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How to Advertise Your Rental Property

Nolo

By Attorney Janet Portman | Jan 26, 2007 | 1006 words, 0 images

 

You can advertise your rental property in many different ways. The kind of advertising that will work best depends on a number of factors, including the characteristics of the particular property, its location, your budget, and whether you are in a hurry to rent. Many landlords and property managers choose a combination of the following advertising methods to get the best results.

"For Rent" Signs

The most common method of advertising involves putting a "For Rent" sign in front of the building or in one of the windows. This method works best when there's a lot of foot and car traffic past the building, and the building itself is at least as attractive as the rental unit. Why is this second factor important? If you've got a diamond in the rough, which neither the neighborhood or the exterior of the building does justice, you're better off using another method that won't mislead (or discourage) interested renters.

Newspaper Ads

Newspaper ads are as traditional as for rent signs, and now they're usually available online if the newspaper has an online version.

Many tenants will begin their search with the classified ads, and those who are from out of town will log on to the local paper from afar. Ads work best in papers that have many residential listings.

Try to target your ads to produce the pool of prospective tenants you want. For example, if you rent primarily to college students, your best bet is the campus newspaper or housing office. To be on the safe side, list also in a newspaper of general circulation -- you don't want to inadvertently invite a fair housing claim by, for example, advertising in a foreign-language newspaper but no other.

Neighborhood Flyers

If your neighborhood has public bulletin boards at grocery stores, laundromats or coffeehouses, consider posting an ad on one of these. Include tear-off strips with your phone number. Consider whether your rental will appeal to the people visiting these establishments -- if you've got a pricey property, you may not find many tenants doing their washing at the local laundromat -- though you might find takers at the high-end gym down the street.

Online Listings

Online rental services have sprouted like weeds in recent years. Some are national in scope; others are regional. To find one in your area, use your search engine to look for residential renting. Don't overlook craigslist, an extremely popular and free service that has all but usurped the other services in many parts of the country.

Homefinders' or Apartment-Finding Services

In some areas, apartment-finding services are very popular (though in large cities, they're getting a lot of competition from craigslist). Landlords pay to list their properties, though sometimes it's the tenants who pay the fee when the unit is rented. If this system is popular in your area, you may want to consider it, especially if other approaches have not yielded results.

Word of Mouth

Many smaller landlords find that instead of advertising widely and having to screen many potential tenants in an effort to sort the good from the bad, it makes better sense to market their rentals through word-of-mouth -- telling friends, colleagues, neighbors, and current tenants. After all, people who already live in your property will want decent neighbors. For example, if you know a vacancy is coming up, you might visit or send a note to all tenants whom you or your manager think well of. Ask them to tell friends or relatives about the available apartment.

University or Corporate Housing Offices

If your rental is near a large college or university, consider posting the rental through their housing offices. Same goes for big employers nearby with employee assistance programs. Most college and corporate housing offices will list your rental for little or no fee. Corporate housing is often a very good bet for landlords -- you know the tenant has a job, and you also know that the tenant has passed many of the same screening tests (in order to land the job) that you'll use, too. For example, chances are the employer spoke with former employers. You can take advantage of these "pre-screened" applicants.

Next we'll look at some advertising methods that work for higher end properties or multiple units:

Real Estate Offices

Many real estate offices handle rentals -- for a fee, of course. The rental business supplements the agents' income, and it gives them a bead on potential homebuyers (the agents hope that your tenant will become their client). You'll pay about 10% of the rent, or one month's rent, for the agent to advertise, show, and sometimes choose your tenant.

Property Management Companies

Property management companies will handle advertising, showing, and choosing the tenant and will want to remain in the picture as the entity that collects the rent and interacts with residents during the tenancy (handling repairs, for example). Again, you'll pay for this service as you would if you use a real estate agent. If you want to off-load continuing responsibilities for tenant management, you may want to choose this alternative.

Print Rental Magazines

Many national and print magazines cater directly to the residential landlord. You've undoubtedly seen them in racks next to newspapers on the street. Listing in a national magazine usually makes most sense for large landlords with multiple properties. If you find a local magazine that has lots of listings for rentals like yours, you may want to use it.

Next Steps

After you advertise your space, you'll need to create a rental application and carefully select a tenant.

For help evaluating prospective tenants, see Every Landlord's Guide to Finding Great Tenants, by attorney Janet Portman (Nolo). This book includes 40 forms on CD-ROM, including a rental application; a legal residency form; and tenant consent forms for contacting references, performing a credit check, and performing a criminal and background check.

Copyright © 2004-2007 Nolo

Creative Rent Collections
Posted by: admin, in Management

Which came first the chicken or the egg?  Neither.  The rent came first; it always comes first.  That should be the mantra of every landlord who wants to succeed because being able to collect rent regularly when due is the heart and soul of rental property.  It is how it is valued by the market, and it is what enables a highly leveraged estate builder to get tenants to pay for his assets. Think of your estate as a monthly balance sheet.  Wealth is measured by the extent that assets exceed liabilities.  When you’re up to your assets in liabilities, you’re broke.  Every month your assets are reduced by the amounts paid out and increased by the amounts paid in.  Your liabilities are reduced by payments you make and increased by compounding interest when payments are not made.  It should be pretty clear that failure to collect rents over time could wipe out all your assets.  That’s even true with free and clear properties because you’ll still have to pay for maintenance, management, taxes, insurance and possibly HOA fees. Let’s start with the premise that your tenants want to pay the rent, but that somehow is just doesn’t command the priority of other bills they must pay.  When you are less insistent upon regular payments than the electric company, telephone company, cable TV company, credit card company, or car finance company, you’re going to come in last.  Hence, you’ve got to emphasize the critical importance of rent payments from the very first meeting with a prospective tenant, and you’ve got to reinforce this every month by being scrupulous to deliver a “pay or quit” notice the same day as the delinquent rents should have come in.

If you’re going to lay down rent collection rules, you’ve got to take them seriously.  In my case, they got a $100 rebate for on-time rents and for taking care of all repairs up to $100 each month.  They lost this rebate and had to pay a $25 rent fee if they didn’t pay on time.  I had a special paragraph in my rental contract that they had to sign which said that they would accept all responsibility for mail that was delivered late, or checks that bounced, and they were encouraged to pay by money order.  They were also informed that no checks would be accepted as rent if any check ever bounced, or if rents were late. 

If I expected tenants to pay on time, I had to make it easy for them to pay, so I rented a private mail box from a private mail box-rental company.  It also sold money orders, made keys, and passed out my rental credit application for 10% of the $30 fee I charged for each person over 18; so doing business with me was very good for them.  They would place the rent checks into my box, and I would have them picked up and deposited in the bank by my maintenance man each month.

He was motivated to do this because I made a deal with him to give him the $25 late rent charge if he could collect the rents in cash or money order before I collected them or they were paid in voluntarily. When I had over 100 rentals, every month a few would not be paid by 5 PM the last working day of the month, I kept “pay or quit” notices (also called 3-day and 5-day notices) in my car, and I could start out immediately to deliver them to the tenants.

Even if they were just a few moments late they had to pay a $25 late fee and they also lost the $100 rebate that I mentioned in my last blog.  So, as I would tell my tenants at the pre-rental interview, even if they had to leave work early and lose an hour’s pay, it could cost them $125 just to be tied up in traffic a few moments.  This little talk set up the first unconventional rent collection ploy.

I explained that the only way they could be absolutely certain of not being late was to pay early.  This could be done in a number of ways: 1. They could sign 12 checks dated the 25th day of each month. I’d send them a reminder that I was going to deposit their checks on the 15th of each month along with a reminder that they could lose $125 if the check bounced for any reason.  This worked quite well with rentals houses that were distant from the central rent collection location.

With houses spread over a 20 mile area that was beginning to experience severe traffic problems, coming to the central collection point on a Friday was difficult at best for some of my tenants, so I advised them to make direct deposits into a special bank account that I set up with one of the major banks that had branches throughout the area.  If they set up their account in the same bank, their checks would clear immediately.  All I had to do was to check with the bank and see if their deposit had been made.  To be able to identify their deposit, I added or subtracted a penny or two on their rent payment, so I could spot those who had paid and not paid on time.

I took this to extremes when I rented my summer home 2500 miles away.  My tenant would make his deposit, then get the bank to FAX me his deposit slip which showed the amount deposited and the date and time of deposit.  As I told him, so long as I got the FAX prior to 5 PM Eastern time on the last working day of the month, he had paid on time. I kept this arrangement with him and the bank for five years.

With all these rents coming in on time, the branch manager at the small branch where I kept my account took it upon himself to get to know me.  During one of our lunches we worked out a new collection wrinkle: He agreed to lend my tenants a whole year’s rent to be paid to me.  Unknown to the tenant, I pledged my rents to secure their loan, but they saw it as their obligation to the bank, and a good way to build a solid credit rating with it. For some reason, tenants always seem to make their payments ahead of the rent, so this was a natural fit.  We kept this arrangement until the bank was merged and my pal was transferred.

Here’s how it worked.  The tenant applicant was given an opportunity to borrow the entire year’s rent from the bank and to make the bank monthly payments.  As I pointed to them, the bank charged a lot less than I did if they were late.  I didn’t see it as running much of a risk.  It rarely happened, but when the bank informed me that the rent had not been paid, I followed the same procedure as with a regular tenant to collect the bank’s payment, but, since I had already been paid my rent, I didn’t charge a late fee and they kept their $100 rebate.

People are accustomed to paying interest, and the interest wasn’t much of a deterrent when compared to being evicted.  If a tenant skipped out or was evicted for cause, I was only too happy to pay the bank back the money it had already paid me and the bank didn’t pursue the tenant.  On the other hand, I had all the years rent in my hands earning interest for me.  At one point, the interest alone amounted to as much as another free and clear house would have earned.

David Tilney, who teaches the best single family house seminar available has reduced rent collections to a few key strokes on his computer.  His tenants authorize him to remove the rents from their bank accounts when due, so he uses his computer to remove the rents and send them immediately to an interest bearing account without any delay in getting payments credited to his account.

From time to time David makes presentations in our seminars.  May 2007 is the only time scheduled in the foreseeable future.  You can contact him at (719) 492-7462 to learn more about his management techniques.

Some of my tenants held seasonal jobs that kept them cash-strapped during slow downs.  With them I let them pay extra during the high season, and pay less when cash was tight.  I only did this at a point in the year at which I got all my annual rents in before the slow season started.

I’ve always been willing to accept property in lieu of rents so long as the property was worth a lot more than the rent payment.  For example, I accepted an elderly Harley motorcycle for one month’s rent that I was able to sell at discount for three month’s rent.  The extra income was to compensate me for all my trouble.  I’ve also picked up appliances, riding lawn mowers, and cars.  One guy offered me a horse, but as I explained to him, I don’t mind rolling collateral, but don’t like to own things that have to eat, and could die.

Is there any reason why you wouldn’t begin to be a smart manager who makes a lot of money.  Is there any reason you couldn’t do this where you live?

http://www.jackmillersblog.com/archives/creative-rent-collections-continued-2

Disabled Renters' Housing Rights

Nolo

Jun 15, 2006 | 1005 words, 0 images

 

Disabled people have significant protections when they rent living space. First, when you are seeking a rental, landlords are not allowed to ask whether you have a disability or illness, or ask to see your medical records. After moving in, your landlord may have to provide you with accommodations, at the landlord's expense, and your landlord may have to allow you to make reasonable modifications to your living unit at your own expense.

Who Is Considered Disabled?

The federal Fair Housing Act and Fair Housing Amendments Act (42 U.S. Code §§ 3601-3619, 3631) prohibit discrimination against people who:

• have a physical or mental disability that substantially limits one or more major life activities -- including, but not limited to:
  • mobility impairments
  • hearing impairments
  • visual impairments
  • chronic alcoholism (if it is being addressed through a recovery program)
  • mental illness
  • HIV, AIDS, and AIDS-Related Complex, or
  • mental retardation
• have a history of such a disability, or
• are regarded by others as though they have such a disability.

Discriminatory Questions Not Allowed

Landlords are not allowed to question applicants about a disability or illness, or ask to see medical records. Even if it is obvious that you are disabled -- for example, you use a wheelchair or wear a hearing aid -- it is nevertheless illegal to inquire how severely you are disabled.

The policy behind this rule is simple: No matter how well-intentioned, the landlord cannot make decisions about where and how you will live on the property that he would not make were you not disabled. For example, if there are two units for rent -- one on the ground floor and one three stories up -- the landlord must show both units to an applicant who uses a wheelchair, however reasonable he thinks it would be for the person to consider only the ground floor unit.

Mental or Emotional Impairments

If you had, or have mental or emotional impairments that make you disabled, or if you appear to have them, you must be evaluated by the landlord on the basis of your financial stability and history as a tenant, not on the basis of your mental health. A landlord may reject you only if he can point to specific instances of past behavior that would make you dangerous to others (such as information from a previous landlord that you repeatedly threatened or assaulted other residents). If you cannot meet the good-tenant criteria that the landlord applies to all applicants (such as a minimum rent-to-income ratio), you may be rejected on that basis, though landlords must consider a proffered cosigner if you are otherwise qualified for the rental but for your income.

Disabled Tenants' Right to Accommodations by the Landlord

Landlords must accommodate the needs of disabled tenants, within reason, at the landlord's own expense (42 U.S.C. § 3604(f)(3)(B)). As a disabled tenant, you may expect your landlord to reasonably adjust rules, procedures, or services in order to give you an equal opportunity to use and enjoy your dwelling unit or a common space. Accommodations can include such things as parking: If the landlord provides parking in the first place, providing a close-in, spacious parking space would be an accommodation for a tenant who uses a wheelchair.

 

Disabled Tenants' Right to Make Modifications

Landlords must allow disabled tenants to make reasonable modifications to their living unit or common areas at their expense, if needed for the person to comfortably and safely live in the unit. (42 U.S.C. § 3604(f)(3)(A).) You have the right to modify your living space to the extent necessary to make the space safe and comfortable, as long as the modifications will not make the unit unacceptable to the next tenant, or if you agree and are financially able to undo the modification when you leave.

Examples of modifications undertaken by a disabled tenant include:

• lowering countertops for a tenant who uses a wheelchair
• installing special faucets or door handles for persons with limited hand use
• modifying kitchen appliances to accommodate a blind tenant, and
• installing a ramp to allow wheelchair access to a raised living room.

These modifications must be reasonable and made with prior approval. A landlord is entitled to ask for a description of the proposed modifications, proof that they will be done in a workman-like manner, and evidence that you are obtaining any necessary building permits. In addition, if you propose to modify the unit in a way that will require restoration when you leave (such as the re-positioning of lowered kitchen counters), the landlord may require you to pay into an interest-bearing escrow account the amount estimated for the restoration. (The interest will belong to you.)

Proof of Need for Accommodation or Modification

Landlords are entitled to ask for proof that the accommodation or modification you have requested will address your needs. For some disabilities -- for example, installing a ramp to accommodate a wheelchair -- the solutions are obvious. But other disabilities, especially mental ones, are not obvious, and their accommodation isn't either -- for example, removing doors to accommodate a person who is fearful of closed spaces. Without some proof, your landlord has no way of knowing whether your request is legitimate or a ruse to obtain special treatment.

If you want a specific accommodation or modification and your disability is not obvious (or if you anticipate an argument with your landlord regarding the necessity of what you have proposed), have your proof ready before you make your request. Ask your physician or therapist for a letter attesting that you need what are asking for and that it will meet your needs. To protect your privacy, carefully explain to the physician or other writer that he need not explain the disability; he need only certify that the changes you would like are appropriate to your situation.

Copyright © 2004-2007 Nolo

Fill Vacancies

Fill Vacancies

As soon as you know there will be a vacancy, you have to start advertising to fill it. If you are checking with your tenants three months before their lease expires, you may have 90 days to find a new tenant. Some landlords generate lead lists and even waiting lists by having permanent signs up that say “Now Leasing.” This is one option. But if you don’t like the idea of a permanent sign or don’t want to deal with inquiries when you have nothing available, I recommend you start actively marketing up to three months before the anticipated move-in date. Start with free advertising methods and progress toward methods that cost money as you need to. One of the common mistakes landlords make is to spend more than necessary on advertising to fill apartments. As long as you have planned ahead and have the time, you can easily start with free or inexpensive methods. Then, as the turnover time draws nearer, you can step up the advertising and start paying for ads. You always need to keep an eye on the balance between time and money while maximizing your cash flow.

“Start actively marketing up to three months before the move-in date”
Contact your apartment association and ask what advertising methods have proven to be the most effective for your market. Let them know what part of town you’re in and the demographics of your typical tenant. Your association will also be able to tell you about any partnerships they have with advertising venues and any discounts you’re entitled to as a member of the association.

Use the following marketing methods to fill your upcoming vacancy:

• When your tenant informs you they are moving out, ask if they have any friends that would want the apartment.  Ask for names and phone numbers you can call or give the tenant some of your business cards for them to pass along.  If they have been happy with the apartment and think you have been a good landlord, they won’t hesitate to mention their apartment to people they know who are looking.  They may even invite these people over to take a look, saving you from having to show it yourself.

“Ask your tenants if they have any friends that would want the apartment”
• Put a sign in the yard immediately.  You’ll want to shop around for a sturdy, durable sign.  Look for one that will anchor itself into the ground and will withstand wind, rain, and someone bumping into it.  You could make a frame out of wood to copy some of the hangman-type signs the Realtors use.  You could order the exact signs the Realtors use if you want to invest a little money.  You can easily find suitable signs at Home Depot and Lowe’s as well.  Look in the aisle with the mailboxes, house numbers, and garage sale signs.  You will find some red and white plastic signs mounted inside a metal frame with an empty space for you to put your phone number into.  I advocate using this type of sign, at least at first, until proven that you need to spend more on something fancier.  Buy the adhesive black numbers on the white reflective material to use for your phone number.  These can be read much easier than handwriting and even show up well in the dark.

You will save yourself time and target your market better if you add some information to your sign.  If you leave it as-is with just “For Rent” and your phone number, either you will have people calling looking for types of units you don’t have, or people will fail to call because of the uncertainty factor.   
“Put a ‘For Rent’ sign in the yard immediate-ly”

Hang an informational sign under the “For Rent” sign to indicate the size of the apartment (number of bedrooms), the rent, and the month it is available.  Again, you could have these professionally made or you could go with the do-it-yourself version.  I recommend printing something very simple on a laser printer with a very large font. Print two copies and put them back to back inside a clear page protector.  Tape up the side so water cannot get inside, and hang it from your sign using cable ties.  An example of this informational sign may be found in our Forms Package.  Alternatively, you can use an information tube but remember people have to stop the car and get out and many will not do this. 

If you have room for multiple signs, or if your building is on a corner, be sure to put a sign on both streets.  Face the sign perpendicular to the street, not parallel, so people driving by will see it easily.  You may put additional signs in the windows if there is good visibility for passers-by and if you have a porch, door, or a common area where it can go.  If you have multiple buildings, you may even put a sign in the yard of one of your other buildings in order to increase visibility and the number of inquiries.  We have found that many people who call are calling on so many apartments, they completely forget where they saw the sign.  There is no harm done if you advertise in a place other than where the vacancy actually is.  Be sure you check on your signs periodically to make sure they are still there.  We have rented the majority of our vacancies using signs in the yard and nothing else.   
“Hang an information sign under the ‘For Rent’ sign”

• Make sure the tenants in all of your buildings know you have an apartment available.  They will refer their friends to you because they want to live close to them and because they know you are a good landlord.  You can either mention this to tenants when you speak, send them each a letter, slip a note under their door, or post a flyer in the common areas of their building.  Incidentally, one of the nice things you can do for your tenants is to provide a bulletin board in a common area.  You can post announcements for them there, and they can post what they want to as well.  Tenants often have items to sell or are looking for roommates.
“Put a sign in the yard of one of your other buildings”

• Hang flyers in nearby laundromats, internet cafes, coffee shops, book stores, libraries, grocery stores, and bulletin boards in public places.  These flyers can have a photo and a good amount of detail.  You can type sales copy, highlighting the features and benefits of your unit, as well as the factual details about its size and when it’s available.  You can also note here if you allow pets and smoking. You may want to tack up a few of your business cards with the flyer.  You can also add tear-off strips with your phone number at the bottom of your page to make it easy for your prospects.   

“Hang flyers in nearby public places”
If your unit is located near a large employer, such as a hospital, university, factory, etc. consider this possibility as well.  There may be an internal newsletter you can advertise in, a company intranet, or bulletin boards you can post on.  If you know anyone who works there, they may be able to advertise on your behalf.

• After a period of time and as the vacancy date draws nearer, offer a referral incentive to your existing tenants.  Send a letter in the mail or post an announcement offering $50 if they help you place a tenant.  When offering the referral, be specific in the apartment you are seeking a referral for, and the date that the apartment needs to be rented by.  Include a description of the apartment and your sales copy so they are equipped to talk about it to their friends.  Because referrals cost money, you offer them a little later in your marketing campaign.  Prior to offering the $50, you have already asked your tenants to send their friends to you for the sake of them wanting a friend to live close by and because they know you are a good landlord.  If you are successful in filling your unit this way, write your tenant a check and deduct it on your taxes as an expense.  Do not have your tenant pay you a reduction in rent.  This keeps the transaction clean and everyone is clear on what was done.
“Offer a referral incentive to your existing tenants”

• Place an ad with any apartment listing services.  Some of them are website-driven and some produce a hardcopy listing that is sold to people looking for an apartment.  The rates on these listings tend to be very reasonable.  The customers of these listing services are often students or out of town people who will be moving to the area.  You will want to evaluate how many people see this listing, how they get access to it, and how current the information is.  Find out how and where the publication is advertised.  Also, find out the target market for the listing to see if it matches the typical profile of your tenants.

“Place an ad with any apartment listing services”
• If you intend to have any students in your building, on-campus advertising can be effective.  Check with college students, call the admissions office, or go to the campus and find out what advertising opportunities are available.  Most campuses have a printed newspaper.  You can advertise directly in the classified section, but also look for ads for apartment finder services or apartment listings.  Some of these may be free to you.  Also find out where the students hang out to study.  There are probably bulletin boards and kiosks all over campus.  Some good places to check are cafeterias, dorm buildings, study areas, the workout facility, and the library.  You are likely to find multiple ideas for marketing specifically to students, since moving is a regular part of the college lifestyle.  You could easily hire a student to scope out the opportunities for you and hang flyers wherever appropriate.

• Check the stands near the door at the grocery store for papers that are strictly apartment listings.  You will need to pay to place an ad but the publication is free to anyone who wants to read it.  These newspapers often have a supporting website with listings that are always kept current.
“Find out where the students hang out to study”

• The major newspaper in your city is definitely an option as well, but will be the most expensive one.  Call the classifieds department and find out about any special rates.  You may get a special rate because you’re a member of your apartment association.  They may offer a special rate if you commit to running a certain number of ads per year.  It may cost over $100 for an ad and this is why it is not recommended as a first resort.  Make sure the wording of your ad is very catchy and indicate the location of your building.  You have a lot of competition in the classifieds, so you want to make sure your ad is noticed.  If you are within 30 days of your vacancy date, and you don’t have any solid prospects, it’s time to place this ad in conjunction with the other methods above.  You will need to gauge the number of calls you have been getting and the likelihood that you will rent the apartment using your existing free/cheap methods.  Remember, at this point, spending $100 or more on an ad is better than losing a whole month’s rent.
“The major newspaper in your area is the most expensive option” 

 

“Spending $100 or more on an ad is better than losing a whole month’s rent”

Tenant Screening

Tenant Screening - Find and Keep the Best

    October 18th, 2006            

One of the biggest concerns new or prospective landlords have about purchasing investment property is about finding paying, responsible tenants.  Knock on wood, in my more than 5 years as a landlord, I have been able to find good tenants and have never faced an eviction.  Maybe I’ve been lucky but I think avoiding eviction is all in screening tenants and keeping the tenants you have satisfied.  Here are some things I do:

 

   

Transferring Risk to Residents

Requiring renter’s insurance as a condition of residency can reduce owners’ out-of-pocket costs for resident-caused damages by nearly 80 percent.

 

By Dirk Wakeham

 

Accidents happen; it’s a fact of life. Every day, residents inadvertently expose property owners and other residents in the community to a variety of risks. Some are life threatening—such as kitchen fires—and others are simple mistakes, such as accidentally overflowing a bathtub.

 

Both types of situations are costly, affect the property’s profitability, increase insurance premiums and can cause rifts between residents and owners. However, by transferring risk to the resident, owners can hold residents accountable for the damage residents cause and significantly improve owners’ bottom lines.

 

“Apartment owners are susceptible to an enormous degree of risk from resident-caused damage,” said Grant Berkey, Vice President, Capstone Real Estate Services Inc., an Austin, Texas-based fee management firm responsible for more than 50,000 units. “As property deductibles and premiums escalate, we are encouraging owners to protect themselves by transferring risk back to the resident. It can ultimately protect the property and its profitability when an accident occurs,” he said.

 

NAA Lease Adds Insurance Clause

In March 2006, the National Apartment Association (NAA) Board of Directors unanimously voted to revise language in the insurance clause within the NAA Lease. Previously, the lease language urged residents to have insurance, but didn’t require it as a condition of residency. Even though the resident posed a risk to the owner, the decision to obtain insurance was at the resident’s discretion.

 

Increased insurance premiums and a recent surge of costly natural disasters were two reasons owners elevated the need to reduce their exposure to risk. Recognizing the value of risk management, NAA also sought ways to better protect its members. As a result, the organization revised the NAA Lease and gave owners the option of requiring renter’s liability insurance as a condition of residency.

 

The updated lease now denotes that property owners do not maintain insurance to cover a resident’s personal belongings, damage to the property or personal injury. Residents are still encouraged to retain insurance coverage to protect against liability claims and damages because of fire, smoke, rain, flood, water and pipe leaks. The changes effectively dispelled the myth that “my landlord covers my belongings.”

 

To further protect owners, the revision also provides owners with the opportunity to require insurance as a condition of residency. By doing so, residents agree that damage they cause will be covered by their own insurance policies. For those owners who do not require mandatory insurance, an addendum to the lease clearly states that by opting not to have insurance, the resident acknowledges that he or she “may be responsible to others for the full cost of any injury, loss or damage caused by your actions or the actions of your occupants or guests.” Although it clearly states that residents are responsible, opting out of mandatory insurance provides little recourse for owners to collect on damages.

 

Damage Control

Full participation insurance at a community effectively transfers the risk from the property owner to the resident’s renter’s insurance provider and holds the resident accountable for any damage he or she causes to the unit or the property.

 

“Mandatory renter’s insurance is the pinnacle in risk management strategies, and the industry is trending in that direction,” Berkey said. “A resident at one of our properties recently started a grease fire in the kitchen, damaging the unit, as well as both adjacent units. The damage totaled more than $38,000 in repairs. Fortunately, the resident was insured and we were able to file our claim through their renter’s insurance policy.”

 

The claim was processed and the insurance provider paid the owner for the damages. In this scenario, neither the property’s operating budget nor profitability were affected by the fire. If the resident weren’t insured, the total value of the damages would have fallen to the property owner. Only after the deductible was met would the owner’s insurance provider cover the remaining costs associated with the damage.

 

Survey Says: 25 Percent Require It

New data support the fact that implementing a renter’s insurance program greatly reduces expenses. LeasingDesk Insurance Services recently commissioned a survey of apartment owners, representing more than 800,000 units, to determine owner’s use and perceptions of renter’s insurance. The study, which was conducted by SatisFacts Research, determined that requiring renter’s insurance as a condition of residency reduces the owner’s out-of-pocket costs for resident-caused damages by nearly 80 percent. Ironically, the study found that more than 55 percent of owners acknowledged that they track expenditures related to resident-caused damages that fall below the property’s insurance deductible; however, only 25 percent currently require mandatory insurance coverage. Even when owners acknowledged an increase in insurance premiums from 2004 to 2005, few had a proactive risk management solution in place to limit the property’s liability.

 

Implementing Full Participation

It is important to note that an owner cannot actually sell a renter’s insurance policy to residents. An insurance license is required to “sell” an insurance policy, so owners typically work with reputable insurance providers that specialize in the apartment market. Often an owner will enter into an agreement with a renter’s insurance provider and implement a policy for each resident who is signing a lease to move in. With a full participation program, residents simply elect to accept the policy and are instantly enrolled in accordance to the arrangement that has been established on behalf of the community.

 

The study participants also reported that implementing a risk management program was easy. A majority of owners from the survey (82 percent) who offered and required residents to have a renter’s insurance policy—and then enforced it - said they would “absolutely” recommend this type of program.

 

Owners who don’t protect their communities through renter’s insurance solutions are leaving themselves and their assets exposed to a higher degree of risk. Recognizing the impact of risk exposure, NAA has created opportunities for owners to implement better risk management solutions, such as mandatory insurance, through its revised lease. Industry data underscore the fact that owners who require mandatory renter’s insurance recognize enormous savings once risk is transferred back to residents.

 

“Accidents do happen - it’s inevitable,” Berkey said. “The good news is that risk transfer solutions have a positive impact for residents, owners and the properties when something does go wrong.”

 

Dirk Wakeham is President and CEO of LeasingDesk Insurance Services. He

can be reached at 888/484-7132 or sales@leasingdesk.com.

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