I was asked to write an article on tenant safety for a trade publication.  Here’s what I have so far, any ideas or comments?

Maintaining a Safe Rental Property

Liabilities are everywhere, especially if you’re a property owner.  As a landlord, limiting liabilities by maintaining a safe property is paramount to your success (not to mention your compliance with Landlord-Tenant law!).  Conscientious rental property owners and their property managers conduct periodic checks of their properties to make sure they are safe.  While there are some obvious things to check for such as loose railings, soft deck boards and slip hazards, there are also some less obvious items that merit your attention.

• As convenient as it may be if you need to make quick repairs or clean up, do not leave any chemicals/cleaners harsher than vinegar or paints/solvents more potent than finger paint anywhere on the property.  Tenants may try to “help out” by oiling the front door with the linseed oil you left behind, not knowing that if you leave a cotton rag soaked with linseed oil hanging around it can spontaneously combust—or the neighbor child might find your shed with the half-full gas tank a good place to learn to use a lighter.
• If you have carpet on stairs, give the edges a little nudge with your foot to make sure it is secured well.  If you have wood interior stairs, consider coating them with a non-stick floor covering.  Check that the railing is secure.
• Lead paint has received a lot of attention with most contractors being required to be certified by the EPA as of April 22, 2010.  If your property is pre-1978, although lead paint can be anywhere, pay special attention to doors, window trim, baseboards and other millwork with paint flaking off- these are areas with some of the heaviest concentrations of lead paint.
• Make sure the water heater is set to 120 degrees at a maximum to avoid scalding.  While you’re at it, make sure that there are no exposed wires anywhere on your water heater.
• Check outside around the foundation and crawlspace and look up at the soffits (the boards on the underside of the roof overhang).  Any unscreened openings are an invitation for critters.  Critters are not just a nuisance; they are a major health and safety issue.  Aside from the sanity concerns, rodents can chew through electrical wires causing a fire or compromise the integrity of a foundation with their boroughs.
• Check the furnace filter—in fact, go ahead and take an extra one anytime you visit a property (unless you visit more frequently than every quarter!).  Gas furnaces that have to work harder to  push air through a dirty filter are more likely to emit unsafe levels of carbon monoxide.
• Speaking of carbon monoxide, any property that has an attached garage or gas appliances of any kind, you should also install a carbon monoxide detector.  Take some extra batteries for it and the smoke alarms when you do your safety inspection.
• Check the exterior walkways for uneven surfaces or moss/algae build up that can be slip and fall hazards.
• Finally, TALK to your tenants.  Tenants will sometimes limp along with a problem that might not seem significant to them, but you know better.  Don’t assume that no news is good news or be afraid to ask because it opens the doors to complaints or extra bills.  Attending to maintenance in a timely fashion will save you big money over time.

With the state of Washington and some of the major cities, such as Seattle, enacting legislation concerning tenant safety, conducting your own safety inspections is a better idea than ever.  None of the items I listed above cost any money (except furnace filters and smoke alarm batteries) and conducting a brief inspection isn’t an arduous task, so schedule one today!

Our basic labor rate is $60 per hour.  While professional property managers realize that this is on the low-end for licensed, bonded skilled labor in the Puget Sound, I sometimes hear from owners something to the effect of, “I’m a CPA and I don’t even make $60 an hour!”  Of course, I’m sure that CPA’s company bills her out at $150 an hour, but she makes a good point- it does seem expensive!

Here’s a breakdown of a $60 labor hour at our company in the State of Washington:

• $20 Technician’s hourly wage- Yes, you can get labor for less, but you get what you pay for.  It behooves everyone to have truly skilled labor.
• $2  Mileage- This is just an average per hour mileage rate.  I pay $.50 per mile to my employees when they use their own vehicles.
• $2.96 Washington State L&I- This is the hourly rate our company pays for workman’s comp insurance.
• $6.29 State and Federal Taxes-  This includes the myriad of unemployment taxes, medicare, B&O, etc.
• $4  Amortized cost of consumable materials, tools, etc
• $7.63  Amortized cost of “support”- This is for the office staff to answer calls, communicate with clients, prepare the bill, research materials, speak to vendors, cost of the software we use, etc.
• $5.44  Amortized cost of “overhead”- This is the cost of doing business such as paying insurance & bonding premiums, licenses, offices, marketing and other operational costs such as waste (hours and materials).

Total cost is $48.32 per hour!  After it is all said and done, there are additional little drips that come out of the remaining $11.68 “profit”.

Most contractors for larger projects make up some of their additional costs by charging for things such as “mobilization/de-mobilization”, a  15-20% flat charge to cover overhead, materials management, project management, etc.  And we all rightfully charge 20-40% premium on materials because afterall you’re paying us to know what type of materials to use and plus, we often negotiate lower prices with our vendors anyway, so our markup turns out to be a wash for the client.

And yes, you could go to a one-man show type of guy who has less overhead and pay him $35-40 per hour directly (I’m assuming he’s licensed and bonded- most of my clients won’t use someone if they aren’t).  However, you’re at the mercy of his schedule, he can’t deliver the communication and accountability our clients expect, if something happens to him there’s not another person to pinch hit, he may not know landlord/tenant laws— and it could cost you in the end because when Guy In A Truck doesn’t have a tool or the knowledge to finish a job, you’ve got to call someone else in to finish the job!

Obviously, I make money most of the time otherwise I would just close my doors and do something else.  It’s a constant dance of refining and retooling the way we do things so that we can continue to deliver on the high expectations of our clients and keep our costs reasonable.

We recently worked on a fully occupied multi-family building that had some pretty extensive mold growth present due to very poor ventilation.  The mold in these units was present in both bedrooms and both bathrooms of each unit and so our remediation efforts included removing drywall, treating studs and then replacing drywall in multiple areas.

In addition to the mold remediation, we were also doing other renovations in the building such as improving ventilation (!); painting the common areas; replacing security doors; improving lighting; replacing the garage door; doing a complete renovation of one unit and other activities that are pretty typical when properties change hands.

Although the project turned out well in terms of the quality of product we delivered, we had some communication and scheduling difficulties that cost everyone time and frustration.  Because we were going to be on-site for a few weeks, we tried to be more flexible with tenant schedules than perhaps we should have.

Since then, I’ve written some new communications policies and procedures for working on occupied multi-family buildings.  The objective of these policies are to a) always remain in compliance with landlord-tenant laws b) schedule work to maximize the use of workers’ time and decrease the number of return trips to individual units and c) make tenants more aware of the purpose, duration and scope of the project happening in their unit and the building.

Here are a few highlights:

1) Draft an outline of a communications plan for the project.  Include it in the bid and bill appropriately for the time it will take to execute the plan.  Owners and property managers should be willing to pay a reasonable amount of money for the time it takes to communicate with tenants- it’s the law afterall!

2) When the bid is accepted, work with the owner/agent to craft a letter that is appropriate to send to tenants making them aware of upcoming projects in the building.  Set expectations of how long things will take, what type of work is being done, and how their lives will be impacted during and improved after the project.

3) Create a master schedule for work to happen inside individual units and distribute it as soon as possible.  Tenants must give access with 48 hour notice in the State of Washington.  Make sure tenants know that unless there are extraordinary circumstances, this work cannot be rescheduled.

4) At the end of each day of work inside units, leave a note for tenants so that they know what work was performed that day and what work is necessary the following day.

These may seem like obvious steps, but it’s been my experience that communications planning is sort of a lost art with contractors.  I always tell my clients that pretty much anybody with a hammer and drill can do the work we do and that communication is what differentiates our company from other companies– and never is effective communication more important than with multi-phase remodeling projects in occupied multi-family properties!

On April 22, new regulations went into effect that could change the way property managers select contractors.  The EPA now requires that ANYONE doing certain types of work on pre-1978 buildings be certified to do so– this includes contractors and even landlords themselves.  (The only exemption is if a tenant does the work themselves for no pay or renumeration at all- weird exception, I know!)

Here’s a brief lowdown on the new regulations that effect ALL rental properties and child-care centers:

• Any time more than six square feet of interior wall or 20 square feet of exterior wall is disturbed (sanded, replaced, repaired) in a property that was built prior to 1978, the work must be completed by an EPA “Lead Safe” Certified Firm in accordance with the processes the EPA has set forth.
• Any time a window is replaced in a building built prior to 1978, the work must be done by an EPA “Lead Safe” Certified Firm.

The National Association of REALTORS has a great video for property managers here

—-> http://www.realtor.org/government_affairs/lead_paint_property_managers_faq

Here in the city of Seattle, it is required that the locks be changed between tenants.  Our local locksmiths often charge at very least a $79 trip fee, plus $12-15 per cylinder to change the locks.  Yikes. (Rental Restoration charges a flat $92.50.)

Kwikset has developed a new secure  cylinder that anyone can change with the tool that comes with the cylinder.  This would be great for high-turnover units and multi-family buildings.  More information is here—->  http://www.kwikset.com/SmartKey/

Very cool!

Eleanor

*Posting this to a wider audience since it would be helpful for agents who have homes listed through the winter to remember to do some of these things for those properties!*

There are a lot of reasons why I created a company that works exclusively with professional property managers and landlords…  the biggest one is:  THEY KNOW WHAT THEY ARE DOING… and <gasp> they are paying attention even when tenants aren’t! It’s no secret that even the best tenants don’t know how to take care of a house as well as an owner would hope.  For example, swapping out furnace filters to ensure a long life for a furnace isn’t really a priority– or sometimes even a thought!

I’m lucky to work with a lot of conscientious property managers who are very busily scheduling work to ready the properties in their portfolio for the winter.  What kind of work is coming in?

Gutters. Here in Seattle, having gutters that are free of obstructions and in good shape as we head into rainy season is paramount!

Furnace filters. Replacing a furnace is expensive!  Keeping up with clean furnace filters every three months (or less- depending on the type of filter and use level) and having the furnace serviced every two years will make it last longer.

Decks. As I said in my last post, decks need love after all the summer wear and tear!  Here in the PNW, transparent stains will barely make it a whole year before their water-resistance integrity really starts to fail.

Pressure washing. Any leftover debris or oils on the sidewalk and steps can cause hazardous conditions– at least here in Washington, it’s up to owners and PMs to limit the liabilities here!

Weatherstripping & caulking. Always a good service to provide whether the owner pays utilities or not!  In my own home, I wouldn’t turn on the heat this month until I had one of my guys go through and refresh the caulking and replace the weatherstripping (and I even had my attic access stairs re-insulated this year… must be the economy, but I’m hyper-wary of heating costs this winter!).

I’ve also helped two clients write letters to their tenants reminding them that it is the tenant’s responsibility to take necessary precautions to winterize their homes, what they need to do in the event of snow and ice, etc.

What else are you doing to get your portfolio ready for winter?

Eleanor

If there are some things your general contracting company subcontracts, such as re-keying, does it end up costing more than if I just went directly to a locksmith?

It costs about the same- and sometimes less.  At Rental Restoration, we’ve been able to arrange awesome deals with our vendors and subcontractors.  For example, our electrical work runs at just $85/hour with no trip fees or minimums.  If you’ve ever sent an electrician out to change out a bum GFCI outlet, you can appreciate how nice it would be to get a bill for just $85 plus materials!  Plus, there’s the element of what your time is worth.  If you have to coordinate five vendors to turnover a unit, how much time are you spending doing that and what is that time worth to you?  Most PMs I know would welcome the oppty to spend their time getting new properties instead of sitting on a locksmith to get a job done… only to have to do the same thing with the painters.

Here’s an update on our latest projects…

In July and August we had so many mini-reno’s from tenants turning over.  Did a ton of whole-house interior painting, installing new flooring, replacing countertops and plumbing fixtures, carpet cleaning, re-keys etc.  The property managers we worked with loved being able to just make one phone call to make it all happen!  And the properties we worked on seemed to rent quicker with their fresh face-lift.  Prospective renters are getting picky with all the choices they have to choose from!

As you can imagine, we’ve been doing a lot of exterior work lately.  Suddenly, everyone wants their deck sealed to battle the upcoming weather!  I’ve worked with so many deck products over the years (before becoming a GC, I owned many properties and was a property manager too).  I finally found a product I really, really love.  It’s called Superdeck and for those in the PNW, you can get it at Dunn Lumber.  Love this stuff.  Great coverage and its triple oil formula really soaks in.  I’m hoping my clients can get 3 years out of this stain, as opposed to transparent stains that tend to need a coat every year and most other semi-transparents that need coats about every two years.

Rental Restoration has also done some landscaping haulouts for those properties where the tenants tended to “let things go” over the summer.  We’ve been able to go in, thin everything out and clean it up so that next spring everything comes back nicely.

I haven’t updated the blog in so long because I’ve been working on another project— Rental Restoration LLC!

Rental Restoration LLC is a general contracting firm that focuses solely on rental properties in the Seattle area.  To fully introduce you to the company, I’ve prepared a little Q&A- which I’ll publish in shorter chunks for your blog-reading pleasure:

Wait, I thought you were a property manager!

Yes, I worked with Seattle Management Group Real Estate for a little under a year.  The brokerage is owned by some old friends who needed help with marketing and business development.  Prior to working with them, I was involved with residential and capital construction, an active landlord, and real estate investor.  While working with them, I realized how much time PMs spend managing vendors instead of managing properties!  I started Rental Restoration while still working at SMGRE and continued to learn more about what property managers need in a reliable contractor.  In the spring, I left SMGRE to focus full-time on Rental Restoration.  I no longer manage properties (except my own!) or hang my real estate license with any brokerage.

What exactly does Rental Restoration do?

Rental Restoration is the only general contracting firm in the area that focuses strictly on rentals.  We understand the need for speed, affordability, excellent communication and quality.  I created this company with a crystal clear vision of providing services that would make the lives of property managers easier!  Rental Restoration offers affordable maintenance, repair and renovation of rental properties.  We do everything from simple handyman service calls to major updates to rental properties.

Do you do the work in-house or do you subcontract?

Right now, we have 8 employees with varying specialties.  We’re able to handle most services in-house.  However, we also have negotiated special rates with journey-level plumbers and electricians to offer our clients an affordable solution when the nature of the service exceeds our on-staff crew.  My business partner and I have been in the construction and real estate field in Seattle for many years and we have an extensive network of specialty subcontractors such as roofers and appliance repair.

Do you have a website?

Of course!  You can find Rental Restoration at www.rental-restoration.com.  We’re adding some new functionalities to the site such as client log-in, so you can place work orders, check the status of work and look at the billing.

MORE Q&A TO COME!

Are you excited about having your very own reliable contractor or what?!!?!?!?

All best,

Eleanor

Most people know that “days on market” is real estate-ese for how long a home has been on a market.  Lately, with all the homes on the rental market, I’ve coined a new term… “DAYS ON LAWN”.

Days on Lawn is how long a home sits for rent by owner.  I’m seeing a lot of homes coming on the market – and sitting on the market– from “Accidental Landlords” and new landlords whose rental rates are a bit unrealistic.  These well-meaning folks don’t have the resources to analyze the current rental market to set an appropriate rent, market the property beyond Craigslist, or properly show the property and therefore they accumulate far more Days on Lawn than necessary.

I genuinely feel compassion for people who are trying to rent out a home right now without professional advice.  As I’ve said so many times in my blog posts, I think it shows a great deal of savvy to see homeowners trying to ride out the market by renting rather than selling and new investors taking advantage of the opportunities to build a rental portfolio.  However, I wonder how often this savvy goes unrewarded because the house never actually sees a tenant… or the house has so many Days on Lawn that the owner grows evermore exhausted and market-weary.

The Days on Lawn phenomenon has an impact on all of us in the rental market.  Many of the property owners I speak with on a daily basis have been doing their homework in preparation for renting their property by running their own comparative market analysis on Craigslist.  They look at CL to find similar properties in their area to get an idea of what rent might be appropriate for their property.  Unfortunately, CL doesn’t tell you how long a given property has been vacant or how much comparable homes ACTUALLY rented for.  So, while the house down the street might be advertised for $2800… you don’t know that this is week 31 on Craigslist.  In my latest post on luxury rentals, I show how the math pretty clearly favors dropping the rent a few hundred dollars to attract a tenant immediately rather than playing a waiting game at a higher price.

I’m not saying Craigslist isn’t incredibly useful!  Of course, Craigslist is part of my arsenal of tools to help clients set a rent range.  Like any tool, however, it’s only useful if you know how to use it well.

A well-respected member of the real estate community here in Seattle recently said that the most important words in real estate have gone from “Location, location, location” to “Drop your price”.*  For the moment, this is as true for the rental market as it is for the sales market.

*(Alright people, before you jump in on that one, I think we all know location will always be king!  It is simply an illustration of the times.)