Even in a pandemic, rent all over California continued to increase. While places like San Francisco saw a decline in rent, places like Fresno and Oakland, and California as a whole saw rents rise and due to the housing shortage that exists statewide, that trend won’t be reversing anytime soon. In order to help address the housing shortage California lawmakers drafted the housing bill SB 9 which would allow homeowners more autonomy over their own land. 

What does SB 9 do?

If passed, SB 9 would give home and landowners more control over their property while limiting the ability of municipalities to stop the construction of additional housing through zoning restrictions. A city would only be allowed a by right approval, or ministerial approval, meaning the city would be forced to approve a proposal so long as it meets a fixed set of standards. This means that if a homeowner wanted to convert a home into a duplex, or split the property into two lots and build a second home, or two duplexes, the city would be required to approve

SB 9 is separate from the laws which allow both an ADU (accessory dwelling unit) and a junior ADU on a property. There were some concerns owners would be able to build a duplex on each lot, along with an ADU and  junior ADU for a total of four units on each lot. SB 9 would limit the number of units to two duplexes per lot, which means if one lot were split into two, it would allow for a total of four units, one duplex per lot. 

Are there limits?

There are some limits when it comes to landowners and developers. If a homeowner or developer has two lots adjacent to each other, only one of those lots can be split into two lots. There are also other limits specific to farm lands and high risk fire areas. Proposals also must adhere to objective local zoning and design standards. There would also be limits to demolition of existing structures and the lot splits would need to be of similar size, a minimum of 1,200 square feet each. The law wouldn’t apply in historical districts, farmlands, wetlands or any other environmentally sensitive area. SB 9 also puts restrictions on destroying current low income housing or rent controlled housing as well as units where tenants recently moved in. 

Economic Opportunities

No matter where you go in California there is a housing shortage. SB 9 would allow for about ⅔ of current housing to convert into duplexes and split lots to build additional housing. This is a huge opportunity for property owners to create inter-generational wealth by building multiple homes on each lot. Land is always at a premium in California, especially since the most populated areas are near the coast and there’s obviously no land to develop west, and it doesn’t take long going east until you’re too far away from urban centers. Land is in such high demand, in many areas, people will buy new homes just to demolish them and build a new one. Splitting up a lot to add more housing has a tremendous amount of value and gives owners an opportunity to build more equity. 

Concerns and opposition

When it comes to the opposition for increasing density, it mostly boils down to people liking things the way they are and they don’t want much change. With SB 9, cities can at least set design standards which would allow for all new homes to work with the local architecture keeping the character of the neighborhood the same. Here are some examples of lots which weren’t restricted by single family zoning and were split into two, as well as two lots where duplexes were built. From the street, it’s hard to tell these apart from a normal single family home restricted by single family zoning. 

A good property manager can be worth their weight in gold. They can help manage the more complicated and tedious aspects of owning rental properties, including dealing with tenants. At their best, property managers take over the day-to-day tasks associated with running your rental business. Their performance will heavily impact your bottom line, so it’s important to find your perfect match. 

Here are 10 questions to ask before choosing a property management company to ensure you (and your tenants) are satisfied.

1) What are your fees?

One of the very first questions you need to ask is how a property management company’s fees are structured. Are they within your budget? Be on the lookout for fees that are suspiciously low. Are there any hidden costs on top of the basic management fee? While their service may seem like a bargain up front, there could also be vacancy fees, setup fees, leasing fees and more.

Keep a close eye on how the fees are structured, including basic rates and extra charges. A good fee structure should incentivize the manager to find great tenants who stick around, so be aware of how evicting a tenant and placing new tenants is handled in their pricing.

2) How do you screen tenants?

Renting to high-quality tenants is incredibly important. A bad tenant might cause damage, fail to pay rent, or in the worst case, need to be evicted. A good property management company should have a robust screening process in place that includes a credit check, background check, and proof of stable income.

It goes without saying that a property management company must clearly adhere to local regulations, as well. Ask questions about landlord-tenant laws. Do they know the answers or where to find them? If not, consider it a red flag.

3) Do you have references?

Reviews are perhaps the best indicator to the quality of a management company. If they are good at their job, then they will be very open about what people have said. If you can’t find testimonials on your own and they won’t provide references, don’t award them your business. 

However, be fair. If you encounter bad reviews, it’s worth prying. Give them the opportunity to explain. After all, few businesses can satisfy every customer, every time.

4) How do you communicate?

Since the property management company will be looking after one of your most valuable assets, it’s important to know that they can be relied upon. Do they provide regular updates and reports to their property-owner clients? 

There should be clear channels for communication between the company and you, as well as the company and your tenants. Ensure emergencies will be dealt with efficiently and other issues and inquiries will be handled professionally.

5) How do you deal with maintenance?

Maintenance and upkeep are vital for any property, so it’s important to know if it’s something your prospective company will handle. If the company does handle maintenance, then you will also want to know whether it is included in the management fee or if it will cost extra. 

6) How will you market the property?

If you want to attract and keep great tenants, then the property needs to be marketed effectively. How often will the company hold viewings while the property is vacant?

The best management companies are willing to go above and beyond—not only in getting the property rented, but also in renting to the right quality of tenant. This means using professional photographs to entice renters, advertising on high-traffic channels and ensuring that the property is in move-in ready condition.

7) How do you handle rent?

It’s important to know exactly how the management company will handle rent. While you may have a preference, ideally the property manager will have an online payment option. Processing rent online is great, as it’s quick, easy and reliable. Most online payment systems also provide options like direct debits and recurring payments.

Going hand in hand with rent payment is how you get paid. Be sure to ask the property manager about their process, including their payment methods and schedule. Finally, it’s important to ask how the management company determines rental rates and handles rent increases. 

8) How many properties do you manage?

This point is particularly relevant if you have a large portfolio. How many units does the property manager currently manage? It’s important to understand the company’s capacity—especially if you intend to grow your portfolio with them. Will they be able to take on more units in the future?

Also, watch out for companies with small portfolios. Few clients can suggest inexperience or lost business.

9) Do you handle inspections?

While many companies do provide this service, it’s not true for all. If they don’t conduct inspections, you will need to find a separate company that can provide this service. If they do provide inspections, is there an extra fee?

10) How long have you been in business?

You want an experienced manager looking after your portfolio, particularly if you’re a new investor. Perhaps more importantly, how long has the current property manager been with this company? Property management is a high turnover role. If an individual has been with a company for an extended duration, it is a very good sign.

As a real estate investor, the success of your property portfolio is a key part of your overall financial well-being. So, you need a property manager who will treat your rentals with the same care that you would. If you make sure to ask the right questions, you will find a trusted partner who can be relied on.

For many, being a landlord is a highly coveted dream. The idea of earning extra income from a passive source is very attractive.

However, it’s important to note that being a landlord isn’t all smooth sailing. There may be a number of obstacles to overcome, including those that pop up out of nowhere. To ensure that owning a rental property doesn’t get the best of you, here are four tips for new landlords.Check out 7 more tips for new landlords

1. Make Sure the Numbers Work

If you want your rental income to be reliable, then you need to treat your property like a business. And when it comes to business, it’s critical you know your numbers.

Rental Rate

The price of rent is the single biggest determinant for how much profit you will make. If you set the rent too low, you may end up losing money on things like unexpected maintenance and repairs. You could also end up with lower-quality renters, who may prove to be more trouble than they are worth.  

On the other hand, if you set your rent too high, you may have a hard time finding any renters at all! Rentometer is a great tool to help determine a realistic rental rate for your neighborhood.

Rental Expenses

Owning a rental property comes with expenses. Landlords who fail to account for these costs will be sorely disappointed by their profits. 

When [[renting a property](https://www.ziprent.com/blog/articles/how-to-prepare-your-home-for-rent)]() out, expenses may include administrative costs, maintenance costs, taxes and even variable insurance costs. Avoid setting yourself up for failure by calculating all of these numbers prior to purchasing a property and setting your rental rate. That way, you will have a much more accurate view of the full financial picture.

2. Hire a Property Manager

A key decision for any landlord is whether or not to hire a property manager. Some may decide it’s better to go it alone and avoid the related fees. However, there are a number of benefits to hiring a property manager that may make the expense worth it.

Perhaps the most valuable purpose of hiring a property manager is the fact they can handle the difficult issues that can (and will) come up in a rental property. This includes things like maintenance, managing the relationship with tenants and even dealing with regulations or other municipal issues. 

Another huge benefit of hiring a property manager is it allows you to scale. If you want to expand your real estate investment portfolio and grow your passive income stream, then you’ll likely need help. 

While you may be able to handle the various aspects of one property, once you own several, the workload compounds. All of a sudden, you might need to fix something in six or seven units—and sooner rather than later. Having a property manager offloads those tasks to someone else.

Although you may want to skip the fees, hiring a property manager means owning 50 units will demand little more from you than when you owned just one. Delegating the day-to-day burdens frees up your time to focus on more important things, like acquiring more rentals.

3. Create Systems

In order to keep your rental business running smoothly, it’s vital that you create systems to streamline the entire process.

Rent Collection

Successfully collecting rent is key as a landlord. Create a process that is quick and easy to avoid headaches. Using an online payment system will allow tenants to remit payment however is most convenient for them and to set up recurring payments if they desire. Plus, you can send reminders and track the whole process so that you can stay on top of all your properties.

Ideally, you’ll want to ask for first and last month’s rent up front, as well as the security deposit. If a tenant can afford this amount prior to moving in, it’s a good sign that they are capable of paying rent regularly. Be sure to check your local landlord-tenant laws to determine what is legal to collect up front.

Tenant Relations

Set up clear channels and rules for communication to make landlord-tenant relations as stress-free as possible. Ideally, communication will go through a property manager. (The last thing you want is a 3 a.m. phone call about the toilet leaking.) Spell out in the lease exactly who the tenant can contact, how and when. 

Record Keeping

Above all, you want to employ systems to track the goings on in your property (or properties). With so many moving parts—like rent, maintenance, taxes and fees—it can be easy to let something important slip by. 

Don’t wait until you find yourself in trouble. Use a quality system to automate as much as possible, to track money coming in and going out and more. That way, nothing will sneak up on you.

4. Attract Amazing Tenants

Placing high-quality tenants in your rental property will make or break you as a landlord. Bad tenants can mean nonstop headaches: late rent, property damage, constant complaints or worse. 

If you want great tenants, here are a few things you need to do. Design a great ad that includes professional photographs to show off the best aspects of your property. Ensure the property is in move-in ready condition—clean, odorless, freshly painted, so on. Finally, relay your contact information, clearly communicate the application process and be responsive.

The Bottom Line

Owning rental properties is often discussed as a means of generating passive income. Make no mistake… it’s work. There’s a lot that needs to be done right, and ample opportunities for missteps. 

Being a landlord will certainly come with challenges. But if you take your time, do your research, network with experts and follow the tips in this guide, you’ll be well on your way to building wealth through real estate investment. 

Real estate investing can be an exciting and fruitful opportunity to generate more income and solidify your financial health. Out-of-state property investing takes this to the next level. By exploring markets other than where you live, you may find it that much easier to set yourself up for success. 

But it’s important to realize that investing out of state can also be risky, particularly if you are new to real estate. This guide will help you understand both the benefits, the drawbacks and the best way to achieve your financial goals.

Why Should You Invest Out of State?

There are clear benefits to investing out of state. Firstly, it allows you to diversify your portfolio. When all your properties are in one city or state, you are in a precarious position. One event—like a natural disaster or a factory going bust—could wreck your entire portfolio.

Out-of-state property may also be cheaper. If you live in a high-cost area, such as New York, then real estate investment may not be realistic for the average person. By expanding your search out of state, you can find gems that are better suited to your level of investment.

Finally, not all property markets have the most investor-friendly laws. You may be in a city or state where investment isn’t incentivized or laws highly favor tenants. In these instances, it’s wise to look elsewhere.

What Is Your Investment Strategy?

If you do plan on investing in property out of state, then it’s important to go into it with a plan. A clear investment strategy will help you streamline processes, stay focused and avoid pitfalls. 

Investing for cash flow, appreciation or both

For long-term property investing, there are generally two strategies: cash flow investing and appreciation investing.

Cash flow refers to the rental income left over after all expenses have been paid. Investing for cash flow involves seeking a property that can seemingly produce strong, consistent rental income long-term. For this strategy to be successful, it’s important that the property meets several criteria:

-It can be purchased at a discount. 

-It is located somewhere with strong rental demand. 

-Average rents of nearby properties are sufficient.

-Property expenses are low enough to turn a nice profit.

-All of the above are provable mathematically. 

While you can sell the property whenever you’d like, the idea is to keep it for the long-term and reliably generate income.

Investing for appreciation, on the other hand, focuses on choosing properties wherein the overall value of the real estate will theoretically increase over time and can then be sold for a profit. In this case, the strategy relies less on renters and more on fundamentals like the neighborhood, the city, community development, large employers moving nearby, and so on. Ultimately, the intention is to sell the property for well above what you paid rather than generate ongoing income through rents.

Alternatively, you may opt for a mixed approach that focuses on both cash flow and appreciation. Finding a property in this sweet spot would allow you to generate a good income while you own the property and also make a great return once it’s sold.

Flipping

Flipping is a short-term investment strategy where the aim is to buy a property that is undervalued (for reasons that will be explained) and then sell quickly for a profit. The advantage is fast cash and eliminating the expenses of holding property. 

Typically, there are two situations where a property is undervalued and therefore prime for flipping. Either the owner is under financial distress or the property needs extensive work done. Both mean buying at a discount. In the second case, renovations are also necessary prior to selling.

How To Find the Ideal Market for Investment Properties

Once you’ve decided on your strategy, the next step is to choose an appropriate out-of-state market. The United States is a wonderfully diverse country—and so are it’s housing markets. While one area may be great for cash flow, another may be better for appreciation.

Here are some of the best markets for cash flow investment:

-Pittsburg, PA

-Boise, ID

-Cleveland, OH

-Birmingham, AL

-Memphis, TN

-Jacksonville, FL

-Tucson, AZ

There are several factors that make a market strong for cash flow investment. The most important include the potential yield, cost of housing, wage growth, unemployment and rental demand. Essentially, the market needs to be healthy and attractive for the renters you hope to entice.

Here are some of the best markets for appreciation investments:

-Los Angeles, CA

-Seattle, WA

-Boston, MA

-New York, NY

-Austin, TX

-Denver, CO

-Nashville, TN

There are a number of factors that determine whether a market is good for appreciation investing. The biggest factor is demand. Coastal cities and economically important metropolises are typically in high demand, but fast-growing emergent cities are a great choice, too.

It’s important to do your due diligence when looking for the right investment market. Tools offered on sites like Mashvisor can greatly help with the process.

Build a Team 

The final issue you need to consider is building the right team. As you are investing out of state, you may well be thousands of miles away. So, you need a team you can rely on to deal with issues that may arise. 

Here are a few key players and their roles:

• The right property manager can handle many of the headaches associated with things like ongoing maintenance. 
• A good estate agent can help you get the best price when buying or selling and navigate the more technical aspects of closing the deal. 
• Finally, a contractor will be invaluable if you need to do repairs or renovations.

Out-of-state investing can be both exciting and lucrative. It allows you to diversify your property portfolio while also taking advantage of the best investment conditions across the country. However, there are certainly pitfalls that you want to avoid. 

By having a clear investment strategy, doing your research before choosing a market and building a team you can rely on, out-of-state investing can be a great addition to your portfolio… even if you’re a newbie.

Investing in real estate can be a really effective tool in your wealth-building toolbox. In addition to income generation and potential appreciation, there are a number of tax incentives that make investing in real estate very attractive. 

However, if you thought staying in the good graces of the IRS was complicated before you began building an investment property portfolio, get ready. Navigating the waters of real estate tax can be complicated. But don’t let this added layer of difficulty scare you away from reaping the benefits! 

For landlords with a small portfolio, this guide will provide everything you need to know about real estate taxes.

Disclaimer: The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial or other advice. Please consult with a CPA or tax professional when seeking tax advice.

Real Estate Taxes

There are a number of taxes your property portfolio will incur. Read on to learn about the most common types.

Income Tax

Rental property can be a fantastic source of income, which makes it a popular investment choice. But with income, comes tax. Put simply, income from a rental property is treated the same as any other income. However, unlike regular income, rental income can be offset by certain other factors (more on that later), potentially lowering your tax bill.

The important thing to keep in mind with rental income is that everything must be clearly and accurately tracked and reported to the IRS. You’ll want to keep separate records—and even a separate bank account—to completely isolate the performance of each investment property. A good rental management tool can go a long way in helping you keep these records.

For income tax rates in 2021, click here.

Property Tax

Property tax is an “ad valorem” or assessed value tax. This means that the tax rate is calculated based on what a property’s value is understood to be. So, an empty lot would hold less value and have a lower tax rate than the same lot with a house built on it. 

Property tax is calculated by the local government. Funds are used to pay for local services like water, roads and schools. To calculate property tax yourself, multiply the value of the property by the tax rate. Pre-built tax calculators can help you figure it out.

Note that property tax and real estate tax differ by definition, although many incorrectly use the terms interchangeably. Here are the facts: Real estate tax is based solely on the property, while property tax can apply to other tangible personal property, too.

Capital Gains Tax

Finally, capital gains tax is triggered when an investment property is sold for profit. The tax is made up of two separate elements: long-term and short-term capital gains. 

Short-term capital gains are anything you’ve owned for a year or less and are taxed as normal income. Long-term capital gains, on the other hand, come into play for property owned longer than a year when sold. These rates are much lower.

Long-term capital gains tax rates for the 2021 tax year

FILING STATUS	0% RATE	15% RATE	20% RATE
Single	Up to $40,400	$40,401 – $445,850	Over $445,850
Married filing jointly	Up to $80,800	$80,801 – $501,600	Over $501,600
Married filing separately	Up to $40,400	$40,401 – $250,800	Over $250,800
Head of household	Up to $54,100	$54,101 – $473,750	Over $473,750

Tax Incentives

Fortunately, there are a number of tax incentives that can help property investors save a lot of money come tax time. Plus, real estate tax benefits include generous ways to finance new investment opportunities.

Deductions

Deductions are one of the major benefits to owning investment property. For example, repairs and improvements can be deducted from your taxable income to reduce your tax bill. 

As property ages, its value depreciates (at least in accounting terms). In essence, wear and tear slowly reduces the value of your property over time (27.5 years for residential property and 39 years for commercial property). This depreciation can then be deducted from your tax bill.

Other expenses like travel, equipment, office space, marketing expenses and even legal costs are tax deductible, as well.

Appreciation

While you pay capital gains tax when you sell, until you do so, appreciation in the value of your property remains tax-free.

Refinancing

Rather than selling, you may want to refinance instead. Refinancing is a fancy term for taking out a new mortgage to pay for the old one. This transaction comes with benefits like improved rates and lower payments. More importantly, it allows you to access the equity in your home. All the associated costs are then tax deductible, and the cash you gain access to is tax-free!

Other Tax Benefits

Finally, there are other tax-lowering opportunities you may want to explore. Section 1031 of the U.S. Tax Code allows you to swap your property with a “like-kind” or similar property without having to pay any capital gains tax (for now). To qualify, you must take 100% of the gains from the sale and reinvest in a like-kind replacement property within 180 days.

To be sure, 1031 exchanges are not truly tax-free. Instead, you are deferring payment on capital gains until a later date (i.e., when selling the replacement property—unless you repeat the 1031 process again). 

You can learn more about 1031 exchanges here.

Opportunity zone investing is yet another means of reducing your tax burden. This program was designed by the government to incentivize the revitalization of some of the poorest and most distressed areas of the country. Investment into any of over 8,000 regions designated as opportunity zones allows property investors to defer, reduce or eliminate capital gains tax.

You can learn more about opportunity zones here.

While it may take time to wrap your head around the ins and outs of real estate tax benefits, it’s absolutely worth doing. Landlords with small property portfolios enjoy a vast number of tax breaks. Be sure that you aren’t leaving any money on the table! And with more and more incentives introduced every year, there is no better time to start investing.

Senate Bill 91 states that the State of California will be able to offer $2.6 billion in the form of emergency rental assistance to Californian renters and landlords who have been impacted by Covid-19.  Those households that are eligible for payments will receive assistance with utility bills, rent, and arrears (where applicable).   

In order to qualify the federal guidelines list the following criteria:

-Households must have experienced a loss of income as a result of the Covid-19 pandemic; and

-Household income should be at or below 80% AMI (median income)

-Households should be able to show there is a risk of housing instability or homelessness

The Rental Assistance Payment Program opened on 15th March 2021, here’s what you need to know.

Why Did it Start?

The rental assistance payment program started to assist low income tenants in California cope with the crushing financial impact of the pandemic.  The economic downturn caused by the pandemic impacted homeowners and tenants; with a loss of jobs and income, some tenants found they were unable to make their rental payments.  There was a knock-on effect on landlords who rely on rental payments to keep business cash flow running.  Despite local and state eviction protections, the state of California knew it had to take action to prevent large-scale homelessness. 

The $2.6 billion pool in federal funds should go some way to help Californians from low-income families stay in their homes.  From March 15th 2021, any landlord with tenants who are low income and who have rent arrears due to the pandemic can apply for relief from the rent assistance payment program.  

Why Landlords Need to Know About This Program

The key points that landlords need to be aware of include the following:

-Applications start from 15th March 2021

-Landlord with low-income tenants can apply for relief

-Landlords can receive up to 80% of back rent 

-Back rent can be collected from 1 April 2020 – 31 March 2021

-Payments received must be used to account for rent arrears from 1 April 2020-31 March 2021

-Tenants will have to verify that they are eligible for the payments 

Any landlord applying for funds from the rental assistance program must agree to waive the remaining 20% of the rent due.  This means that the landlord cannot try and evict their tenant for the remaining 20%, or take the matter to the small claims court. 

If landlords want to apply for the relief payments, then they can apply through the state website – Housing Is Key.  Once the application has been reviewed and approved by the state, the payment of 80% of rental arrears will be paid straight to the landlord. 

The application requires input from both the landlord and the tenant.  Tenants can apply first, but if they do then the landlord will be notified and vice versa if the landlord applies first.  According to the California Apartment Association, the largest landlord group in the state, landlords should notify eligible tenants as soon as they can and inform them that they will be applying for relief, and both parties should work together. 

As a landlord applying for the relief you will need some documentation to hand including:

-Property deeds

-Mortgage information 

-Lease agreement

-Property tax statements

-Insurance Statements 

-Bank statements evidencing rent collected (if no lease agreement in place)

For landlords who use the services of property management companies, these companies can apply on behalf of the landlord.  In fact, property management companies can deal with the application for relief quicker than landlords as they tend to have all the required information and documentation to hand, saving the landlord time and hassle. 

How this Program Impacts Landlords

The program impacts both landlords and tenants and is meant as a relief package to help and support both parties.  Landlords will be helped out because they will be in a position to recover 80% of arrears, backdated to 1 April 2020.  However, if landlords apply to the program for funds then they do have to forego collection of 20% of the arrears.  

According to Geoffrey Ross, Deputy Director for Federal Assistance at the California Department of Housing and Community Development, the program will ‘help resolve the unfortunate situation where a lot of folks fell behind with their rent’.

An important point for landlords to be aware of is that if they do not apply for rent relief, they could be penalized for later trying to sue their tenant for arrears in an eviction court.  The California Apartment Association also advises that if landlords turn down tenants for rent relief then they could be violating the fair housing discrimination laws in California.  

For landlords who have outsourced their property management services their property managers will be able to assist with the application for relief, so check with them first before submitting an application. 

How this Program Impacts Tenants

Tenants need to know if they are eligible for relief under the rental assistance payment program.  The program is aimed at low-income tenants and their landlords.  In order to work out if you are eligible, tenants need to make under 80% of the local median income.  Median income can vary depending on where you live, tenants can use this sheet to work out their median income. 

Eligible tenants will also have to show that at least one person within the household has lost their job during the pandemic, and due to the loss of income there is a risk of homelessness. Overdue utility or rent bills can be used as evidence of a risk of homelessness.   In order to distribute the aid quickly to those who most need it, and those tenants most at risk of homelessness, the state will initially deal with households who earn below 50% of the area’s median income, or tenants who have been unemployed for 90 days plus. 

The program will offer assistance to all tenants who meet the eligibility criteria, and this also includes all undocumented tenants too. Tenants who apply will not be questioned about the citizenship status.  Before an application is made, tenants should ensure that they have the following documentation to hand:

-Covid Related Financial Hardship Declaration 

-Latest pay information with employers details

-Letter from employer terminating your job

-Evidence of applying for unemployment benefits

-If self-employed, tenants should provide: tax statements and records, income statements, other evidence of loss of income.

What is SB 91?

Disclaimer: This is not legal advice and any decisions made should be made in consultation with a legal expert. 

When the pandemic became widespread in early 2020 and residents of California were issued stay-at-home orders, rent and evictions became an issue that would persist well into 2021. As many tenants, especially the most vulnerable, were losing their sources of income, landlords were put in a tough position of often being unable to collect rent while potentially having to evict tenants in the middle of a pandemic. In response to the concerns about evictions, the state legislature passed an eviction moratorium with AB 3088. With AB 3088 set to expire the state legislature passed SB 91, which expands on AB 3088, and it was then signed into law by Governor Newsom. 

What does SB 91 do?

SB 91 applies to residential properties only. Most of the eviction restrictions from AB 3088 remain the same, and while tenants are still responsible for paying missed rent, landlords are unable to evict tenants for that unpaid rent, or any future unpaid rent caused by the pandemic. During this time, landlords are unable to, or threaten to turn off utilities, stop maintaining units, take away services, lock tenants out, take property out of units, or call immigration services.

Prior to the passage of SB 91, tenants had until January 31st 2021 to pay 25 percent of rent due. Now that date has been changed to June 30th. SB 91 establishes a rental assistance fund with 1.5 billion from the federal stimulus set aside for the program. Tenants still have to pay 25 percent of the rent and the landlord must issue a 15 day notice for non-payment of rent. The landlord must also issue a blank declaration of hardship to the tenant and the tenant then has 15 days, not including the weekends, to return the paperwork. 

The qualifications for rental assistance are anyone making under 80 percent of the median income in the area. Households making 50 percent or less of the median income or those who are unemployed will be given priority. 

What can the funds be used for?

If the landlord agrees to accept back rent, it can only be for 80 percent of what is owed between April 1st 2020  to March 31st 2021. Landlords can’t go after the other 20 percent. For example, if a landlord is owed $1,000 for missed rent, they will agree to accept $800 to settle the debt. If the landlord doesn’t agree, the funds can only be used to pay for 25 percent of the rent missed. If there’s money left over, it can be used for rent moving forward up to 25 percent of the monthly rent due. In order to receive the funds from the rental assistance program, all forms must be submitted by the landlord. 

The landlord is not allowed to use a security deposit or rent payment for rental debt without written approval from the tenant. Late feeds are also not allowed to be tacked on to back rent. Landlords also can’t use suspected rental debt to turn down applicants.

There are several reasons why people encourage others to invest in real estate. An investment property can provide a steady stream of income even when markets are down and is a great way to build generational wealth aside from other ways to invest money.

1. Conventional Financing or Bank Loans
2. Fix-and-Flip Home Rehab Funding
3. Bridging Loans and Financing
4. What financing option should you consider?

Becoming a property owner is great way to generate a stable and passive income stream, but it also takes a certain amount of capital to get started. If you don’t have enough capital to get started you may consider options for various loans that will help you close on your next investment or rental property.

Investment property financing or financing a rental property can take several forms and there can be strict requirements that borrowers need to be capable of meeting. When seeking financing options choosing the right type of loan is vital to the success of your property investment. It’s important to consider the requirements for each type of loan and how those requirements will affect you before you contact a bank or lender.

Financing for investment properties usually comes in the form of shorter term loans that allow you to fund the expenses for converting or renovating a current property or land into apartments, single-family or multi-family units. These are typically provided as a loan, backed against the property or a land estate.

Read the following to find common financing options you may want to explore to finance your first rental property and investment property:

1. Conventional Financing or Bank Loans

Conventional bank loans, home equity loans and hard money loans are the three types of loans you would want to consider for your investment property. These loans will allow you to invest in Buy-To-Let (BTL) or ‘buy to rent’ properties and taking out a mortgage that is secured against that property.

If you’re an existing homeowner you’re probably already familiar with conventional financing options. A conventional mortgage follows the guidelines created by Fannie Mae or Freddie Mac. One thing to keep in mind is that unlike with FHA, VA or USDA loans, these are not subsidized by the federal government.

Typically, a 20% down payment is required with conventional financing. However, don’t alarmed when a bank or lender requires a 30% down payment for an investment property. As a borrower you’ll also need to allow the bank or lender to review your credit score, credit history, existing income, and assets that you own. This will show them that you’re able to afford your existing mortgage on top of the new payments that would be required for the investment property.

It’s also not uncommon for a bank or lender (creditors) to require borrowers (you) to have a few months of cash reserves. This is referred to as mortgage reserves. Some banks or lenders require borrowers to show a few of months while others require borrowers to show a year’s worth of cash reserves from a seasoned asset account. What they’re looking for is your ability to make the PITI (principal, interest, taxes, and insurance) payment amount for the loan.

2. Fix-and-Flip Home Rehab Funding

Owning and renting an investment property has its perks. But what if you don’t wish to become a landlord? As a property investor you can do what’s known as flipping a property. Most investors will purchase a property and rehab the property to get it ready for sale (or rent). A fix-and-flip loan is a form of short-term loan that helps the homeowner to finish repairs and renovate the property so it can be placed back on the market as soon as possible. Fix-and-flip loans are common when conventional financing solutions aren’t available.

Fix-and-flip loans are also referred to as ‘hard money loans’ and these loans ensure that the property backs the debt. While banks and lenders still evaluate things such as credit and income, a higher concern is weighted on the potential profitability of the property so these types of loans are usually easier to apply for than a conventional loan.

Pro of a fix-and-flip loan

• Apply and get loan funding for the loan in days rather than weeks or months.

Con of a fix-and-flip loan

• Depending on the bank or lender you may see very high interest rates up to 18% on the loan.

Depending on the lender you may be able to find some who offer fix-and-flip loans with interest only or longer periods of time and flexible payment schedules. Home Equity Line of Credit (HELOC) Banks and lenders are usually reluctant to offer a HELOC, often referred to as a second mortgage, since it poses a higher risk to the lending institution. Tighter restrictions and standards for HELOCs have been imposed following the financial crisis in 2008.

Many investors will consider a HELOC on their existing primary residence or investment property they already own. Here are a few items you’ll want to have prepared if this is the route you are considering:

• Know your loan-to-value (LTV). This is the appraised value of your property divided by the balance remaining on your loan. Minimum LTV usually ranges from 65-80%.
• Recent credit report and good credit scores to lock in lower interest rates.
• Proof of income through bank statements, pay stubs, W-2s or 1040s.

You’ll want to make sure that you don’t overextend yourself securing a HELOC. The interest rates on HELOCs are usually variable and can increase as well. Lastly, remember to treat HELOCs like a credit card and not to draw more than you can repay in full.

3. Bridging Loans and Financing

If you’re looking to sell your existing investment property and purchase a new investment property then a bridging loan may be what you’re looking for. This short-term loan will allow you to buy the new property without selling your existing property first. There are two main types of bridge loans. These are:

• Closed bridging loans
• Open bridging loans

A closed bridging loan is when you set or agree to a date that your existing property will be sold so you can pay off the principle of the loan.

A open bridging loan is when you have found a new property but haven’t sold or put the existing property on the market.

If you’re considering an open bridge loan you’ll be asked a lot more questions since banks and lenders see this type of loan as more risky. Be prepared to show proof that your existing property is actively listed.

4. What financing option should you consider?

This article briefly covers the tip of the iceberg when it comes to lending and financing your investment property. We encourage you to contact banks and lenders to discuss all of your options to understand the pros and cons of each before making your decision. Investment properties, whether you rent or flip, will expose you to many risk factors that you should fully understand before taking the leap.

If you’re still wondering how much you can afford, our friends over at Credit Donkey talk more about markets, loans and down payments. They also have loan estimate calculator to project loan payments and help you determine how much of a housing payment you can afford.

Self-tours are changing the landscape on how homeowners allow tenants to search for and view new rentals. Through the use of technology, renters can easily schedule on-demand showings and leasing agents are able to get homes rented more quickly than ever before.

1. What is a self-tour?
2. How safe is a self-tour?
3. What are the benefits of a self-tour?

The extensive, time-consuming and often cumbersome process of scheduling a home tour can be exhausting and complicated for all parties involved. Oftentimes it can take anywhere from two to three hours to schedule a showing that will last 15 minutes. In today’s busy world that outdated process doesn’t cut it anymore. Thankfully, with techology and innovation of self-tours or self-showings, we can ease the hassle of both scheduling, showing and renting potential properties.

Progressive and innovative property management and tenant placement companies, like Ziprent, are utilizing technology to facilitate self-tours, so that all parties involved can spend less save time scheduling showings and more time renting or seeing them.

1. What is a self-tour?

A self-tour or a self-showing is when an agent or owner typically leaves a lockbox or uses an electronic keypad to grant access to the home. The tour is scheduled online and the potential tenant has the freedom to view the home during their pre-scheduled time slot. This system completely eliminates the need for any unnecessary back and forth between both parties when trying to coordinate a showing.

Before self-tours were a thing agents or owners had to carve time out from their day to schedule a showing and be on-site with the potential tenant. Now owners, agents and property management companies, like Ziprent, can speed up the entire process and get the rental property off the market faster. This means less time your property sits vacant and income is being generated.

Of course, for the protection of the home, agents and owners do not just simply hand over the code or the keys. Self-tours require special screening and verification for the protection of both the home and the owner.

2. How safe is a self-tour?

At Ziprent, we have a multi-step process that renters must go through to secure their self-tour showing time and receive the entry instructions. First, you must request a visit on the property listing’s page. Current listings can be found here – https://www.ziprent.com/renters.

We require a valid phone number and email address. Additionally, we capture the user’s IP address when the “Request a Visit” is submitted for a property. We then send a text with requires a response in order to receive the email with the lockbox instructions. The lockbox code sent to the interested renter will only work during the hours requested.

If the renter misses their scheduled timeslot, they are either required to rebook or contact us for assistance. This double verification process ensures that the renter has supplied accurate contact information in the case of any issues.

Ziprent also holds a liability policy to protect our owners in the very rare case there are any issues with the showing.

Since 2017 when Ziprent started, we’ve scheduled over 12,000+ showings and not once have we had an issue with any of our self-tours. A testament to both the technology and the process.

3. What are the benefits of a self-tour?

Self-tours helps owners, agents and renters speed of the overall leasing process.

For owners and agents the traditional in-person showings can be time consuming both to schedule and to show the property itself. If you have multiple showings in one day, which is typical, a leasing agent or owner can find themselves showing the house for hours on end without actually leasing the property.

Along with convenience, typically, those who schedule a self-tour are more qualified renters. To be able to view a home via self-tour, the renter must create an account and submit personal information, which is just enough upfront effort that they are probably pretty serious about renting the property.

Because self-tours can be scheduled online, without any direct contact between the parties, self-tours alleviate the need for the lengthy back and forth necessary to find a time that’s convenient for everyone. Instead, the leasing party can be available by phone or email to answer any additional questions after the tenant has viewed the property.

They also help increase visibility and exposure, allowing for multiple showing per day. The efficient process behind self-tours can get a home rented faster than traditional leasing methods.

On top of all of this the owner and agents get up-to-date, real time analytics on property views, tours scheduled and more.

For renters, a self-tour eases the stress of trying to find a place to rent. Oftentimes, potential renters have limited schedules. The ability to plan tours without the restrictions of multiple conflicting schedules makes it convenient, stress-free, and easy to accomplish. Many renters must search for homes before or after work, which is not always convenient for leasing agents who work a 9 to 5. With a self-tour, the property can be viewed after hours or even holidays, relieving the leasing agent and owner from on-call tours.

Once a showing is scheduled the renter can take their time viewing the property at their leisure, utilizing their entire time slot if needed. There is no feeling of being rushed or the obligation to have lengthy conversations about the home prior to moving forward.

The convenience of the self-tour is highly beneficial for all parties involved. Setting up a self-tour is quick, easy and secure. Homeowners and renters alike can feel safe with the process.

Ziprent takes the responsibility of leasing homes seriously. Through the use of exceptional service, efficient processes and innovative technology, we are able to provide superior experiences to both our owners and our renters.

Why flat fee pricing?

Aiming for a fresh new approach to property management, we set out to evaluate every convention within the industry to come up with a service that both landlords and tenants will love. One of those conventions we chose to tackle was pricing. We charge a flat fee for both tenant placement and property management. Or in other words, we don’t charge based on a percentage of rents collected but instead based on number of units we are managing for our customers. So why the change?

Traditional property management costs too much

Over the last decade, we saw rents double or in some instances triple. All while property management companies used percentage based pricing to charge more and more. The fact is that value of time did not double in that time frame. Actually, with new technological advances, property management companies are spending less time doing what they used to do before. Being landlords ourselves, we decided things needed to change.

Enter Ziprent

As technologists, we streamlined the monotonous tasks – enabling us to make customer service our number #1 priority. Ultimately, we priced our service to be more in line with the tasks we were performing.

“How do I know you are going to get me the highest rent?”

As a property management company, our core mission is to maximize profits for our landlords. We do it by utilizing every resource possible to set the proper rent at tenant placement and continue to keep rents at market by renewing leases every year (and at the right time of the year!). With absolute transparency through our proprietary platform, our landlords not only see the result but also the process at a granular level. So you don’t have to rely on percentage based pricing for us to do our job, you can see it. And we’re sure you’ll be impressed.

“What about vacancy? What motivates you to keep my place filled?”

As landlords ourselves, we intimately understand the importance of keeping vacancy to a minimum. Our tenant placement system prioritizes the process of turning a lead into a lessee as quickly as possible. While our system keeps track of leads, showings and applications, our property managers constantly follow up with prospective tenants to encourage them through the process. In case of a turn-over, we work with the outgoing tenants to schedule showings prior to their departure with the goal of minimizing vacant days. Let’s not forget – the best tool to keep a unit occupied is to take care of the tenants.

Final Thoughts

We take pride in being available 24/7/365 to listen and to act diligently. Happy tenants lead to low vacancies and high property monetization! We are not paid unless the unit is occupied. So whether we are finding a new tenant or managing a property, we only charge our fee when the property is occupied and monetized. It really is property management simplified.