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Charlotte Property Management Tips - Should I rent or sell my home in Charlotte?

This is a question many homeowners continue to ask.  If you've been paying attention to the national press you might think that housing prices are increasing significantly and that it is a seller's market. However, this is not necessarily the case in the Charlotte region.

Some neighborhoods are seeing a resurgence in prices, but most neighborhoods still aren't experiencing prices near the highs hit in 2006-2007. In fact, a significant percentage of our new rental property clients are folks who have tried to sell but simply can't get the price they need in this market and therefore, they now want to rent their home. (The good news for them is that we're getting homes rented very quickly and rental rates continue to increase).

I believe Charlotte will lag the rest of the country in terms of the percentage increase in pricing. There are several reasons for this, not the least of which is that Charlotte entered the housing crisis after many other parts of the country and the Charlotte bubble wasn't nearly as large (particularly compared to Florida, Nevada and California).

"Charlotte foreclosure sales jump 45% in Q1 2013"
So reads the headline of a recent newspaper article. Although sales of foreclosed homes declined nationally in the first quarter of 2013 (vs Q1 2012), they rose significantly in Charlotte. In fact, foreclosure sales represented more than one in five sales in Charlotte in Q1. I expect this trend to continue into 2014 as banks try to monetize the inventory they have on hand.

Additionally, as prices increase, many reluctant landlords (those renting their homes that would rather sell them) will opportunistically list their homes. This will continue the downward pressure on prices.

So for many homeowners, becoming a landlord will be a better alternative than selling. How do you know which is right for you? First, get a realistic idea of sales price. You can't look at what others are asking for their homes. You must look at the sales prices of other homes in your neighborhood during the past six months or so. If nothing has sold in your neighborhood recently, it may be a good indication that the market just isn't there yet. Remember to take about 10% off the sales price to cover Realtor commissions, legal fees, taxes, etc.

Next, find out how much rent you can expect from your home. The best way to do this is contact a qualified property manager (preferably a member of the National Association of Residential Property Managers-NARPM). Factor in the monthly management fees, repair costs, vacancy costs, etc, and see if there is enough money left over to allow you to make the monthly mortgage payment. You should ensure you have enough funds to cover 3-6 months of payments with no rent income. If you don't have the money (or the credit capacity) to do so, don't even think about renting your home.

Finally, if you decide to rent, hire a qualified property manager. There are too many reasons to discuss them all here, but one mistake on your part can wipe out any income that you have collected from your tenant. We regularly take over management of homes from homeowners who have gotten themselves into a huge mess with their tenants and need us to clean it up. Unfortunately, by the time the owner calls us they've typically already lost thousands of dollars in rent!

To review:

• Determine a realistic sales price, deduct 10% and see if you can live with a sale.
• Determine realistic rent rates, deduct 10% -15%, and see if you can afford the house payments.
• If you decide to rent, hire a qualified property manager who is preferably a member of NARPM. 

Charlotte Property Management Tips - Documenting the Condition of your Charlotte Rental Home

Our Charlotte Property Management team often takes over management of troubled properties from other property management firms or individual homeowners. In about half the cases the tenant ends up leaving the home (either through eviction or on their own). It is our job to assess the damages and distribute the security deposit, if any, as allowed under North Carolina landlord-tenant law.

Unfortunately, there is often little or no record of the condition of the home just prior to the tenant's occupancy. Sometimes an owner will have receipts for work done or they'll say things like "the home was perfect when they moved in". If we're lucky, the owner or previous property manager will provide us with a move-in checklist filled out by the tenant. 

A picture is worth a thousand words (video is even better!)
Nothing is as good as pictures or videos documenting the condition of the home both before and after a tenant's occupancy. Which one is more descriptive? A sentence that says "Personal items left in home and carpets not cleaned" or the following picture?

It is Alarca's policy to create videos of every Charlotte rental home before and after a tenant moves. These videos are uploaded to YouTube and links are sent to the homeowner and the tenant. In addition to allowing us an easy way to determine the difference in condition, we have also found that these videos eliminate almost all discussions about how the security deposit has been applied. Here's a sample of one of our move-in condition videos:



Even if you're letting a friend or family member rent your home, do yourself a favor and document the condition of the home with photos or video. This will save you or your future property manager a lot of headaches when your tenant moves out. Also, make sure you get a security deposit (see our blog on rental tips here - 
http://alarcarealty.blogspot.com/2013_03_01_archive.html).

Charlotte Rental Agreements - Charlotte Property Management Tips

Our Charlotte Property Management practice sees all types of leases when we take over management of a Charlotte rental home from an individual landlord or another Charlotte Property Management company. Often, an individual homeowner will simply download a lease from the internet and some of these forms can be sufficient for use in Charlotte. On the other hand, many of these forms simply do not address even the most basic landlord-tenant issues, let alone those issues specific to Mecklenburg County and North Carolina. Property Managers (or Real Estate Brokers who happen to manage a few properties) will typically use the Realtor Residential Rental Contract that contains all of the proper clauses for North Carolina. The mistakes we see when we get these forms is that they have been filled out incompletely or incorrectly.

As a Charlotte rental property owner, why do you care what lease is being used for your home? It is your primary means of protection for your investment. A poorly designed lease will not provide the protection or the leverage you should have as a property owner. Many leases contain clauses and fees that are in violation of North Carolina law and an educated tenant will be able to sue you for treble damages in these cases (illegal late fees and returned check fees are the most common). I've seen landlords in court for tenants who haven't paid for months end up owing the tenant money because of their lease!

The correct lease will address upfront all of the important details regarding the term of the lease, rent payment, late fees, eviction fees, pets, housing rules, security deposits, tenant and landlord obligations, right of entry, termination notice requirements, repair responsibilities, county or city specific ordinances, HOA rules, etc. For example, the standard NCAR rental agreement is six pages long, excluding the repair addendum and other addenda such as pets, pools, lead paint, bedbug, etc.

I'm not going to attempt to address all of the clauses that should go into a lease, but rather I'll discuss the most common errors here.

1. The lease form is not completely filled out. At a minimum make sure you're completing every line in whatever form you're using! It should include a start date, the monthly rent, the term of the lease (year, month-to-month, etc), the amount of the security deposit, the names of the occupants, late fees, eviction fees, etc.
2. The form isn't signed. Make sure all of your tenants over eighteen sign the lease and preferably initial each page.
3. There's no security deposit. OK, so this really isn't a problem with the lease form, but it is such a huge mistake I had to address it. ALWAYS GET A SECURITY DEPOSIT! Especially if you're renting to a friend, coworker or family member. There is simply no business rationale for not getting one. After you get it, you must deposit it in an escrow account held in a North Carolina bank (yes, even if this is your only rental home and you're renting to a friend).
4. The late fee and/or returned check fee exceed the maximum allowed under North Carolina law. The late fee cannot exceed 5% of the rent and the maximum returned check fee is $25. Additionally, the late fee cannot be assessed until the fifth day after it is due. 
5. There's no Right of Entry clause. You want to be able to legally get into the home when necessary. Make sure your lease allows this as long as you provide reasonable notice to the tenant (48 hours notice is certainly reasonable).
6. There's no Lead-Based Paint Addendum for a home built prior to 1978. This is a Federal law and the penalties can be substantial. You don't need to test the home, but you need to disclose that it hasn't been tested. See this link for more information - Lead Paint Blog
7. There's no move-in report or any other documentation regarding the condition of the home just prior to the tenant's occupancy. This isn't really a lease item, but it is such a common and huge error that I felt compelled to address it. If nothing else, take a lot of photos and/or a video of the home the day before the tenant moves in. Make sure to keep them in a safe place.
8. The lease doesn't waive the 10 day notice requirement for filing eviction. This tip alone is worth the time you've spent reading this blog. North Carolina law requires a landlord to provide written notice to a tenant ten days before filing eviction. If the notice doesn't meet specific criteria and contain specific wording, a magistrate may call it invalid and you'll have to start over (I've seen it happen!). Here's the tip - your lease can waive this requirement so you don't have to provide it! Simply add these words to your lease "Tenant agrees to waive the required 10 day notice period prior to filing for Summary Ejectment in the event of default by Tenant." Now you may simply file the eviction papers when the tenant defaults.
9. The lease doesn't have the proper addenda addressing neighborhood or property specific issues. I can't go into all of them here, but here are some common omissions - Housing Rules, Drug Free Housing, Bedbugs, Appliances, Repair, Charlotte Rental Ordinance, Pool or Hot Tub, Lawn Care, etc.

When you have a good landlord and a great tenant none of this may seem important. If things turn sour, however, the lease is the most important document you can have. Unfortunately for us, it is rare that someone will turn over a tenant-occupied home to Alarca for management when everything is going well. We typically will take over when the tenant is behind on the rent or the current Charlotte property management company isn't meeting the needs of the homeowner. It makes it much more difficult to quickly deal with a problem tenant when the lease isn't completed correctly or doesn't contain the proper clauses.

If you're a good landlord, you've performed the proper screening and your lease contains the proper clauses, you can significantly decrease the risk of a major financial and emotional headache. If it's too late, call a professional Charlotte Property Manager to help you out!

How to Find a Tenant in 30 Days or Less in Charlotte

We are often asked how we find great tenants for Charlotte Rental Homes so quickly. The answer is simple - we show great homes to a huge number of potential tenants and we make it extremely easy for them to get information about the home, tour the home and apply for a lease.

If you diligently follow these steps, it is extremely likely that you'll find a new tenant for your home in under a month.

1) Make sure the home is in great shape! I can't tell you how many times we see homes that haven't even been cleaned, let alone repaired or painted. Your Charlotte Rental Home should be in move-in condition when you're showing it. The carpets, appliances, fixtures, walls, ceilings, etc. should be clean and free of any significant defects. The walls should be clean and free of holes and will preferably have a fresh coat of paint throughout. The home should be completely free of any offensive odors, insects or rodents. All the light bulbs should work and the home should have working heat or air conditioning and water.

2) Take high quality photos and videos. Online marketing has quickly become the number one source of leads for most rental homes. Your online photos and descriptions should present your home in the best possible way. Unless you are a great photographer with great equipment, hire a professional  photographer. You can use the pictures again and again as long as the condition is similar.

3) Price the home appropriately. Unfortunately the market doesn't care how much your mortgage, insurance and taxes cost each month. Potential tenants are going to compare your home against other homes in the neighborhood and they are going to rent based on their perceived value. A vacant home is a huge liability and you don't want to prolong this period, so conduct your market research and price the home accordingly. Remember, just because someone is asking $1500 a month for a home doesn't mean they're going to get it, so look at the prices of homes that have actually rented during the past six months or so.

3) Advertise the property everywhere possible. There are a huge number of Charlotte Rental Homes on the market at any one time. People need to know about yours. If you don't know the major online sites in your area, simply search for "Charlotte Rental Homes" and take a look at your options. Craigslist is another source that should be refreshed as often as possible to ensure your home shows at the top of the list. Make sure you have a large legible yard sign with easy to read phone numbers.

4) Make it easy for people to get information about and walk-through your home. If someone calls about your home you need to answer the phone. People don't like to leave messages and you may miss an important lead. Be ready to show the home as soon as possible. Again, prospective renters don't want to wait to see their new Charlotte Rental Home, they want to see it now. At least one Charlotte Property Manager allows the tenant to see the home immediately by using a one-time code to see the home when the tenant wants, whether it be immediately or at 8:00pm on a Friday night. This significantly increases the number of showings and therefore, the chance of getting the home rented.

5)Make it simple for your tenant to apply. Online applications are the norm and savvy Charlotte Property Managers allow their tenants to pay via credit card, online, or by cash at any local Seven Eleven store.

6)Make sure you have defined selection criteria and run the appropriate background and reference checks on all of your applicants. You don't want to rent your great Charlotte Rental Home to someone who will destroy your home or fail to pay the rent (if this happens, you'll want to read our blog on evictions). You also do not want to violate State or Federal Fair Housing Laws, so make sure you become familiar with the laws and treat everyone equally in applying your criteria.

If you diligently follow these steps and you are friendly and helpful when dealing with potential tenants, your home in Charlotte should rent in 30 days or less. Once you find your Charlotte Rental Home's new residents, if you quickly and professionally address their concerns (repair issues, etc) and consistently treat them with respect and you could very well end up with a long-term tenant.

Who's responsible when a tree falls?

During the storm we experienced last week we had several tenants inform us that trees had fallen in their yard. In one case, a neighbor called to tell us that a tree in "our" yard fell onto her car. In almost all of these scenarios the person whose property is damaged wants the tree's owner to pay for the damages. Outside of negligence, however, the tree's owner is not responsible for the damages to the neighbor's property.

The rule can be summed up as follows: It's your property, so take care of it, unless you can prove your neighbor was negligent. If a dead limb of your neighbor's tree is overhanging your property line, it is your responsibility to take care of the issue (without causing unnecessary damage to the tree, of course).

If your neighbor wants you to pay for damages, it isn't simply sufficient to say that the tree was unsafe. They would have to prove that you knew or should have known that the tree was unsafe. Some cases have determined that the tree owner wasn't liable because the neighbor didn't maintain the portion of the tree that was overhanging the neighbor's property.

When one of Alarca's tenants calls us to tell us the neighbors' tree fell into our tenant's yard, we send someone out as soon as possible to examine and take photos of the fallen tree and the damage. We also send a tree-service out to remove the portion of the fallen tree that is on our tenant's property. If warranted, we'll contact the landlord's insurance company. The premise is simple - we want to take care of our residents. We can deal with who pays for the damage after the problem has been resolved.

Property owners can best protect themselves by ensuring that their trees are examined periodically to ensure they are not obviously dead or decaying. Any dead branches or trees should be removed by a professional tree service. Alarca encourages our tenants to report dead trees or any other unsafe condition to ensure that our residents are kept safe and our clients are protected against unnecessary liability claims.

New NC Rental Laws for 2013

All of us at Alarca hope that you and your families had a wonderful holiday season and wish you the best for 2013. Our team is looking forward to a great year and will be implementing a number of initiatives to provide our clients with more value-added services and communications.

There are a few new ordinances and laws that took effect on January 1 and although I won’t address all of them here, I want to discuss a couple that will impact many landlords. 

Charlotte Rental Property Registration Ordinance – This ordinance took effect on Jan 1 and requires all owners of rental properties in Charlotte to register their properties with the City. There is no immediate cost and the registration is available online at this link: https://rentalregistration.charlottenc.gov/ . 

The City has stated they will give owners a six month grace period to complete the registration. More information can be found at this link:  http://charmeck.org/city/charlotte/CMPD/resources/Ordinances/Pages/RentalOrdinance.aspx

Tamper Resistant Smoke Detectors - When installing a new smoke alarm or replacing an existing smoke alarm, a landlord must install a tamper-resistant, 10-year lithium battery smoke alarm.  Compliance with the new law is not be required if: (i) the dwelling is equipped with a hardwired smoke alarm with a battery backup, or (ii) the dwelling unit is equipped with a smoke alarm combined with a carbon monoxide alarm that meets existing requirements for carbon monoxide alarms.  Also, this legislation does NOT require a landlord to replace existing smoke alarms that are in good working order or which simply need new batteries. Tenants will NOT be required to replace batteries in the new 10-year lithium battery equipped alarms. The cost for these alarms is about $25 each (compared to roughly $10 for the type we used to install).

If you have any questions about either of these or any other property management issues, please contact Alarca (http://www.alarca.com) and we'll be happy to help you out!


Here's to a great 2013!