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The Truth About EVICTIONS

July 16, 2012 by
By Kevin B. Postema, Editor

Landlord Can’t Force Dog To Be Evicted

I am a renter in Los Angeles. I’ve had my little dog for three years now and the landlord never seemed to mind. Now he wants to change the building’s policy on pets, and he is demanding that I get rid of my dog. I would move before I would do that. The rental agreement states “No Pets,” but it seems unfair to me. Should I start looking for another apartment?

If you live in the City of Los Angeles you can probably unpack those boxes. If the landlord accepted rent for more than a month and knew about the pet, and it sounds like he did, he has probably waived his rights to require you to get rid of your dog.

He may prohibit any new renters moving into the building from having pets, but he cannot evict you for keeping your dog if he has accepted the rent knowing of her presence.

If you give up your dog or it dies, the landlord may prohibit you from getting a new pet as long as he uniformly bans pets in the entire building.

Can’t Evict a Renter for Writing Bad Checks

Every month my tenant in West Hollywood gives me a bad check. I have to wait one to two weeks to really collect the rent by the time my bank lets me know his checks are bad. When I give him a three-day notice to pay rent or quit he always gives me another check right away. It’s always good. Can I evict him for this?

You cannot evict a renter in California because he gives you bad checks, if he subsequently makes good on them. All is not lost, however, you can require that a renter who perpetually gives you bad checks pay his rent in the form of cash, a cashier’s check or a money order.

You must serve the renter with a 30-day change of terms of tenancy notice. In the notice, you should make reference to the series of bad checks and let the renter know that from now on he must pay his rent by one of the above-mentioned means.

Of course, by definition, a 30-day notice requires at least that long to become effective. So, you’ll likely have to take at least one more check from this renter.

From “The Best of Apartment Life: How to Survive Apartment Living and Ownership,” by Kevin B. Postema.

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Sewage Back Up – Here’s the Scoop on the Poop

July 10, 2012 by
By Chris Bevington, Farmers Insurance

A  few months ago, my son flushed a toy train down the toilet at his pre-school. A short time later, Dad got the bill from the school director. Total plumbing repair costs were $700. Fortunately, I only had to pay a small portion of this, as some additional work was done on the drainage system.

Sewage back up in apartment buildings, especially older ones, can be a very common problem. Many of the readers here may have experienced a large-scale sewage/plumbing problem at their property as opposed to fire damage or another major loss. Basic insurance plans have limited sewage back up coverage or perhaps no coverage at all.

Check your property policy to make sure you have adequate coverage for your building. Sewage back up problems can be caused by tenants and the items they decide to dispose down the toilet. Roots growing into the drainage system or a drainage pipe that is crushed under the weight of a vehicle driving across the yard are other common causes of sewage   back up.

The larger the size of your property, the more severe the problem can become, especially if the back up commences during a heavy use period, such as a weekday morning when all of your tenants are getting ready for the workday. Educating your tenants on the items that should not be flushed down the toilet is a good idea. Protecting your property by adding adequate sewage and drain back up to your policy is good common sense. Some insurance companies provide endorsements to cover sewage and drain back up that can be tailored to fit the size, age and location of your property. Contact your insurance carrier to see if you are covered.

Bevington is an Agent with Farmers Insurance. He offers business insurance to property owners and renters insurance to your tenants. He is a member of AAGLA and a property manager since 2005. You can reach him at 310-418-1500 or at cbevington@farmersagent.com.

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Four Steps to Solving a Mold Problem

May 22, 2012 by
By Jason Harris

The fundamentals of dealing with mold contamination are a four step process:

Initial Inspection:

When an occupant is suspicious of mold contamination, contact a mold inspector. Signs of suspect conditions include: moisture on surfaces like walls and flooring, malodors such as damp musty odors, and visible signs of discoloration or dark stains on surfaces. The inspector should be certified and there are many certifying organizations. Licensure is not required in California. An inspector should offer value in terms of service, product and price. The inspection process typically includes a visual inspection, temperature and humidity readings, moisture readings of building materials and sampling. The inspection report should provide findings of all aspects of inspection and testing. The conclusions and recommendations should offer the next step whether or not to have a mold remediation company correct the problem.

Remediation/Removal:

If a problem has been positively identified, the next step typically involves a destructive, invasive process known as mold remediation. First, the source of moisture intrusion has to be identified and eliminated.  For example, if a leaky pipe is producing moisture behind the wall, a plumber needs to correct the problem. That way, you know the moisture will not reoccur and produce the mold contamination again. Once the problem is fixed (or concurrently) a mold remediation company should be employed to remove the moldy materials and clean the air of the affected area. This work should not be relegated to a handyperson. The remediation company should be licensed and insured because they are usually going to be employing workers, destroying parts of the structure and potentially building it back. As a rule, if there is going to be more than $500 worth of work being performed, a licensed contractor should be doing the work.

Clearance Inspection:  After mold remediation has been completed, a post-remediation inspection should be performed to verify the area is cleared prior to reconstruction. A documented report of the findings should be provided by the inspection company. It is prudent to use the same company that performed the initial inspection so that the process is administered consistently from beginning to end. It should be noted that the inspection company should be a separate company than the remediation company to avoid conflict of interest. There are companies that perform all four steps of the process, however, chances for improprieties exist and may compromise your legal standing in a lawsuit.

Reconstruction:

Once a structure or area within the structure has been deemed ready for reconstruction by the clearance inspection, the final step is to rebuild the area so that occupants can resume normal activities of daily living. This final step can be performed by the remediation company or by general laborer that specializes in the work needed.  Quality, timeliness, and cost are all considerations at this step. As an apartment owner, returning tenants to the unit is top priority to mitigate further loss of rental income and/or costs for displacement.

The above article was produced by Same Day Mold Testing. The company was established in 2005 to serve owners, managers, and tenants in the arena of mold contamination. If you have questions or would like more information about this article, feel free to send an email to samedaymoldtesting@gmail.com or visit us online at www.SameDayMoldTesting.com.

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Building Ordinance Coverage: YES YOU NEED IT

May 18, 2012 by
By Christian Bevington, Farmers Insurance

Laws and regulations with city, county and state levels are a daily fact of life to apartment building owners in California. Remaining in compliance can seem like a full time job. If your property experiences a major loss, don’t expect a regulation break from City Hall. In fact, you might now face the most costly compliance issue you will ever experience as a property owner.

Building Ordinance or Law Coverage is an optional coverage designed to protect the property owner from the cost of complying with building code laws that were passed after their property was built.

Say for example, three units are destroyed due to a major fire at your property. During the planning of the reconstruction, you may learn that your municipality requires upgraded standards for your buildings electrical, plumbing, and HVAC systems. This could easily add substantial costs to your already absorbent expenses for this project. Other items may include a sprinkler system and handicap access. This may be additional items added in order to keep your property in compliance with new building codes.

Let’s take this a step further, say your property building has endured over 50% of structure damage. Depending on where your property is located, the local codes may require the remaining structure be demolished completely and reconstructed to rebuild a new structure in order for it to be in compliance with current building codes. A standard building policy may have an ordinance or law exclusion. This could mean that the demo and reconstruction costs on the half of the building that was not damaged are not covered. We recommend you carefully read your policy to see if you are exposed.

Building Ordinance Coverage can be added to your building policy by endorsement. This   endorsement is designed to provide funds to cover the additional reconstruction costs associated with compliance of current building codes. Building Ordinance Coverage can mean the difference between being able to completely rebuild your property into an income generating asset or having to walk away from the shell of a structure because you simply cannot afford to rebuild to codes now on the books.

When shopping for a new building policy, look for an insurance company that offers endorsements on Building Ordinance Coverage. The level of coverage your property needs will depend on your local building codes. Farmers Insurance provides endorsements to cover building ordinance compliance that can be tailored to fit the size and geographic location of your property.

Bevington is an Agent with Farmers Insurance. He offers business insurance to property owners and renters insurance to your tenants. He is a member of AAGLA and a property manager since 2005. You can reach him at 310-418-1500 cell or at cbevington@farmersagent.com.

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Stay Informed with the LATEST News from NAA

May 14, 2012 by
By NAA

Advantage in D.C. Apartment Market Could Shift to Residents

Digested From “Could D.C. Area Soon Become a Renter’s Market? Yes and No.”

Washington Post (03/21/12) by Steven Overly

The Washington, D.C., metropolitan area has not been a favorable one for apartment residents in recent years. A relative dearth of new rental housing coupled with soaring demand for apartments have pushed monthly rents higher and made desirable units more difficult to find.

As of December 31st, the average rental price throughout the region stood at $1,685; 2.1% more than a year earlier. Analysts, though, say that dynamic may begin to shift in favor of apartment residents as early as this summer. A swollen backlog of apartment communities under construction is set to begin opening over the next two years. A. Grant Montgomery, Vice President at Delta Associates, observes, “In the near term, the market will be more of a renters’ market because of the large amount of supply that’s coming online.” Two years from now, he adds, “those units will fill up, and they will have strong performance for owners.” That does not mean that area apartment dwellers will see major declines in vacancy rates or desirable options and incentives in Metro Washington’s most desirable neighborhoods.

Apartments in D.C.’s Dupont Circle, for instance, will continue to command high rents. Delta   forecasts that 12,472 rental units will come on the market in 2012, with another 10,887 apartments to follow next year. A significant influx of supply versus the approximate 5,800 units added to the market in an average year. Northern Virginia will see the bulk of new stock between now and the end of December, with 5,895 apartments on pace to come on the market.

BofA: Families Facing Foreclosure Can Rent

Digested From “BofA: Families Facing  Foreclosure Can Rent”

CNNMoney (03/23/12) by Chris Isidore

Bank of America plans to offer a small number of customers facing foreclosure the option to stay put and rent the property instead. The pilot program initially will be offered to some 1,000 consumers in three states: Arizona, Nevada, and New York, and will entail homeowners giving up the title to their property in return for bank forgiveness of their mortgage debt. They would then be permitted to rent the property for up to three years.

Lexington Asset Management Goes to Single Stream Recycling

Digested From “Lexington Goes to Single Stream Recycling”

Memphis Business Journal (03/23/12)

Lexington Asset Management, LLC is adding a new recycling program to all of its apartment communities in six states. The Memphis-based property asset management firm last week inked a deal with William-Thomas Group to implement its Haul Pass Network waste and recycling service at the more than 3,000 rental units Lexington manages nationwide, replacing soon-to-expire waste contracts. The Ohio-based company will provide single-stream recycling at each of these apartment communities. Lexington executives say putting all waste services under one contract could save the firm thousands of dollars a month.

Wall Street Gold Rush in Foreclosed Homes

Digested From “Wall Street Gold Rush in Foreclosed Homes”

NDTV (India) (03/25/12)

The U.S. Government is proceeding with a trial project to sell large pools of single-family homes that Fannie Mae owns in some of the nation’s most downtrodden housing markets. While investors are flocking to foreclosures to take advantage of the current rental craze, proponents of buying foreclosed homes are urging caution with regard to the kind of returns they can expect and the challenges and potential negatives that come with being a landlord. Others worry that those that contributed to the housing bust will now benefit by purchasing foreclosures at a sizable discount.

Elk Grove (Calif.) Considers Banning Smoking at Apartments

Digested From “Elk Grove Considers Banning Smoking at Apartment Complexes”

Sacramento Business Journal (03/22/12) by Michael Shaw

Elk Grove, California, is contemplating the concept of implementing a ban on smoking at area apartment communities. The City Council is prepared to consider limiting smoking and creating an ordinance to ban the practice at local apartments. But not everybody supports the idea. The Rental Housing Association of Sacramento Valley said apartment owners should decide on the appropriate policies, not the city. Several other Sacramento communities have either enacted similar legislation or limited the amount of smoke-free apartments.

Consortium Offers Fair Housing Seminar

Digested From “Consortium Offers Fair Housing Seminar”

TBNWeekly.com (03/26/12)

In April, the Tampa Bay Fair Housing Consortium will celebrate Fair Housing Month with a one-day training seminar covering such topics as fair housing laws and what fair housing means to persons with disabilities. The April 13th seminar featured a panel of distinguished speakers, with a keynote address delivered by Congresswoman Kathy Castor. The Tampa Bay Fair Housing Consortium is a collaboration between the Bay Area Apartment Association; Bay Area Legal Services; the cities of Clearwater, Largo, St. Petersburg, and Tampa; the Greater Tampa Association of Realtors; Gulfcoast Legal Services; Hillsborough County; and the Pinellas County Office of Human Rights.

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How “Smart” Are We?

September 28, 2011 by
By Ed Zobrist, AAGLA Member, ENOVATIVE KONTROL SYSTEMS

DOES THIS SOUND LIKE YOUR BUILDING?

In our buildings, there is an area we rarely visit.  Yet, in that area there is an opportunity to literally put thousands of dollars per year in our pockets – instead of the pockets of our friendly utility providers. For a limited time, under the On Demand Efficiency (ODE) rebate program, a product is being offered for free that will return to us thousands of dollars annually. By lowering our natural gas bills, electricity expenses, and on-going plumbing repair and maintenance costs, the D’MAND CIRC® system is the most cost- effective building enhancement on the market. 

According to the California Energy Commission (CEC), out of every $1,000 we spend on energy for hot water, $400 is wasted at the heater and another $300 is wasted distributing the hot water throughout the building. These dollars literally go down the drain before a single drop of water pours from your tenant’s tap or the laundry appliance. 

What’s wrong with this picture?

Let’s take a trip to your hot water room.  The first item that catches our eye is the boiler/hot water tank.  I’ll bet that the burner is on or will turn on in a few minutes. Since we are visiting during a weekday, let’s assume that most of our tenants are away at work. Why is the gas burner turning on when there are only a few people at home? 

If our burner and circulation pump are controlled by an intelligent system, they only come on when needed. This excessive burning of natural gas to heat water no one is using, according to the CEC, represents $400 of the $700 in wasted energy per year.

What is the other $300 in wasted energy costs?  Adjacent to the hot water tank is a small electrically driven pump. You don’t have to wait for it to turn on. It’s running as we speak. Guess when it will stop? NEVER? You’re paying for the electricity to run the pump non-stop from the date you bought your building. Does this pump need to run continuously? Not anymore. 

This is wasting $300 out of every $1,000 we spend for hot water each year. This pump’s job is to keep a continuous flow of hot water to each of our units through a recirculation hot water pipe, a distribution loop. As freshly heated hot water is pumped out from the burner to the units, the cooled water in the pipes returns to the burner to be re-heated and sent back out. This is a never-ending process. 

Why are we paying a lot of money to circulate hot water to all of our tenants, regardless of whether they’re home? 

THERE IS A BETTER WAY

Thanks to the CEC, the word is getting out.  Out of 6-million multifamily buildings in Los Angeles County, 2,000 have installed state-of-the-art, no maintenance systems reducing annual energy consumption by thousands of dollars per year, depending on a building’s size. 

THE SOLUTION

Demand-controlled technology, or “smart” systems only activate when there is a need for a pump’s services. The typical, continuous circulation pump is replaced with an almost identical sized pump that easily retrofits to universal flanges.  

The critical difference is the D’MAND CIRC® pump uses a temperature sensor placed on the hot water return line in the loop that delivers cooled water to the burner for reheating.  Another sensor, called a flow sensor, is placed on the hot water line as it leaves the hot water tank. 

These two sensors make decisions by sending electronic signals to the recirculation pump.  Instead of the pump running continuously, it only operates when a combination of factors occurs. In the case of the temperature sensor, the pump comes on only when the hot water in the recirculation loop has fallen below a preset temperature and the flow sensor has signaled that someone has opened a hot water tap. 

Otherwise, the pump remains off, generating significant savings in natural gas and electricity. One ensures hot water is kept available in the loop while the other ensures fresh hot water is available to all tenants within seconds of turning on the hot water tap.

This system typically saves up to 10-30% off water heating costs.

The system includes a brand new circulation pump, comes with a 5-year warranty and is being offered for free through the ODE utility rebate program.  Take advantage of this incredible deal. Even when it is sold at retail for $1,600, it is amortized in less than two years for most buildings, making it extremely cost effective.

After recouping this small investment, the money saved stays in your pocket.  It usually installs in less than two hours and has a life expectancy of over 15 years. This system is designed by an L.A.-based company dedicated to assisting multifamily building owners (like you and me) reduce energy consumption through simple, innovative, cost-effective solutions and smart designs

For more information, go to www.enovativegroup.com or call 714-580-8150 or 805-453-6635.

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Top 5 Reasons Why Owners and Builders Need an Attorney When Incorporating Solar Energy in a Project

September 23, 2011 by
by Matthew Gorman, Esq., Alvarez-Glasman & Colvin

Solar energy development in California has been widely welcomed by the public and private sectors, with policymakers, environmentalists, businesses, landowners, and others lauding the efficiency, cost reduction, and reliability that solar energy offers – all while maintaining a low-carbon footprint as a sustainable energy source. But with the fast pace of solar energy development in our state, it is easy to “jump into the solar energy pool” too quickly, without undertaking the due diligence and other preliminary steps that can avoid pitfalls particular to solar energy projects.

Specialists in the Solar Rights Act and laws concerning solar energy systems are struck by the number of legal problems which arise from well-intended, but overzealous, incorporation of solar energy systems on development projects. Often, these problems would have been easy to resolve had experienced legal counseling been offered at the outset…but all too often attorneys field inquiries from developers and others whose projects are already well-underway, making it far more difficult and costly for their legal problems to be resolved.

For the vast majority of these projects, it is far more cost-effective to enlist the counsel of an experienced solar energy attorney at the outset of a project. Here are the top five reasons why this is true.

1) Getting Entitlements
As solar energy has gained popularity, government agencies have been inundated with applications for a variety of solar projects. They are quickly developing complex regulations that limit or prohibit these projects. You need an attorney with expertise in the myriad of differing regulations in order to secure the entitlements that will allow your project to proceed.

2) Preventing Unforeseen Liabilities
Solar energy poses a host of potential liabilities that are only now being realized. Liabilities include repair and maintenance claims; access to light; limitations on insurance coverage; claims over clean energy certifications; disputes over shade; claims of solar system trespass; disputes over aesthetics; product warranty and liability claims; and other liabilities.  A knowledgeable attorney can navigate these pitfalls and ensure that your contracts will protect you from liability.

3) Get the Most Out of Your Investment 
While the law establishes many financial and other benefits for those converting to solar energy, these rules are constantly changing. A seasoned attorney realizes all of the potential advantages the law offers.

4) Foreseeing Disputes
Because solar energy has only recently been widely incorporated in projects, most developers and attorneys are wholly unaware of the common types of disputes that these projects can encounter.  Potential disputes that a solar rights attorney might easily resolve might not even be recognized by an attorney unfamiliar with the nuances of solar energy law until it’s too late. You need an attorney with a history of handling these projects in order to foresee disputes which may be on the horizon and to respond quickly and effectively.

5) Knowing What’s Feasible Before It’s Too Late
All too often an owner or builder will embark on a project that incorporates solar energy without first determining what legal obstacles exist. Only when millions have been invested and the project is well underway are legal problems identified, leaving developers scrambling to locate a solar rights attorney to untangle the problems – something that cannot always be done without significant consequences to overall project viability. It is best to include an attorney versed in solar rights law early-on in the planning stages of your project in order to determine what legal obstacles must be overcome to ensure a feasible and uninterrupted project.

Attorneys at AGC have been at the forefront of the Solar Rights Act and other solar energy laws which shape California’s clean energy future. If you are planning to incorporate solar energy on a  current or future project, or if you have other questions concerning the legal intricacies of solar energy law in California, contact AGC attorney Matthew Gorman or any of the firm’s other attorneys at or 562-699-5500.

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LAHD Workshop Series

August 1, 2011 by

LAHD along with Eberly Company and their other outreach contractors are having a series of workshops to provide the constituents with outreach and informational services regarding REAP and the LAHD's fees billing requirements. Please see the flyer below for more information

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Dear Maintenance Men…

July 25, 2011 by
By Jerry L’Ecuyer and Frank Alvarez

Dear Maintenance Men:
I have a rental unit with an otherwise perfectly good carpet, if it were not for the candle wax and gum melted into it. Can this carpet be saved? What do you recommend as a course of action? Bradley.

Dear Bradley:
The best way to remove candle wax from a carpet is to use your iron. Put an absorbent paper towel over the wax and heat the area with a hot iron. The paper towel will absorb the wax as it melts. Be careful not to burn the carpet as an iron can melt carpet fibers. Any leftover stain may be removed by blotting the area with a small amount of white ammonia to act as a dry-cleaning solvent. Blotting with a mild detergent mixed with warm water may also work. Make sure the detergent does not contain any alkaline or bleaches.

Gum can be removed by either freezing and removing it in pieces or using peanut butter to loosen the gum’s grip on the carpet. A product known as “Goo Gone,” found at any hardware store, may be used to remove gum, tar, grease, and glue. Use Goo Gone sparingly. Don’t soak.

Dear Maintenance Men:
I’m redoing my building’s landscape and want to be “Water Wise” as they say. Where do I start? I typically have a burnt orange thumb, but I want to give it a go anyway! Sally.

Dear Sally:
As they say in real estate: Location, Location, Location! Locate the proper plants in the proper places, such as shade plants in the shade and direct sun or drought resistant plants in the sun. Group the shade plants together and the drought resistant plants as another group. Try not to mix the two groups together. Add mulches, peat moss and other water retentive substances to your dirt. This will help your soil retain moisture.

You might consider cutting back on the amount of lawn your building has and employing crushed stone areas and larger drought resistant plant beds. Use silvery or grey colored foliage, as these plants tend to be more water wise. A sure way of cutting back on water usage is to automate your sprinkler valves. Use drip irrigation where possible and schedule watering times in the evenings, night or very early mornings. Talk to your favorite nursery for specific plant advice.

Dear Maintenance Men:
I own a building that consists of all two-bedroom units, with one and three-quarter baths. The three-quarter bathrooms have a sink, toilet and bathtub, but no shower. I would like to convert them to full baths by adding a shower. How do I do it? Bill.

Dear Bill:
This is a great upgrade to any unit. There are a number of ways to go depending on your budget and do-it-yourself skills. The most economical and simple solution to adding a shower to a bathtub is to install a diverter spout that includes a ½” hand shower fitting.

The hand shower is sold separately or as a kit with the spout. Connect the hand shower hose to the spout and hang the showerhead on the wall. Other than installing waterproof shower walls, you are ready to go.

The second option is a bit more involved, but a much better solution. Because most tub-only bathrooms usually have no wall tile or shower wall material, gaining access to your existing valve and plumbing system should be easy. Let’s begin with the items you will need to start your project. (If you have an existing two-valve system, now is the time to go to a modern single-valve set-up.) The easiest apartment application valves are either Moen or Mix-it valves. There are many other brands. The kit will come with a valve, spout, shower arm and head. You will still need to purchase a ½” copper pipe at least 56-59" long, a 90 degree brass elbow, slip to thread with ears to attach it to the wall stud at the showerhead. Be sure you have a full propane torch with solder.

Now you are ready to install. Don’t forget to turn off the water. Since you will be installing new shower walls, don’t worry about damaging drywall. Cut a hole in the drywall stud to stud, 12" high at the existing valve level.

Then cut a 4" wide strip of drywall 59" up from the location of the existing valves. Now that everything is exposed, remove the old valves by cutting, or use the propane torch to melt the solder joints. Install the new valve in place, cut a ½” inch copper riser 56-59" and solder it to the valve.

Solder the brass 90-degree elbow to the pipe and screw the elbow to a cross stud. If you can’t find an elbow with ears, use plumbing tape or a pipe hanger to secure the elbow in place. Test your plumbing installation for leaks.

Install new drywall to cover your plumbing work and the tub is ready for the installation of the shower wall material of your choice. We recommend a one-piece wrap-around shower wall system available at your local home center.

Call Buffalo Maintenance, Inc., or JLE Property Management, Inc., for maintenance, consultation or management. For an appointment, please call Alvarez at 714-956-8371 or L’Ecuyer at 714-778­0480. Please view our websites at www.BuffaloMaintenance.com and www.ContactJLE.com websites at www.BuffaloMaintenance.com and www.ContactJLE.com.

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Avoid the Top 10 Multifamily Investment Mistakes – Part Two

June 11, 2011 by
By Dawn Dyer, Dyer Sheehan Group, Inc.

Last month, I highlighted two of the top 10 mistakes made by multifamily investors, and how to avoid them.  We discussed these, as well as other potential property owner pitfalls, at the May session of the Apartment Investor Academy, held in Camarillo.

If you missed it, it’s your lucky day!  Over the next two articles, I will finish the list of the Top 10 Multifamily Investment Mistakes that you can make.  Included below are four more of the most common impediments to success for apartment investors, as well as ways you can help ensure that your properties run smoothly and generate the best possible return on your investment.

3)  Thinking You Can Time the Market

Real estate is not a get-rich-quick scheme.  It is a powerful tool for building financial wealth and security over time.  It is very difficult to time the market well enough to get in and out quickly with large profits.  Buying real estate solely for short-term appreciation is a risky gamble…one that many experienced investors lost on during the recent sudden and dramatic correction in the real estate and mortgage markets.

Multifamily properties should generate an acceptable return on investment, considering realistic income and expense assumptions, including adequate reserves; but don’t expect to retire on the merits of one acquisition.

4)  Dodging Due Diligence

Jumping into a property acquisition without completing sufficient analysis is like flying blind…it’s dangerous.  You must do your homework to understand the property, tenant profile and demand drivers, market dynamics, pipeline of new product, and regional and local economic conditions.

Once you own rental property, it is critical that you complete a thorough check on tenants before leasing to them.  Call former landlords and references.  Run and review credit and criminal background reports through AAGLA.  Also, be sure to check references on contractors, lenders, brokers and other professionals before you engage their services.

5)  Over-paying for Property

You make money when you buy real estate right.  This doesn’t mean fixating on a pre-determined “discount” (as in, “I only make offers at 70% of listing price”).  Careful scrutiny of all aspects of income and expenses and market dynamics is required to really understand the property financials, physical condition, any maintenance issues, and upside potential.  Don’t just rely on the cap rate analysis provided by the seller or listing broker. It may not be based on realistic assumptions.  Do your own analysis, and then make a reasonable offer based on comparable market data.

6)  Lacking Staying Power

Real estate is a business. To succeed over the long term, you must have a business plan that includes adequate reserves for potential challenges, including, but not limited to, spikes in vacancies, falling rents due to unexpected events or disasters, or emergency expenses for repairs or an uninsured liability.  Reserves are needed to protect your investment over time, and to allow for rational versus reactionary decision making.

Tune in next month for more tips to success in multifamily investing!

Dyer Sheehan Group, Inc., is Ventura County’s Apartment Expert. Our professional Brokerage & Real Estate Consulting Services enable Clients to Make Informed Investment & Development Decisions by Identifying Opportunities, Solving Problems & Mitigating Risks.  All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.  Copyright©2011 Dyer Sheehan Group, Inc.

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