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Real Estate Negotiating Tactics

System - Tuesday, January 31, 2017
Real estate investors tend to settle into a set style during the negotiation process, and most of the time it may work well. It always pays to keep these major ‘classes’ of negotiation tactic in your back pocket, however:

Standard Practice Tactic
Getting the other party to agree to certain standards and common practices that commonly define such deals. Propensity towards automatic compliance is great. You can also have official forms that are pre-printed with items in your favor.

Bogey Tactic
Use a bogey, third-party bad guy to be the focus of ‘why it has to be this way’. E.G. “The bank will not lend me more than 70% LTV based on the rental trends in this area, and I only have $15,000 for a down payment”. Best if the bogey can be governmental/ regulatory.

Nibbling Tactic

After the major agreements have been made, nibble away at the smaller things to gain advantage. Post-inspection, perhaps. After seller has psychological ‘sold’ mind-set, they will typically make last minute concessions. Repairs, appliances, roofing,

Good Guy/Bad Guy Tactic
Get the person over to your side by being a confidant. “Listen, between you and I, I really want this to happen. My partner is demanding that we discount the property by 20%… I am confident I can talk him into 10% though if we act immediately.”

Deadline Tactic
Put pressure on the other party to react to your proposals. If anything, lets the other party know that there are other proposals you are considering, and that this one stands to fall through the table if a quick transaction is not achieved.

Calculating Gain… Correctly

System - Sunday, January 22, 2017
Even with advanced Real Estate investors, we often see incorrect gain calculations upon disposition of property. Visit our website below for more details but here is the short summary:

Capital Gain = Adjusted Selling Price minus Adjusted Cost Basis

Adjusted Selling Price

= Selling price
MINUS
o Selling expenses (realtor fees, fees, advertising)
o Expenses to fix up to sell
o Loan charges paid by Seller (loan placement fees, points)
o Excise taxes

Adjusted Cost Basis
= Original purchase price
PLUS
o Costs associated with original purchase (all fees, RE taxes owed, inspection costs, —not points—)
o Major improvement expenses (—not routine maintenance—)
MINUS
o Deductible casualty losses (e.g. caused by natural disasters)
o Depreciation allowed or allowable if the home was used for business or rental purposes

Days on Market for Rental Properties

System - Friday, January 13, 2017
Many people wonder  how the wintertime is affecting Denver rental rates. Even though we are entering the late fall period, the market remains strong for renting out properties…so traffic is still there. Instead of averaging 21 days on market in the summer, typically you will see around 32 days in the winter.

A few of the added days on market could be eliminated by a property manager being stricter with their owners on price competitiveness. One method that works quite well is to have a loss-leader rate in your advertising (e.g. $900 for 6 months), where you can negotiate a higher lease amount for the additional months. This is a lot better than waiting 2 months to get your desired $1,100.

The goal is to get eyeballs and calls on YOUR ad… not the others. Once you have a conversation going, the deal is typically yours.

Landlord Requirements for CO Detectors

System - Wednesday, January 4, 2017
n case you have not heard, the governor just signed legislation that significantly impacts owner/landlord/property manager liability when it comes to Carbon Monoxide (CO) detectors.

The legislation is posted in its entirety on the Echo Summit website under owners forms.

A few things of SIGNIFICANT note:
  • Read this section carefully: 38-45-104. Carbon monoxide alarms in rental properties.
  • Battery-powered detectors have too be installed using NATIONAL FIRE
  • ASSOCIATION’S STANDARD 720. You have to purchase the report for ~$40. We did, and it is EXTENSIVE.
  • There are very well defined responsibilities for both the landlord and the renter. Understand these and make sure your renter understands them too.
  • Anybody installing these things has to be certified to do so…
  • Our conclusion is this: have only a professional HVAC company install these. It will cost more, but the liability has now become extreme as the legal pendulum has swung to the conservative side. It is also critical that the landlord inform the tenant about their legal responsibility regarding CO detectors. We find that insert the verbiage fro the CO House Bill directly int their lease serves this end.

Denver Property Management - Security Deposit Disposition 12

System - Thursday, December 29, 2016
by Scott Lukes

By Colorado Real Estate law, a landlord has 30 days to return the tenants security deposit after t have regained legal possession of the property – unless, they otherwise state in their lease: up to 60 days. No more than that. 

With the Security Deposit Disposition, the landlord took in a certain amount of money from the tenant upon signing a lease agreement to cover any damages during their stay. When the manager is doing the Disposition, it iss simply an accounting of how much money was collected minus how much was used for repairs that are being charged to the tenant (beyond normal wear and tear). The difference is returned to the renter via check, and with an itemization of amounts deducted from their original deposit. It’s a good idea to mail that final check with a delivery confirmation so they tenant can’t come back and say they never received it. This will be covered in more detail in a future topic. 
One area where landlords get into trouble is determining exactly when the 30 day clock starts ticking from when they will need to return security deposit. When does it begin? The answer: when they regain legal possession of the property. It’s not a simple as it may sound. Obviously, the easiest way to regain possession of the property is when the lease is over and the tenant hands the keys back to the landlord. At this point we have the property back in legal possession. 
What about an eviction? If the tenant is in the eviction process (the lease is now expired) when does the 30 days notice begin? The answer: the 30 days begins when the landlord gains possession of the property from the court. What happens when the tenant is still in the property and their possessions are still in the house? The landlord will have to order a sheriff’s eviction. Then, typically, it would be a good idea to get an attorney involved at this point. It’s usually at that moment the sheriff’s eviction takes place when the 30 day notice clock would start ticking. 
What can the landlord withhold for? Please see our other reference material on “Normal Wear and Tear” where we go into details on this topic explaining many items and time periods that are and are not appropriate to withhold security deposit for in the name of normal wear and tear. 

For more information on this and other topics, please visit us online: 
http://echo-summit.com/education 
If you prefer to watch a video on this topic, visit us at: 
http://echo-summit.com/education/videos 

Renting has increased sharply across age groups - even for Denver rentals 12

System - Monday, December 19, 2016

 

Harvard Center for Advanced Studies

Colorado Marijuana laws for Denver Rentals Management

System - Friday, December 16, 2016

Property management usually has more to do with ‘grey’ areas than it does with black and white.  There is no more grey right now than with medical marijuana and outright legalization of marijuana through Amendment 64.

The big issue, of course, is that federal and state laws differ from one another.  On the federal level, HUD enforces the federal Fair Housing Act (Amended, Title II of the Americans with Disabilities Act, and § 504 of the Rehabilitation Act of 1973, to be exact). HUD’s viewpoint is that marijuana use, even for medical purposes, should not be allowed.  HUD is against housing providers granting reasonable accommodation requests related to medical marijuana, even in states like Colorado that have a Constitution that allows it.

 

So where does this leave the landlord?  General consensus is that as long as a landlord has an -enforced- policy in place that they disclose and follow consistently, they probably won’t get into trouble for allowing or not allowing marijuana.  The most conservative approach adopted by professional property managers is prohibition... marijuana use is prohibited even if the resident possesses a medical marijuana card or makes a reasonable accommodation request. The prohibition policy is legally defensible because marijuana use or possession is a felony under the federal Controlled Substances Act.

 

But how could a landlord get into trouble? A typical scenario would be someone with a pot card wants to rent from them.  The tenant says  “this card says I’m disabled, so under the American with Disabilities Act I’m asking for reasonable accommodation from you.”  This is a fair statement just as if someone in a wheel chair would ask for a wheel chair ramp, or someone with a seeing eye dog asks to bring their dog into a no-pet property. They are asking for the same accommodation.    As long as you have a published policy (that you strictly enforce and never waiver on) that says you do not acknowledge the pot card, and do not allow the use of marijuana you’re going to be safe.  The problem arises when 1) the applicant was never notified of this policy before their credit was run and/or before they moved in, or 2) the landlord allows tenant A to use marijuana (medical or not), and does not allow tenant B to use it. In this case, they have opened themselves up for a possible discrimination lawsuit.

The best way landlords can protect themselves from this potential outcome is to have their policy included in a published “rental applicant selection criteria” document. When someone fills out an application they need to communicate to the applicant what their selection criteria is for marijuana.  Then, when they sign the lease, the landlord should reiterate their policy through a thorough Crime and Drug-Free Addendum which further details their policy on marijuana and helps to further protect against liability.   

We are not suggesting that landlords allow or disallow the use of medical marijuana or other consumables, but they do need to have a policy and follow it consistently… as with anything in property management. 

Another area where landlords have to be very careful; if allowing growing on-premise, and it turns out that the renters are doing something illegally (or violating some form of code), the landlord might be brought into and legal proceedings, and held equally accountable.  If you allow growing, know your stuff and seek legal advice in advance.    

Average rents in Denver increasing ---- AGAIN - Great news for landlords

System - Wednesday, November 30, 2016

Average rents in all Denver counties increasing... AGAIN - Great news for landlords

 

 

 

 

Colorado Division of Housing

Essential Denver Property Management - Craigslist Scams -

System - Monday, November 28, 2016
The number of fake rental scams on Craigslist and other online classifieds continues to grow, with new aliases appearing daily. But while the names may change, the methods are always the same. These thieves, mainly based in Nigeria, the U.K. and the U.S., are out to steal renter’s money and identity. 

There are several items to look out for: 
1) The scammers tend to use yahoo, ymail, rocketmail, fastermail, live, hotmail and gmail, and they also post ads under anonymous craigslist addresses. 
2) They use photos stolen from other property advertisements and many times copy the legitimate ad with same description and photos. 
3) Look for the misspelling of words and more formal language that isn’t commonly used in such online advertising. The emails will be overly polite and poorly written or express excessive eagerness to rent the property without having proper steps including property inspection, background and credit checks. 
4) When there are two identical ads the monthly rental fee will be much different. For instance a legitimate ad for a 4 bedroom house would be, say $1,350 per month. The scam ad will list the same property, same pictures and assume the homeowner’s identity but list it for $850. If it’s too good to be true it probably is. They will have a sob story or say they are not available to show the property but the renter can go and check it out if they wish. 
5) What they all have in common is that sooner or later they send request to transfer funds via Western Union, Money gram or some other wire service. Never, under any circumstances wire money at the request of the prospective “landlord” and never provide a bank account number, bank routing number or other financial or personal information. 

A renter should ALWAYS do business face-to-face with the landlord or property management company. It’s important to have access inside the property and to sign documents and contracts in person and in an office or professional setting. 

For more information on this and other topics, please visit us online: http://echo-summit.com/education 
If you prefer to watch a video on this topic, visit us at: http://echo-summit.com/education/videos 

Denver Rental Insurance Subrogation - Denver Property Management

System - Friday, November 18, 2016

Insurance Subrogation for Denver Property Management

 

 

 

 

 

 

 

 

Key Topics

  • Securing the property
  • Dealing with insurance
  • Environmental and safety issues
  • Restoration contractors

 

 

 

 

When there’s fire damage at a property it’s a very emotional experience for both the tenant as well as the owner. As an owner this might happen once or twice in a lifetime. As a tenant, they can lose personal possessions and be displaced for several weeks. This report will focus on what happens after the fire department has left. There are several steps necessary to work through on the road to recovery and restoration of the property.

 

Step 1: Secure the property

 

The house must be secured to keep the curious and looters out. Usually, this means boarding up windows, securing doors, covering fire, and firefighting holes in the walls and roof. Protecting the house from the weather is also important. Rain, snow and freezing weather can make matters worse. In freezing weather it may be necessary to drain all plumbing. Normally, the first-response restoration contractor can secure the house removing water and seriously damaged materials, drying the house and contents and removing smoke residue.

 

 

 

Step 2: Call an insurance professional

 

The next step is to make some phone calls — first, and most important, to an insurance professional or company. Major insurance companies have 24-hour hotlines and will generally treat the problem promptly. Be sure to ask the insurance company to recommend at least three fire restoration companies. Choose one to start the immediate work. These companies are very familiar working with insurance companies on all matters of restoration.

 

Few people know exactly what their insurance policies cover. Work with the insurance company agent or representative to find out what is covered, what is not covered and what may be subject to further discussion. They will assess the scope, breadth and depth of the damage and provide estimates of the repairs according to industry-accepted standards. Get all this in writing as soon as possible, because it will influence what work is done immediately and what can be put off until later. Filling out all the forms is a top priority. The restoration contractor can help to complete them.

 

Be sure to document any disputed items or classes of items that are supposedly not covered. There are arbitration processes that can be used to get a final determination (short of going to court) of what is actually covered. In general, insurance companies want to find a fair and reasonable scope of needed repairs to bring the property back to the condition before the event.

 

Step 3: Call the company that holds your mortgage

 

The homeowner should also call the financial institution that holds the mortgage. Fire lowers the value of the property and affects the mortgage. Properly restoring the house will restore its value, but keep the mortgage company involved.

 

 

 

Step 4: The environmental phase for personal protection

 

A fire-damaged house can be very dangerous. It may be structurally unsound. If it is, the fire department will not allow people on the site. Contact the fire department to learn about conditions of access. The fire department may allow a qualified restoration contractor into the house. It may also be necessary to contact the police as well, if they are involved in an arson investigation.

 

After the fire is out the house may still have dangerous chemicals produced by the fire or from fighting the fire. The house will be dark, probably wet and likely already be growing mold. If the house was built before 1980 there could be issues around asbestos. Any ‘Hot’ areas where there is contamination will be sealed off and abatement will be the next phase to properly clean up the area and dispose of any contaminated items.

 

Floors can be slippery and there may be sharp and jagged items lying around. If access is granted to go back in the house, wear safety boots, a hard hat, and protection for lungs and eyes. The fire department and restoration contractor can recommend proper safety gear. Don’t go into the house alone. Investigate in teams of at least two, one of whom is a professional. Once the house is cleaned up and people are allowed on the premises it’s now time for the actual construction phase to begin.

 

Step 5: The restoration phase

 

The fire-involved homeowner is, ultimately in charge of the remediation. Although sometimes it seems that the insurance company is driving the process, it is important that progress is monitored closely in the restoration and meticulous notes are kept to document any problems, It’s important the owner be available to all the involved parties 24 hours a day, to be kept informed of critical steps and decisions.

 

 

 

As stages of the restoration are completed to satisfaction, the owner will be expected to sign off on the work. If some work isn’t done well enough, note it on the document during the sign off, and request that a holdback be kept to ensure that the work is done well enough later on. Remember to be reasonable and sign off as soon as possible.

 

It may be necessary to obtain extra financing to complete all the work that should be done. Check with the mortgage company or financial institution to make sure that the money will be there if needed.  A little preplanning can save a lot of stress. That’s important after a fire.

 

Restoration work may also be a good time to upgrade the property. If the upgrades are really needed or highly desirable and are affordable, seriously consider doing them during the restoration or immediately after restoration. Remember that there may be financial support for energy upgrades, which can provide some tax relief or money back.

 

Step 6: Paying the bills

 

Restoring a property after a fire can be a complex process involving many subcontractors and complex bill of materials and other fees and permits. The good news is most of all the financial matters will be handled directly between the contractor and insurance company. That is why selecting the right restoration contractor is so important at the beginning of this process. Make sure the contractor has a good history of working with the insurance carrier. The better they work together the easier and quicker the property can be restored to rental condition.

 

 

 

For more information on this and other topics, please visit us online: http://echo-summit.com/education

 

If you prefer to watch a video on this topic, visit us at: http://echo-summit.com/education/videos

 

 

 

 

 

 

 

 

 

 

Key Topics

  • What is Subrogation
  • Who is responsible?
  • Waiver of Subrogation

 

 

 

 

This report will explain an insurance term call Subrogation. In its most common usage Subrogation refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim. So when an insurance claim is paid, the parties involved (including the owner, tenant, fire department, etc) are looking for who is at fault in order to collect financial damages.

 

This process can be very expensive. Claims can be as small as a few thousand dollars for mold damage and upwards of several hundred thousand dollars for major damage like a fire. So it’s important that the insurance company investigate who was responsible and how did the damage occur.

 

Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. This could include any money paid out for property damage, deductible amounts, diminished value, pain and suffering, loss of consortium, etc. The definition of subrogation is the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.

 

Waiver of Subrogation

 

Some contractual agreements might require the insured to waive their right of subrogation (and therefore the insurance company's rights) against the other party in the event of a claim. A waiver of subrogation prevents the insured’s insurance company from pursuing damages from a specified party. If an insured is ever asked to sign a waiver of it is a good idea to consult an attorney before waiving any rights or limiting the amount of damages that can recovered.

 

 

 

 

 

For more information on this and other topics, please visit us online: http://echo-summit.com/education

 

If you prefer to watch a video on this topic, visit us at: http://echo-summit.com/education/videos


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