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Cedar Park and Leander: Part of Austin’s Explosive Growth

The U.S. Census Bureau recently reported that Austin is among the three fastest-growing cities in the country, and seventh for number of residents increased between 2012-2013. Dynamic in so many ways—business and technology growth, area colleges and universities, world-famous music festivals, popular athletic events, year-round recreational activities, eco-friendly advances, diverse night life, and more—it’s no surprise that growth all around Austin is booming, especially in the Cedar Park and Leander areas. The data on these two cities is exciting.

Of cities with at least 50,000 residents, the Census Bureau rates Cedar Park as the 4th fastest growing in the U.S., with a 5.6% population increase. Bursting with growth, its present population of over 61,000 grew 18.4% between 2010-2013, and an amazing 90.14% since 2000. Averaging an unemployment rate under 4%, a low rental vacancy rate, appreciating property values, and newly completed business developments, Cedar Park is a great city to live and invest.

Leander is another desirable city in the Austin Metro area. In September the Leander and Cedar Park city councils both passed tax rates which will lower homeowners’ property tax rates for 2014-2015. According to the Bureau of Labor Statistics, Leander’s unemployment rate so far this year is 3.40%, the 4th lowest in Texas. Earlier this year the Austin Business Journal called Leander “ground zero for growth,” which isn’t surprising since it had a 20.6% population growth between 2010-2013, and an astounding 105.34% increase since 2000.

Last December, The Milken Institute’s annual index of Best-Performing Cities announced Austin as the best-performing metro area in the U.S., weighing employment growth most heavily because of its primary importance to a city’s vitality. The Austin Metro is an exceptional place to work and a vibrant place to live, and because Austin is one of the fastest-growing U.S. cities, home values continue to increase, yet mortgage interest rates remain low.

This makes Cedar Park and Leander great places to find a home—or even to become a landlord!

Whether you want to purchase a home or an investment property, or even refinance an existing property, call us at 512-257-9836 for a free market or lease analysis, and to answer any questions you may have. Our office provides sales, leasing, property management, and mortgage services. You can also visit our website at www.smartsourcerealty.com .

Millennials: Austin’s Exciting Rental Market

Millennials play a large role in Austin’s rental market.  Born between 1982-2000, Millennials comprise 25% of our city’s population. They are the fastest-growing workforce population in Austin, and 90% of them rent!
 
According to a recent article in The Austin American-Statesman, Millennials save at a far lower rate than the last three generations. Most of them are not saving at all and have little or no assets.  This means that renting is more affordable to them and may be their only option. Millennials are more willing to move and change jobs. Renting gives them the flexibility they desire.
 
So what do Millennials look for when renting a home?  Over half of Millennials enjoy cooking. They want a new, modern kitchen. They eat out less and really like an outdoor living space for entertaining friends. This is even more important to those with children. They love their pets–most of them have at least one dog or cat. They want places to ride their bikes (and bike storage) or walk their pets, and many like to be within walking or biking distance to a store, restaurant, café, trail or park.
 
Connectivity! Millennials are incredibly tech-savvy and most of them have smart phones–and they’re constantly connected. Most pay all bills online, and they love to make purchases on modern-looking, mobile-friendly websites. In fact, over half of Millennials report that if they have difficulty searching a site with their smart phone, they probably won’t use that company or business.
 
Because Millennials are the online self-service generation, our company has gone to great lengths to makes sure that potential and current clients can not only apply online, pay their application fees and their rent online, but can create their work-orders online. They communicate with us online, too, whether they have questions or are in need of repairs. Our property management system will even send text messages to tenants. They don’ want us to call them. So, we make it easy to do business with Millennials.
 
Austin is a beautiful, active, high-technology, ever-growing dynamic city which consistently rates in the top 5 “Best Cities” among 25-to-34 year-old Millennials. For them, Austin is great place to live, and while mortgage interest rates are still low, this also makes Austin the perfect place to be a landlord.
 
Whether you are looking into purchasing an investment property or want to refinance an existing property, feel free to call us for a lease analysis or to answer any questions you may have. Our office provides sales, leasing, property management, and mortgage services. You can also visit our website at www.smartsourcerealty.com .

Austin Area Rents Hit All-Time High

It is a great time to be a landlord and have investment property in Austin and surrounding area. As many of you know, rents took a dive with the high tech bust in early 2000’s. Finally, fourteen years later, rents are at an all-time high.
Austin continues to grow, and over 100 people are moving to the area daily. Since we manage many homes in the Cedar Park/Leander and Round Rock area, we did a lease analysis for these areas.  We did a year-to-date rent analysis for 2014 and compared to 2013 using MLS leasing data. We analyzed average and median rents. Below is a chart showing leasing data for the Cedar Park/Leander area for single-family homes:
 

CedarPark/Leander
CDOM
Sqft
List Price
Lease Price
2013-14
2013-14 %
Average – 2013
        23
         2,001
 $     1,541
 $      1,539
Difference
Difference
Median – 2013
        16
         1,882
 $     1,475
 $      1,475
 
 
Average – 2014
        21
         1,941
 $     1,588
 $      1,587
$    48.50
3.15%
Median – 2014
        14
         1,842
 $     1,545
 $      1,545
$    70.00
4.75%

CDOM represents the total days on market. Most homes are renting quickly. So, we did not anticipate the days on market to change much in 2014. Austin has had a robust economy with consistent job growth for some time.

The average rent in the Cedar Park/Leander area increased by $48.50 per month, or 3.15% to $1,587 per month. The median rent increased by $70, or 4.75% to $1,545 per month.

Round Rock
CDOM
Sqft
List Price
Lease Price
2013-14
2013-14 %
Average – 2013
        24
         2,087
 $     1,567
 $    1,565
Difference
Difference
Median – 2013
        15
         1,924
 $     1,475
 $    1,475
 
 
Average – 2014
        23
         2,098
 $     1,666
 $    1,663
$   97.70
6.24%
Median – 2014
        15
         1,966
 $     1,550
 $    1,550
$   75.00
5.08%

Just like homes in Cedar Park/Leander, the days on market did not change in Round Rock. This confirms the Austin and surrounding area have a strong rental market.

Monthly rents are slightly higher in Round Rock. The average rent in Round Rock increased $97.7 per month, or 6.24% to $1,663 per month. The median rent increased by $75 per month, or 4.75% to $1,550 per month.

Notice that the average and median rent is for homes in the 1,842 – 2098 sqft range for both areas.

Home values have also increased, but mortgage interest rates are still near record low levels. Now is a great time to take advantage of mortgage rates whether you are considering refinancing an existing rental property or are considering purchasing an investment property.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services. You can also visit our website at www.smartsourcerealty.com .

Tenants Evicted And File Appeal As Pauper

Our company manages over 300 properties. We always try and work things out with tenants when there is a problem paying rent. Our yearly eviction is very low (less than 2%), and we only file when tenants are not able to pay rent and have no source of income. Eviction is always a lose-lose scenario for both landlord and tenant.

We recently received an eviction judgment for a tenant for non payment of rent in Justice of the Peace court. The tenants moved into home after paying their security deposit through our ACH system, and their first month’s rent draft was returned NSF. While we have many issues with tenants paying rent in a timely manner, this was the first time we evicted a tenant for not paying the first month’s rent. Their rent draft bounced in the online tenant portal.

Tenant did not respond to email correspondence or calls, so we filed the eviction. The judge awarded a judgment for possession and amount of past due rent. Once the landlord receives a judgment, the tenant has five days to either vacate property or file an appeal. If an appeal is not filed and tenants fail to vacate within five days, we file a writ of possession. This allows the constable to place a notice on the door, and we remove the tenant’s personal items and place them on the curb.

The tenants filed an appeal as a pauper on day five. This allows them to appeal the case without a bond. Usually a bond is required, but this is waived if tenant file as a pauper. However, the tenants are required to pay one month’s rent into the court registry within five days of filing the appeal. Most don’t pay into the court registry. This allows them to buy more time and get five more days to live in home before a writ of possession can be issued.

Surprisingly, the tenants did pay the first month’s rent into the court registry. Once they do, the Justice of The Peace court forwards the file to the county court. The tenants are required to pay additional monthly rents until a hearing is held. We were surprised the tenants paid the first month’s rent, because these funds will be surrendered to the landlord if landlord receives judgment in county court. Most file the appeal and don’t pay the rent into court registry.

Once file goes to county court, we cannot represent the landlord as the property manager. An attorney must be hired, or the landlord must file all motions and judgment paperwork pro se. The county court does not file any paperwork. This is why the landlord should hire an attorney. In JP court, the judge will prepare and sign the judgment. This is not the case in county court.

Our client filed the paper work pro se without hiring an attorney. We did however assist the landlord in presenting the case to the judge. The tenant failed to pay the two most recent month’s rent to the court registry and breached the appeal rules by not paying the additional rents when due.

The hearing lasted only a few minutes. Unless there is a legal reason to not pay rent, the landlord will usually prevail in court and receive the judgment as long as paperwork is filed properly. The judge awarded the landlord a judgment for two month’s rent plus a reletting fee for breach of lease. Additionally, the judge agreed to release the first month’s rent received in court registry to the landlord and agreed to sign a writ of possession within three days.

In summary, it can be very challenging in dealing with the eviction process. Most landlords don’t understand the rules and requirements. Hiring a property manager can help you deal with these issues in the event an eviction is needed.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services

 

Investing In Duplexes- By Karl Jennings, Jr.

I have been asked from time to time what is my favorite or most preferred investment property. My preference is a multi-family duplex property. A duplex offers several advantages over a single family resident property. An investor purchase can purchase a duplex as an owner occupant buyer which requires a much lower down payment. Additionally, a duplex can generate a higher cash flow, lower vacancy costs, produce a larger pool of qualified tenants, and be an easier property to manager if property is not located in a mandatory Homeowner’s association (HOA).

Many tenants prefer to rent a property that is not in a mandatory HOA. The tenant may have a commercial vehicle they use for work, and subdivisions with a mandatory HOA may not allow this. We receive many violation letters from HOA for items such as grass being too high, garbage dispenser being left outside, weeds being in flower beds, items left in yard, and front fences in need of repair. This is just a small list.

The HOA can fine the owner and place a lien on home or even foreclose if there are outstanding HOA dues, fines, and or attorney fees. These rules can be burdensome for both the tenant and owner. A tenant may choose to not renew their lease if multiple letters or fines are issued. This can result in unnecessary vacancy costs for the landlord. Monthly HOA fees also decrease your profits and cash flow.

A duplex can also produce a higher cash flow than a single family residence. It is more costly to purchase two homes than a duplex. A duplex will produce a higher rent as a percent of sales price than a home. If investors want to maximize their cash flow, purchasing a duplex in a good location can be very profitable. For example, an investor you may not get $1,600 in rent for a $160,000 home. However, if an investor purchases the right duplex at a good price point, he or she may get $1,600 in rent or close to 1% of the sales price.

There is also a larger pool of tenants who can afford a duplex. Rents are more affordable for a duplex. Most duplexes have two or three bedroom units. Not every tenant needs a three bedroom unit. So, a duplex can be attractive to a small family, two roommates, students, or single person. This increases the number of tenants who can afford the property.

Unlike a single family residence, if a tenant vacates one unit of a duplex, an investor does not lose 100% of the rent. Having more than one unit can minimize monthly vacancy costs. It is better to have rent from one unit than no rent at all. The owner can also setup leases where the lease expiration dates are at different times of the year. This will minimize both units being vacant at the same time.

Finally, an investor can purchase a duplex as an owner occupant buyer and occupy one side. This is a great way for a first time investor to be a landlord without putting 20%-25% down. An owner occupant buyer can purchase a duplex with an FHA mortgage which offers attractive mortgage interest rates and down payments as low as 3.5% if property meets FHA guidelines. An owner occupant must live in the home as their primary residence for at least one year. After one year, the unit can be leased out and investor can purchase next property and have us manage both units.
In summary, investing in a duplex can be very profitable if an investor uses a professional to purchase the right property. We can analyze monthly cash flows, provide a lease analysis, and help you purchase the right property. We are experts and lease and mange hundreds of properties.

For any questions regarding duplex investments, email Karl Jennings at karl@smartsourcerealty.com or call our office at 512-257-9836.

 

Can I Borrow My Down Payment When Purchasing A Home

I have helped several buyers this year, and the subject came up if the down payment for a home can be borrowed from a family member or margin type of account. Unfortunately, the down payment for a home must present in a bank account and be a liquid asset (cash in bank). Down payment funds cannot be borrowed. All down payments used for a home purchase must be in borrower’s most recent bank account.

If non liquid funds are in an investment account, the lender will require a paper trail to show the proof of liquidation plus proof of deposit into borrower’s liquid bank account. This would include stocks, mutual funds, or use of IRA funds which are subject to early penalty fees plus ordinary income tax. A borrower can also exercise stock options, but borrower will be required to show copy of transaction and a paper trail showing the sale and deposit of funds.  

Any large non payroll deposit must be documented. Lenders will scrutinize any large deposit made into the borrower’s checking account. This includes gifts and sales proceeds from selling personal or real property. If borrow sells a car or commodity like gold/silver, the lender will require a bill of sale and proof of deposit. It is also a good idea to have both parties sign the bill of sale.

If funds will be used from proceeds of selling a home, the lender will require a signed certified HUD1 settlement statement showing proceeds from the title company. If borrower is selling home and purchasing another home at the same time, the lender will allow the sales proceeds to be used in the purchase of new home. The sales proceeds can be used immediately for home sales transaction.

A borrower can use an employer sponsored 401K for a down payment. However, the lender will require borrower to provide the employer’s policy for withdrawing funds. For example, the employer may limit the amount of funds that can be withdrawn from employee’s account. Most 401K withdrawals are setup as a loan, and the borrower must pay back within a certain period of time. The monthly debt will be counted towards the borrower’s debt ratios. So make sure you can support the additional monthly debt and still qualify for the mortgage. There can also be consequences if loan is not paid back in full and borrower has a change in employment.

Borrowing money with a line of credit or margin loan will also be scrutinized. Any down payment used for the purchase of the home must be seasoned and in a cash bank account. This means that the funds must already be in the borrower’s bank account for at least 60 days, or two monthly statement cycles. If a borrower receives a gift or borrowed and deposited funds into their bank account two months ago, the lender will assume the current funds are seasoned and belong to the borrower. Deposits made more than two months ago will be analysed by the lender.

Gifts can also be made for home buyers. Rules vary depending on type of mortgage. Borrowers applying for an FHA mortgage can receive a gift for 100% of their down payment and or closing costs. Borrowers who apply for a conventional mortgage must have at least 3%-5% of their own down payment seasoned in their personal bank account. The person or donor gifting the money to the borrower will be required to issue a letter stating the amount of the gift, the relationship of the person they are giving the gift to, and the gift will not be a loan or be repaid. Lender will only allow gift funds for a primary residence. All funds used for an investment property mortgage must be the borrower’s funds and be seasoned.

There are also IRS rules and guidelines for gifts. The IRS allows a donor to gift $14,000 per year to an individual. Generally, the donor is responsible for paying any applicable gift tax unless special arrangements are made and donee agrees to pay tax instead.

In summary, it is very important to understand the down payment rules when purchasing a home. Any large deposits must be documented. Sales of stocks, mutual funds, and stock options must have a paper trail showing source of funds and deposit into borrower’s bank account. Gift funds will also require a letter and paper trail.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services

What Is The Difference Between Cash Flow And Profit?

Sometimes profit and cash flow are misunderstood. Calculating cash flow is easy. Monthly cash flow is simply the remaining funds an investor has each month after collecting rent and paying all property expenses. Subtract the mortgage payment, insurance, property taxes, mortgage insurance (if applicable), and any other expenses or repairs. The remaining funds are the monthly cash flow. However, profit is a different calculation.

An investor who owns rental property is able to deduct mortgage insurance, property taxes, mortgage interest, repairs, leasing, and management fees. Improvements made to the property can also be deducted, but usually over several years. For example, adding a new fence or sprinkler system would be considered improvements, and the IRS requires you to deduct this type of improvement over five years.

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Why Every Buyer Needs A Title Policy When Purchasing a Property

While most homeowners have title insurance, few understand what it does or what it covers. In Texas, most transactions are closed at a title company, and the title company issues a title policy which protects the buyers’ ownership for as long as they or their heirs own the home.
In Texas, it is customary for the seller to pay a title policy. However, in any contact, commissions, fees, and terms are all negotiable. If a buyer is financing and obtaining a mortgage, the lender will require a title policy to be purchased as a condition of funding the loan. Regardless, we highly recommend all buyers have a title policy included in their transaction.

Once a contract is executed and receipted at a title company, a title professional will search the public records to look for any problems with the home’s title. The search reviews land records going back many years. At closing, an Owner’s Title policy is issued and protects the buyer should a covered title problem arise with the title that was not found during the title search.

Many risks can arise when purchasing a home and transferring the title from seller to buyer. Possible problems can include errors or omissions in deeds, mistakes in examining records, failure to discover a recorded lien, forgery, undisclosed heirs, or conflicting wills. About one out of every four title searches discovers a title problem, but most are resolved before closing.

Choosing not to purchase a title policy can result in severe financial loss. We had a cash buyer almost lose their property due to a title issue. Last year, one of our clients purchased a $250,000 home for cash. A title policy was issued by the title company. The title company missed a recorded lien in the title search but did issue an Owner’s Title policy. The home went into foreclosure six months later, and an investor purchased the property at the county steps and satisfied the payment of the lien missed by title search.

Because a title policy was issued to our client when he purchased the home, he contacted the title company and filed a claim. The insurance company was able to settle with the buyer who purchased the property under foreclosure. Fortunately, the buyer was an investor, and he made a quick profit by settling with the title insurance company for the amount of the insurance coverage.

Since the buyer purchased home in foreclosure and was the legal owner, he could have refused to settle with the title insurance company and taken legal possession of the home. Had this happened, our client would have lost the home but would have been compensated by the title company for the amount of coverage on the policy. Our client also spent thousands of dollars in improvements for the six months he owned home. The improvement costs also would have been lost.

So whether you are an investor or purchasing a property as your primary residence, it is critical to purchase a title policy. Our client would have lost over $250,000 plus improvements made to the home had a title policy not been purchased. The cost of the title policy is usually less than 1% of the purchase price.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services.

Should I Use IRA To Purchase Real Estate?

Should I use my IRA to purchase a rental property? I frequently have clients ask me this question. There are many advantages in purchasing investment property. I will discuss the advantages of purchasing investment property outside an IRA and also discuss the rules for purchasing a property using an IRA.

I personally invest in rental properties for the following reasons: 1)cash flow; 2)depreciation; and 3)leverage. Understanding these terms is critical if you want to build long term wealth using a portfolio of investment properties.

If your monthly rent exceeds the monthly property expenses, the property produces a monthly positive cash flow. Unlike many investors who invest for appreciation, I invest for cash flow and won’t purchase a rental property unless it produces a positive cash flow. Putting money down on the right property that produces a monthly cash flow will generate a profit in any economic cycle. I started purchasing rental properties in 1999 and have never lost money, because all of my properties cash flow aggregately. And, I have survived two recessions (Austin high tech bust in 2002 and recent recession).

Depreciation is a non-cash expenditure. It is an expense that is not incurred by landlord. The IRS allows landlords to depreciate the improvement of their home over a period of time. Land cannot be depreciated. The depreciation period is 27.5 years for a single family residence. For example, if you purchase a property for $125,000 and the land is worth $25,000, you can depreciate the improvement of $100,000 over 27.5 years which equates to a yearly expense of $3,636.36.

Cash flow is not the same thing as profit. Profit is calculated by taking gross rents and deducting all expenses. Principle payments are not deductible. Instead, investor depreciates property as noted above. Hence, profit is calculated by taking yearly cash flow plus yearly principle reduction. If the property profited $3,600 in a single year, the $3,636.36 depreciation wipes out the gain and produces tax fee income. If you are in a 25% tax bracket, you just saved $900 in income taxes with a tax free gain. See my blog article for more details on depreciation.

Leverage increases your return on investment. For example, you can purchase the home below market, producing instant equity. Obtaining a mortgage and using the bank’s money to generate cash flows will increase your rate of return. Appreciation should be treated as a bonus. If home does appreciate, the return on your investment is much higher if you finance property. For example, If an investor purchased a rental property for $125,000 and home appreciates 2%, or $2,500, the rate of return is 8% with a 75LTV mortgage scenario (investor put 25% down). Your rate of return quadruples compared to paying cash or using an IRA to purchase home. Add yearly profit of $3600 in tax free income (after depreciation), $900 in tax savings from $3,600 profit (if in a 25% tax bracket), and your rate of return increases to 22% the first year. Rate of return is even higher if property was purchased below market. Purchasing the right property at the right price and leveraging a 75LTV mortgage can produce a return greater than 25% the first year.

It is important to understand cash flow, depreciation, and leverage before we discuss purchasing a home with an IRA. With a normal investment property purchase, you can deduct mortgage interest, insurance, repairs, property taxes, management fees, etc. After expenses, you can depreciate the property which will offset gains or even make property realize a loss. Owing a home in an IRA negates these tax benefits. You can’t deduct the property taxes, repairs, and other expenses or take advantage of depreciation. Also, it is very difficult to get a mortgage to finance real estate inside an IRA. So you have to use the IRA and pay cash for the property. Paying cash reduces your return as noted in example above.

The IRS has strict rules that must be followed. You cannot occupy property or complete repairs. The IRA owns the property, not you. You will also need a property manager to find tenants and handle rents and disbursements. Of course, we recommend hiring a property manager, especially for out of town investors. All repairs must be paid out of the IRA. Failing to follow these rules can result in you losing the tax-deferred status of your entire IRA if you are younger than 59 ½. This can result in you owing taxes on the full value of the IRA plus 10% penalty.

In summary, it may be more advantageous for investors to purchase an investment property without using an IRA. Purchasing investment property outside an IRA will increase your rate of return, give you more flexibility to manage and work on property, produce tax free income by leveraging depreciation, and allow you to better leverage your capital by taking advantage of today’s record low interest rates. If you don’t have the down payment or cannot qualify for a mortgage, purchasing a home using an IRA is still a good alternative. Long term, we expect the rental market to remain healthy even during a recession. Higher rents and greater demand for rental properties will still generate a nice profit for investors who finance property or purchase property with an IRA.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services.

Should Investors Consider Yelp Ratings When Hiring A Property Manager?

I just got back from a regional property management conference in Las Vegas which was sponsored by NARPM (National Association of Residential Property Managers). NARPM has yearly national conferences and several regional events for property managers. This conference was specifically held for broker/owners of property management companies (not employees or staff). One of the speakers was an employee of Yelp, a popular online website that allows users to provide feedback for company services. With the rise of social media sites and online tools, Yelp has evolved as a popular online tool. However, Yelp and its procedures raised quite a bit of controversy amongst property managers attending the conference.

We provide a very unique service. We are hired by owners to lease and manage their properties. It is our responsibility to find qualified tenants, collect rents, and manage repairs and any issues with the property. Property owners are our clients, and as licensed real estate agents, we have a fiduciary relationship to our property owners. Our signed management agreements require us to process rents, draft lease agreements, disburse owner funds, and establish specific policies and procedures that benefit our property owners.

However, we have a customer relationship with tenants. It is our job to be professional and fair and manage repairs in a timely manner. We strive to provide professional service for both our tenants and our property owners. Yet tenants have far different expectations than property owners, and this is where the feedback issues arise.

Some property managers attempt to solicit positive feedback when outstanding service is provided. The Yelp employee discouraged owners from soliciting positive feedback. Yelp has a powerful screening tool and will hide feedback entries. Yelp will screen non customer feedback to show a more accurate snap shot of the service provided by the company. But, like junk email filters, many positive feedback entries are removed from feedback system, and junk email filters move valid customer emails to the junk folder. It is not a perfect science. Some managers claimed the negative feedback entries were permitted and the positive feedback entries were screened. Many property managers felt they were in a lose-lose scenario.

Unlike a restaurant, retailer, sole proprietor, or service provider, our end users do not hire us. We are hired by owners. Yet tenants are the retail users of the property and services we provide. Owners expect us to minimize vacancy costs and expenses. Yet tenants want full refunds of their security deposits and don’t want to pay late fees when paying late. They expect service calls to be completed within hours and want to be placed in hotels if the a/c system can’t be repaired the same day during the hot months of the summer. This is just a short list of the expectations we face daily with tenants.

So by doing our jobs and making fair and reasonable decisions that are consistent with our policies and procedures and Texas law, we have disgruntled tenants who are upset with our services who enter negative comments into websites such as Yelp. Tenants provide one sided comments that sometimes are inaccurate and unsubstantiated.

Yelp is certainly a powerful tool and will continue to grow in popularity. More and more consumers are using online ratings to research if they want to hire a person or company for their services. However, I would not recommend this as the only tool for a prospective property owner to use when considering a property manager.

I recommend using multiple tools when choosing a property manager. Referrals are one of the best metrics to use in determining the success of your relationship with a property management company. Property managers have different business philosophies and procedures. Many have years of experience, multiple designations, and an efficient system in place. Make sure you choose a property manager that has the tools, services, and procedures to fit your needs. Low vacancy rates, fast lease times, timeliness of owner ACH disbursements, easy access to owner online reporting, effective property marketing, responsiveness, structure of business (office, employees, no employees) and professional service are just a few items that should be discussed when interviewing a property manager.

In summary, be cautious of using just one screening tool such as Yelp, Google and other online rating systems in your search for a property manager. Don’t shy away if you see a property manager with a poor rating. Instead look at the context of the feedback and manager responses. Some of the best property managers in the industry have low ratings, because they have made prudent decisions on behalf of their clients, the property owner.

If you have any questions, please call us at 512-257-9836. Our office provides sales, leasing, property management, and mortgage services.

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