Real Estate Sales Tips

Qualifying Tenant Prospects

2012-02-03T14:25:00Z

By convention, when qualifying tenant prospects, most landlords will consider credit history, residential history, and income. Some will even look at criminal history. The question is—how should the landlord weight the results of these inquiries?

Commonly, the credit history becomes the 800 pound gorilla in the room. But I question the wisdom in this thinking. Rather, I would propose that if there must be an 800 pound gorilla, it ought to be the residential history. While the credit history does offer good clues about tenant money management discipline, property managers, all too often, fall into the trap of referencing only the credit score, perhaps thinking that it is meaningful and relevant. I suppose the score could be consulted for its reference value. But in my case, I merely glance at the credit score. I don’t use it in my factoring at all. I do consult the remainder of the report, as I am interested in determining if bills are getting paid, if there has been a foreclosure (eviction), recent bankruptcy, judgment, etc. And then I want to ascertain what caused these circumstances, and whether there is evidence that their behavior has improved since the event occurrence. But I think the residential history speaks more directly to the purposes of a landlord.

There are two aspects of the residential history that interest me—the duration of pass leases, and the comments of the previous landlord. My supposition is that, regardless of credit standing, if the tenant prospect has handled these things well for a long time, and assuming the income is stable and sufficient, I just about don’t need the credit report at all, and whether a best or worst case scenario it only amounts to 20% of my assessment anyway. I would even consider relaxing my usual standards for the Rent/Income ratio if the prospect had a stellar residential history.

In order to keep these qualifying criteria in perspective, I employ a qualification matrix. This helps keep me from overly weighting one unsavory criterion to the unnecessary detriment of the prospect. I would highly recommend such a model for any landlord wanting to objectively judge a prospect.

Choosing a Property Management Company and Its Maintenance Services Policy, Part III

2012-01-30T13:25:00Z

How can an investor know if the professional property manager they are employing is getting them the best bang for the buck with maintenance services? In this the last of a 3 part Blog, we will discuss the difference between the use of corporate and non-corporate service companies.

Have you ever heard commercials on the radio where a heating and air conditioning company is offering to install one air conditioning system for regular price, and install a second one for free? How can they do that? Wouldn’t it be a really bad business decision if they could not make a profit on such an arrangement? After all, they are not running a charity! Could it be that tremendous profits reside in the retail price—installed? Instead of charging you $6,000 for the unit, couldn’t they have just charged you $3,000. The answer is, probably yes.

In many cases, the corporate installer has no choice but to charge outlandish fees for their services in order to offset a tremendous business overhead. On the other hand, the small mom-and-pop operation can minimize its overhead while still providing competent service, and can, contrary to popular belief, even afford to warrant their work. While it is risky to call just any old mom-and-pop in the yellow pages, in the case of a professional property management company, such smaller dealers have earned a reputation with it, and will likely honor warranty work to maintain that valuable relationship.

So take a close look at your management statements. Observe who the property manager has been hiring to do work. If the names are well known corporate names, you might want to have a conversation with your property manager. It may well be that they have worked a special arrangement with the company—one that is truly in your best interests. But if not, and if you are really paying full market rates, you might question the benefit you are driving from the maintenance aspect of your relationship with that property manager. It may be time to make some demands on that company or look for another.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Choosing a Property Management Company and Its Maintenance Services Policy, Part II

2012-01-16T15:25:00Z

In shopping for a professional, property management company, a candidate tells you that it sub-contracts for all maintenance services. Is this a good thing? How can you know? We will answer these questions in this second part of a 3 part BLOG.

It could be a good thing, if the contractors it hires do good work and do it for a reasonable fee. It could be a bad thing if the property management company and the vendor have a cozy, but veiled side deal, by which the property management company earns a little money each time it refers the contractor. By most standards, such side-agreements are considered unethical, and if not fully disclosed, illegal in most states. But that does not stop ingenious minds from finding creative ways to sidestep the law. How can you know?

If the rate you pay seems to be market rate, then you may have one of those surreptitious deals going on behind the scenes. In a fully legitimate arrangement, you should enjoy a benefit due to the economies of scale offered by your property manager. It is for this reason that most vendors will discount their services—because by doing so, the vendor secures and maintains a favorable relationship with the property manager. If the property manager is truly looking out for the best interests of the property owner, it will pass this benefit along to the owner. If not, it might suggest that the vendor go ahead and charge full market rates and kick-back the difference to the property manager. Sometimes this process is accomplished by having the kicked-back funds routed to a wholly owned subsidiary of the property management company, so that it can claim, at least technically, that the funds are not coming back to it.

This is nothing but smoke and mirrors though, and the result is pretty much the same as if the fees were coming straight back to the property management company itself. Ask some probing questions about the relationship between your property manager and the vendors it will choose to do the maintenance work on your property. You have a right to know, and an economic interest in the answers. There is one more vital point to discuss about this, and due to space constraints, I will talk about it in my next BLOG.

Daniel R. Wilhelm
Managing Broker
3 Options Realty, LLC.
www.3optionsrealty.com
dan@3optionsrealty.com
678-397-1282

Choosing a Property Management Company and Its Maintenance Services Policy

2012-01-11T15:44:00Z

Do you own real estate that you would like to have professionally managed? Your selection of a property manager could be the difference between whether your investment succeeds or fails. There are many tests in the process of choosing a property management company, one of which is its maintenance services policy.

There are basically two policy types with a variety of hybrids in between. A common policy is having an in-house maintenance operation. The stated intent of such policy is to control costs by having a salaried maintenance staff. On the surface this makes sense, but when you look at it closer, maybe not. In such a program there is an inherent need to make the operation profitable. Even though the original intent may have been to provide a good economic solution for the property owner, that virtuous intent can become quickly overshadowed by an insatiable pursuit of profitability. In such cases, maintenance work often finds a way to self-generate.

For example, I acquired an investor a few years ago who owned a duplex. He was jumping ship with a professional property manager because in over a year of service, he had never received a single rent proceeds check. Maintenance services consumed 100% of his rent payments every month. He was frustrated, and rightfully so. This landlord was helping pay the wages for that management company’s in-house maintenance staff.

One hybrid of this policy is to have an in-house maintenance staff handle some or most of the handyman-type work, while independently contracting for specialized services. While this approaches a better solution, the same potential fault resides in the policy. We will explore another service option in my next BLOG.

Dnniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Buying Foreclosed Property – Contentious Banks

2011-12-28T15:00:00Z

Let’s say you are a home buyer, and you want to close the sale with your choice of closing attorney — not an unreasonable expectation. But the bank refuses to accommodate you. What can you do? The easiest answer is—don’t buy the property. But if you have your heart set on that particular home, for whatever reason, that may not be an option.

In an earlier BLOG we examined the problem with using the title-holding bank’s choice of closing attorney. The problem has to do with the bank’s disincentive to assure good, marketable title. So as a buyer you simply have to protect yourself. Assuming your negotiating efforts have failed to change the bank’s mind about demanding the use of their attorney, I recommend a 2 part solution:

First, do not be satisfied with the title examination being done by the bank’s attorney. Hire your own attorney to do a full title examination. You will get no resistance from the bank’s attorney on this point, although they won’t like it much if you come back and ask them to fix something that your attorney discovered, that they were hoping to glaze over.

You will definitely get some resistance on the second part of my solution though, when you tell the bank’s attorney that you do not want to buy owner’s title insurance with them—that you will purchase it elsewhere. Attorneys make a ton of money selling this insurance, so they will not be pleased. I would recommend buying your title insurance through the same attorney that did the full title exam. This solution will cost you a little more, but the benefit is well worth the cost, and if you are savvy, you can negotiate this cost into the purchase price.

If you want a less costly solution, there is another option that will be likely met with resistance as well, but it also may be feasible. Require the bank’s attorney to do a full title exam. You could even buy title insurance with them in such case. But only do this under one resolute condition. The attorney must do a full title exam, even if you have to pay a little extra for that. In reality, you will probably be charged for a full exam regardless, because most buyers would not know the difference. If the attorney does a full exam, she has a professional obligation to do a good job. If she does not do a good job, and that is still possible, at least she will be putting her license to practice law at risk with the state board.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Buying Foreclosed Property – Beware the Flawed Title!

2011-12-23T16:04:00Z

There are some really great deals out there in the foreclosure market, but buyers need to ask whether owning a property with an unmarketable title is what they really want, because that’s what buying a foreclosure could very well translate into.

In recent years it has proven, virtually universally, that sellers (banks) demand that buyers close with the same attorney that the sellers had used in the foreclosing process. This is a really bad idea for the buyer. The problem is that the foreclosing attorney usually does only a limited title search, which is the norm for big banks. As implied by the name, limited searches invariably yield limited results. The bank does a limited search because it wants to avoid the cost of a full title exam, and it doesn’t really care if the title is marketable or not, as long as it can transfer title. After transfer, the bad title then becomes the buyer’s problem. The Bank doesn’t really want to know, because if it knew the title were flawed, it would be unethical to sell the property until after the bank had cleared up the problem. But whatever the bank's motivation, one thing is for certain. When buyers sign at the closing table, they assume any and all problems that may have existed prior to, as well as those created during the foreclosing process. This is true even if title insurance is purchased by the buyer.

Why doesn’t title insurance protect the buyer? Well, in the long run, it may protect either all or part of their equity, but what it does not do is magically make the title clean. That is to say, a process still has to happen, and it may be a lengthy one. If the insurance company decides to litigate, it could take years before a resolution is reached. Meanwhile, the buyers are stuck with a property that cannot be sold, unless they find an unsuspecting buyer, and have no scruples about selling a property with a blemished title without disclosure.

So, what can buyers do to protect themselves? The first step is to demand that an attorney of their choice, someone other than the foreclosing attorney, do the closing, and that a full title exam be performed. There was once a time when dispassionate resistance from banking institutions made attempting this a losing battle for buyers, but not as much so today. Recently, FANNIE MAE and FREDIE MAC have relaxed on this demand. FHA has always been flexible on this count. Since these three sources probably represent better than 90% of the loans in the marketplace today, you should put this demand in your offer to purchase, and remain firm in the negotiations.

But what about those banks that are holding and servicing the notes. They are still pretty aggressive about demanding that buyers use the bank’s closing attorney. They will tell you it is either their way or the highway. If you really want the house, the highway is not an option. In my next BLOG I will suggest a solution for the problem of dealing with these contentious banks.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

First and Last Month’s Rent

2011-12-07T13:31:00Z

Do you collect a first and last month’s rent upon move-in? Do you also collect a separate amount as a security or damage deposit? Do you know how to properly treat these funds in accordance with state law?

In some states collecting last month’s rent on move-in is treated the same as a security deposit. Essentially, rent collected in advance is not considered rent until it is due and payable. Be careful that you observe that law. Penalties for noncompliance can be severe. The safest thing to do is to simply collect a sufficient amount of security deposit to mitigate risk, and not generate some complex scheme.

One fallacy in collecting the last month’s rent is that you never know for certain when that last month will be. Let’s say you have a 1 year lease and your tenant has paid you in advance for the last month’s rent. Six months into the lease, she stops paying rent because she lost her job. She tells you she hopes to have a new job soon. You inform her she must move or pay rent. When can you apply the last month’s rent? Technically, it is not disbursable until it becomes due and payable, which is her last month occupying the premises. What if she remains in the property for more than a month from your demand to move? If you disbursed funds, you may be deemed in error and even in breach of agreement.

Here’s another problem this policy creates: Can you process for eviction after delivering demand to pay or move, even though you have the last month’s rent on deposit? How will a judge interpret that? There would be no question at all about it if the money was held as a security deposit, but as last month’s rent, the answer is not so clear. I would not want to test that defense.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

All Residential Leases are not Equal

2011-11-29T17:45:00Z

In most states, a residential lease does not have to be in writing, if it is for a year or less term. Nevertheless, it is a very good idea to have it in writing for any term length. But if you do have it in writing, are the terms and conditions sufficient to protect you under state law? In other words, how do you know if you have a “good” lease?

First of all, the perspective matters. What’s good for a tenant is not necessarily, and, almost without exception, cannot be good for the landlord, and vice versa. You can be sure that if a landlord hired an attorney to draft a lease for her, it would look significantly different than one drafted for a tenant client. For this reason, without any doubt, the best lease for you will be the one crafted specifically for you by an attorney familiar with your state’s statutes.

Unfortunately, the cost of legal counsel causes most private landlords to look for other solutions. Many elect to use the generic leases commonly sold at retail office supply stores. Even though such leases have been usually drafted by an attorney, they are designed to avoid conflict with the laws of multiple states, and often times all fifty states. Because of this, these leases must be nonspecific. Bottom line—they are not designed to comply with state statutes, but rather to simply avoid conflicting with them. This is because the landlord-tenant laws of each state can and do vary immensely. So it’s not too difficult to understand why this kind of lease is better than no lease at all, but really not by much.

In many states, Realtors® use a standard form drafted by a committee at the state association of Realtors®. Usually, several attorneys sit on the committee, so Realtors® can be comfortable that the lease is legally competent. This lease is much better than the store bought variety, because it specifically observes state statutes and regulations. Unfortunately, because the committee designing this lease has no allegiance to either party, it crafts the document in such a way that it is fair to both landlords and tenants. The problem with such a lease is that in an effort to be fair, it ironically leaves both sides vulnerable. Surely, a skilled property manager can supplement the lease to benefit their client by adding a few choice special stipulations. But there is a limit to what can be done to undo the “given” by special stipulation. In any case, it is difficult duty to write such special stipulations without shining the light on the issues to such an extent that these acts would pass the scrutiny of an astute tenant prospect, thereby inviting question and debate, which is the last thing a landlord wants at lease signing.

Perhaps the most efficient alternative is to hire a professional property manager to represent you in the deal. But also make sure that this property manager has suffered the expense of producing an attorney reviewed, proprietary lease. Not a lease designed by a committee, which is fair to all parties, but rather one that is written specifically to protect your interests and rights under the law.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Using the Credit Score in Tenant Qualification

2011-11-21T19:59:00Z

Let’s say you have just received an application from a prospect for your residential rental property. An important consideration for you is going to be her credit history. But what weight should this history have compared to other qualifying criteria, and how important should the credit score itself be compared to other criteria?

As a professional property manager, I put little stock in the credit score itself, but the history used to derive that score is very useful. Credit scores may be useful for creditors that have to justify their decision-making to other higher ranking bureaucrats or perhaps investors. But in the property management business, this is rarely the case. Some professionals, perhaps those less confident in their own judgment or decision-making ability, might ask a property owner to weigh in on the decision, but I rarely do this. Indeed, I think my credit-history interpreting skill is one of the reasons the property owner has hired me in the first place. And truthfully, those that lean too heavily on this sole criterion may be truly seeking only an alibi—someone or something to blame should things later fall apart. While it’s nice to be able to divert accountability, this does nothing to remedy the problem, which was a decision made on a bad premise.

I am certainly interested in the prospect’s overall credit picture, which is what the credit score depicts, but I am really more interested in why and how she got the score. In fact, the score itself is not even considered in my appraisal of the prospect. For example, if our prospect lost her job and had to let her home mortgage go into foreclosure, her score will be ruined for years. But I am more interested in the money management discipline she demonstrated before and after that tumultuous event. That will tell me more about the character of person than the score.

In my qualification decision table, I put the most weight on rental history. I want to know how long she lived in the same place, and how well she treated the property during her stay. Did she pay her rent on time? Were there any bad checks presented? These are the kinds of questions I want answers to, and these are things that do not show up in a credit report, because rent is not considered a debt by the credit reporting bureaus—another reason to be wary of the score, which is generally designed to help creditors evaluate loan risk, not rent.

I am also interested in the tenant's employment or source of income. Does she have a job? How long has she been employed by the same employer. What does her debt/income ratio look like? How stressful will it be for her to make the rent payments? These are the kinds of questions I want to ask about her payment potential.

I will definitely look at the credit history, but for me, rental history and source of revenue are far more important considerations that indicate the probability that a prospect will become a good tenant.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Lease-Purchase, Buyer Beware!

2011-11-05T16:26:00Z

Are you considering purchasing a home on the basis of a lease-purchase, or otherwise known as a lease to own? If so, be very careful, it may be one of the biggest financial mistakes of your lifetime.

The concept is simple enough. You contract to buy a home with a closing date some number of years out, and in the meantime you occupy the premises and pay rent until that closing date. Usually a large sum is deposited with the seller as consideration for the right to purchase. It is also not uncommon for some part of the monthly rent to be applied as a rent credit, which will cumulatively apply as a credit to the down payment on closing day. So each month that passes, the buyer contributes increasing capital, earning greater and greater equity in the property.

It is partly because of this accumulating equity that caveat emptor could not be more applicable in a lease-purchase. Many people attempt such transactions without legal counsel, or even without the assistance of a knowledgeable real estate professional. This could lead to a big mistake. There are many pitfalls in such arrangements—often times not even known to the seller. So it’s not necessarily that the seller is intending to rip off the buyer. They just sometimes become unsuspecting victims of their own life’s trials and tribulations.

Probably the most common pitfall is the possibility of sudden, seller financial instability. If for whatever reason, after entering into the lease-purchase agreement, the seller stops making mortgage payments, the house will eventually be foreclosed by the lender. The lender will not observe your purchase agreement because it is subordinate to their lien. By law, they must assume the lease provisions, but that won’t help for very long. They will surely not take responsibility for either the substantial consideration deposit you made, or the cumulative rent credits earned. You will have recourse against the seller for these sums, but if his financial means are so depleted that he has decided to let the house go, there is probably nothing for you to go after. So good luck with that!

The best way to avoid this particular pitfall is to arrange for an escrow agent to supervise disbursement of your monthly rent payments. You can hire an attorney to do this, or even some real estate brokers will handle this for you. What they will do is receive your rent payments and then make disbursements from those proceeds directly to the seller’s lender, and possibly even remit property taxes as well. You will also want to have the lease-purchase agreement recorded to establish a lien on the property. This way, the owner must satisfy your purchase agreement, and would be prohibited from transferring title out from under you.

A couple of other unfortunate outcomes would be that at the end of the leasing term, you cannot get financing to purchase the property, or the appraisal comes in substantially higher or lower than the agreed sales price. If you cannot facilitate the purchase, for any reason, you will probably lose all of your accumulated equity. Because there is such an unpredictable downside risk in this procedure, be sure to design a purchase contract that affords you some protection in the event of these possibilities. Let the buyer beware!

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Whose Name is on the Lease?

2011-11-03T14:14:00Z

If you are a landlord employing the services of a professional property manager, do you know whose name is on the lease? You should, because it could cost you in court!

Many professional property managers have opted to put the owner’s name on the lease, as “landlord” rather than the management company’s name. They do this to avoid service-of-process in the event of a lawsuit. They want the tenant’s attorney to go after the owner, not themselves. In reality, in most instances if there is going to be a lawsuit, anyone and everyone associated with the case will be served. So this is really not an effective strategy.

But the problem for the land owner is not about who might be served, because this is a rare instance in the first place, and as already mentioned, it doesn’t really matter, because ultimately both manager and owner will be served regardless of the name on the lease. A more likely scenario would be a case in which the tenant is being evicted, and in the process, elects to answer the dispossessory warrant. In such event, the case will be heard by a judge, usually a magistrate. In most Georgia courts, the judge will not allow the property manager to act as plaintiff if the property management company is not named as landlord in the lease. This is true, even if the property management company filed the warrant, on behalf of the land owner, and in the property management company’s name per agreement. Most judges would consider this to be practicing law without a license, and would disregard the management agreement terms.

When the land owner’s name is expressed as landlord on the lease, the court will only allow the land owner, or an attorney for the land owner, to address the court. If the land owner resides out of state, as many do, the land owner would either suffer the cost of a trip to town, or the expense of a lawyer. And if the management company attempts to represent the land owner, hoping that the judge won’t catch it, there is a good chance the court will dismiss the case, causing the land owner to have to start at square one with a new dispossessory warrant.

The bottom line is that if the lease is written between the management company and the tenant, then the court cannot deny the property manager the right to defend its position as principal on the lease, saving the owner both expense and inconvenience. So if you are a land owner, it is important that you know whose name is on the lease, especially if the property is professionally managed.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Protect Yourself from Diminished Value

2011-10-07T16:02:00Z

Suppose you are going to court to evict a nonpaying tenant. This should be a no brainer. But in this case, the tenant has countersued, claiming the house needs repairs. Watch out!

We had a recent case like this. This was an older house and did need some things done to it. But the condition of the house was acceptable to the tenant upon move-in, as was so indicated on the inventory. Four months after move-in, the tenant stopped paying rent. He did not have a job, and had no money. We sent him the demand for possession and he wrote a letter back suggesting that we apply his security deposit to the rent, which we will never do. Also, in his letter he listed some dozen maintenance issues. Most of them were either false or gross exaggerations. Clearly, he was trying to mitigate the fact that he was in breach of contract for nonpayment of rent. This overused tactic seldom works, and most judges see through it. Nevertheless, in good faith, we attempted to address some of the legitimate issues. He made it difficult for the vendor to access the property, so we got very little accomplished before the court date.

In court everything looked like it was going our way, the line of questioning that judge took seemed right along the lines I would have expected. In the tenant’s counter-suite he moved for consideration for the value of stolen personal property. The judge denied that motion because there was no evidence submitted and the judge did not think the landlord was liable for the tenant’s stolen property anyway. Everything seemed in place for a judgment for the plaintiff. Surprisingly, while we did get the writ of possession, we did not get a money judgment for the back rent. The judge determined the condition of the property to have diminished the value of the rent. How he decided how much that amount should be is beyond my understanding.

I think I could have argued this defense if I had perceived the direction that the judge was taking. But I did not. It was not until after he gave his judgment that I realized what he was thinking. He gave no indication whatsoever in his questioning, and the tenant did not move for this defense.

So what’s the lesson learned? As a landlord, if a counter-suite is made concerning maintenance and repairs, do not assume that the judge is with you on it, make your case for why there is no case for a claim of diminished value, even if this is not asserted as an affirmative defense by the tenant. If the judge does not think your argument is relevant, he will stop you before you get too long winded. But the lesson I learned is to never leave a question of diminished value on the table ever again.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Residential Rental Agreement and the Law

2011-09-20T20:36:00Z

Do you know if your rental agreement is a restatement of the law or does it supplement the law? It probably does a little of both, and you really ought to know the difference.

For example, in Georgia, many leases include a merger clause. The lease probably does not need the clause as it is clear from statutory law that oral agreements are unenforceable without credible witness. But it still pays to have such a clause, because it helps set expectations for the tenant. In most cases, the tenant is probably unfamiliar with the law, but if the law is restated in the lease, then they may not feel compelled to go to court to discover that their defense is worthless. They can see in the mutual agreement that they have no case. So restating the law can be a good idea, if you want to avoid dealing with lawsuits.

Do you have a waiver clause? You do need this clause as it is not given in the statutes. This clause protects you when you act in such a way to appear to be waiving a requirement in the lease due to performance. For example, you do not charge a late fee two months in a row, and then decide to start enforcing the letter of the contract. Without the waiver clause, the tenant might assert an argument that you waived your right to demand it, based upon your demonstrated behavior. They would have a defendable argument.

Another very important clause is the severability clause. This clause protects you such that when one part of the lease is ruled out of compliance with law, the remainder of the lease remains enforceable. Without this clause, it could be ruled that the entire lease is unenforceable.

Know your lease and know the law. It might serve you well someday.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282

Notification Requirements for Rent Tendered by Insufficient Funds

2011-07-27T13:37:00Z

What is the notification waiting period for the landlord to begin dispossessory of a tenant that paid rent with a check that bounced? There are two separate laws that Georgia practitioners must apply to such a case.

In Georgia Code § 13-6-15, “Damages for writing bad check”, the payee must notify, in writing, the maker of a check drafted on insufficient funds in order to claim damages. Such notification must be done in writing, and the maker will then have 10 days from the date of notification to make the check good, before the payee can file charges, whether civil or criminal. It is a good idea to send such notifications by certified mail so that you have an official date stamp of delivery.

In Georgia Code § 44-7-50, “Demand for Possession…”, the payee has technically not paid rent. But it is debatable as to whether the landlord should proceed directly to a dispossessory warrant. Because Georgia Code § 13-6-15 specifies a 10 day waiting period for the maker to make the check “good”, it could be interpreted by the courts that the landlord may not take other legal action until the check disposition matter is resolved. It may be worth the risk though. If the landlord proceeds to dispossess the tenant, and the tenant does not raise the 10 day defense, it probably would never be brought up in court, and the plaintiff would prevail.

The worst that would happen is that if the tenant answered the dispossessory warrant and raised this defense, the landlord would stand to lose approximately 20 days in removal of the tenant, but only if the court took this position. In any case, the wise landlord will check with legal counsel before making any decision on this matter. The information provided here is simply the opinion of a professional property manager, and not an attorney at law.

Daniel R. Wilhelm, Managing Broker, 3 Options Realty, LLC., www.3optionsrealty.com, dan@3optionsrealty.com, 678-397-1282

Residential Property Management, Fish or Cut Bait?

2011-07-10T12:23:00Z

Residential property management is not for the uncommitted. This is not a part-time gig! You must either be all-in or just don’t involved. It will invariably end badly for the uncommitted.

Recently, more and more licensees are dabbling with leasing and some are even stepping out on a limb and offering property management services. Caution is in order here! Although there is tremendous liability at stake, this is not a reason to not do it—just a reason to properly prepare for the job. Entering this field of work unprepared could cost licensees their licenses. It can also result in debilitating lawsuits. So how can one prepare for the job? That’s the question.

The process and protocols of working with a tenant or property owner in leasing and marketing is similar to selling. There are differences though. One big one is investing in sufficient industry specific marketing resources to do a good job. This requires substantial financial and time commitments. It also demands a level of professional competency equal to the job. So this may not be right for the casual player. But the bigger step is in the management of the property.

Property management demands a certain temperament, which, if lacking, could cause emotional displeasure at best, and result in professional catastrophe at worst. The job is definitely not right for everyone. Indeed, it would be ill advised to wait and discover this after having acquired several property owners that are depending on their agent’s professional competency to protect their investments. A good place to start researching might be to take a few locally established, property managers to lunch and pick their brains. Ask the hard questions and be honest with yourself when you hear the answers.

After passing this first test, before even beginning work for property owners, seek formal training from the local chapter of the National Association of Residential Property Managers, www.NARPM.org or from a local board of REALTORS^©, if they sponsor such training. These foundational classes will lay the framework for the business. They might also offer that key perspective needed to decide if this is the right business in the first place.

There are two common ways of starting up a property management business—the slow way and the fast way. The slow way is to simply hang out your shingle and begin gently growing, learning as you go with a gradual learning curve. The fast way is to acquire inventory by purchasing an existing company. The slow way is probably the wiser plan of action, but the fast way would be okay if the acquisition of the inventory came equipped with experienced staff. It would be a bad idea, for example, to acquire 180 units from a sole practitioner, and expect to replace that practitioner without any other help. In most cases, the bookkeeping alone would be enough to drown the enterprise. In any case, don’t fear doing it, just be prepared and be careful.

Daniel R. Wilhelm

Managing Broker

3 Options Realty, LLC.

www.3optionsrealty.com

dan@3optionsrealty.com

678-397-1282