with. I don’t recommend people rent to felons, especially recent felons, that’s just a recommendation. Some people do and some people don’t mind. If it’s 10 years old and again there’s an explanation for what happened, and it seems like we’re dealing with some changed folks, everybody deserves a second chance and absolutely do that.
And really, it makes it tough in my business with Renters Warehouse, we actually work with each individual owner to decide what they want to approve or what they don’t want to approve. And so long as it’s legal and we’re not discriminating against anybody, great.
And so a lot of people ask, “Hey what’s your criteria to apply?” Well, depends. And depends on the house, on the price and the owner and all these things, and again, it’s got to be legal. But some people are comfortable with, “I had a felony charge last year,” I’ve had owners say “I think they deserve a second chance, I’m going to move them in,” and some people say, “I had felony charge 10 years ago,” and another one might say, “I’m just not interested.” And that’s a legit reason. As long as you treat everyone the same. You can’t take the next guy that’s got felony nine years ago because you need to be treating people the same.
But so again, you should dig into that criminal part. And it’s important also to know that there’s actually federal rules now, and standards around terrorist watch lists, checks. If you’re over the age of 18 and you’re applying for housing as an owner or a landlord, you’re required to or suppose to run against the OFAC watch list which is essentially some finance watch list, some terrorist watch list. And so at Renters Warehouse we’re also doing that.
We actually run against the terrorist watch list, make sure we’re not renting to potential terrorists. We’re not renting to sex offenders. We have a sex offender watch list and registry in our background check. So those are some of the things you don’t always think about, just trying to keep up with the ever growing federal regulations on what you need to look for, who you can rent to, who you can’t rent to, and it really starts to muddy the water a lot.
Mike: And difficult for smaller folks to get through on their own.
Kevin: Exactly. And so that’s why it’s important as a property owner and a real estate investor to have, whether it’s a great property manager or just really know, there’s plenty of services online that you can go to. But sometimes I wouldn’t pick just by price. If you’re getting a $4.95 background check, it’s not that good. You may have to pay for the data. And so I buy my reports in bulk. I buy a lot of reports across the country every year, background check reports, and we pre-pay for them so we get the best deal we possibly can. And our reports are, I don’t remember the exact price, but they’re like in the $20 range and that’s in bulk because it’s that detailed data.
Mike: So finding a great tenant and all that that entails, so what else are some important things?
Kevin: We can bulk a lot of stuff into the next topic, which is really you need to treat your property like a business. Maybe it was your personal home before or you’re personally attached to it because it’s a big, valuable asset, or for whatever reason, a lot of people bring personal feelings into it or I’m going to do this person a favor or maybe I don’t like confrontations. And by the way, if you don’t like confrontation, don’t get into property management on your own because there’s inevitably going to be some confrontation.
But treat it like it is. It’s a business. So treat your business like a business. And that means, make sure you have processes in place for things. And I always start with rent collection, why having a great property manager is important because if you have a great property manager, they don’t forget to collect the rent.
Now, what I mean by that, obviously you need to collect rent, but what happens for maybe some smaller property managers or someone who’s not a professional property manager, does it on the side. Or if you’re like me before I was in professional property management, the 1st comes around, you kind of start thinking about your rent, I wonder if that’s coming in.
A couple of days go by, you don’t have the rent but it’s not really due, so that’s fine. And then I get busy with work and might be the 8th or the 9th and I’m like, man, I haven’t received rent yet. No faults, but a lot of people are busy. Again, if you’re trying to do on your own and you forget and now you’re calling your tenants the 10th. That just sets bad precedence. The tenants say, I’ve got until the 10th before he remembers to call me or the 11th and then I’m going to mess him around for a few days and I’ll finally pay.
Where if you have a great manager, something we really focus on a lot at Renters Warehouse obviously is really we’re kind of [inaudible 00:19:21] about our rent collection. So we have people that that’s all they do, is collect rent. And the point is whether you’re doing it yourself or using a company, have a schedule up and use the technology that’s available to us today to put those reminders on your calendar and say, “If I don’t have the rent by the 3rd,” if that’s when your rent’s late depending on your lease and your state or the 5th, make a phone call. I’m going to make sure I send my certified letter, that I got it send.
It’s really interesting to see how tenant behavior changes. If you have maybe and iffy tenant out of the gate and they start to pay a little bit late, but they see that you never forget and you’re on them, you don’t have to be mean about it, it’s just that you’re reminding them, they know that you’re looking for the rent and you’re staying on top of them, generally speaking, they become pretty good on time payers because they don’t want hear from.
But if you have that same tenant who maybe is a little bit iffy and you have that person that forgets once in a while, it will get drug out pretty far. And so really, again, that goes back to treating it like a business. It’s really, it’s money coming in to you and it’s important and so it’s something you’ve got to remember about, whether you make that schedule and also know, if you’re doing it yourself, research and you have to know the laws of how you can collect rent in your state. It varies from state to state to state.
As you know, being in a real estate industry across the country, that’s one of the hard things about our business, is the rules are very so different in every state. It’s not like we’re running McDonald’s here where everything is pretty much the same. In Georgia we might have one way we can do things or one time frame before we can send a certain letter. And in Florida it might be totally different than it is in Minnesota. And so, know your local city and state’s rules on how you can collect rent, what you can send, when you can send it, when they’re technically in default. And so remembering to do those things but also doing it in a legal way is important. That’s kind of that first topic inside of treating it like a business, so to speak.
Mike: And if you have multiple properties, maybe take a second to talk about how important it is to do things the same way for each tenant. I mean, there’s all these rules now in terms of you treating somebody one way and somebody else a different way or having different rules for different people.
Kevin: It’s getting worse and worse all the time as far as that’s concerned, and we actually have to be careful about it in our business. A lot of times in the past, we’d run into certain people, we’d use maybe a late fee as a tool to collect rent. And say, “Technically we need to charge you this late fee that’s in your lease, but if you can give me the rent today, I’ll waive the late fee.” It’s a good tool. But now that there’s been so many new regulations and rules around fairness, so to speak and making sure everybody is treated the same, we’ve been advised really we shouldn’t even do that. Because if we waive it for that guy, the next person can say, “Well you waived it for him,” even though they’re really not affiliated, a different property.
If you go to multiple properties, it’s very important you treat everybody the same. So this may come into a lot of viewers today of someone that had a tenant for 10 years and he’s always been great, recently fell in hard times, so he’s given him some chances throughout the months. And he’s accepted some late rent and hasn’t really been hard on him, but he’s got a new tenant that isn’t. So he or she has been much harder on them. That can cause conflict and that can actually set you up for lawsuits and things.
And so again, just understanding how regulations work and making sure you’re following a process, doing it the same way is going to get you better results with your tenants and making sure things get done, as well as protecting yourself from problems down the road.
The second part of really treating your property like a business is, and this is generally for smaller landlords, smaller investors maybe on one or two properties. But we have to get out of the mindset of when I spend money its an expense, to when I spend money its an investment. And it comes to maintaining the property. We find so many people maybe defer some maintenance because they can’t quite take care of it or they’re slow to respond to maintenance requests again because one, it’s expensive and that’s tough, or two, they forget. They get the request in the morning when they’re at work and they’re, “I’ll deal with that later,” the next thing you know, four days go by.
And there’s rules and laws around how fast you have to respond to tenants. Each state again varies, so know your rules of maintenance and when things need to be done. If it’s deemed an emergency by your state or your local municipality, there’s a shorter time frame, 24 hours or less sometimes to repair something. If it’s just a standard maintenance request, you might have up to 10 days or 14 days or 8 days, depending where you are.
And so knowing how fast you need to get things done, being able to respond. And again it goes back to as responsive as you are as an owner and a property manager, and as respectful as you are to your tenants if they have an issue and you’re able to get it fixed, they’re going to be much better quality tenants as the tenancy continues. Teach them early that you care about the rent getting paid on time and they’re going to do those things. And how you treat your home, whether you’re deferring maintenance or not, fixing things, that’s perceived as, well, you don’t really care, and often times those tenants are going to start to mimic those behaviors.
So really making sure you keep the maintenance up on the house. Doesn’t mean you go above and beyond, but if there’s something that needs to be fixed, make sure it’s fixed. And do it in a timely manner and make sure you understand the laws around that.
And brings up one more point. Understanding the laws around maintenance and what you need to fix, what the time frame is, will also allow you to understand maybe it’s something you can charge your tenant for. Because there are certain things that, maybe if you’re broke, it’s the tenant’s fault, they’re swinging from the chandelier, they need to replace the chandelier.
Mike: That never happens though, does it?
Kevin: Right. And understand what that is or what can be charged back to your tenants and what can’t be. And again, that’s going to be a money-saving opportunity there if you really understand how those dynamics work.
Mike: So we’ve got finding the right tenant, treating your property like a business and all the maintenance issues.
Kevin: That’s right. And the third thing I’ll mention with really what it takes to have great property management or a good property manager like that is really just keeping accurate records of your accounting. And this goes to more than just property management, but it goes to making successful rental property investments, is working with a great CPA, keeping great accounting records because there’s so many deductions I find our clients lose or aren’t using. They get the basic ones, their mortgage interest. [inaudible 00:25:37] sort of things that property management fees are actually tax deductible. So fees that my clients pay to us can be deducted.
Maintenance expenses can be, there’s depreciation to be done. And too many people I find that own rental property are still using TurboTax or one of the online systems to file their tax returns. That’s all fine except for the fact that you’re going to miss deductions and you’ll probably save a lot more money by paying a couple of hundred bucks to have someone come look at it and make sure you’re using a real estate CPA, someone who really understands the real estate stuff. And I’m sure you could touch on that. I’m sure you’ve talked about that before on some of your . . .
Mike: Yeah, it’s night and day. I would say it’s funny because at this time of year, we’re close to the end of the year, my wife and I are starting to do tax planning on all of our businesses and you start to make decisions at the end of the year about tax decisions really. Like how much am I going to contribute to our retirement accounts for example. Just different things you might want to do to get in this year or get in next year, or whatever it might be. And so we always have this planning exercise with our CPA.
But I can tell you having been with a few different CPAs, you definitely want somebody that understands real estate and real estate investors because a CPA is not a CPA any more than a foot doctor can do open heart surgery. You want, nothing against foot doctors out there, but they have a specialization and you need to find somebody that really understands that to get the most you can from a tax benefit standpoint.
Kevin: And so it’s important that you as an owner or your property management company are really helping you by keeping accurate records. This goes back to when we started the show earlier today, talking about how there’s a lot of people still doing it on paper files or spreadsheets or whatever and just not keeping those accurate records on maintenance expenses and costs or what rent was paid, what rent wasn’t, different fees and all that kind of stuff.
And so it’s really important. And that’s where, I’m excited for where this industry is going. Because property management has been a very fragmented business industry for a long time. There’s no real big player in the space. We’re very, very big across the country and we’re still tiny. So that’s just one opportunity there is for us. But with that and with the renewed focus on it and with institutional investors coming out and investing in single family homes and making it a legitimate asset class, there’s a lot of focus on it. So there’s a lot of new technology being developed for individual owners to apply to their properties. A lot of technology for property managers to be able to use to manage properties better for people.
Internally in our business, we actually create our own technology. We find problems that we can solve by this and roll it out. And again, just applying really what’s been happening in every other industry across the United States for years of enhancing it with technology. Hadn’t happened in our business until the last few years. So that’s been exciting to see. And it’s good for investment property owners and tenants because it’s more accurate, it’s faster, it’s more efficient and just really more professionalized experience for everybody.
Mike: Well, is there anything that we missed in terms of what people should be thinking about, in terms of the things they need to do well or need to be done well for their rental properties?
Kevin: Well, we really got into not forgetting to do things, treating it like a business, finding great tenants. If you do all those things, you can almost forget about it, right? Just let things happen and that kind of stuff. But don’t entirely forget about it. And a lot of people don’t visit their homes for two, three, four years. You and I were joking about this earlier today before we started the show. Make sure your property manager is doing inspections of the property or visiting the property. Because often times if your rent’s getting paid, there’s no maintenance requests, everybody thinks, hey, this is pretty good, this is fantastic. But it’s a big asset, it’s worth a lot, make sure you’re checking it out, or at least at a minimum your property manager is.
I have a full team, a bunch of people that work for me, that’s all they do, is inspect homes all day long. Exterior, interior, checking them out, doing their thing. And that’s actually becoming more and more challenging too as states and the federal government tighten up on what the definition of privacy is and how much homeowners can really go in and inspect the home and make sure it’s in good shape.
Honestly it’s not always checking up on the tenants, it’s just making sure that maybe there’s something that wasn’t reported or maintenance thing and the furnace filter is changed or that if you’re in a state that has winters, that the water lines have been properly winterized. There’s legitimate business reasons to do these things, that gets harder and harder to do.
But just because you’ve got your properties running so well that you can kind of set it and forget it, don’t forget about it entirely. And I recommend at least twice a year being able to go out and physically check the property out, make sure that [inaudible 00:30:19] the exterior, the interior, people are taking care of it. And you’re going to learn a lot about how your tenants are and you’re going to learn a lot about if those are tenants you want to keep around the property as well.
Mike: One more thing I want to see if you can touch on. We’re almost out of time here, but I just want to see if you can just touch on the importance of people, whether you’re doing it yourself again or you have a property manager, to keep up with market rents. Because I’ve known people in the past that they know they’re charging below market rents, but they’re like in their mind it’s saving me money because they’ll stay there longer. Some things like that. But they’re clearly leaving money on the table. Just talk about the importance of keeping those market rents up.
Kevin: That’s an especially good thing right now because we’re seeing . . . there was just a Zillow report out a couple of months ago that showed rent was up in all the major cities across United States except for two. And those two were Minneapolis and Chicago. Minneapolis, so I got a lot of flack about this from the local press running some interviews. But at the end of the day, Minneapolis was actually the worst . . . no. Chicago was the worst performing market as far as rental increases and it was down a half of 1%. So really it was flat. Let’s call it what it is.
Mike: Right.
Kevin: And Minneapolis was down 0.3%. So really unchanged. But really everywhere else, every other big city across the country had seen rental increases, rate increases from half a percent to as much as 18%. And so rents are on the rise. And so right now, especially with the supply and demand we have and a lot of tenants and a limited inventory of homes, very important to make sure that you’re staying up with it because you could be leaving a lot of money on the table. It used to be maybe just 25 bucks a month. It’s still money. Now it can be a hundred bucks [inaudible 00:31:55] depending how long your tenants have been there. And so that’s one reason.
The second is really, as a community business owner, that’s really who we are, people rent homes, everyone being able to keep up with what the market’s doing is important because it allows everybody to get fair value for their homes and you’re not going to leave the money on the table. And that’s going to be that cash flow that you need to maybe replace the air conditioner down the road or something like that.
And again, a good investor is going to look at that on an annual basis and say, what’s my property worth now? I’m sure I rented it for $950 last year, can I rent it for $1,075, $1050, $900? What is it? Because on the flip side, if you’re in a market where rents are going down and you still continue to try and price at the wrong point, it’s going to sit vacant for two to three months before making a move and that’s a very expensive mistake.
But not keeping up with it, not keeping up with those market rents, just to maybe not have a vacancy, which is usually the excuse I hear [inaudible 00:32:50] my tenant move out. They’re going to withstand some rental rent increase, especially when they go out and do their own research on what can I get in the marketplace. Sometimes you’re not really, really far above the market, they’re going to realize that that’s the market, that’s what it is. And if I move here, I have to move somewhere else. I’m going to pay the same, and oh by the way, now I have to move.
So tenants are used to the fact that over time prices go up and rents may go up, part of the game. And so that’s very important to stay on top of that, at least on the annual basis and understand when lease renewals are coming up, what to do today and what should I be charging.
Mike: Kevin, thanks for joining us. If folks want to learn more about you or Renters Warehouse or any of those things, where should they go to learn more?
Kevin: Our website is the best really for everybody. It’s just RentersWarehouse.com, and all of our information is there, what locations and cities we’re in across the country. And my contact information I believe is on the site there as well so to be able to reach out to me if they have questions or want to get in touch with me.
Mike: Kevin, thanks for sharing some information with us today, we definitely appreciate it and great to see you.
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