In the News | Ratner Property Management

“Tenants Don't Have the Right to Choose!”

by Shaya Stauber

Rent Control has been fiercely debated by both sides for years. Tenant advocates claim it is necessary to keep Tenants from being thrown on the streets from heartless and callous Landlords, while Landlords claim it is a free market where Landlords should be able to charge what they want and they claim Rent Control doesn’t actually make rent more affordable. But no matter what side you are on, there are some parts of Rent Control that don’t help anyone’s cause.

Did you know that if a Tenant wants a Landlord to install a new service, like a new air conditioner, and is willing to pay for it, it is illegal for the landlord to do so (unless the Tenant physically moves out of the unit and signs a brand new lease)? YES, you read that sentence correctly; if a Tenant wants a Landlord to install a new service, like a new air conditioner, and is willing to pay for it, it is illegal for the landlord to do so. How does this make sense?

Without getting into the overall Rent Control debate, I want to focus on just this aspect of it, taking away a Tenant’s right to choose. How is it allowed, or Constitutional, that a Tenant doesn’t have the legal right to choose to improve their living conditions?

A Landlord is actually allowed to make improvements to the overall building without the Tenants consent and charge the Tenant, as long as it is on the city’s approved list. Yet coming to mutually agreeable terms with the Tenant is not allowed.

A Landlord won’t make improvements if they can’t justify the investment. Unfortunately, the social good isn’t enough of an incentive. There also needs to be financial motivation.

If a tenant wants a new air conditioner, they should be able to come to terms with the landlord where it makes sense for both sides.

I understand there are many Landlords that just want the low paying Tenants to move out so they have no interest in improving their lives and incentivizing them to stay.

But what about those of us, that have accepted our circumstances of having below market Tenants, yet still want to provide great customer service byproviding services that customers are willing to pay for?

Should we add services, but only allow the New Tenants to use it?

Would it make sense if an airline wasn’t allowed to offer upgrades or food for sale since the price of the ticket was already set? Or Toyota not being able to offer upgraded packages on cars once the lowest priced model is advertised? Or a hotel not being allowed to offer a mini bar or movies once the guest checks in? The answer is no.

Who is this law protecting? I am trying to play devil’s advocate and defend this law, but I can’t come up with a reason.

Is the law there to prevent the Landlords from forcing the Tenant to do something they don’t want to do? This isn’t happening here as the Tenant needs to approve any charges.

Are Tenants not smart enough not to get tricked by the Landlord? So why do we allow a new Tenant to sign a lease with any extra services they want at any price they want? Are only the current tenants too dumb to be able to get bamboozled by the Landlords?

I can at least understand why freezing rents benefits those already living in their units, but with this law, I can’t find anyone who gains.

To not allow two willing and able parties come to terms for goods or services is at the very least anti-capitalistic and at worst, anti-Constitution.

I would love to hear who is protected by this law, and if the answer is no one, it should be abolished immediately.

“Customer Service - The Real Victim Of Rent Control”

AOA Magazine: November 2019 / by Shaya Stauber

The Year was 1999 and the Los Angeles Lakers just moved from the Great Western Forum in Inglewood to Staples Center in Downtown LA. They had a shiny new home for their brand new superstars Shaq and Kobe. The Lakers hadn’t won a playoff game past the 2nd round in 8 years and they were finally ready to change that. They also brought in Phil Jackson from Chicago to right the ship and bring the Trophy back to Los Angeles.

That same year, I bought my first apartment building. It was a 12 unit building with mostly 2 bedrooms, built in 1975. This was very different from what I knew, as our family traditionally bought industrial warehouses, but I was enthusiastic to learn a new type of real estate. I understood that managing an apartment building would be different, but I was excited for the challenge.

Staples Center was a state of the art building, with all the bells and whistles. Located right in the center of Downtown and it had a seating capacity of over 19,000 fans. The bars and concession stands were upgraded from the Forum. They added 3 levels of Luxury Suites around the arena, making it a great venue for executive and business meetings. The locker rooms, arena clubs and the rest of the facilities were all state of the art. The great team on the floor matched the great arena and services off the floor.

I decided that I, like the Lakers, needed a great launch for my first apartment building. I was planning on painting the building, upgrading the common areas and remodeling the interior of the units. I wanted this building to be the nicest on the block to attract great Tenants and give them a great place to live. I wanted this to be a place I would be proud to call home, which in its current condition it wasn’t. My dream was to transform it into something amazing. Much like the Lakers had done.

To pay for the new arena, new superstars and the new coach, it did not come as surprise that the team needed to raise prices for these upgrades. So they increased ticket prices, and continued to do so for many years. They also increased the prices for drinks and food for the new restaurant choices. To offset the increased costs, the team raised prices, which is what any business would do. Most season ticket holders didn’t mind because they got a much better venue and with a much better team.

I, too, got ready to increase my prices to help pay for all the upgraded services I was planning to offer and that is when I learned about Rent Control. Even if I made all of these upgrades, I couldn’t charge any more rent than I was charging until then. The law actually forbade me from signing a new lease with a Tenant unless they actually moved out. Unlike the Lakers, I was not allowed to increase my prices, to pay for the cost of the upgrades. That severely handcuffed my efforts to improve the tenant’s experience in the building, as I simply couldn’t pay for them. When my investors heard that the LA market was so regulated, they stopped investing with me to invest their money in areas with less restrictions.

Anyone can see how not being able to increase prices in line with increased services (not to mention increased costs) will result in not caring about customer service, which is offering the best experience for your customer.

The Alternate Universe
Now let’s enter an alternate universe, where Property Owners are free from rental restrictions and the Lakers are now subject to Ticket Price control.
The Lakers would not be allowed to increase ticket prices more than 3% a year regardless of the upgrades to the arena or the quality of the team on the court. Jack Nicholson would be sitting courtside at a cost of $187 a ticket, with the person next to him having just bought tickets for $2,500 a ticket.

They would still be playing in the Forum, but after years of disrepair due to lack of money to make upgrades, it is now dubbed the Below Average Western Forum. The concession stands are loved by Baby Boomers because it still feels like the 1970’s from the old décor to the same menu, since prices on hot dogs and beer could only rise 3%.

The locker rooms and bathrooms have a mildew smell that just gets worse each year. Most of the players are past their prime because they can’t afford to pay for top quality. Any younger players they do have are only there to prove themselves to other teams because only the Lakers have these restrictions. They can’t afford to pay top salaries because ticket prices are what pays the salaries, so without the ability to increase prices, they can’t pay the players. The same would go for the quality of coach.

The Lakers would be playing in a rundown arena, with a team that hopes to just not be the worst each year and fans enjoying (or rather, not enjoying) the same foods and souvenirs for 20 years. I would be surprised if anyone shows up for this type of customer experience.

Now I have the ability to charge any rent that the market is willing to pay. So I am constantly looking for ways to create a better experience while trying to turn a profit. I take the Silicon Valley approach and see what service I can offer my clients. I start with upgrading the common areas with swimming pools or fire pits. In some buildings, where the residents want better security, we may choose to offer a doorman. We can offer the newest in smart home technology to control everything inside your home. Or offer concierge services to help maintain your home while you are at work. The possibilities are endless on how we can improve our customer service because we can make a profit.

I recognize that my product may not be for everyone, but that is the beauty of free markets, people have the ability to choose. You can choose to eat at McDonald’s or Wolfgang Puck. Stay at a Motel 6 or the Ritz Carlton. Go to a Lakers game or watch it on TV.
When business owners can focus on the Customer (while trying to make money doing it) the entire market benefits, and people can now choose whether they want it or not.

Restrictions work against people’s self-interests because who will put in the time or money to make improvements if they can’t even pay for them?

Whether it’s the Lakers, a restaurant, or a Property Owner, when limitations on profit are put in place, it leads to the death of customer service.

“12 MUST HAVE Qualities of an On Site Manager”

AOA Magazine: December 2011 / by Shaya Stauber
Having an onsite manager can be extremely effective even when not required by law. It is crucial to hire the right person, or they can be a waste of money and can cause serious harm. Here are 12 things to look for when hiring an onsite manager.

1. Polite, Kind and Patient:
They should be enjoyable to speak with and someone you would want as your neighbor, because that is how tenants think when meeting them.

2. Punctual:
Tenants are busy and if the onsite manager is late to show a unit, the tenant will leave and not give the building a second chance.

3. Computer literate:
They don’t need to be computer programmers, but they should be competent with email, Microsoft Office and able to learn a new program if necessary. Having a manager that doesn’t use email or a computer can make your job twice as hard.

4. Job History:
You want to make sure they currently have responsibility and know how to handle different situations. Call their current employer to get a sense of their work ethic. (Also, be sure to run a credit ad eviction report as you would on a regular tenant.)

5. Enthusiastic About Work:
This is like any job; the happier they are, the better they perform. You don’t want someone who is only doing this for a paycheck, because they will grow tired of it and it will affect their performance. You want a person who love interacting with people and is enthusiastic about it.

6. Have Flexible Hours:
If they can show a unit in the middle of the day on short notice, or meet a repairman for an emergency it will be very helpful. Having managers that have rigid schedules with little flexibility makes it difficult to manage a building where anything can happen at any time.

7. A Couple Where One Spouse Stays Home:
This is the ultimate flexibility and being able to show units on short notice will help rent vacancies quicker. When the onsite manager is usually on the property it gives the property an advantage over other buildings where a prospect needs to wait to see a unit. It also makes residents feel more comfortable having someone there watching the building.

8. Handy:
Having someone who knows how to change a switch or put a washer on a sink will save time and money. Not having to call someone every time will keep both you and the tenant happy. This isn’t a requirement, but will be extremely helpful and cost effective.

9. Stays Calm Under Pressure:
Managing a building can be stressful and things always come up, so they need to be able to keep a level head and make the correct decisions. Many times managers are yelled at by tenants, and they need to answer politely, handle it with professionalism and not exacerbate an already tense situation.

10. Bilingual:
This will not only help with potential tenants, but allows them to communicate with current tenants. In some buildings where most tenants don’t speak English, this should be a requirement. Trying to have a tenant explain a leaky sink in broken English can be frustrating for both parties and will often lead to a miscommunication where the problem is not resolved.

11. Speaks Clearly:
This may sound obvious or trivial, but the first interaction a potential tenant has is on the phone. If the manager is speaking quickly or unclearly the tenant will probably give up and move onto the next building. I have seen managers mumble or speak so fast you can’t understand them and it makes leasing a unit difficult.

12. Follows Orders:
Many times people feel they know how to do it best, or their way is the right way, and this can be problematic. You want a manager who will give you their opinion, but follow what you instruct them, even if they don’t agree. I have seen managers do the opposite of what they are told and this can’t happen.

Having an onsite manager can either make your building a real community where no one wants to leave or a place where every tenant will leave the second their lease is over. It’s all about getting the right person for the job. There are no guarentees, but these tips should help you find the right one for the job.

Shaya Stauber is a principal with Ratner Property Management – R.E. License 01385202. Ratner Property Management has been managing properties in Southern California for over 90 years. For more information, call (818) 767-4750 or email info@ratnerpropertymanagement.com

“10 Suggestions When Qualifying a Tenant”

AOA Magazine: September 2010 / by Shaya Stauber

In today market it is a challenge to find a new tenant, but you don’t want to act desperate and accept the wrong one. Here are ten things to do when screening a potential tenant. Many landlords will make rules about credit scores and say anyone with a score below 600 is bad and anyone above 700 is great. Unfortunately, both of those statements can be incorrect. Some tenants with low scores had tough times in years past, but are stable now and some with great credits are currently struggling and might not be able to pay rent.

The credit and eviction reports from AOA are great and provide a lot of data that can be used to evaluate the tenant beyond the score. Every situation is unique, so treat each tenant accordingly, but these suggestions can be applied to most situations. When qualifying a tenant these should be the landlords primary concerns:

Can the tenant pay the rent on time?
Will the tenant be a good neighbor?
Will the tenant maintain the apartment?

It can be tricky balancing their ability to pay and if they will be a good resident, so you have to decide what is most important to you.

1) Look deeper than the credit score for the root of the problem. Evictions and bankruptcy are bad, but a foreclosure or a collection can have a reasonable explanation. A late payment will affect the credit score the same regardless of when it was in the past few years, but from a landlord’s perspective, it will make a difference if it happened years ago or last month. The difference being if the problem just started or if it is behind them. The credit score may be the same for two different people but for completely different reasons, so you need to research the underlying information to know what happened. Look at each negative event individually to find the root of the score.

2) Look at the employer, the industry and the length of time they have been at their job. If their industry has downsized recently they might be in trouble, but if they are in a more secure field, like a nurse, they have more security. Decide for yourself which jobs and industries are safe. Talk to their employer to get a sense of their job performance. Their job is what allows them to pay the rent, but equally important it tells you about the person. Good work habits and workplace responsibility are the makings of a good tenant. Listen to the tone of the employer since they might not be allowed to say anything negative, but their voice might tell you what they are really thinking. Obviously, look at their income after deducting expenses to ensure there is a cushion to pay the rent. Look at the physical location of their workplace; the closer they are to your apartment, the less of a chance they will vacate after their lease is up. If they are far, they will probably try to find a closer place to work with all else being equal. The employer can be a great source of information; you just need to know which questions to ask and how to interpret the answers.

3) Check where they live currently as well as in the past. Many landlords will only look at the current residence, but look as far back as possible. Often a tenant is a good tenant in their current building but a disaster in the apartment before that one. Use the credit report and application to find their previous addresses. After sending the standard written questionnaires about the tenant to the current manager, follow up with a call and ask what type of tenant they were, and as many questions as you can to learn more about the applicant. A red flag is if the tenant has moved often. It might be nothing but this should alert you to look deeper. It can happen that a tenant gives you a fiends number and says they are the building manager and you may never know. There are two ways to try and catch someone who is doing this. Ask the alleged manager random questions to see if they hesitate or get nervous. Use industry related language such as “Have you ever issued them a three day?” If they don’t know what a three days notice is, they are clearly not the real manager.

Second, try and verify the number of the manger independently by searching the internet or doing a drive past the building. By getting the number yourself, you can assure you are talking to the real manager. This doesn’t happen often, but if you have any suspicions it doesn’t hurt to verify.

4) Check the local court for any lawsuits naming the tenant as a defendant or plaintiff. Credit reports will show evictions but will not show if a tenant has sued or been sued by a landlord. i encountered a tenant that was kicked out of his two prior apartments, but was never evicted because he sued the landlord and a n out of court settlement allowed him to leave the building with an unpaid balance. This didn’t show up on the credit or eviction report, but by checking the court records, it was clear that this person was a problem. Check to see if they also sued or were sued by other residents. At the very least you can ask them to explain and decide if you believe their answer. I am not saying not to rent to a tenant who has sued or been sued, but it will give you a good indication to them as a tenant.

5) Check the type of car they drive and compare it to their income and their anticipated rent. Ideally, you would like a tenant to drive a car that is well within their means and cost 20% of their rental payment. If the car payment is 20% of their income, then that is a problem. Looking at their car may seem superficial, but it gives good insight into what type of person they are and their level of responsibility. You want a tenant that cares more about getting from point A to point B and paying their bills, than how they look behind the wheel of a car. This is not to say that someone with a nice car won’t be a great tenant, but if they drive a car they can’t afford, they are choosing vanity over practicality which can be dangerous.

6) Check their checking and savings accounts to gauge their financial responsibility. In my experience, people who are financially responsible are more likely to take care of the apartment and pay the rent, financial planners say you should have six months of living expenses in cash, so this is the ideal situation. This doesn’t mean if they have less it is a deal breaker, but the more savings, the more security. Beyond just indicating their level of responsibility, the more they have in their bank, the more they have to lose if they breach their contract or damage the building.

7) Check credit card balances to see if they are over extended or have acceptable amounts of debt relative to their income. This will tell you if they live within their means or if they spend first and worry about the consequences later. Someone that has high balances is more likely to sign the lease for an apartment they can’t afford and not live up to their obligation. You want someone who has a manageable amount of debt, which they can pay back over a small amount of time, but not someone that based on their current income and debt, will never be able to pay off their balances, short of winning the lottery.

8) See if the tenant has family or friends living in the building or immediate area. The rental application should have a place for personal references to obtain this information. If the tenant has family or friends nearby or in the building, they are more likely to stay than if they didn’t know anyone. Finding someone who knows current tenants is ideal and will help build a community that should translate into lower turnover. If they don’t know people in the immediate area, they are more likely to move closer to friends or family after their lease expires. This is helpful if you have equally qualified tenants to use as a tie breaker.

9) If you are unsure about the tenant or something doesn’t feel right, meet the person face to face. You can learn a lot about a person from a meeting that can’t be found on a piece of paper or from other people’s opinions. A personal meeting can be crucial and that is why so many deals get done with a handshake or on the golf course. There is something to be said for looking someone in the eye before making a deal. A meeting is the ideal situation, but many times it’s not practical which is why I suggest using it only when you have a funny feeling or something doesn’t smell right.

10) Consider if the tenant is downgrading or upgrading from their past residence. It is preferable if they are moving up in quality or size. Today it is common to see people moving from a home to an apartment, and while it is a concern, it shouldn’t be a deal breaker. If someone is downgrading from a better building in a better area, this usually indicates they are going through tough times and their ability to pay rent is in question. If you have an option, choose the tenant that is upgrading.

Qualifying a tenant is like painting. Each piece of information is like a color that can be used. The more information you have at your disposal, the more color options you have to create you art. It is possible to paint a picture with only two colors, but more colors will translate to a better picture. This may seem like a lot of work to qualify one tenant, but imagine the work needed for an eviction. You just need to know what to look for and what to ask to gather the necessary information. If you pick the right tenant, you may not need to do this work for that unit for many more years.

“When Does Spending Increase Profits?”

AOA Magazine: September 2010 / by Shaya Stauber

Rents are down, vacancies are up and there is no sign the market will get better in the near future. The natural reaction when times are tough is to cut spending, but you need to fight this urge and spend more. Increase spending on things that improve the value of the building, attract new tenants and retain current tenants. This may sound ludicrous in a time when, (rents have dropped in some areas up to 50%,) many owners are barely making their mortgage payment and vacancies are destroying the bottom line, rather just the opposite.

The way to improve the bottom line is through spending. Why do landlords spend money when times are good? Many landlords were willing to throw money around two years ago when money was coming in and rents were at the peak. This was at a time when you had your pick of tenants and a vacancy had multiple applicants. Landlords were spending just because they had it not because it would increase profits or occupancy. If your pipes are working perfectly would you fix them just because you had money in the bank, and if they are broken – not fix them if money was short? There was nothing wrong with spending money when you had it, but to skimp when times are tough is shortsighted.

Spend when you need to – not just when you have extra money. Microsoft didn’t have commercials before Apple started doing well and began advertising the MAC. Microsoft was the market leader and had plenty of money to spend, but they waited until it was necessary to start spending. Now they have real competition and they need to spend and even though times are tough, they are spending more.

Especially now, when times are tough – it may be necessary to spend some money marketing your building and keeping your clients (tenants) happy.

Upgrades and Amenities
There are many vacancies on the market so you need to set yourself apart without getting in a price war and lowering the rents. If the rent is dropped too low in a rent controlled building, it might take years to get them back to market. The trick is to set your building apart without lowering the rent.

Accomplish this by making upgrades to the units like new appliances, new paint on the cabinets, granite, new carpet, new landscaping, and other common area upgrades. Some of these items are expensive, but remember these are upgrades to the building, which will increase the value.

It’s a numbers game and the more people who see the vacancy, the better the chances are of renting it. Having pictures and a floor plan/virtual tour available online will allow more people to easily view the unit. This is a one-time expense per unit type and it lasts forever. Offer an incentive for anyone who comes to see the unit – like a raffle, with the prize being movie tickets all the way up to a TV.

Once your potential tenants are looking at the apartment, make sure that it stands above the competition. Have amenities to offer for lease or as part of the unit. Some amenities you can offer are a TV, refrigerator or a fully furnished unit. These items may be expensive but they create value and help rent the units quicker and without lowering the price. There are many possible upgrades for the complex and the unit, and each building is unique, so look at your building to see where upgrades can be made. There are also some services you can offer in your building:

Have a mobile car wash come to the building at night to wash cars;
Have a local dry cleaner offer pickup and drop off for tenants or
Add a vending machine.

Be sure to let the tenants know that these are amenities, and that the landlord is not responsible for the product. They should speak to each vendor if there is an issue. Don’t let it become a headache but offer as many amenities as possible.

The ideal scenario is to stop a problem before it starts, like going to the dentist for a cleaning to avoid cavities. This is accomplished by retaining your existing tenants. Don’t ignore existing tenants with the thinking that “my tenants aren’t going anywhere – nobody likes to move”. Tenants WILL move! There will then be down time and an avoidable vacancy. Be proactive; don’t wait for your tenants to ask for a rent reduction. Tenants know the market, so first try to keep them happy without lowering the rent. The same advice goes for this – perhaps an updated kitchen or some other upgrade that sets you above the rest. Money spent on the building will increase the value if it’s spent wisely. (Always try to get a lease extension in exchange for the work being done.)

Build Relationships With Your Tenants
Let your tenants know that you care. When a tenant feels like a person and not just a number on a rent roll, they will show more loyalty. A few ways to accomplish this is with holiday cards, a holiday party or some form of raffle for all tenants that pay rent on time. If tenants feel they have a relationship with the landlord, it will be harder for them to leave. Recognize how tough it is financially for most tenants and be as accommodating as possible. Don’t have rules across the board that can’t be broken; evaluate each tenant individually. If a tenant has a job that pays on the 5th, let him pay on the 7th. As long as the tenant is paying consistently on the same day and the money is not needed for the mortgage, be flexible. Offer credit card payments for rent. There are companies that provide this service and the credit card fee is paid by the tenant. This will allow the tenants to have up to a month to pay the credit card company and alleviate some pressure.

Create a Community
Having a community and not just a building will help retain tenants. If tenants are close to their neighbors and socialize with them, wouldn’t they be more likely to stay than tenants who don’t know anyone and have no ties to the building? Most interaction today is online, so people crave personal, face to face contact and the landlord needs to create a community to offer this desired interaction. Landlords can create the initial contact since so many tenants are uncomfortable doing it on their own.

Throw a building party where the tenants can meet neighbors in a relaxed environment
Start a small craigslist style blog where tenants can sell, buy and barter with each other or share DVD’s
Offer a rent credit to any tenant that refers someone who signs a lease. This will lead to more tenants knowing their neighbors.

There are many other creative and inexpensive ways to get tenants together. Anything that gets tenants interacting in a positive way will help to keep the building occupied.

Know Your Market
The solution for a tenant who is paying significantly above market is to lower the rent. Many landlords won’t lower rents or make improvements for existing tenants because they feel it is giving money back that is already in their pockets, but this is wrong. It is tough to convince a tenant to stay if they are paying $1,700 for an apartment that is worth $1,200. What will happen if the tenant moves out? What rent would you get for that unit, what improvements would need to be done and how much down time would there be? If the rent decrease is warranted don’t let pride or reluctance to change with the market stop you from making a sound business decision. If you do lower the rent to keep a good tenant, have the tenant sign a confidentiality agreement to avoid conflicts that may arise from having tenants compare their rents.

Landlords need to see their building and their neighboring market from a tenant’s perspective. Pretend to be a tenant who keeps hearing how rents are going down everywhere and that “it’s a tenant’s market out there.” Look at other buildings in the area and see the competition; compare market rents and what amenities other buildings are offering. After seeing other buildings, be honest and ask yourself “Would I want to live in my building or in the one down the street?” This will help you determine the current rental value and/or any necessary building upgrades. If it’s impossible for you to remain impartial, ask a friend to do it for you. A property manager can be impartial and honest since they are a neutral third party. So the next time a tenant calls for a rent reduction, you will know if it’s truly warranted or if the tenant is just fishing.

Summary
The ideal situation is to retain current tenants avoiding costly and timely vacancies. Accomplish this by being accommodating and understanding to the tenant’s situation. Assume tenants are looking around and go see firsthand what is on the market, then compare it to your building in both price and quality. Try to offer free or inexpensive amenities for the building to keep tenants happy and to build a community. When necessary, don’t be afraid to spend money on the building or lower a tenant’s rent. The money is not wasted since it will be improving the quality and value of your property. The key is to survive these trying times and wait until it gets better. Real estate is a long-term investment, don’t panic and cut corners. This is merely a bump in the road on a long journey. Do what’s necessary to improve your building, occupancy and profits.