Making a shrewd, financially prudent real estate investment requires lots of due diligence. So, does renting out apartments or offices and serving as a landlord, whether for a single unit, several, a hundred or thousands! In the past, many landlords didn’t know where to seek help to manage their portfolio.
And that’s the situation Jeff Cronrod found himself facing as a landlord decades ago and why he organized the American Apartment Owners Association (AAOA) in 2005. “I was involved with other landlord support groups, but none had a national focus and I felt we needed it,” he says. “I understood the problems and challenges of being a landlord after acquiring more than 4,000 units through the years. I also knew that a large group would be able to offer more services, information, support, and all could be done online,” he says.
Today, the importance is even greater as the rental market tightens, prices climb, and inventory is further hit by the challenge coming from shared housing options like Airbnb and VRBO, which remove units from the market.
AAOA now represents more than 92,000 members and more than 1,000 continue to sign on monthly with it also having a retention rate of 92 percent. Membership costs range from no charge to $99.99 a year, based on the services requested. Following are five key challenges for which the organization offers assistance:
1. Tenant screening. Finding qualified tenants is tough. But it’s even tougher and costlier to have to evict those who may not pay, get renters to keep their units neat, and avoid causing problems if part of a multifamily community where others’ needs must be considered. AAOA offers information with asking the right questions and suggests the proper channels to go through in order to check someone’s credit worthiness. The key is that landlords want to be in a good partnership with their renters—one that lasts for years. What goes into a thorough screening? What about acquiring information regarding any prior evictions, criminal records, sex offenses, terrorist leanings, fraud, and so on? “You also want to be sure the person is who they say they are!” Cronrod says. Each report is handled separately, and the organization offers five or so different packages with different reports included so landlords can take their pick. Information is returned almost instantaneously.
2. Lease guarantee. Finding the right tenants is a major first hurdle but being sure they will pay is another essential one. For $300 a year, AAOA offers a guarantee valued at $2,500 that will cover expenses for any tenant who can’t come up with some of the funds to move in. “It’s hard for many people starting out to have the funds for security deposits—both on the front and back ends, as well as the first month’s rent. And it can be much higher in cities like New York and Los Angeles,” Cronrod says. If the renter can come up with that money but later runs into a problem or needs to be evicted, the $2,500 can be used to reimburse the landlord. The good news is that fee is much less than what an eviction could be, which Cronrod says can easily run $6,000 but can also take up to 90 days.
3. Educational information. The organization has pulled together and posts online resources for the many topics a landlord should become an “expert” about, from how to collect from a delinquent tenant to how to do a tax-free exchange, get rid of bed bugs effectively, and tap into other experts’ knowledge (including the learnfromgreen site). The AAOA’s site’s average webinar takes between 35 and 45 minutes to watch, and may be free or cost less than $25. One definite benefit is that they can be watched at any time.
4. Myriad forms. Rather than reinvent the wheel, AAOA has pulled together more than 100 worth printing out. These include one for a pet deposit to cover any potential problems from Rover or Fluffy and all legal forms that can be downloaded to avoid attorney fees.
5. Weekly newsletters. Every Tuesday and Friday AAOA sends out a newsletter to keep landlords conversant with different issues, including new laws in different cities and nationally. “In New York City, a landlord now must keep the tenants’ deposits in an interest-bearing account that go to the tenants when they move out if all is OK,” Cronrod explains.
In the case of owning and renting, being well prepared and safe is always better than being sorry.