Psycho: Norman Bates was evil, but Marion Crane was no saint either.

by jay.raman@ashokalion.com 7, October 2012 15:40

As a child, I had a strong appreciation for Alfred Hitchcock's brand of horror. It was chilling, but subtle. Psycho was a prime example of the brilliance of the gifted Alfred Hitchcock. However, as I was reviewing this movie for our Ashoka Lion Facebook list of horror movies for property managers; I realized that Marion Crane (played by Janet Leigh) was no angel herself. If you recall, Marion had embezzled $40,000 from her employer, and this is why she was hiding at the motel. Unfortunately for Marion, she met her untimely death in one of the most famous murder scenese in cinematic history (the bathroom scene in Psycho is a all time classic moment).

As a property manager, I am obviously scared of knife weilding lunatics; but Marion's crime is equally as scary for a property manager. As a licensed Texas real estate brokerage in both the Houston and Dallas markets, we are bound by ethical and legal obligations of fiduciary duty to our clients.  Marion's crime could devestate a firm like ours if that money stolen was the client's rent money.  Our duty as a property managers includes safekeeping of the client's rent monies collected, insuring appropriate disbursement of funds to vendors, and keeping record of income and expenses. This is a duty that our firm takes very seriously, as we want to limit mistakes and issues from ever arising. It would be nice to claim mistakes would never occur, but this would be foolish, as humans are bound to make mistakes. The key is to reduce those occurences. Our processes and procedures are sometimes unique from other property management firms. For example:

 

  • Rent is not to be mailed to our offices in Houston or Dallas.   Many firms do allow tenants tenants to mail in payment, but our property management policy is to disallow this. Over the years, tenants will claim that the rent is lost in the mail, and they did send it In fact, tenants will go so far as to show receipts from money orders,etc to prove this. These kinds of issues can be dealt with at a eviction hearing, but today, some judges will have sympathy for the clients who provide some kind of documentary proof. The burden is on the landlord to prove that the rent was not paid at that point.
  • Property managers do not pick up rents.   We do not pick up rents from tenants. A few years ago, one of our property managers had her purse stolen after leaving a property. Reprimanding the property manager does not solve any issues, and a landlord may have sympathy to our plight, but they expect their money to be remitted to them. Fortunately, this crime only resulted in the loss of a few hundred dollars of rent, and reimbursing the owner for that loss was not dramatic. However, that lesson taught to my property management team has stuck with us to this day. Our rent collection process does not involve picking up rents either.
  • Double entry accounting of money on two systems: We maintain our records of our bank accounts on Quickbooks for our internal records, but we also maintain our owners and tenant records on a web based system as well. By utilizing the two systems, we are able to identify issues more quickly as we use different staff to handle each system's entries.
  • Match Bills to Work Orders: To pay bills of nonutility nature, our accounting staff is required to upload invoices to an appropriate work order. If they cannot locate the work order or the work order amounts do not match, the back office staff will assign a review to clarify and approve the bill.
  • Person who organizes payments is not person entering bills: Our staff divides the role of uploading bills and paying bills to two different persons. Occassionally, our office will get a bill that we missed or some how the system was not working, and our managing director will sign off on the overriding the control. This separation of duties further insures that bills are paid as appropriate and reduces risk of a employee embezzling the funds.
  • Person who organizes and sign off on payments does not perform the reconcilation of the bank account.  Our managing director approves payments if they do not follow our process procedure and he is the only signer on the account , but another member of our back office team does the reconciliation of the various property management accounts (escrow owner reserve, accounts, escrow deposit accounts, etc). This separation of duty further reduces risk that a fraudulent act could occur.

Marion Crane may have been victim to a insane man living in a creepy house with his deceased mother, but her crimes against her employer scare property management firms like ours almost as much as Norman Bates (played by Anthony Perkins).

 

 

The Omen: Signs of the appocalypse that we see as property managers

by jay.raman@ashokalion.com 6, October 2012 00:30

The original The Omen was a 1976 movie that scared me witless. I remembered that I watched the movie on local network 20 Vision in Houston, and I was way too young to watch something that scary. The movie was just so scary to me, as it involves the story of the AntiChrist's arrival to a family by way of a secret adoption by Robert Thorn (played by Gregory Peck) due to the loss of their own baby that very same night.  The adoption was secret to protect Robert's wife, Katherine (played by Lee Remick), from the emotional trauma of losing her own child. 

This first movie was focused on this child's infancy stage to being a young five year old child.  The signs of evil surround Damien as he grows up. Among the signs that we come to bear witness to are that he had a birth mark under his with the numbers 666, a nanny who commits suicide proclaiming it is for Damien, a evil nanny who replaces the recently deceases nanny and brings with her a Rotweiller (who brings a Rotweiller to a new job?), Damien's own terror when approaching a church or sacred ground, and many other ominous signs.  The protagonist is Damien's adopted father, who is faced with the decision to try and stop his adopted son. Being a property manager in the Houston and Dallas area, we have our own version of omens that fortell of doom.  4 omens are:

1) Owners ignoring preventative methods to maintaining their property- Sometimes owners will ignore issues that should be dealt within a prompt manner for numerous reasons including financial ability to pay, desire to improve profit, belief that the problem is not severe to merit attention, and various other reasons. Like The Omen, these ominous signs rarely go away, and in fact, many times, they just get worse. For example, we always warn owners to consider preventative maintenance of their AC systems, Furnances, etc. We know that the situation may get worse and lead to a owner having a larger issues later on down the way.

2) Owners who only focus on price when comparing our bids to a untested random vendor- Another dangerous omen that we come across are owners who refuse to accept pricing from qualified vendors. Some owners will balk at the idea of spending money for various maintenance service, but in our experience as property managers; we know that the vendors that we are asking for assistance are expeirencd and qualified.  Our property management company will request fair pricing, but we do not necessarily work with vendors on the basis of price alone. Our goal is to find affordable, experienced, responsive vendors so that we can balance quality and price.   Sometimes, owner's balk at prices of services, and they will use vendors that they find on Craigslist and compare them to the prices that our property management companies vendors will charge. We warn owners that using untested vendors on the basis of price can lead to heart ache.

As property managers, we are caught in the middle, as the owner will have issues with quality, price, and responsiveness with these untested vendors; but we are also hearing from the tenants, who are demanding problems get fixed in a timely manner.  This is why we always invite owners to provide us the names of quality, respected vendors that they have experience with who will be open to joining our vendor list when they sign up for property management services from us; but we warn them that just using any random vendor could be a disastorous.

3) The owner who refuses to set the price near the recommended rent that the market indicates- Prior to listing a property for rent, our broker will send a landlord a rental maket analysis (referred to a comparative market analysis or "CMA" for short).  We do this to help set the expectations that a property hopes to achieve in terms of rent rates. Ocassionally, our property managers will come across a owner who has their own value that they feel, and they will ignore our suggestion. We have often learned that this owner will still blame us if their property is not moving off the market.

4) The owner with unrealistic expectations of money being remitted- This owner will not accept our processes and timelines as realistc. We tell these prospective owners that we often will remit rents back in the middle of the month, and they find it unacceptable. They argue that they have to pay the mortgage. However, we tell them that this is not a unrealistic expectation because the tenants could be late, bank holidays and weekends adjust when rents will clear a account, our staff has to reconcile and review the owner's  rental property activity to make sure that we have netted all appropriate expenses prior to sending it out, and a myriad of other reasons.

We explain that a owner should not bank on the fact that the owner's rental draw will to be in prior to most mortgages being due. This kind of owner tends to get mad and frustrated at the onset, so we always politely explain that our processes and services are built on reducing mistakes and insuring that we are carefully accounting for the monies provided to us. If they refuse to see rationale of our systems, we will let the owner know that our firm may not be the right fit for their services.

Though our signs are not the same as world ending signs that the threated in The Omen, but these signs do scare us as property managers.

 

 

Tips to Dealing with Difficult Tenants

by jay.raman@ashokalion.com 25, July 2012 22:56

'A tenant slashes his landlord across the stomach when the latter got into an argument with his tenant while collecting the rent’.

You may have come across such threatening stories about violent situations occuring between tenants and their landlord. Not all tenants behave this way, but obviously, landlords sometimes face aggressive situations or difficult situation with their residents. 

As Investment Property Managers, we often come across landlords in Houston and Dallas facing the problem of evicting difficult tenants. Our eviction team has handled several eviction hearings and has assisted several distressed owners in Houston and Dallas to carry out the eviction process smoothly. The following tips would help you to deal with or avoid hostile tenants:

It goes without saying that proper background checks (criminal, eviction, and credit) and reference checks are highly essential before renting out your property to a new tenant. You should be assured that you are leasing your unit to a responsible and qualified person who will not be a threat to you or his neighbors. It is imperative to conduct proper screening of your prospective tenants before leasing your property to prevent all future calamities.  Often times,  prospective landlords will feel our criteria as their property management company are too difficult and strict, but our goal is to reduce risk that a tenant who may not be a quality individual obtains the keys.  Many owners do not realize that a eviction is a prolonged process that can cause a lot of heart ache and anger, and therefore preventitive measures in screening are preferable to having to deal with evicting a tenant.

Once a tenant has moved in, the steps to follow include:

Inform the tenant:
The first step is to inform your tenant that he/ she is violating the terms and conditions mentioned in the lease. Ideally, they should be informed over the phone and this conversation should be followed by a letter along with the copy of the lease. Don’t forget to highlight the violation in the rental agreement.

Settlement with a tenant: Foreclosures through out America have forced many banks work to remove occupants of a property through settlement (Cash for Keys) programs. This is done to avoid the scenario escalating with prolonged legal issues and reducing property damage. If you believe that the tenant will move out with minimal issue, then you may want to negotiate a relet fee or way to obtain your property with minimal.

Notice For Eviction Process:
If a phone call does not work as a reminder, then you may have to initiate the eviction procedures. For example, if your tenant has not bothered about paying the rent, then provide them a notice to vacate giving him/her appropriate notice to pay the rent or vacate the house (these terms are governed by your lease and state law) by certified mail.

Let the law handle the eviction:  If you feel unsafe during the proceeding, then let the legal process play out and stay away from your property during the eviction process.  Often times, you can file a  “Writ of Possession” after the eviction period,  if you are unsure that the tenant has vacated the premises, and a Sherriff can accompany you to the property to gain access. Do not try to circumvent the process by illegally locking the tenant out, cutting of utilities,etc, as it is both illegal and will only escalate the hostility.

Know your legal obligations: The best way to deal with violent tenants is to know the law of the land and to be aware of the terms mentioned in the lease. While making a rental agreement ensure that it specifies the time when the tenant should pay the rent, additional late fees and activities that are not allowed in the unit.  You should know if working with a tenant for a minimal payment may negate the eviction proceeding.

The following video cites a horrifying incident about a violent tenant who bit off one of the fingers of his landlord after an argument.  Being a landlord does not always have to end in violence or negative situations, but it is something to understand that it can be difficult.

http://www.youtube.com/watch?v=lI-WiotRN5o

Fort Bend Landlord Sued For Failure to Maintain AC

by jay.raman@ashokalion.com 25, April 2011 16:28

A Fort Bend area landlord was named in a lawsuit that alleges his failure to maintain a air conditioning system lead to a disabled man's death in the Third Ward area.  His estate is alleging that the disabled man was hospitalized and eventually died to the heat and humidity in the home due to the broken air conditioning unit. This case brings up several issues that should be addressed:

1) Did his lease require written notice? If so, did the tenant provide the landlord or his property management company this notice?  This is why we tell our Houston and Dallas area tenants if they cannot provide certified mailed letters for the notice that they can provide notice by fax or online through their tenant portal.

2) Did he have a unpaid balance at the time of the written request being submitted? The Texas property codes allows for landlords to not be required to make property repairs if the tenant was not current on their rent.  This is why we provide tenants a portal to check their balances and make their repair request.  

3) Did the owner carry liability insurance coverage? Liability coverage can assist when the owner is found negligent for harm caused by property conditions.  Ashoka Lion recommends that our Houston and Dallas property management clients carry $1,000,000 of coverage, but at minimum max out your coverage (usually in a homeowners policy, $500,000 without any special underwriting required). Additionally, you can obtain a umbrella liability coverage to cover any amounts that are not covered in your primary insurance coverage. If you are not comfortable with determining your needs, you can contact a insurance professional to walk you through this process. Ashoka Lion requires all owners to name the property management company a additional insured on the policy to insure appropriate defense in suits like this.

However, the problem is that this landlord will have to incur cost and time loss due to these kinds of legal actions.   This requires a clear documentation of all actions and communications for homeowner and their property management company. This is why Ashoka Lion  works to transcribes our  notes to histories for our owners, tenants, properties, and vendors. Our goal is to archive all documentation and actions taken to mitigate claims of negligence on behalf of the property management company and the Houston and Dallas property owners that our property management company represents. You cannot prevent someone from suing you, but it is prudent for landlords and their property management companies to take appropriate risk mitigation techniques to reduce impact of charges such as these.

Survive and thrive by "Going Green and Going Mobile".

by jay.raman@ashokalion.com 22, March 2011 14:49

Today, our economy is facing a double whammy in that we have weak economic data and we also see further cutbacks in governmental support.  For Ashoka Lion, this is just another feather in our cap for thriving and improving our firm's property management services during these difficult times. Since 2008, the real estate market has been in a tail spin, and most economic indicators indicate that it will continue to be weak market for forseeable future. Investors cannot get lending to buy investment property, and so it limits the potential pool of real estate investors that are buying in the Houston and Dallas markets.

Our property management firm saw the writing on the wall, and we decided to reposition our value proposition in this real estate market. Instead of cutting back and shriveling up  to wait out these economic times, Ashoka Lion has expanded our property management service offering every year.

Since 2006, here is a list of improvements that we now offer real estate investors and tenants:

  • Online Rental Owner Portals with financial reporting including income statement, balance sheet, and rent roll
  • Online tenant portals with tenant statements
  • Online document storage of leases
  • Online rent payment option for tenants
  • Online rental owner disbursements
  • Electronic calendars accessible by Mobile phones for property managers
  • Property managers telecommute into our property management system
  • Voice Over IP Phones routed to property managers
  • Electronic disbursements of Vendor Payments for services done for properties
  • Tenants can provide us written notice of repairs or move outs via our online portal
  • Property repair Work Orders are emailed to Vendors
  • Digital approval of Estimates and Documentsby Rental Owners
  • Use of Electronic Signature Programs for Leases
  • Tenants can now pay rents over the phone
  • Mobile friendly riders to Text to get information about Listing and Vacant Properties
  • QR Bar Codes on sign riders to get information about Listing and Vacant Properties
  • Vendors were instructed to fax or email over invoice versus mailing us paper invoices
  • Online rent application for our properties that can be found at www.LionRealEstate.com
  • Providing tenants a letter of top energy saving ideas to reduce down electricity usage
  • Our website's "Green Lifestyle" Section 
  • Expanded our property management operations to the Dallas, Texas area
  • And More!

Do you see a pattern in our improvements? Yes, our property management firm focused on being "Green" and mobile.   We decided that we could not build a business in the traditional mode to server our property management clients in the Houston and Dallas markets, and so we tailored our property management business to be built on a mobile platform that reduces down as much waste as we can.  In Houston,  our property management team got rid of our former office space near downtown Houston.  We shifted to mobile platform that agents  and property managers access from home or  on their mobile phones. This saves us in cost related to overhead for rent, storage space,etc. In addition, our property managers do not waste time driving to the office to do their work,  and so they are generally happier with the arrangement. Our business structure allows us to save in several ways that benefit our bottom line, but these improvements have also benefited our company in our goal to be one of the "greenest" management companies in the property management industry. Our tremendous financial savings also translated to environmental benefits including:

  • mileage lost to commuting to office
  • paper consumption printing invoices to store in paper files
  • paper printing for leases
  • mileage spent driving to collect rent

In fact in 2010, Ashoka Lion was selected as one of the top case studies by our digitial contract and document approval vendor (http://bit.ly/fnzaa0 ).  I know that our property management team is not perfect, but we are trying to improve our property management services for our rental property owners by relying on state of the art technology to maximize efficiencies and reduce our carbon footprint.  We could have waited to be a late adopter to technology or try to do business in a more traditional manner, but these difficult economic times requires us to think in new bold ways; if we want to thrive. If the old adage is that "the early bird catches the worm", then isn't it easier to catch the worm if you are mobile and nimble?

 

What is normal wear and tear? 6 techniques to reduce down issues with tenants

by jay.raman@ashokalion.com 15, March 2011 11:28

I came across a article on the AshokaLion Twitter account, and it got me thinking about "wear and tear" clauses in leases. Every lease has a "wear and tear" clause in it, but it always remains a vague concept. I decided to research what other investors and real estate sights came across, and I found most had the vague notion of the wear and tear clause. I did find one article by Rental Housing Online (http://bit.ly/gklzFl) and they had a pretty good list. It definitely was not exhaustive, but either is our addendum that we provide to tenants at their walk through with our property managers upon moving in.  We have tried to provide a list of common types of damages, explainations what we consider to be "normal", and we try to explain to them what potential charges may be upon them moving out (at least some minimums that we have come across). We know this is not a complete list, but it is impossible to have a complete list due to all the circumstances at the property (including condition of the property at the time of  tenant moving in and age of the items).

I know it is impossible, but we do try to explain that "normal" is based on reasonable standards. For example, we state that scuffing a wall and it needing to be repainted is not "normal".  However, it is "normal" to have a rug steam cleaned with a rug doctor machine. However, if I have to get a commercial cleaner to take out damages to a carpet, then this should be considered "excess" of normal wear and tear".  As a kid growing up in the Houston area, my family lived in a home for over 10 years as kids, and when we moved from that home; our family was able to cleaned our carpet  to make it presentable.  It is not a huge leap of faith to think that our care was not extraoridinary, and this is why our property managers in Houston or Dallas do not understand tenant's claims that it is normal to have punch stains in the floor or bleach on the floor. 

Typical things that we would deduct from the security deposit for include:

  1. Scuff Marks on walls requiring us to paint
  2. Nail Holes in Walls
  3. Damages to windows
  4. Broken Knobs on ovens or stoves
  5. Unreported leaks that cause damage to cabinets or floors
  6. Carpets requiring commercial carpet cleaning
  7. Smoking in the house and it sticking to walls and carpet (we request all tenants if they smoke to smoke outside the house).
  8. Pet Urine requires us to get  a professional cleaning
  9. Lost Keys
  10. Unreturned Garage Remotes
  11. Food left in the refridgerator (if mold is in the refridgerator, then we may just replace refridgerator)
  12. Broken door knobs
  13. Missing Smoke Detectors after it was installed
  14. Blinds damaged
  15. Carpet that burn marks or bleach stains (replacing room carpet)

I know that there are horror stories for tenants about items being charged that they would not consider normal wear and tear. To reduce these confrontations between tenants and landlords or tenants and property management companies in the Houston and Dallas area, I would suggest doing the following:

  1. Fill out the Inventory and Condition Form within the requested time and keeping a copy. Many real estate agents and property managers will give you this form to fill out, so I would strongly urge you to do.
  2. Take Pictures and/or Video.  You, your property manager  and/or real estate agent should take pictures and/or video of the property at the time of the move in. I would make sure to have the correct time stamp on videos and pictures, so you can demonstrate what condition the property is at move in.  As you usually are given a few days to finish documenting this form, it is not hard for tenants to document with video and cameras damages.   I would suggest sharing this with landlords and managers as soon as possible to make them aware of these damages that you find subsequent to the move in walk through, if you want to claim it on your inventory and condition form.
  3. Report damages quickly. Landlords can charge tenants for damages that they fail to report on a timely manner that get worse. For example, if you see a leaking pipe under a kitchen report it, as it may lead to damaging the wood in the cabinets.
  4. Know how to shutoff toliets and cut off water at the main water cutoff. If you see water flowing, know how to cutoff the water at the main water cutoff. This will reduce down damages that remain that could have been prevented.
  5. Do not use items that you know are possibly damaged. If your AC is having problem, shut the AC off to prevent further damage because you used it after it was having problem. The same could go for appliance, disposals, and anything else that you fear may not be working. You should report these items and take the appropriate precautions. These kinds of damages could be grounds to deduct part or all of a repair cost for the matter.
  6. Keep up your preventitive maintenance. If your home has a AC unit, then I would suggest changing the filters to avoid damaging the system. Unpaid repair costs in our leases can be deducted from the security deposit.

I know that some of our real estate investors probably have more examples, so if you do not mind sharing on our Facebook page (http://on.fb.me/dQDvrM) that would be great. We will post a discussion under that tab to collect feedback and input regarding example of what is and is not considered "normal wear and tear", and while you are there; please do not hesitate to "Like" our facebook page.

If anyone has dealt with court cases that involve these issues, then feel free to share this as well in our discussion section. We would love to see how any of our Houston, Dallas, Texas, or any courts around the United States for that matter adjudicate these standards.  

Renting To Tenant with Pets Can Be Tricky!

by jay.raman@ashokalion.com 12, March 2011 11:43

Landlords often ask what our pet policy for our property management firm is, and we explain that we have developed our policy to be flexible to allow pet owners to live at properties that we manage. However, we also acknowledge that risks exist when renting to tennat with pets. Many communities are considering breed ban laws, and in fact some states have passed some very strict policies in regards to pet laws (See Maine). In fact on our Facebook page (http://on.fb.me/ibGgSo), our property management team found a article discussing the new law in Maine that now makes landlords at fault in animal attacks regardless of knowledge (this is referred to as strict liability).  While Texas laws regarding landlord negligence for pets at a rental property is not that severe, there is negligence based liability for landlords who rent to pets. What this means is that if the landlord knowingly put a dangerous animal at the property, then they can be found liable if the pet attacks.

What this means is that landlords must weigh the benefits of increasing their potential pool of tenants versus the increased liability. I know some  property management companies do not rent to owners of certain pets, but as our CEO and several members of our property management teams own  pets including a Doberman; we did not want to take that stance with our property management firm. Therefore, we do rent to tenants who have pets, but Ashoka Lion has our own default procedure for pets including:

  1. Enrollment in Pet Damages Program
  2. Renters Insurance is Mandatory with $300,000 of coverage. The policy or insurance agent must acknowledge that the pet liability is included per the policy.
  3. Renters Insurance Policy must name the owner and management company as insured parties
  4. Signed Pet Agreement
  5. Landlord must have $1,000,000 of liability coverage either through their primary home insurance policy or umbrella coverage with our management company named as a insured party.

We believe that this policy addresses the heightened legal risk for renting to tenants with pets in the Houston and Dallas markets, but  it also allows our landlords flexibilty to not turn away good tenants who happen to love animals. Our philosophy is that you can love your animal, but you must realize that it comes with additional responsibility.

 

 

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