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Salt Lake City’s rental market among nation’s best for investors

First Published in the Salt Lake Tribune

Salt Lake City once again ranks among the best U.S. cities for investing in rental properties.

All Property Management, a trade group for those who own and manage apartments and single-family rental homes, says Utah’s capital is the sixth best urban market for rental investments among Western cities.

And it rates as the ninth best market in the nation, the group says in its Rental Ranking Report reflecting the first three months of 2015.

As it did in 2013, when Salt Lake City placed high on its list, Seattle-based All Property Management credits the city’s healthy yearly job growth — which the group puts at 2.75 percent — and historically low vacancy rates for rentals, pegged at 5.2 percent.

Other metrics include property-appreciation rates and the average number of days it takes to lease a vacant rental.

The trade group also says Utah’s relatively low property tax rates and annual homeowners insurance premiums let rental owners keep more of what they earn from their properties than investors in other parts of the country.

The study says Western states in general rank better for returns on rental investing than other regions, accounting for seven of the list’s 10 best U.S. rental markets. Among other Western cities with high returns are Seattle, Portland, San Francisco, San Jose and Denver.

Salt Lake City’s ranking is part of a well-documented surge in rental markets here and across the U.S., driven by demographic trends including a large generation of young, frequently cash-strapped adults choosing for now to rent instead of buy.

With homeownership rates approaching their lowest levels in a generation and rents rising, All Property Management says, “it’s a wonderful time to own rental housing.”

That news won’t surprise investors in Utah’s rapidly expanding stock of apartments as new complexes rise across the Salt Lake Valley and surrounding counties. But if you’re a renter or looking for an apartment, some of the trends might give you pause.

With vacancy rates down, average monthly apartment rents jumped 4.9 percent in Salt Lake County in 2013 and 2014, ending last year at $892 per unit. That’s according to a January 2015 report from Equimark, a Salt Lake City firm that tracks multifamily residential real estate along the Wasatch Front. More recent numbers, circulated by the commercial real estate firm Berkadia, put average rents in the wider metropolitan area at $933 a month as of March.

Tony Semerad

How to Handle Noise Complaints from Neighbors

If you rent out a house in the middle of nowhere, you can rent to the noisiest tenants imaginable. Why? Because no one can hear them.

But if you rent to tenants who will live in close proximity to other people, you hope they’ll respect their neighbors’ right to quiet.

If you rent to noisy tenants, a few things might happen. You might receive a formal complaint from a building manager, a nasty email from the neighborhood HOA, or a nuisance complaint from the city if a neighbor complains to the police. If you don’t do anything about the complaints, you could receive fines until you do something.

So what should you do if you get complaints that your tenants are so loud they’re disruptive?

Determine Whether the Complaint Is Valid

Before you confront your tenant, find out the nature of the noise complaint. Your tenant could very well be causing a disturbance, but it’s just as likely that the complainant isn’t warranted. Tenants are allowed to live their lives, and sometimes that includes making noise.

Your job is to determine whether your tenant is crossing the line by being excessively noisy.

If your jurisdiction places a limit on noise decibel levels, then your tenants should not exceed this level. If your rental property is subject to noise laws and you receive a complaint, ask the department that issued the complaint to come out and measure the noise levels to determine whether there is a valid reason for the complaint.

If you don’t have regulations, you can use some common-sense measures to evaluate whether your tenants are the problem or whether the complaining neighbor is just being fussy.

Here are some examples:

Dinner Parties
Having people over for a get together that ends by 11 p.m. is not complaint-worthy, but regular loud parties that go late into the night are a problem.
Noisy Feet
Tenants walking around their own apartment, no matter what time of day or night, is not complaint-worthy from a downstairs neighbor, but if your tenant is jumping rope or acting out their own WrestleMania session at midnight, that’s valid.
Barking Dogs
A dog that barks occasionally is not complaint-worthy, but a dog that barks incessantly all day or night is.
Loud Arguments
Disagreements between partners are bound to happen, and an occasional argument is not complaint-worthy, but a nightly screaming match is.

If the Noise Complaint Isn’t Valid

Let the complaining party know that you have researched the noise complaint. Tell them what you did to determine whether your tenant is guilty of a noise violation or not. If you found out your tenant didn’t do anything wrong, let the complainant know that you didn’t find any evidence to suggest the complaint was warranted.

If the Noise Complaint Is Valid

If you’ve received multiple complaints from a variety of sources, your tenant is probably being too noisy. You might also wish to witness for yourself whether the complaints are valid by driving by your rental property and seeing for yourself.

You need to address this issue with your tenant immediately. If your tenant is being too noisy and interfering with the neighbors’ peace and quiet, you should tell your tenant to keep the noise at acceptable levels. Explain the problem and what you expect your tenant to do to resolve the problem.

Sometimes the resolution is easy. If a downstairs neighbor complains about noise coming from upstairs, for example, put down area rugs. If your tenant listens and stops the noisy behavior, problem solved. If not, and the complaints continue, you may need to evict.

Have a Clause in Your Lease

You can protect yourself from noise problems by including a noise, or quiet hours, clause in your lease. That way, if your tenant violates the noise clause, you can act based on the lease terms, such as fining them if you receive a valid noise complaint.

Screen Tenants

The best way to ensure you’ll rent to tenants who won’t cause trouble is to screen them first. Run a background check and check references to determine whether potential tenants have a history of complaints against them. I use Cozy tenant screening, and I recommend it.

Bottom Line

If you get complaints about a noisy tenant, you need to do something about it. Don’t rush to judgment by automatically blaming your tenant. But don’t ignore the complaints, either. It’s best to come up with a compromise that everyone can live with.

If you have a question about this topic or need assistance with anything else, contact a TierOne Real Estate Property Manager at 801-486-6200 – we are here to help you with your rental/investment property whether you are a current client or one in the making.

Is your “no pet’s” policy costing your more money than it is saving you?

There are many reasons why landlords choose to not allow pets on their properties. Some people are worried about the damage to the property. Others are worried about the reaction of the neighbors and other tenants. But the most common reason by far is that the landlord used to allow pets and got burned by a tenant that allowed their pet to damage the property.

This is unfortunate because, if properly handled, renting to pets can be a highly profitable tool for a landlord. The key is to minimize and offset risk by doing through background checks of the pets and their humans, by collecting sufficient deposits to offset the risk, and by collecting additional revenue through pet rents and pet fees.

Why bother in the first place? Isn’t it much simpler to just say no pets and not worry about it? Not necessarily. Often having a no pet’s policy is much more complicated and problematic than allowing pets under controlled circumstances.

How a “no pet’s” policy creates more hassles

The first problem with not allowing pets is that it limits your marketing ability. 50% of renters in the United States have a pet. This includes tall tenants, short tenants, rich tenants, poor tenants, and every other sort of tenant. By putting “no pets” in your ad, more than half of the people who are looking for a place to look won’t even consider your place. This means that it will take more than twice as long to rent the place, and it means you will have fewer quality applicants. Instead of saying no pets allowed in your ad, you could put “pet’s negotiable” and then when they come in to the place you can see what kind of offer they are willing to make. And who knows, maybe they will love the place so much that they will decided that the cat can live with grandma for a few years up on the farm while they enjoy your property.

The second problem with a no pet’s policy is that it creates an incentive for a tenant to get around the policy one way or another. Landlords who don’t allow pets are much more likely to have a tenant who hides an unauthorized pet in the house. They are also much more likely to get a falsified request for an assistance animal. And if they are forced under fair housing law to accept an animal they are going to have to come up with animal rules in the lease anyway – and will have to face the potential damage, the problematic issues of dealing with other tenants, and all of the other negatives associated with allowing pets WITHOUT any of the benefits (like additional security and income) that you can get out of pets but not assistance animals.

Evaluating Risk

Don’t be so focused on minimizing your potential losses that you forget to maximize your bottom line profits. If a dog does $500 worth of damage, but you got $1,000 in extra security deposit and $2,500 in extra rent and fees, did you come out ahead? Of course you did – you made $2,000 and still have $500 in additional security.

The key is to evaluate the potential risk and ensure that you are receiving proper security and compensation for that risk. If a tenant came to a landlord and offered a $1 million deposit to allow them to keep a goldfish, who wouldn’t accept that? The security so far outweighs the potential damage that it would be a no brainer. The difficulty comes in adjusting your need for security to the tenant’s ability to pay. That means evaluating your potential costs, setting a minimum requirement for a deposit on top of that and then potentially asking for more as an opening to negotiations.

It is also important to evaluate risk by doing a background check on the animal and its owners. If the owners have poor credit or a poor rental history, then it might be safe to say that such irresponsibility might also indicate they won’t be responsible pet owners that will keep their pet from damaging the property. It’s also a good idea to do some checking up on the animal itself. Get references from previous landlords, require copies of veterinary records and city licensing, and feel free to exclude animals that might not have such a history (or charge an even higher deposit). Also make sure that it is clear to the tenants that you are approving this specific animal, not giving them a license to bring in any animal they want. And remember, you still have the right to restrict or require more security for pets based on breed, size, age, species, or any other factor that you wish.

The principle ways of offsetting risk are by 1) charging an additional deposit, 2) charging a negotiated amount of “pet rent” on top of the regular rent, and 3) by charging a non-refundable pet fee to allow the animal. In addition to this, you should do regular inspections on all of your properties and make sure that the animal’s behavior is not causing damage to the property or problems with the neighbors. By properly using these three tools you are able to not only ensure that the tenant can pay for almost any potential damage, but you can also make a tidy profit in the process.

If you have questions about how to rent to pets, email us at admin@tieronere.com or give us a call at 801-486-6200.

Avoiding Familial Status Discrimination

Many landlords aren’t familiar with their responsibilities when it comes to renting to families with children or don’t even know that families with children enjoy a protected status under federal housing discrimination laws.
The Fair Housing Act protects tenants against discrimination based on seven protected classes, including “familial status.” This means that if you refuse to rent to tenants simply because they have kids or you treat tenants differently because they have children, you may be violating federal law.
Here’s a rundown on exactly whom the FHA’s familial status discrimination ban protects and how it applies to your property.

What Types of Families With Children Does the FHA Protect?
The FHA’s familial status protection is broad. Here’s what you need to know to determine if the ban on familial status discrimination applies to your tenants:
1. The FHA protects families with children even if the children aren’t living with their biological parents. Children may live with a biological parent, stepparent, foster parent, grandparent, or any other adult who has legal custody of them. In addition, if a child is living with someone whom a parent or legal custodian has designated in writing, then such a household is also protected against familial status discrimination.
2. The marital status of adult tenants is irrelevant. As far as familial status protection is concerned under the FHA, it makes no difference if the adult members of the family are married, divorced, single, widowed, or separated. So, for example, a single father with one child is protected just as much as a married couple with three children.
3. Children must be under 18 years old. The FHA doesn’t simply protect people who happen to be living with their children. For familial status protection to apply, the law requires that there be at least one person in a household under 18 years old. So, for example, a couple who’s looking to rent an apartment with their 18-year-old son isn’t protected (even if the son is still a high school student). Similarly, a couple who starts renting an apartment with a child when he’s 17 years old will lose familial status protection on the child’s 18th birthday.
4. Children don’t have to be part of a household yet. Tenants are also protected against familial status discrimination if they’re expecting a child to become part of their household. So, landlords can’t discriminate against tenants because they’re pregnant or in the process of adopting a child.
It is fair to have reasonable limits on the number of people that can live in a rental home. However, when it comes to families with children you have to be reasonable, and the Department of Housing and Urban Development (HUD) has ruled that usually means allowing two people per bedroom, with one additional person in the rest of the unit. So in a two bedroom apartment you should allow a family of up to five people to live there, and in a one bedroom you should allow a family of three. (Again, this applies to families—unrelated individuals can have a different occupancy standard). Recently a large number of apartments nationwide have been taken to court for not using this standard.
This standard is especially important when it comes to a small apartment and tenants who are pregnant or who have a newborn. Refusing to rent to such tenants (or making them move) is the most common violation of this rule, and will always get you in trouble. As far as a judge is concerned the amount of space and the additional wear and tear on a unit caused by a newborn is so negligible that if you were to force them to move to comply with a “two people per bedroom” occupancy standard it would be almost impossible to justify that in court.
Two other common problems with familial status discrimination involve steering and rules. Steering occurs when managers discourage a household with kids from renting upper floor units or in areas they want to have adults (like near the swimming pool). Don’t do this, you’d be asking for a $10,000 fine. When setting rules, you should make sure they don’t have disproportionately negative effects on families. For instance, a rule that the swimming pool has “adult swim hours” when families can’t go is discriminatory. Requiring adult supervision on a playground may also be discriminatory.

NOTE: For health and safety reasons it may be ok to set some rules for things like pools, but consult an attorney before setting any such rules.

If you have any questions about these issues please email admin@TierOneRE.com or call us at 801-486-6200.

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