The Property Management Show

The goal of the Property Management Show podcast is to deconstruct business success into its key components and invite subject matter experts to help you improve every facet of your property management business. The topics covered here range from property management marketing, industry innovations, success stories, all the way to general best practices on how to run a successful business enterprise. The podcast creators are Brittany Jones and Marie Liamzon-Tepman from Fourandhalf, Inc – a marketing company that works exclusively with fee-based Property Management companies. Fourandhalf Marketing Agency was established in 2012 and has the best and longest track record for helping property management companies grow. They help with both marketing strategy as well as implementation. Their services include property management website design and SEO, content creation to attract and nurture leads, reputation management, online ads, you name it. Visit fourandhalf.com to learn more.

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Apr 16, 2020 • 1h 3min

Part 2: Reimagining How Standardization is Implemented in Property Management Companies

The last time we were together on The Property Management Show, you learned why having standardized systems and processes is so important to your property management company. This week, we’re digging a little deeper into that: we’re talking about how to implement standardized systems and what to do first. This can really be transformative for your property management business, and we’re joined by Dave Gorham, who makes this a living and breathing part of the way he does business at Realty Solutions. How to Implement Standardized Systems in Property Management: Job Descriptions and Organizational Flow In Part 1, we discussed the importance of standardizing your processes and what kind of obstacles and benefits you can expect when you use them in your property management company. Now, let’s take a look at the process behind standardized processes: how do you implement standardized systems? Realty Solutions is a New Jersey-based property management company that is successful now because they embraced a sense of organization. Dave was an early adopter of job descriptions and putting together an organizational flow. You have your own assumption or expectation about what each person on your team does. It’s important that those team members have the same expectations and assumptions. Unless you have something written down, you cannot talk about why you may be out of sync. Don’t keep your job description in your head. Write it down. If you’re the president of the management company, you have some expectations about what your bookkeeper should do. But, your bookkeeper might have different ideas about what her job is and what your job is. That’s why you have to write down every job description. It allows everyone to know your true responsibilities and the responsibilities of others. Titles and jobs have different meanings from industry to industry and even from company to company. At Fourandhalf, our job description for an account manager is very different from what an account manager does at a bank or a cable company. Each business defines it for themselves. If you don’t have each role defined, everyone will have different expectations. So your first step in getting an organizational flow in place and systems standardized is to define every role in your property management company. Contracts and Agreements Lead to Accountability If you don’t spell out what you’re doing, it’s easy to get out of scope. Identify your roles and relationships. You can customize things as needed, but make sure it’s written down for everyone to see and understand. You wouldn’t take on a property management client without a contract. Make sure your employees have a job description – or a contract – as well. That’s a precursor to a compensation package, and from there you can move to KPIs and improvement plans. Agreements need to be in place as well. They can be put into place by two people. Those agreements have to be described in writing. They also have to have consequences which are good or bad, and there has to be a way to clean up the agreement if it stops working. Things do not happen magically. You need a collective mindset that agrees to this, and it has to come from a leader within the company who sets up guard rails or boundaries and then allows every employee to use their creative and critical thinking to follow the processes and commit to the agreements. Developing an Organizational Flow (Chart) How should you implement standardized systems like organizational charts or flows? At Realty Solutions, Dave developed an organizational chart for the company, but he doesn’t want you to embrace all the negative connotations that come with the term ‘organizational chart.’ Don’t see it as a superiority scale or a picture of who is most important in the organization. It’s better to make it an organizational flow rather than an organizational chart. This is important in getting rid of the idea that if someone’s name is above you, it’s in a superior or authoritative aspect. What the organizational flow should show is where you go for support or questions. The person in the box above you knows what you do and how you function. You’re the one keeping yourself accountable – not the person in the next box up. This turns into a decision-making and operating structure. You may remember the Fourandhalf blogs Michael Lushington did a couple of months ago on work flow. This is similar. Before Michael came to Fourandhalf, everyone had an idea about who did what, and how they should respond if something went wrong. But, nothing had been written down. Nothing was on paper. There wasn’t any standardization. We were successful, but as we grew and added new people to the team, things were bound to break. Those ideas in our heads had to be put into a work flow. Workflows Are Not One-Size Fits All Dave is not a micro-manager at Realty Solutions. His job is to create policies and procedures based on what works well. That’s an ongoing conversation with everyone on the team. Each best practice is put into a policy, and that’s something every team member (they changed the language from employee to team member) has available to them. If a property manager is struggling with rent collection or a fair housing issue, there’s a policy in place that provides the guard rails or the boundaries of what should be done. The goal is to have all this in place so your company can move on without you. We want our companies to survive without us. It’s what Scott Fritz talked about last year at PM Grow, and it’s something every property management company owner should be prepared for. Your organizational flow has to have meaning. If you’re a huge national company with a large organizational chart, it may feel too big and every team member feels like an ant in an overwhelming system. Organizational charts can be big – but, they have to mean something. PM Grow Summit Sponsorship Providing Support for Team Members Whether the organizational chart is operational or hierarchal, it delivers creative license and support to your team members. You’re encouraging people to think critically and make their jobs their own. This is a culture you need to create inside your property management company because it expands out to your owners and your residents and your vendors. It provides you with a natural litmus test when you’re screening or talking to a potential new owner. You’ll know right away if you’re talking with a bad resident or an owner who isn’t your target client or a vendor who might not be a great fit. This is one of the ancillary benefits provided by solid organizational flow. When you’re responsible for a team, you shouldn’t be telling them what to do. Instead, they should be telling you what they need to do their jobs. You need to support your team members, and that’s got to align with methodology. If you choose to micromanage, you’re taking away the creative license and critical thinking abilities of your team. Dave says his company was in a position last year where the whole business felt dumbed down and team members were not thinking critically. They were pushing buttons and sending things out but not really investing themselves in anything. He wants his team members to manage as if they owned the property themselves or as if they were the residents moving into the home. He wants them to consider whether they’d be happy with the decisions they are making for the client or the resident. How did the company get to the point where people were not critically thinking? Partly, it was due to what we always talk about. Property management companies want to grow, but they’re not always prepared for that growth. The way you work at 150 units is not going to be the same way you work at 1,000 units. It’s a different business. You have to recognize when the business changes. Your team members need systems and structure, and they also need creative license within those systems so they’re not just pushing buttons and nothing more. Responding to Questions: Noise vs. Solutions Every management company has high maintenance clients and residents with constant issues and problems. This is frustrating for a property management question, and you have to make sure you’re responding to the question or the problem, and not the noise. Figure out the real question. When a client or a tenant or even a team member brings you noise, simplify what’s being asked. The noise is at an emotional level. Logical solutions are at a higher level. To solve a problem, you need the facts. If the facts aren’t clear, ask for clarification and keep going. Think if it as a disease. The noise represents the symptoms of the illness. If you keep treating the symptoms, they’ll come back over and over. If you get to the actual cause of the illness, you can cure it completely. Limit the noise so you can be more compassionate. Even if there’s a decision that one party will find to be negative or not what they wanted, your willingness to show compassion allows people to accept the negative decision. Don’t be afraid to include that need for compassion in the job description. You might think of a job description as being a list of tasks a person has to manage. But, it could include how those tasks are managed. You have to tie the job back to the overall organization. They why is just as important as the what. Empathy vs. Compassion in Property Management The difference between empathy and compassion is huge. Dave held a class on it for his team members and he coaches people to realize that empathy has no business in property manager. Compassion does belong in the way you manage your business, but empathy is not the skill you want to bring to the office. When you have empathy for someone, you’re putting yourself in that person’s place. You’re getting noisy with them. That prevents you from seeing a path to solve their problem. When you’re compassionate, you’re outside of the noise and you can see a clear black and white answer. Being compassionate is more beneficial to all parties when you’re a property manager or managing a property management business. You get through the noise and you move on. With your systems standardized, all the answers are right there within your company’s structure. If you have a situation with a tenant or an owner, you’re going to be able to respond to it. There’s a lease and a contract and an agreement within your company that shows your team members what to do. No one should have any expectations that are out of alignment. Ritz Carlton understands compassion. They use the terms “ladies” and “gentlemen” instead of employees or customers. They help people without hesitation and without asking why they should. Dave once needed a ride back to the hotel he was staying at in Orlando after having dinner at the Ritz Carlton. They had a car take him back without any questions asked. The hotel chain didn’t know who he was, and they didn’t ask if he was a hotel guest; they simply responded to the need. Everything is yes, whether they were hotel guests or not. This is compassion, and Ritz Carlton trains their team members on compassion. It’s not dissimilar to treating people like residents instead of tenants. Mapping Out Your Operational Flows How can you map out your operational flow? Start with the organizational chart that reflects every role in the organization. Then, fit in the tone, the idea of the job, and a key question – are they compensated properly for the job? You need a separate compensation document. You also need an agreement at each level. The property managers should have their agreements and bookkeeping has another and sales has their own agreements. You can keep diving in to decide how far you want to go. Once your organizational chart and your job descriptions and compensation documents are in place, you can move on to performance improvement plans and key performance indicators. Dave uses organizational flow to understand when something needs to change for his team members. He currently has a property manager who didn’t get the training she needed when she was first hired. She had to figure everything out on her own, and she pushed ahead without anyone supporting her. Now that Dave is looking at the work she does, he’s worried that it will be hard to scale with the way she is working. So, they’re working together to help her be better as her job changes. What to Remember When You Implement Standardized Systems in Your Property Management Company Policies. Procedures. Best practices. You can use those terms interchangeably. Make them public on your website, as PDFs, whatever you have to do to make them real and accessible. You should have a process and a procedure for each thing, whether it’s eviction or move-in inspections or rent collection. That doesn’t mean the property manager doesn’t have to think. You’re still leaving room for creativity because you don’t want to get too standardized. Four years ago, Buildium went into a partnership with Happy Inspector. It was supposed to be the perfect way to conduct inspections. Most people loved it, but it didn’t work for Realty Solutions. They felt it took away all the critical thinking and made the process too standardized. So, Dave and his team developed their own inspection process, but now the company is outgrowing that, so they’re giving the Happy Inspector platform another look. Your biggest takeaway should be this: Don’t have a process just to have a process. It has to have meaning. It has to live and breathe. Thanks for joining us for both segments of this podcast with Dave. If you have any questions about how to implement standardized systems into your property management marketing, contact us at Fourandhalf. And, we hope to see you at PM Grow in Austin this May. The Property Management Show is brought to you by Fourandhalf. We help property managers strategize and implement marketing plans that bring in owner leads. Get a free marketing assessment to find out what you need to supercharge your marketing and unlock your company’s growth potential. The post Part 2: Reimagining How Standardization is Implemented in Property Management Companies appeared first on Fourandhalf Marketing Agency for Property Managers.

Feb 27, 2020 • 42min

Part 1: The Power of Standardized Systems in Property Management Companies

Our next big topic on The Property Management Show is the importance of standardized systems when you’re starting, growing, or even preparing an exit strategy for your property management company. This is such an essential topic that we’re breaking it into two parts. Today is Part I, and we’ve asked Dave Gorham to join us because he’s a systems and standardization success story. Introducing Dave Gorham of Realty Solutions Dave Gorham is the broker-of-record and owner of Realty Solutions, a New Jersey-based real estate management company. Realty Solutions is more than a property management company; they look at the full lifecycle of an investor and an investment property. In addition to managing properties, the company does community association management and operates a law firm. They’ve been in business for more than 20 years. With over 30 years of real estate experience himself, Dave can also approach his work from a place of personal experience because he’s an investor, too. He’s also a Mind-Set Coach for Frame of Mind Coaching, and loves building leaders. Defining a Standardized System in Property Management: What it Is and What it Isn’t Anything that makes what you do repeatable and easy to track is a standardized system. It could be a calendar. It could be a history of events. It could be a list you keep with a paper and a pen. The idea is to track what you do and measure results. It’s that simple. When you really start to build your standardized systems, you’ll start thinking about property management software and accounting software. A standardized system is not a rigid set of rules. It’s a consistent plan to leave people more space and energy to be creative and work their own way. This is an important distinction. The systems provide enough guidance so that when things happen, there are warning signs to show you what might be coming or what area of your business might be affected. The successful standardized system will have rigid processes but will give the user freedom to do their job better. In a property management company, your standardized systems might cover how internal communication is tracked or what happens when someone signs up for your services or where you start when one of your clients wants to sell a property. PM Grow Summit Sponsorship How to Manage the Fear of Standardized Systems People get nervous about standardized systems because people fear they won’t be nimble enough in their job. It creates fear in an organization sometimes, especially when people believe that they should do things according to their own best judgment. You have to demonstrate the benefits of a standardized system against the risks of doing everything on a case by cases basis. Fears are usually dissipated as soon as people start using the system. With the right standardized and consistent process in place, you don’t have to figure out what you’re going to do next. You know what the next step is, and you’re prepared to take it. But now you can use your critical thinking and your creativity to do a better job with those steps. A property manager can do a better job working with a vendor who has been a challenge when she is working within a standardized system. Everything is tracked, so that property manager is not only working better – her work can be repeated and measured because she’s documented what she’s done. Sometimes You Need a Better System Everyone uses some sort of system. The question you need to ask is – how do you know if your system isn’t working? Consider your sales process. You may have a process and you know how to go through the motions. But, is it repeatable? Can anyone follow that process and have the same successful results? If it’s not scalable and another team member cannot follow the system, then you need a better system. As you grow your property management company, you’re going to continue hiring people and bringing on new team members. If the standardized systems you’re using don’t make sense to new people or can’t be used by someone else, they’re not working for you. Why You Need a System: An Example (or Two) Dave is working with a business owner who is re-starting his brokerage company. It’s a small business and the owner has always had a lot of freedom with how it’s run. The business is five years old, but it’s also brand new, as if he’s starting over. Why? It’s a new business now because he decided he wanted to grow and move the business forward. So, he needed what he didn’t have yesterday, which was a set of systems that include software. Now, he can track what he’s doing and see where his greatest successes and challenges are. He has a small team that’s going to grow as he scales. A second example is a new client Dave just began working with, who he has known for years. Five years ago, this client was self-managing 20 rental properties. That required systems, and the owner had some in place that worked for his 20-unit business. Then, he found himself managing 50 homes and then 90. Essentially, this owner was running his own property management business because he owned so much real estate and he wasn’t using an outside company. The problem is this: the business changed, but the systems didn’t. At 150 properties, this client was feeling like he was in some hot water. He needed better systems, but he didn’t know what those were, and his entire portfolio was in jeopardy. It wasn’t being mismanaged out of malice or because there was some lack of understanding about how the real estate and property management industries work. He was still making money, but he didn’t have the systems in place to track the moving parts. How could he know he was profitable? Let Your Systems Breathe It is very easy to feel like a system isn’t working on day one. But, you have to trust the system and let it breathe a little bit. Think of it like opening a bottle of wine. The system needs some air. It needs to settle. When your team trusts the system, it will work. The implementation process will take a lot longer if the team fights it or struggles against it. When the team adapts, there’s an “a-ha” moment and immediate buy-in. But, sometimes you have to break a lot of bad habits to get there. To effectively get your team on board with a standardized system, you have to accept feedback about positive and negative experiences. The system itself is not good or bad, and it doesn’t care what people are saying about it. How Communication Helps System Implementation Communication helps you and your team adapt to new systems faster and more completely. Dave’s company is big on communication. They talk about things and they trust one another. Recently, a new system went into place where nine agreements were proposed and everyone had to agree to them. One such agreement was that cell phones and computers would no longer be allowed in update meetings. That was frustrating for some people who never want to be without their phones. So, they talked about it. These conversations include everyone from the leadership team to the individuals at the secretary level. Everyone agreeing to the new systems has changed the culture at Realty Solutions dramatically. The secretaries in the office have the same weight as the founders when it comes to making changes. Communication fosters accountability. You all agree to this standardized system, so you are accountable to yourself for following it. Another one of the agreements Dave’s team came to was that three people had to be in a room in order for something to be changed. Whether it’s a system or something involving a client or a vendor or a tenant, the two people discussing the change has to bring in one more person from the leadership team. At that point, with those three people in the room, it can be adopted and then brought up to the full group. This isn’t a debate that everyone will be involved in; it’s the unveiling of a new system that was agreed upon by at least three people. Standardized systems provide integrity within your property management company. It’s integral and closed and whole. You have the opportunity to put it all together. Impact: How Standardized Systems Help Businesses The client who finally asked for help with his 150 doors to manage is a success story. Things were working before, but they were working badly. Now, he can track things. He can show his profits with some reliable documentation, and his banks are happy. He may not be bringing in the money he wanted to, but his business is stable and next year he’ll earn more. That’s a big deal. Realty Solutions has grown dramatically as well, thanks to its set of standardized systems. They currently have 600 doors they’re managing, plus a number of law clients, plus a number of sales transactions, plus 20 community management contracts, all totaling about 3,000 doors. Five years ago, this would have been hard to imagine. But, a business can grow from 150 to 300 to 500 to 1,000 units with the right systems in place. When everything is standardized, you’re prepared. You can react quickly to anything that isn’t working, and you can fix what is broken. At the end of 2019, Realty Solutions bought a huge batch of contracts and a community management company. Integrating those staff members and those clients would not have gone well if strong systems were not in place already. What to Do When Your Employees Are Uncomfortable With Change Fear and ego are the two things that get in the way when people are joining your team from the outside and integrating into your way of doing things. Those new people at the table had their own systems, and they might be protective of them. Transparency helps. If you can be open and transparent, and the new people you’re working with can be open and transparent, you’ll have a win/win situation. This should be your intention. Dave admits that one of his favorite sayings is “I told you so.” He even loves saying it out loud. This is because the consequences are pretty high. He cannot have everybody doing things in different ways when he’s running a successful company. While he might enjoy the “I told you so” moments, things rarely get to that point because he’s good at educating people and talking about the business and how it operates. He and Rob consider what they have a democratic dictatorship. What they say as the company owners will be the way things are done at the end of the day. But, the team is encouraged to talk about it and figure out how those standardized systems can work for them. Most property managers are in this business to serve and make money. So, if you’re going to fail – fail forward. That means you have to correct your mistakes. The transparency you have with your systems requires faith and trust. Faith is blind. If Dave can provide his team with faith, he’s a good leader. Trust requires evidence. People will trust your systems because they’ll see the evidence that they work. Takeaways from Part 1: The Power of Standardized Systems in Property Management Everything can be standardized. If you think of systems as rails that you should stay within, you’ll find that you’re better protected against risk. Going outside those rails elevates your risk. Establish those boundaries and stick to them. In Part Two of this podcast, we’ll talk about how you do this – how you can implement your standardized systems, and what you should look for when you’re putting them together. Make sure you join us for the continuation of our discussion on this important topic. Standardization is not what you think it is. We hope you’ve learned that and a lot of other things today. Please contact us at Fourandhalf or Dave at Realty Solutions if you have any questions about how standardized systems in property management can help you grow your business. The Property Management Show is brought to you by Fourandhalf. We help property managers strategize and implement marketing plans that bring in owner leads. Get a free marketing diagnostic to find out what you need to supercharge your marketing and unlock your company’s growth potential. The post Part 1: The Power of Standardized Systems in Property Management Companies appeared first on Fourandhalf Marketing Agency for Property Managers.

Feb 6, 2020 • 43min

An Overview of AB 1482 with Guest Keith Becker

Looking for an summary of AB 1482? Look no further. If you’re managing properties in California, it’s hard to avoid discussing AB 1482. This new law has probably taken center stage as you help the landlords and investors you’re working with comply with it’s requirements. We asked Keith Becker (DRE License #01201067) of DeDe’s Rentals & Property Management to help us understand what’s happening in California with rent control, and what other markets and states are thinking as we implement new standards here. Keith is heavily involved in the National Association of Residential Property Managers (NARPM) and extremely active in property management legislation. When it comes to managing homes in California, Keith gets around. So, his insights are worth listening to. Keith Becker: A Brief Bio We’d be very surprised if you don’t know Keith already, but in case you don’t, here are a few things you should know about him: Keith has been managing residential rental homes for 25 years. DeDe’s Rentals in Santa Rosa has been around for nearly 50 years. Keith has been the president of the California state chapter of NARPM. He’s been NARPM’s regional vice president for Hawaii and California. Presently, Keith is on the NARPM board for the North Bay area and he’s also on the board of the California Apartment Association. Keith still loves when he does, and when he’s not running DeDe’s, he spends his free time focused on property management. He loves this industry, and he follows everything that happens in it. A Summary of AB 1482 and Getting Good Advice AB 1482 is also known as the California Tenant Protection Act. If you own a property management company – even outside of California – you need to know what this law is and why it’s considered the minimum standard right now. This is rent control. There are two things to think about right away: We are discussing some heavily legal information today. Like most of you paying attention to this podcast, Keith is a property manager not an attorney. A lot of information surrounding this topic has legal implications, especially when you execute the laws. If you have a legal question, talk to an attorney who specializes in landlord-tenant law. It’s complicated, and we expect it will only get more complicated. Politics has shaped much of what’s going on in California and with rent control. We aren’t going to get into politics. We’re talking today about process. This has already happened. While there’s always a threat that Costa Hawkins, one of the primary rental housing laws in California, will be overturned in the future, we’re not dealing with that today. We’re dealing with the current law and what it means for you, the properties you manage, and the tenants you work with. PM Grow Summit Sponsorship Baseline Rent Control: California State Law and Local Laws This statewide rent control law is the baseline for any rent control ordinances throughout California. What you need to know when we’re balancing the state law against rent control laws in cities throughout California is that whichever law is more onerous to the owner and more favorable to the tenants will always apply. Some cities already have rent control laws in place that are more arduous than AB 1482. Their stricter laws apply. For example, let’s look at Richmond. In Richmond, landlords cannot raise the rent on their tenants any more than the Consumer Price Index, or CPI. The new law, AB 1482, says you cannot raise the rent more than five percent plus the CPI. This does not mean that Richmond owners can now raise the rent five percent plus CPI. The Richmond law is more onerous for landlords, so that law applies. But – the rent control law in Richmond only applies to properties that were built before 1995. With AB 1482, the only properties that are exempt are those have been built in the last 15 years. So, you may have a property that was exempt from the Richmond local law but is now pulled in through this statewide law. It’s very much a situation of “if this, then that.” You must know AB 1482 but you also need to know your local laws. If you have a portfolio of 100 properties, you’ll need to look at each property individually and determine how the law applies. Exemptions to AB 1482 There are a few automatic exemptions to AB 1482: Commercial properties Tourist or hotel accommodations Hospitals Religious facilities Extended care or residential care facilities Dorms owned and operated by colleges or schools Deed restricted low or moderate income and affordable housing Housing already subject to stricter rent control laws. These properties are automatically, by statute, excluded from AB 1482. If any of your properties fall under those categories, set them aside. But, these are probably not what you manage. Next in the exclusion algorithm is the age of your property. The law is written with an expiration date of 2030, so it’s only going to last 10 years. There were some concerns that no one would build in California with this law hanging around. So, the bill includes an exclusion for the first 15 years of a property’s life. The rent control law does not apply to any residence that was constructed in the last 15 years. It doesn’t matter what type of property it is or who owns it. Buildings younger than 15 are exempt. Costa Hawkins said rent control only applies to buildings constructed before 1995. But now, AB 1482 says it applies to buildings older than 15 years, and the exclusion has a rolling date. The problems get complicated when owners cannot establish what their property’s starting date is. According to the law, it depends on the date the initial certificate of occupancy was registered. You’ll have to pull the assessment and find out when your property was granted the certificate of occupancy. This will tell you if and when you’re subject to the rent control in AB 1482. If you own a property that was built in 2010, it’s exempt now, but it won’t be in 2025. Exemption Examples for the California Tenant Protection Act Writing contracts will only get more complicated, and when we run into situations that aren’t clear, those questions are going to be answered by litigation. Let’s presume your property has been around for more than 15 years. The next question in the exemption algorithm is this: is your property a single-family home or a multi-family property? Condos are treated as single-family. If you have a single-family property, the next question is – who owns it? If it’s owned by a REIT or a corporation or an LLC in which one of the members is a corporation, the rent control law will apply to you. If you’re an independent landlord or an individual or even a family trust, then your single-family property is exempt. Why would that matter? Well, when the market collapsed in 2008, giant companies like Homes for America and Blue Mountain and other large corporations swept through California and bought up a lot of single-family homes for pennies on the dollar. These investment firms now own a lot of rental real estate, and they’re making big money. So, AB 1482 was written to say that those corporations and investment firms don’t get the benefit of exemption. But, individual landlords renting out a property can benefit from the single-family home exemption. If you’re not renting out a single-family residence, your next question is – does the owner reside in one of the units in a duplex or a multi-family property? If the answer is yes, that property is also exempt from AB 1482. This applies to duplexes and main homes with another unit in the back. Everything that remains is non-exempt. AB1482 Rent Control Exemption Questions: Navigating through the intricate exemption guidelines can be a lot of work. To help you with this process, Keith created the questionnaire below that should make this more manageable. 1.) Is your property classified as a long-term residential (domicile) rental? Examples of properties that do NOT classify as domiciles: commercial property; transient and tourist hotel rooms; hospitals; religious facilities; care homes; college or boarding school dormitories. If answer to #1 is “no,” the unit is exempt by statute. If YES, continue to question 2. 2.) Has it been significantly LESS THAN fifteen years since the first “certificate of occupancy” was granted for the building, no matter how many units it may include or how ownership is held? If answer to #2 is “yes”, property is statutorily exempt ONLY through the fifteenth anniversary of certificate of occupancy. If answer is “no,” continue to question 3. (See NOTE below.) 3.) Is the building a single-family residence or a condominium (“separately alienable unit”)? NOTE: The property is identified as a duplex, whether it’s a single-family residence (SFR) with an in-law, two separate units of somewhat similar size, or an SFR with an Accessory Dwelling Unit (ADU) or junior ADU on premises. If answer to #3 is “yes,” continue to question 4. If “no,” continue to question 5. 4.) Is the single-family residence or condo owned by a corporation, an REIT, or an LLC where one or more members of the LLC is a corporation? If answer to #4 is “yes,” PROPERTY IS NOT EXEMPT. If answer is “no,” continue to ADVISORY below. 5.) Does the property have three (3) or more residential units on one parcel? If answer to #5 is “yes,” PROPERTY IS NOT EXEMPT. If answer is “no, continue to question 6. 6.) Does legal owner maintain one of the two units as their primary residence, did they do so at the commencement of the other unit’s tenancy, and does the owner maintain their primary residence at this location throughout the entirety of tenant’s residency? NOTE: The property is identified as a duplex, whether it’s an SFR with an in-law, two separate units of somewhat similar size, or an SFR with an ADU or junior ADU on premises. If answer to ANY of these questions is “no,” PROPERTY IS NOT EXEMPT. If answer is yes, continue to ADVISORY below. Specific Lease Agreement Verbiage Protects Your Exemption Did you know that you can lose your exemption? Yes, you read that right. According to AB 1482, properties that are exempt must be identified as such. You must notify your resident. If you have someone new moving in, put that exemption in the new lease. If you have an existing resident, the law indicates the exact verbiage you need to provide, and it gets so specific that it instructs you to use 12-point font in the notice. Required Disclosure for AB 1482 Exempt Properties: ADVISORY: Even for properties that are nominally exempt, the Housing Provider can LOSE that exemption by lack of action. To protect exemption, Lessor must provide to Residents the following written disclosure, in no less than 12-point type: “This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.” All new EXEMPT rental contracts and renewals occurring on or after July 1, 2020 MUST include this disclosure. For tenancies existent BEFORE July 1, 2020, this disclosure must be provided as a written addendum no later than August 1, 2020. IMPORTANT NOTE: Question #2 above asks whether certificate of occupancy was “significantly less” than fifteen years. This is likely to be an immediate issue for properties constructed in the mid-2000s. Nominally, the age-related exemption ceases AS OF THE EXACT ANNIVERSARY of the date of permit sign off. Accordingly, Housing Providers will need to be able to obtain that information, even if it’s not presently easily available. City Building and Permit Departments will likely need to make this information available with a reasonable degree of accuracy. During the first 14 years or so, the “non-exempt” disclosure is not applicable – but potentially, neither is the EXEMPT notice itself, since the very last portion of the disclosure MIGHT NOT BE ACCURATE: “the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.” Once your property reaches the fifteen year mark – or anywhere close to it – restart the questionnaire at #3 above. How to Keep Your AB 1482 Exemption To stay exempt, you have to put the exemption in your lease. The tenant has to sign to acknowledge having received it or you can document that it was provided to them. Keith and DeDe’s Rentals handles it the same way they handle the service of a Three Day Notice. They mail it and tape it to the door with a proof of service so everything’s documented. If you don’t provide this notice, your tenant can come back in eight years and say they never got that disclosure. If you can’t provide proof that you made the disclosure, every rent increase since then can theoretically be scrutinized and limited. This is the one warning Keith wants to broadcast far and wide. Just because a property is exempt, doesn’t mean no action is required. Make sure you’re sending out those disclosures, and make sure you can prove you sent them. Also, the owners you work with may not be knowledgeable about this matter, and so it’s important to educate them on what is happening and where their property stands. Understanding the Look Back Implications Most of us knew this was coming, and some owners might have tried making a large rental increase before the law went into effect. If an owner increased rent by 30 percent before AB 1482 went into effect, there’s a “look back” provision that requires the owner to comply. The look back is March 15, 2019. If you increased rent by more than what the law currently allows on or after March 15, you need to dial back the increase so that it’s in compliance with current rent control law. You don’t have to give the money back, but you do have to reduce the increase to the allowable levels. Do not let your owners ignore this. Be honest and ethical and let them know that if they try to ignore any part of this law, their lives are only going to become more difficult. Align yourself with the NARPM code of ethics and standards of professionalism. These standards are pretty clear about being ruthless with clients and owners who misbehave. What AB 1482 Means for Other States Owners and property managers in Georgia and New Jersey and Kansas are watching California carefully and getting nervous about what’s possible in their own markets. California is not unique. Big tenant protections are in place or moving towards law in states like Washington, Oregon, Colorado, and even Florida. Some states have constitutions that emphatically void any type of rent control laws. In 23 states, rent control is unconstitutional. So owners in those states are feeling pretty relieved. But, what we do in California often trickles outward to the rest of the country. There’s a lot of dialogue in other states and tenant advocacy groups have been more and more energized. Even in states where rent control is voided, advocacy groups are examining what they can do to make renting out a home harder for landlords and easier for tenants. These regulations are bad for owners and ultimately bad for tenants. In 2019, the average rental increase in California was 3 percent. Now, it will be 8 percent when you include CPI. So, tenants will pay the price for bad laws as much as landlords. The one shining light here is that this makes rental property owners less capable of managing their own homes. A good property management company can really stand out as an important ally and a necessary service. What You Can Do To Affect Rent Control Laws It’s a good time to remind property managers that you have to get involved. These laws happen at a state, county, and city level. The California Apartment Association is very active politically. Make sure you’re a member. At NARPM, there’s a lot of talk about how to be politically active and energized and motivated to be able to influence the decisions that are being made locally and on a state level. NARPM is good at many things, but as fee-based single-family residence property managers, you have unique priorities and constituencies. You’ll need to be much more politically active within NARPM to be able to create the influence you need. One of the challenges of being a property manager is that it can feel very lonely. But, there’s a whole tribe of property managers out there who understand the frustrations and the challenges of dealing with these complex situations. The industry is stronger when property managers are reaching out to one another. This has been a very basic summary of AB 1482, and you can expect us to do a deeper dive in the future with Keith. We have a lot more to talk about. As Keith mentioned at the start of our discussion, he is not an attorney. These are complicated issues we are dealing with, so he strongly advises that property managers reach out to lawyers who specialize in Landlord-Tenant Law. He says that if Prop 10 2.0 comes to pass next November, it will only get worse. As a final note, Keith says, “Whenever you have the opportunity to do so, VOTE. And tell your owner-clients to do the same.” While you wait for our deeper dive into this topic with Keith, check out some of his own videos on AB 1482: Property Age Exemptions Rent Caps and Vacancy Decontrol Single Family Home Exemptions No Fault Just Cause Notices & Tenant The Property Management Show is brought to you by Fourandhalf. We help property managers strategize and implement marketing plans that bring in owner leads. Get a free marketing diagnostic to find out what you need to supercharge your marketing and unlock your company’s growth potential. The post An Overview of AB 1482 with Guest Keith Becker appeared first on Fourandhalf Marketing Agency for Property Managers.

Jan 23, 2020 • 48min

Property Management Market Trends with Jeff Hacker

Jan 9, 2020 • 1h 10min

Risk Management Mistakes That Keep Property Managers up at Night with Guest Kathleen Richards

Risk management isn’t a sexy topic, but it’s something that you need to think about as the owner of a property management company. Making mistakes while managing – or not managing – your risk will keep you up at night. It could also result in lawsuits, huge fines, and even the loss of your business. We asked Kathleen Richards of PM Made Easy and The Property Management Coach to talk through this topic with us. If you haven’t thought about risk management before, this information is for you. If risk management has been in your back burner for a while, this information is also for you. Introducing Kathleen Richards Most of you probably know Kathleen, but we asked her for an update on what she’s doing now. Kathleen sold her property management company in 2017, and before doing that she became a certified business coach. She launched Property Management Coach and then bought LandlordSource, which has recently been re-branded and newly launched at PM Made Easy. She helps property management business owners figure out what they need, and one of the things they always need is risk management. What Does Risk Management Mean for Property Managers? Risk management means covering all your bases. The property management industry is very litigious. So, you need to manage the risk that’s present in the properties you’re managing, and you also need to manage your own risk as a business owner. As a property manager, you have risks associated with accounting, hiring employees, and how you do business. Mitigating as much risk as possible is crucial to the success of your property management business. Common Property Management Risks 1. Regulatory Compliance Would you believe that some property managers start a business in states where licensure is required, without being licensed? Often, they don’t even know that they need the license. So, your first risk could be this simple. Do you need to be licensed as a property manager in the state you’re in? Find out, and if necessary, get licensed. Moreover, make sure you read up on the laws and regulations related to property management in your area. Each state can have different rules, and these regional or state specific rules are subject to change by the regulatory bodies. So make sure you are always up to date with new laws and any changes. 2. Risks associated with owners, tenants, and vendors You have to screen owners as carefully as you screen tenants. Working with bad owners is a huge risk. You don’t want to work with owners who don’t care about their own risk, because that only increases your risk. Perhaps a new owner who wants to work with your company has a vendor who they’ve been working with for years. But, the vendor isn’t licensed or insured. You shouldn’t use that vendor, no matter how confident your new owner is in the work. It introduces too much risk. Kathleen was once an expert witness in a court case where a tenant asked an owner if the tenant’s friend could trim some trees on the property. The owner agreed and the tenant’s friend fell off the ladder, shattering a hip. That friend had no insurance and sued the owner. The property owner absolutely should have known better than to let that tenant’s friend climb on a ladder while at the property. This was a huge and unnecessary risk that cost the owner a lot more than it would have cost him to hire a professional company. Another example from Kathleen’s personal experience involves marijuana. It’s legal in California but it’s not legal federally. So, when she discovered a tenant was growing marijuana, she discussed the risks involved with the property owner. The property owner didn’t really care, but Kathleen didn’t want to take on the risk of what could happen with drugs – even legal drugs – growing in the back of the property. The tenant had kids living in the property as well, and Kathleen could not live with herself if anything happened to those kids because of the drugs being grown in the property. So, she ended her contract with that owner and invited him to manage the property himself. There are a lot of risks associated with your owners and your tenants and your vendors. You have to think about the potential consequences and weigh the risk. 3. Fair Housing Risks In property management, the risk of violating fair housing laws is always present. Your employees need to understand every detail of the fair housing laws. Make sure they read policies and sign off that they’re understood. Send employees to trainings. Give them reading material. Continually train them on fair housing. From service animals to discrimination, fair housing can be scary. There’s so much that can happen. Here’s an example. A property management company didn’t have a receptionist; property managers were responsible for answering the phones. A prospect called to ask about the various properties that were available for rent, and the property manager who happened to pick up the phone spent a lot of time discussing the available homes. The phone call ended. That caller was a tester, or an attorney who makes calls like this to try and find property managers who violate fair housing laws. So the tester called back, this time speaking with a foreign accent. A different property manager answered the phone and instead of spending time discussing the properties as the other manager had, directed the caller to check out the available homes on the website. This resulted in a lawsuit. It doesn’t matter if there was discrimination or not; two presumably different tenants were not treated consistently, and that’s a problem. Now, that management company has a receptionist who handles all incoming tenant phone calls. Another extreme situation occurred when someone asked a property manager if 10 people could move into a two-bedroom property. The property manager advised that 10 people were too many. She used the guidelines of two people per bedroom plus one extra person. But, a discrimination lawsuit was filed and that property manager lost her business. Not only did she lose her business, she now has this complaint on her record with the Department of Real Estate. A well-trained staff is required to manage your fair housing risk. PM Grow Summit Sponsorship Risk Management Issues You May Not be Thinking About You’re running a business, and many of your biggest risks will be accounting and employees. 1. Internal Risk Management Issue: Accounting If you’re not comfortable with accounting and all the financial risks that are present, hire a good bookkeeper. Get someone who understands property management software. Hire a virtual assistant who can specialize in accounting. Make sure there are checks and balances in place that protect you from things like embezzlement. 2. Internal Risk Management Issue: Employees Employees come with risks, too. Make sure you have a manual of policies and procedures that documents your expectations and the requirements of your company. You can’t have an employee who drinks alcohol while at work because what if that employee is in an accident? Kathleen knew a real estate agent who did property management for a company that didn’t allow family members, vendors, or employees to rent the homes that the company managed. That makes sense. But, the real estate agent went ahead and rented a home to himself and his family. Then, they stopped paying rent. So, the employer had to evict those tenants and it took two years of court appearances and lawsuits. Be mindful of the internal risks as well as the external risks. A Framework for Mitigating Risk in a Property Management Business Step 1: Identify your risks Maybe you’re doing a property assessment and you notice a cracked driveway where it would be easy for a tenant to trip and fall. Or, the plants outside the front windows are so high that it would be easy for a predator to hide there. You’re going to check the property for carbon monoxide detectors and other things that increase or reduce risk. Then, you’ll present these risks to your owner, and let them know what actions they need to take. Identify the risks in every aspect of your business. Step 2: Analyze the risks Your next step is to analyze the size and strength of the risk. How often will this risk potentially happen? Maybe you require your owners to carry at least half a million dollars in liability insurance. If you have an owner who refuses to have a policy that large, will you continue to work with the owner? You need to analyze the risk. Or, perhaps an owner won’t want to add you as an additional insured to their policy. Analyze the size of this risk and the severity of what would happen if something went wrong. You need to know how much of a risk you’re working with. Step 3: Create a plan of action Then, based on your evaluation of the risk, you need a plan of action that will allow you to move forward. You’ll have to document everything, and you’ll need a process in place to address each risk. Once you have that process in place and everything is documented, review your risk management system and plans. You may need to make adjustments. You may need to add processes. Update and renew your risk management system constantly. It has to be current. Assess and balance the risk. Remember what’s at stake: fines are severe and you can lose your business. Risk Management Blind Spots and Accountability for Property Management Companies Small property management companies have a lot of operational risks to deal with. There is an urgency to set up the accounting and employment systems properly to protect themselves. Larger companies with 1,000 doors or more, or companies that have been around for a long time have different challenges when it comes to risk management. They can become complacent. If they’ve done something a certain way for 10 years and nothing bad has happened, they’ll have a hard time seeing why they should change things. But, if you’re using a lease from 10 years ago, there might be terminology in there that’s actually illegal today. As your company grows, you start delegating more. Make sure your employees are following the standards you’ve set and the processes that are in place to keep you safe from risk. Audit your risk management systems every year. Many brokers don’t realize that they’re ultimately responsible for everything happening in the company. They need to be signing off on a lot of forms. If an employee forgets to hand a tenant the lead disclosure booklet, the broker will be the one who answers for that mistake. You need a process. You need a checklist. You need to check everything off that list. This is a blind spot for big companies. Make sure everyone follows your policies and procedures and protections. If you’re a corporation, make sure you’re doing your minutes and reporting them with your taxes. Don’t open yourself up to additional risk. Your property management company is a business, so act like a business. Large companies have entire departments dedicated to risk management. You may not have those resources, but you can take the risk management process just as seriously. Increase your insurance products. Buy cyber security insurance. Take out a bond on your bookkeeper so all your cash balances are covered. Get a rider on your E&O insurance that covers fair housing. Increase your insurance for vehicles or buildings. It’s a cost. But, you have to protect yourself. Waiting until something goes wrong is stressful and expensive. In property management, 99 percent of what we do is fully anticipated. You know you’ll collect rent every month. You know you’ll have to perform maintenance on your property. You know there’s a potential for people to get hurt there. Anticipate the risk and put processes in place that define how the situations are to be handled. Think about first responders who go charging into burning buildings. They do it calmly and professionally. Why? Because they practice these situations all the time. They have a Plan A and a Plan B and a Plan C. If something happens, they have a process. This is risk management. Don’t lose sleep and don’t find yourself in reaction mode. It’s easier to invest your time and energy on the front end. The key takeaways you can do right now: Prepare yourself. Do a complete risk management audit. Be curious and ask questions. Think about what a judge would say in every situation you find yourself. Thanks to Kathleen and to our listeners. If you have any questions about what you’ve heard about property management risk on our podcast this week, contact us at Fourandhalf. We can put you in touch with Kathleen and help you grow your property management company. The post Risk Management Mistakes That Keep Property Managers up at Night with Guest Kathleen Richards appeared first on Fourandhalf Marketing Agency for Property Managers.

Dec 12, 2019 • 1h 3min

Property Management Banking and Trust Accounts (Explained by a Banker)

Nov 14, 2019 • 1h 2min

How 1031 Exchanges Can Grow a Property Management Business (Even if You Don’t Do Real Estate Sales)

Today we’re joined by Eric P. Hoglund, Broker (DRE #01420325) with Estey Real Estate & Property Management. He explains the benefit of understanding 1031 exchanges for property management companies, even if your company doesn’t do real estate. After doing a lot of traveling with the Navy, Eric decided he wanted to be closer to home so he could raise his kids and be with his family. His wife’s family had owned a property management company since 1946, and he began learning everything he could about the real estate and property management industry. Eric knows that getting your real estate license doesn’t mean you know anything really important about real estate. Terms like ‘escrow’ sound scary, even to professional agents, and there are lots of acronyms. When he closed on his first home, he was a licensed agent but still felt outside of the loop. The entire process made him nervous, and that allowed him to think about how his clients and his owners felt during this process. He sees his mission as demystifying things for his clients. Currently, he’s managing around 300 properties and his company does between 15 and 20 million in sales. Why do we have Eric here today as a guest on The Property Management Show? Because we’re talking about 1031 Exchanges, and that’s one of those terms that might need to be demystified. It’s a term that gets thrown around a lot. Everyone is aware that it exists, but not everyone is clear on what it is. Defining a 1031 Exchange The tax code scares people right away. But, a 1031 Exchange is not as complicated as people think. It’s simply a way to defer taxes. This exchange is a way to move gains that you’ve earned on one property into a new property that you’d like to purchase. Here’s an example. Let’s say you bought a home years ago for $100,000, and you just sold it for $200,000. That’s a gain of $100,000, and it’s taxable. But, if you take that $100,000 and put it into another property, you can defer those taxes. You need to buy a like property, but that isn’t as restrictive as you might think. It simply means you have to buy another income-producing property. So, you can sell a condo and buy a fourplex. For a while, everyone wanted to own a winery. It’s possible to sell a rental property to buy a vineyard. One thing you need to know is that you never actually see that gain from the property you sold. The money immediately goes into an exchange holding company, and you’ll pay some fees. So, it moves from one escrow account to another. Many investors find this is a great way to do business, especially when you don’t overcomplicate it. Some investors, for example, want to take their $100,000 gain and only roll $70,000 into the next property while keeping $30,000. It’s possible to do that, but you’ll have to pay your tax on that $30,000. The 1031 Exchange isn’t mystical, but if you don’t know the rules, it’s easy to get into trouble. There are some timelines that are important: 1. From the time you close on escrow with the house you’re selling, you have 45 days to designate up to three different properties for your next purchase. You don’t have to close on those; you simply have to demonstrate that you’re moving towards a purchase. 2. You have 180 days after your first sale to close escrow on your purchase. So that’s six months. After that, you cannot leave the money there indefinitely. If it looks like you’re not going to close within those 180 days, get your tax expert involved. When you finally liquidate and get out of the income producing property business, you’ll have to pay those taxes. But, the 1031 Exchange is a great way to stay in the business even when you’re ready to sell an investment. It’s hard to escape taxes forever, but you can minimize what you pay. This is similar to what happens when someone inherits a property. If your parents bought a fourplex in 1962 for $40,000, and you inherit it when they die while it’s worth $1 million, that will seem like a big tax bill. But, you get a step-up adjustment, which means your tax clock starts ticking at $1 million. If you sell that property in two years for $1.2 million, you don’t have to pay a tax on the gain from the original $40,000 value. You pay on the $200,000 gain your property has earned. This doesn’t always make sense. If you’re selling a property and you only make a few thousand dollars, the capital gains tax will be equal to or even less than the fees you’ll need to pay to the exchange company. It might not be worth it, but at least run the numbers to find out. PM Grow Summit Sponsorship Buying and Holding Real Estate Investments Investors always grumble about how rich they’d be if they had just purchased a lot of Apple stock back in the day. Here’s something most people don’t realize: that house you inherited from grandma is actually your Apple stock. If you hold onto it, you stand to make a lot of money. Real estate is one of those things that provides some great returns if you buy and hold. The richest people you meet will be rich because they bought a home and paid it off. Then, they bought a rental property and paid it off. Then, they bought two more rental properties – and so on. The 1031 Exchange allows a lot of investors to hold onto the value that they’ve accrued in properties. 1031 Exchanges for Property Management: What if Your Property Management Company Doesn’t Do Real Estate? A lot of property management companies are 100 percent focused on management and they don’t do real estate sales. If that sounds like you, there’s still a lot that you can do to benefit from 1031 Exchanges. A property manager has one of the more unique positions in the customer/client relationship. There’s a lot of trust between owners and managers; or there should be. It’s not an easy job to manage property. You need to understand a slice of the market that’s even larger than what real estate agents are doing. So if part of your business model is not to sell real estate, you still have a unique ability to have the owner’s ear. You can build in some value and some services. Imagine this. Maybe you’re having a lot of trouble with an owner’s fourplex. There are problems with the roof and the foundation has some issues, and the market is good, so it might make sense to sell it. If you can get your owner thinking about selling that property, you don’t necessarily have to lose the business of those four units. You can suggest your owner do a 1031 Exchange and buy a multi-family building with eight units. You can run the numbers on estimated rental values and occupancy rates. Your owner’s Realtor can take care of the sale and the purchase. You can look at deferred maintenance issues and help the owner decide whether the investment makes sense. First, you’ve provided a valuable service to a client. Second, you’ve developed a deeper relationship with a local real estate agent who just closed a sale. Third, you’ve grown your own portfolio. Instead of managing four units for this owner, you’re now managing eight. Everybody wins, and the win happened not because you were looking at your own bottom line – but because you were looking at your client’s bottom line. You’re the expert. When Does a 1031 Exchange Make Sense? Maintenance issues can tell you it’s time to look for a new investment property. There are other triggers. First, it might make sense for your investment goals. Before any investor buys a property, he or she has to decide if the purchase is for cash flow or for equity. The beauty of real estate is if you hold the investment long enough, lines cross and you get both goals met. But, your first question should be whether you’re buying for cash flow or equity. As long as the numbers work for you, an exchange is a good idea. You should also consider a 1031 Exchange if you have an opportunity to buy in an area that’s growing. You’re looking for growth in both economy and population. Make sure you understand the market. This is another area where property managers are extremely valuable. An opportunity might look great in a specific market, but if there are a bunch of homes and no tenants to fill them – your investment will not perform. Finally, know how long you’re planning to invest in rental real estate. You want to know your exit strategy so you make a smart decision when exchanging one property for another. Seacoast Commerce Bank Sponsorship Property Managers Complete an Essential 1031 Exchange Team Before investing or engaging in a 1031 Exchange, investors at every level will need to call in some experts. They need a real estate broker and a property manager. They need a tax person and an attorney. The team has to expand. It’s tempting to focus entirely on property management, or to get comfortable managing properties and not understanding the benefits of selling homes or facilitating exchanges. But, investors and homeowners need a team to make the right decisions. Position yourself as a collaborator who will make people successful, and you’ll notice that the business will come. You may not do the buying and selling, but if you know how it works, the owner is more comfortable reaching out to you and including you on the team. Relationships are everything. A sin of almost every property manager is that they don’t reach out to their clients unless there’s a problem. Check in with your owners from time to time to tell them that everything is going well. Ask them if they’ve thought about selling any property or if they’re interested in picking up additional units. Maybe they’re not. But, they’ll know you’re thinking about their future and their opportunities. Property managers are natural team builders. You’re required to wear a thousand hats every single day, and you have to talk to a lot of experts. You need to know a little bit about plumbing without being a plumber, and you need to know how a 1031 Exchange works, even if you’re not a real estate agent. Different Types of 1031 Exchanges Now that you understand the basic 1031 Exchange, you should know that there are other, more complex exchanges. For example, there’s a Reverse Exchange where you already bought something and now you’re going backwards. It can be done, but it has to be done a certain way because you’ve already bought and sold. For years, there was a trend where people wanted to shield themselves from the tax burden of selling rental property by moving into it. Maybe you have a rental and it’s never been your home. But, once you move into it for two to five years, it becomes a primary residents, and you can defer taxes without doing the exchange. You don’t even have to live there for consecutive years. There’s flexibility. You can sell one rental home and buy another with the 1031 Exchange. There’s no limit on how long it has to be a rental, but your tax expert will probably say at least five years. You can move into it yourself to avoid the taxes, but you’ll have to live there for five out of five years. Make sure you know the tax code or you work with someone who really knows the tax code. Things change all the time. Property managers can utilize 1031 Exchanges by helping their existing owner and investor clients get more properties or better properties. Upgrade your portfolio by increasing your doors and the quality of those doors. Stop looking at your bottom line. Look at your client’s bottom line. And, don’t discount yourself. You are a smart and intelligent property manager. You know what a good property looks like. We hope you feel more comfortable with 1031 Exchanges, and that you know how it can help you build your property management business. If you have any questions for us or for Eric, please contact us at Fourandhalf. The post How 1031 Exchanges Can Grow a Property Management Business (Even if You Don’t Do Real Estate Sales) appeared first on Fourandhalf Marketing Agency for Property Managers.

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