• About Frank

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 613 other followers

  • Frank Rizzi manages Bos Commercial in West Covina and has been in real estate since 1988. Since then, he has made millions for his investors over the last decade.

    With his team of experts, he has built a solid reputation as a responsive expert with in-depth market perspective of a local firm coupled with the sophisticated capabilities of a national company.

    BOS Commercial has positioned itself to handle every aspect of your commercial property
    investment whether it be purchases, management, leasing, renovations, or sale of your property.

  • Advertisements

Stick It Out or Play the Field? Long Term Vs Short Term Leases

In property management, one of the things we discuss with new clients is their goals. Are they planning on keeping the property long term or are they looking to sell it at the first opportunity? Do they want to move back into it at some point? How much flexibility do they need? What is their risk tolerance?

We want to make sure that we are enacting strategies that fit what clients are trying to achieve. They aren’t all in the same life situations.

It’s the same thing in the dating world. Some are looking to get hitched. They want to be seriously dating in an exclusive relationship on the way to marriage. They want someone on a long term basis who they will be with through the thick and the thin. This type of dating allows for greater security and a lasting partnership. However, it is a difficult one to leave without very hurt feelings and does not always allow you to see the best that the partner has to offer.

Other people are looking for “fun”. They want to meet as many people as possible and continually upgrade who they are going out with. This is a strategy that entails a lot of dates, work, and stress. The swinging singles would also argue that it also includes a lot of excitement, the ability to always see the best of the other person, with little actual commitment from their end; when something better comes along (or any other reason, including none at all), it is understood that they are gone.

Leases are the same. Some owners want to have the security of a payment coming in every month. They are willing to sign a multi-year lease for the current market rent, with no rent escalators built in. They want their tenants to be there for a while and be happy. To this end, they often will make home improvements for the tenants. They know they will be holding on to the property long term and are willing to make some sacrifices to keep tenants for the same time period.

Some owners like flexibility and the ability to always get the market rent (or more) for their home. They entertain weekly or monthly leases where they know they can demand a premium for the short lease period. Sometimes there are big events (like the upcoming Democratic National Convention in Charlotte) that they know they could get the equivalent of several months rental payments for renting out for only one week! They also have family and friends that come into town often and they like to have an open place for them to stay.

There are certainly downsides to short term leasing! There are no recurring rental payments guaranteed to come in every month, which is a financial risk. There are many opportunities for the bevy of new tenants that go in and out to damage the place. There are also increased payments to the property manager for fixing up, marketing, and procuring tenants so often. These need to be covered by the excess rent that is hopefully commanded.

Long term versus short term leases is much like the old argument of risk versus reward. Short term leases provide higher highs and lower lows, while long term leases are a moderate investment path that should provide consistent, average returns. The question is what the owners’ goals and needs are and this can certainly change many times during the relationship with the property manager.

For most property owners, the long term leases are the most economical option for their investment homes. However, one size does not always fit all and short term leases can provide a nice bump in income!


Knowledge is Power (Know Your Lease)

Landlords sometimes get caught by surprise when they try to enforce a lease provision because they discover that it’s not what their lease actually says.

If it’s been awhile since you read your lease, take a few minutes to review some key provisions before you speak with problem tenants:

Is there a grace period for late rent?  Some leases provide as much as 5 days leeway before you can get tough.

Do you have to serve notice of the default?  The lease may add extra steps.

On what grounds can you evict the tenant? Can you move on it after a criminal arrest, or suspicion, or do you have to wait for a conviction? What if the tenant smokes pot? Starts a band? Steals the neighbor’s parking space? While you can’t possibly list every contingency, your lease must be drafted well enough to cover lots of different possibilities.

Does the lease “auto-renew”?  While that provision is prohibited in some states, it’s still common in standard leases.  This clause can work against you when you are trying to run the clock on a bad tenant.

Do tenants have to notify you if they get a pet?  A roommate?  Sublet the apartment?  Are you required to consider it?

Is there a guarantor on the lease?  Do you have the person’s signature and contact information?

While you probably can’t tweak the lease until the term runs, at least you will know what you are up against when dealing with problems.


Quick Tip to Save Money This Summer

Landlords face the challenge each summer of keeping tenants cool without astronomical energy bills.


Programmable Thermostats


Programmable thermostats are one option in keeping energy costs under control.  Now, these devices have gone mobile.

Using a smart phone or computer, a tenant can ‘phone home’ and adjust the air in case they are stuck late at the office, decide to go out after work, or realize they forgot to do it before they left the apartment.

For example, Trane has come out with the ComfortLink™ Remote Thermostat which allows users to activate the energy savings mode from anywhere in the world. Users can opt to receive texts alerting when it’s time to change the filter, schedule annual maintenance, or when the system is not holding the set temperature.

Keeping energy consumption low helps cuts costs for landlords who pay utilities.  For tenants who pay their own way, it avoids that behemoth bill they didn’t plan for that puts them behind on the rent. Energy-saving tools are good leasing incentives, save unnecessary wear and tear on expensive appliances, and may even qualify for rebates offered by strapped utility companies offering incentives to those who agree to cycle off the grid for part of the day.


Attic Fans


In summer, temperatures in an unventilated attic can exceed 160 degrees F. A properly sized attic ventilation system will reduce attic temperature to 5-10 degrees F above the outdoor temperature. Ventilating the attic reduces the amount of heat transferred from the attic to the home, decreases the load on the air conditioning system (reducing your electric bill), and extends the life of the roof.

In winter, heat trapped in the attic may melt snow on the roof, which trickles down and creates destructive ice dams in the colder eaves.

Everyday home activities such as cooking and showering create moisture which collects in the attic and promotes mold and mildew growth, reduces the effectiveness of insulation, and attacks the wooden attic structure. Year round fresh air circulation from an Attic Fan removes this moisture and prevents moisture related problems.


Attic Insulation

Attic Insulation is just as important in keeping your house cool this summer. The insulation is placed in the Attic to prevent the radiant heat of the sun from penetrating the house. Make sure that all areas of the Attic is covered, otherwise you could lose 30%-40% of the effectiveness due to a few inches if not insulated correctly.