Knowledge Base

What is due diligence in real estate? Many struggle to find the answer to this question, especially those who don’t have much or any experience in home buying. It’s a well-known fact that there are plenty of steps that need to be taken before the final contract is signed. But what exactly are those steps and how to go about performing them is an entirely different story. Due to this, we’ve decided to create a simple guide that’ll hopefully make this a far less intimidating and stressful process.  What is Due Diligence in Real Estate? Due diligence in regard to real estate can be defined as thoroughly researching the property in which you are interested. Shopping for a house or office space involves high stakes, so no detail should be overlooked. Therefore, aside from performing the standard inspections and appraisals, you should always do your homework, and that means doing some investigating on your own.  We have to mention that some experienced real estate investors choose to skip certain parts of due diligence, which is fine since they have the knowledge to do so. However, those purchasing their very first home or trying to get into the business of property investing should carefully follow a real estate due diligence checklist, such as the one we’ve prepared below, and resist the urge to rush any of the listed tasks. Due Diligence Checklist for Buying Real Estate Shop around. House hunting may be interesting at first but it can get quite tiresome after a while, causing some to look at a minimal number of options. Without seeing as many properties as you can, you can’t be certain that your final decision is the best one you could make. Also, keep in mind that it’s pretty easy to get the wrong impression of the real estate market by looking at homes in a single area.  Investigate the surroundings. Our next piece of due diligence real estate advice concerns analyzing each and every neighborhood thoroughly. You can learn a lot about a property’s value from its surroundings. The area’s demographics, the state of the homes in it, and crime rates can tell you if the value of the real estate you’re interested in is going up or down.  Organize inspections. Once you’ve done your own research, you should call in the professionals, experts who can spot potential problems you may not be able to. There are many types of inspections and, depending on your budget and due diligence deadline, you should try to organize as many of them as possible. Here are the most common types of inspections: General inspection: A general inspection report should include information on the state of the walls, floors, staircases, roof, heating and cooling, foundation, porches, plumbing, electrical installation, and the like. These inspections are only visual and are required by most lenders. Wood-destroying organisms inspection: Some lenders will also ask for a WDO home inspection. The inspector should tell you if the structure has any wood rot caused by either termites or moisture and how severe the damage is. Even if your lender doesn’t request it, we suggest you don’t skip this real estate due diligence task as wood rot-related repairs can be costly. Lead-based paint inspection: This type of inspection is mandatory for any house built before 1978. If the seller knows that lead-based paint has been used in or outside of the home, they are obligated by law to inform you about it. Radon gas inspection: Not many people know that a radon gas inspection even exists, but if you have the time and money, we would definitely recommend that you have it done. According to the United States Environmental Protection Agency, radon, a radioactive gas, causes thousands to get lung cancer every year. Therefore, although a radon test usually isn’t a part of a typical real estate due diligence process, you might want to consider it. Defective drywall inspection: Another rare inspection is the defective drywall test. It’s used to determine whether or not a home was built with defective drywall, which was manufactured in China, imported to the US, and used in construction between 2001 and 2009. Not only do the high levels of sulfur in the contaminated drywall affect the quality of the structure but they can also lead to respiratory health problems.  Arrange appraisals. If you’re planning on obtaining your funds through a crowdfunding platform or from a bank, you should expect the lenders to request an appraisal. Even those who don’t plan on taking out a loan should think about adding an appraisal to their due diligence real estate checklist because it determines the realistic value of a property and, as such, can keep a seller from attempting to inflate the property’s price. Compare rates. When looking for property financing, you mustn’t forget to take the time to compare interest rates from multiple lenders. The first few offers that you get may turn out to be similar, but don’t let that stop you from exploring further. In the long run, even the smallest of differences could end up saving you a good amount of money. Assess the property’s eligibility for insurance. Before your due diligence deadline passes, you should make sure that the property you intend to purchase meets the minimum standards of insurance companies. There are three main types of insurance that we’d like to mention here: Homeowners insurance: If you plan on living in the property you bought, you should consider getting a homeowners insurance policy. It protects both your home and the assets inside it from unforeseen circumstances such as tornadoes, fires, or thefts. Your insurance rates will be higher if your property is, for instance, old or in a flood zone, so keep that in mind during your property due diligence assessments. Landlord insurance: No matter how careful you are when screening your potential tenants, accidents happen, which is why we’d advise all those intending to rent their properties to buy landlord insurance. This type of coverage provides financial protection if your property is damaged, becomes unavailable due to a catastrophic event, or if someone gets hurt while living in or visiting it. Vacant property insurance: Vacant property insurance is typically the most expensive of the three, but if you’re planning on flipping a property, you might want to look into getting this kind of policy. Empty homes are at high risk of theft, vandalism, and fire. Perform a title search. A key part of due diligence in real estate is doing a title search. During this process, public records and other documents relating to the property are examined to determine the property’s legal ownership and if any lines or claims are associated with it. If you fear that your title search might not uncover every single issue, you might want to think about purchasing title insurance. Title insurance covers disputes that occur both during and after a sale.  Check the restrictions of the homeowner association.  Owners of properties located in communities managed by homeowner associations have to follow the rules these organizations make and enforce. Whether you’re conducting residential or commercial real estate due diligence, you should remember to check what these rules are. Although this may not seem like a very important step to you, know that some HOAs impose extremely strict requirements, which you may not wish to adhere to. Consider getting some assistance. Navigating the home buying process and all the paperwork that comes with it shouldn’t be taken lightly, especially if you’ve never done anything similar before. To avoid getting overwhelmed, you might want to consider hiring a real estate attorney. Note that online legal firms tend to be more affordable than their brick-and-mortar counterparts. As you can see, the answer to the question of “What is due diligence in real estate?” is quite a long one. If, while reading it, you felt like there was far too much to remember, there are some great free task management apps you could download to help you keep track of everything.

If you’re moving for the first time into a community with a homeowner association, you must be wondering how much it’ll all cost you. What do HOA fees cover, are they negotiable, and how are they collected? Do you have to pay HOA fees even if you aren’t using the services it offers, and what happens if you don’t pay them? We’ll guide you through all the details, explain HOA rules thoroughly, and provide an insight into how a homeowner association functions.   Understanding a Homeowner Association  Homeowner associations are formed within communities, buildings, or neighborhoods where properties are owned by multiple parties. The aim of these organizations is to create and enforce rules regarding the properties within their jurisdiction regarding the cleanliness and the condition of the properties and their uniform appearance. What else is a homeowners association in charge of? An HOA can also be in charge of minor tasks such as seasonal lighting, snow removal, etc.  HOAs have the legal authority to require residents to abide by the terms of the contract they signed. If the property you bought was previously in an HOA, in most cases, you’ll automatically become a member of it. That’s why getting acquainted with the HOA’s rules should be a part of your due diligence when buying a home. Failing to abide by these rules can lead to penalties such as monetary fines, the restriction of some privileges, or even legal actions.  How Much Will It All Cost You? Let’s shed some light on homeowners association fees. Depending on the neighborhood, the monthly or annual HOA fees members are required to pay usually range from $200 to $400 per month. In luxury neighborhoods, fees can go up to $10,000, while HOAs in less attractive areas can have lower-than-average fees of about $100 per month.  The prices vary depending on the city or area, too. According to a Trulia study from 2015, the lowest were in Warren, Mich ($218 per month) and the highest in New York City ($571). The same study established that older buildings entail a higher average fee due to more extensive maintenance requirements.  What Do Homeowner Association Fees Cover?  Before we get into detail, please note that this isn’t a definite list. Different HOAs offer different services to their members, so you should always check the rules of the particular HOA your (prospective) home belongs to. In this section, we’ll discuss the most common, basic services. Communal Areas Maintenance The homeowner association will usually cover the expenses of repairs in common areas, lawns, roads, and pavements maintenance, as well as snow removal. What else do HOA fees cover? It can be the maintenance of common areas, such as patios, lobbies, elevators, landscapes, and many other things. City Services Sometimes, HOAs cover certain communal utilities: trash removal, electricity for communal areas, water and sewer fees. Pest Control Residents of condominiums often struggle with cockroach infestations, and single-family houses sometimes have to deal with rats, termites, squirrels, or even rabbits that can seriously damage gardens. Having your HOA deal with pest control - especially roaches in buildings - is only logical because these insects spread from one unit to another, so getting rid of them has to be a joint effort if it’s to be successful. Insurance Condos association fees won’t cover the insurance costs for your humble abode but only for the communal areas and the exterior of the building. In case, for example, your condominium and/or the surrounding property is damaged in a natural disaster, you can lean on your HOA. But make sure to purchase homeowner’s insurance to protect your home.  Additional Amenities  We’ve listed some essential services covered by HOA fees. However, those who reside in more luxurious properties might get additional perks included in the (higher) price, such as security services or access to spas, gyms, tennis courts, swimming pools, community clubhouses. Do You Have To Join an HOA? After learning the answer to the question “What are HOA fees?” your next question is likely whether HOA membership is mandatory. With more than 350,000 homeowner associations in the US running about 53% of all properties, future homeowners don’t have much choice unless they’re lucky enough to find a home within the jurisdiction of a voluntary HOA. Voluntary HOA If you reside in a community with a voluntary HOA, you don’t have to sign up for its services. By refusing the HOA payment, you probably won’t have (free) access to communal facilities or community clubs reserved for members only. On the bright side, apart from not having to pay the steep fees, you won’t have to abide by the rules imposed by the association.  Mandatory HOA If typing “What do HOA fees cover” into the search box is what landed you here, it’s more likely than not that your real estate is in an area with a mandatory HOA. That means you will have to pay a monthly fee and abide by its rules. The good side of the situation is that you won’t have to deal with maintenance and bureaucracy yourself. However, painting your house in loud colors, keeping a zoo at home, or renting your apartment to just anyone without going through a thorough tenant screening process first probably won’t be an option.  Breaking HOA Rules  An average HOA fee is a major budget item for most families, so many people are tempted to just skip their payments. A word of caution if you’re thinking about dodging the fees and/or rules of your HOA: Penalties against rule-breakers can be harsh and might lead to legal action against the homeowner or even foreclosures of the property.  To avoid all that unnecessary trouble, take enough time to study the rules of your future home’s HOA. According to real estate statistics, home buyers spend 10 weeks on average searching for a new home, so there’s plenty of time to examine all the possible sanctions and restrictions a HOA might impose.

Becoming a homeowner is one of the best experiences one can have, but purchasing a property comes with many decisions. Finding the right home to fit your lifestyle and budget in your preferred location can seem like mission impossible. Add to that the interchangeable terms for property types, and the confusion can become mind-numbing. We’ll focus on handling one of those issues and explain the difference between a townhouse and a condo. We’ll also briefly cover other types of properties so you can walk into a realtor’s office with the knowledge and confidence you need to find the perfect place to start your new life as a homeowner. Keep in mind, though - real estate is one of those niches where definitions can vary even in theory; in real life, the line where a condo ends and a townhouse begins is even more blurred. However, once you have the basics, you’ll be able to tell one from the other much easier. What Is a Condo? In the realtor playbook, a condominium is a style of joint ownership - as a new owner, you’d be purchasing a piece of a building, which would give you exclusive access to some of its areas. Having a condo means living in an apartment building, but you own the apartment instead of renting. You also share joint ownership of the whole building with other owners, including the gym, pool, grounds, or any other common areas the building has. This solution is typically cheaper than the others, but it can also be limiting for some people. Living in a condo makes you a part of a community, but where that will land on the list of pros and cons of buying a condo depends solely on you. What Is an Apartment? Now, you’ll often hear the word ‘apartment’ used interchangeably with ‘condo,’ which can lead to confusion. However, the term ‘apartment’ typically refers to the individual units that make up a specific style of building. These units are usually occupied by tenants based on a lease. In practice, an apartment building is owned by a person or business that rents the units to carefully screened tenants and oftentimes relies on property management software or a company on call. Even though this is the main difference between a condo and an apartment, it isn’t always the case, and there are exceptions to it, too. You usually can’t tell whether a building consists of apartments for rent or if it’s part of a condominium just by looking at it, as they’re built more-or-less the same. Some modern condos look more like multi-level townhouses, which only adds to the confusion. Luckily, this is where brokerages and real estate agents can help, as it takes them a quick look into their real estate CRM to find precise information about the property you might be interested in. As mentioned before, there are always exceptions, but the main difference in the condos vs. apartment struggle lies in who owns the units in a building - those living there or landlords. What Is a Townhouse? A townhouse is a type of building: To first-time homebuyers, it’s easiest to explain by saying, “think row houses.” A townhouse shares one or more walls with other townhouses, but the owners don’t have to worry about downstairs or upstairs neighbors. You’ll also likely get your own basement, front yard, or backyard with a townhouse. Townhouses come with the convenience of a condo and some of the flexibility of a single-family home. With this type of property, you get more privacy than with the former, as it’s very close to owning a single-family home. The critical difference between a condo and a townhouse is that townhouses are more expensive. On the other hand, they’re much more affordable when compared to the price of a single-family home. In other words, it’s a reasonable middle ground, which is why this option is so popular with new homeowners. Homeowners Association (HOA) It is essential to take a moment here to discuss the role the Homeowners Association (HOA) plays with these types of properties.  When you purchase either a condo or townhouse, you’ll have to abide by HOA rules, but also cash out for HOA fees. HOA’s fees are typically higher in condos, as the HOA is responsible for most of the maintenance, which allows for a lock-and-leave mentality, where you don’t have to worry about repairs. This is another difference between a townhouse and a condo, as HOA fees for townhouses cover only a few services, such as water bills or lawn maintenance. Any repairs on a townhouse may be a bit expensive, and you might have to pay for them at a moment’s notice. Now, let’s quickly go over the remaining property types: Single-family and semi-detached homes. Single-Family Homes Single-family homes or fully detached, stand-alone properties are the dream of many wannabe homeowners, but these can be very expensive. Still, they come with much more space, privacy, and rights than the other options on this list. Semi-Detached Homes A semi-detached house shares some similarities with the townhome definition, except you get to share a single outer wall of your home with someone else, whereas with a townhouse, you usually share both. These houses are typically mirrored images of each other. So, Which Home Is Right for You? As usual, the answer is: It depends on you and, more specifically, your lifestyle. People who chose condos typically appreciate living with neighbors, sharing common areas, and take a lot of comfort from it. Not having to worry about maintenance in a condo is a nice bonus, even though it might mean paying a bit more in HOA fees each month. On the other side of the condo vs. townhouse debate are the people who appreciate their privacy more. They could also prefer the type of lifestyle that requires a backyard, for example, but cannot yet afford a single-family home.

Quite a few real estate agents have given up on the open house concept and categorized it as an archaic selling method. On the other hand, those that still use this strategy say they’ve had great success with it. So which example should you follow? Well, in our opinion, an open house is not to be underestimated - if it’s done right. But simply letting people in the door isn’t going to do much. That’s why, today, we’re going to give you all the necessary tips and tricks on how to do an open house and do it well. What Is an Open House? Before we go into more detail, we’d like to clarify what exactly an open house is, to avoid any mix-ups. An open house is a period during which a property may be shown to any potential buyers or tenants, but it can also refer to the property itself. There are also broker’s open houses, which, unlike their traditional counterparts, aren’t available to the general public. Instead, their goal is to enable real estate professionals to examine a property and assess if it would be of interest to their clients. How To Do an Open House Successfully? Do Your Research There’s a lot you can learn from your competition, so take the time to visit open houses in the area where the property you're selling is located. If you have the time, you should go to the surrounding areas as well. While attending these open houses, pay attention to how the homes are staged, what features the real estate agent in charge is focusing on, and, most importantly, try to assess the buyers’ reactions. Create a Description The second step of preparing for an open house involves creating a property description sheet. This sheet should contain information such as the property’s address, asking price, number of bedrooms and bathrooms, total square footage, photos of the interior and exterior, as well as anything else that could be relevant to potential buyers. Make sure all the information you list is correct, because errors could make you look unprofessional; as someone new to the world of real estate, you can’t afford to make a bad first impression. Stage the Property You’ve most likely heard of this term, but if you haven’t, know that staging is the process of preparing a property for sale. Before hosting an open house, you need to make it look as appealing as possible to the majority of your prospective buyers. You should focus on cleaning and decluttering the space, as well as removing any personal items such as photos, monogrammed towels, and personal knickknacks. You may also need to replace some of your old appliances. Inform People We’ve reached what’s perhaps the crucial part of this entire process: Getting people informed and interested in your open house. If you’re well-connected, this shouldn’t pose much of a problem. There are numerous excellent text marketing apps you can use to send out a text blast and notify all your prospects. However, you’ll have to resort to more elaborate open house ad ideas if you’re short on contacts.  According to the National Association of Realtors, 93% of all home buyers use the internet as their primary source of information regarding real estate. Therefore, your advertising efforts need to be aimed at: Social media platforms: Facebook, Instagram, and Twitter are the most obvious choices, but seeing as how immensely popular TikTok has become, you might want to consider using that as well. Real estate websites: Your open house advertisement should be listed on at least one or two real estate websites. We recommend  Zillow and Trulia, since they are among the most visited. Multiple listing services: If you’re an agent, you might want to join an MLS. MLSs are networks that enable brokers and agents to exchange data about properties for sale.  Your own website: Out of all the things we’ve listed so far, building a website isn’t among the most important conditions you need for a successful open house. However, if you’re planning on further pursuing a career in real estate, you should definitely think about it, especially considering the fact that, nowadays, there are numerous affordable and easy-to-use website builders available, such as Wix and Squarespace. Video sharing websites: More and more agents have begun filming video tours and posting them on YouTube and similar sites. It may seem counterintuitive, but giving people a preview of the property could actually get them to come see it in person. In addition to the internet-related advertising methods, you can also print open house flyers and distribute them at gyms, grocery stores, and large workplaces, and put up a “For sale” sign in front of the property. Be a Good Host You’ll need to be both friendly and professional. Keep in mind that your goal isn’t to make the property seem perfect - there’s no such thing - but to point out the features that make it stand out from the competition. After you’ve shown the buyers around the home, be prepared to answer any questions they may have about it and leave them enough time to explore it independently. In addition to that, try to find out about other open house listings they are looking at. You should remember to put out some refreshments as well – cookies and bottled water are the safest options. Some agents serve alcohol to get a better turnout, but we'd advise against that, since your focus should be on attracting serious customers, not anyone who just wants to take advantage of the free drinks. Lastly, make sure that every visitor fills out the sign-in sheet. Their contact information is vital for the next step in this “How to Do an Open House” guide. Stay in Touch You should never forget to send a “thank you” email or text to the people that visited your open house. Not only is it polite, but it will also enable people who may not have picked up one of your flyers or descriptions to get in touch with you. The message should include a link to your web page or ad. During the following week, you should call every one of your visitors and ask them if they are interested in the home and have any additional questions about it. If they are disinterested, thank them for stopping by your open house showing and use the opportunity to hear their opinions on how you could make the property more attractive to future potential buyers. Those serious about a career in real estate can benefit from getting a good piece of customer relationship management software. In the beginning, you probably won’t need it as much, but as you gain more contacts, you’ll see that developing a relationship with them will get increasingly harder if you don’t enlist some help to keep track of all the information. When to Host an Open House? Scheduling your open house at the right time can make the difference between two visitors and twenty. People tend to have more free time on weekends, but the best time for an open house depends on the area in which the showing is being held. In metro areas, you don’t want to organize an open house too late in the day, since the heavy afternoon traffic will most likely discourage many from coming. You should be fine if you choose any time slot between 11:00 a.m. and 3:00 p.m. Setting a time in the suburbs is less tricky. Our suggestion would be to let people enjoy their mornings and host your open house between 12:00 p.m. and 4:00 p.m. Although it may seem like a fun idea, avoid the temptation of holding an open house on a public holiday. Few will want to go through the effort of finding the time to drop by. Another thing that you should remember is that you will almost certainly need to organize several open houses to get the best possible offers. When planning several showings, sticking to a schedule will help you keep track of everything you need to do and make things less confusing for your potential customers. Note that, unlike standard open houses, broker’s open houses are typically held midweek, since agents are more available during those days. Should You Hold an Open House? Now that we’ve explained how to host an open house, let’s discuss whether you should actually do it. Pros: Exposure: Open houses are a terrific way to publicize a property. They may not lead to a direct sale every time, but sometimes the hardest part of selling a home is making people aware of it. To help with that, you should make use of flyers and internet ads to attract attention to the actual event, and then put in plenty of open house advertising effort to maintain buyer interest while they’re on the property and afterward. Attracts inexperienced buyers: A lot of first-time homebuyers don’t know where to start their home-buying process, which is why they will commonly attend open houses to ask a real estate agent for advice, see what’s out there, and perhaps even learn from other visitors. Networking: Potential buyers aren’t the only visitors you should expect at your showing. In most cases, you’ll also find real estate brokers and agents there too. Not only can they offer you useful open house tips, but they might actually have one or several clients who might be interested in your property. Lack of pressure: During private viewings, buyers can feel pressured into making a purchase, while an open house enables them to explore the home in a relaxed environment. Keep in mind that, to create such an atmosphere, you mustn’t be trying to market the home too aggressively. Convenience: If you time your open house right, you could get plenty of potential buyers who just happened to be passing by at the time of the showing and see your open house sign. On top of that, not everyone is a huge fan of technology, and many people still prefer to experience things first-hand instead of through a virtual tour, for example. Cons: Time-consuming: Whether you’ve recently become a real estate agent or you’ve decided to sell your home on your own, keep in mind that marketing, preparing, and presenting a property takes a significant amount of time and research. Low selling chances: As we’ve already mentioned, many real estate agents don’t believe that open houses work. The truth is that most serious prospective buyers will usually opt for a private viewing instead of a group one. Security risks: Unfortunately, one of the main downsides of an open house event is that criminals often use them to explore a property without raising suspicion or being supervised. The odds of a post-open-house break-in increase in situations when the home is vacant. What’s more, you’ll have to look out for any attempts of theft during the event as well, as large crowds make it nearly impossible to find the culprit afterward. Hobbyists and curious neighbors: For some, occasionally visiting open houses is a kind of hobby, especially when high-end homes are concerned. While conducting your open house follow-up, you might also discover that some of the people you had met were just inquisitive neighbors who wanted to compare the property to their own. Obviously, none of these individuals will be interested in making a purchase, and they aren’t very useful as future contacts either.

People who aren’t familiar with the real estate terminology quickly get confused by all those titles, licenses, and requirements they come across once they decide to sell their property and find someone to help them with it. Although, in everyday speech, many of these terms, such as real estate agent vs. broker vs. Realtor, are used interchangeably, there are, in fact, differences among them, and each of these real estate professionals needs to have a different skill set.  In short, the main difference between an agent and a broker lies in the fact that agents must work under a broker, while brokers may operate independently. Real estate agents take a commission of a successful sale, out of which a percentage goes to the broker they work for, while brokers take both a percentage from their agents and a commission from their sales. Finally, a Realtor is anyone belonging to the National Association of Realtors. Now, since this is a very broad explanation, let’s get into what each role entails in more detail. What Is a Real Estate Agent? The real estate agent is typically the person people rely on when deciding to buy or sell a property. Also known as real estate associates or salespeople, agents meet with clients, list properties, host open houses, and handle everything else in the process of finding a new home for their customers.  It's also the title anyone looking to sell houses will likely have at the beginning of their real estate career.    How Do You Become a Real Estate Agent? Each state has its own set of requirements for becoming a real estate agent, from age and education level to strict background checks. However, regardless of the state, the steps for obtaining a license are the same - if you want to become a real estate agent, by definition, you have to take a prelicensing course and pass the licensing exam. Once you get your license, you’ll have to activate it with the state’s real estate agency.  After activating their license, agents can start searching for the right brokerage to work with. It's essential to choose the brokerage with fair commission splits an excellent lead generation set in place. Brokers achieve this by assigning this duty to one or more of their employees or by purchasing a subscription at one of the best lead generation companies.  Once they have a brokerage and their leads, agents can go ahead and help their clients sell or buy their homes.   What Does a Real Estate Agent Do? There are several roles agents can fulfill. Depending on whom they represent, agents can be listing agents, buyer’s agents, and rental agents. Each of these specialists has their own set of responsibilities to help their clients make a sale or purchase they’ll be satisfied with. A listing agent represents home sellers and is there to help them through every step of the process, including pricing and marketing the home, hosting open houses, negotiating with buyers, and navigating closing procedures.  The closing procedure is where the difference between a real estate agent vs. a broker is most noticeable to clients. At this point, the brokerage will step in and handle the legalities, hold the money in escrow, and help with the paperwork needed to seal the deal. On the other side of the deal, there’s the buyer’s agent. Buyer’s agents are responsible for finding the right home for their clients, negotiating the offer, and troubleshooting potential problems. The third role a real estate agent can take on is the role of the rental agent. These agents usually help prospective tenants find and lease their new homes or commercial property. They can also help landlords who have trouble finding and screening prospective tenants on their own. What Is a Real Estate Broker? A broker is someone who has started as a real estate agent but has completed additional training and obtained a real estate broker’s license. This additional license allows brokers to work independently and hire real estate agents.   How Do You Become a Broker? Just like with agent’s exams, each state has its requirements for becoming a broker. The courses typically go a bit more in-depth than the regular real estate agent’s, but they cover similar topics, such as contracts, taxes, and insurance. Within these courses, brokers also get familiar with the relevant laws and regulations and how to legally approach issues that may arise in construction, property management, and operating a real estate brokerage.  What Does a Real Estate Broker Do? All brokers have the primary goal of finding new leads and clients. All parties in a brokerage are responsible for maintaining relationships with their leads/clients, either in person or with some help from real estate CRM software. Depending on their other duties, real estate brokers can be associate brokers, designated, and managing brokers. Associate brokers are those who have a license but are working under another broker. In this instance, an associate’s responsibilities are similar to an agent’s, as they typically don’t supervise agents - that’s the job for principal brokers, also known as designated brokers. Every real estate brokerage has a designated broker, and their job is to supervise agents and ensure that they are operating in accordance with the law. The third type of broker is the managing broker. Managing brokers oversee daily operations in a real estate company. They are responsible for handling transactions, hiring new agents and training them, and managing any other administrative staff employed at the office.  What Is a Realtor? The last title that can be somewhat confusing is the title of Realtor. A Realtor, by definition, is anyone who is a member of the National Association of Realtors. Both agents and brokers can be Realtors, but other real estate professionals, such as appraisers and property managers, can also become members. All members must strictly adhere to the NAR’s Code of Ethics. 

If you have a detailed and signed lease with tenants who follow it to the t, you’ve hit the landlord jackpot. It’s not always that easy, however - many landlords have shaky relationships with their tenants and will often find themselves in situations where an unpleasant confrontation is unavoidable. A tenant’s lease ending can be very frustrating for a landowner. There will be those unicorn tenants whose lease landlords will be happy to renew. More often, however, “How long can a tenant stay after the lease expires?” is just one of those questions a landlord might ask themselves with a tenant lease near expiring. The best route is to contact your tenants even before the lease expires and discuss with them whether you would like to have them stay or figure out whether they’re planning on leaving. Starting the process early will give you the time to attract new tenants if your property becomes vacated. But if it’s already too late for that, here are the answers to some common questions that might be keeping you and other landlords up at night. What Happens When a Rental Lease Expires? As mentioned before, this typically depends on your relationship with the tenant. If they were a good renter, you might consider renewing their lease. Otherwise, you could continue to accept rent from them without a lease agreement, which would be viewed as a tenancy at will - something we will discuss further below. Finally, you can start the eviction process, but that can be troublesome and time-consuming, so avoid it whenever possible. Smart landlords typically set up a clause in the lease on what happens after it expires. It can stipulate that the lease is automatically renewed or switch the tenant to a month-to-month agreement. If no such agreement is established, tenants turn into “holdover tenants.” What Is a Holdover Tenant? By default, as soon as their lease expires, a tenant becomes a holdover tenant. However, this is far from optimal for landlords - you’ll want to avoid having holdover tenants and redefine their tenancy within some kind of agreement. Without a lease in place, there’s not much to protect either party if anything goes south. Ambiguous leases are also very unhelpful. Some tenants will try to pay rent even after the lease expires, and you should avoid accepting that before putting the terms in writing. If you do take the rent, you expose yourself to several risks down the road. People whose lease expired and are still paying rent fall into two categories: Tenancy at sufferance and tenancy at will. Tenancy at Will This category entails paying rent and living on a property without a lease but with the landlord’s approval. It is a tricky position to be in for both landlord and tenant, as, just like the name suggests, either party can change their mind at any time. Tenants can stop paying rent and vacate the premises, and the landlord can tell them to leave by serving them an eviction notice with no warning. This term is sometimes used interchangeably with a month-to-month lease, but renting month-to-month after the lease expires is still commonly regulated by some type of written agreement that states how long the state can last or the conditions under which the lease ends. Tenancy at Sufferance Tenancy at sufferance is a situation that often ends badly, as it means that the tenant pays rent and occupies the property against the landlord’s wishes. If you, as a landlord, don’t want the tenants to stay, but they are staying anyway, you shouldn’t accept rent, as it can complicate the situation if you are forced to start an eviction process. After all, you shouldn’t have to accept “forever” as the answer to the “How long can a tenant stay after the lease expires?” If your tenants remain on your property against your wishes, you should refuse to accept money or extend the lease, thus making the tenant a trespasser on your property. This will help you prove that you don’t want them there if the situation escalates. How can the situation escalate, you might wonder? The tenant might up and leave, leaving you with unpaid rent. While you can overcome this situation relatively easily by going to a small claims court or hiring a collection agency, there is a worse situation to be in - the one where the tenant refuses to leave after the lease expires. How to Get Tenants to Vacate the Property If a landlord doesn’t want the tenant to stay on the property any longer, there are two approaches to solving this issue.  Offer Them Cash for Keys Before starting an eviction, which on average costs $3,500, to get your property accessible for rent again, you might want to try the good old cash-for-keys solution. It may not be legal in your state, and it requires some negotiating, but it is undoubtedly the cheapest option in terms of both time and money. You would be offering your tenants cash to move out, and if they accept, you will be able to rent out your property to someone else sooner than you would with another solution. If you are comfortable paying the tenant who stays after the lease expires to vacate the property, make sure to put the terms in writing and not pay up before your former tenants move all of their belongings. There have been many instances when personal belongings created problems for both tenants and landlords. Starting the Eviction Process While, as a landlord, you might be considering eviction first, we’re leaving it as a last resort. Each state has its laws on eviction, so it can be challenging to estimate whether eviction is the right step to take. Some state laws favor tenants, other landlords. It would be advisable to hire a lawyer, or at least inform yourself of the applicable eviction laws in your state. If your question is: “How long does it take to evict a holdover tenant?” the answer can range anywhere from a few weeks to a few months, and it depends on the tenants’ rights. The first step is typically serving the tenants with an eviction notice, which they will hopefully abide by, and leave your property. If not, the landlord needs to promptly file an official complaint with their local rent court after the notice expires. After this, the eviction court hearing date will be set, and it would be best to have a lawyer accompany you there. Eviction after a lease expires can be very unpleasant, which is why the better-safe-than-sorry approach is crucial when choosing tenants. It is always recommended that landlords perform a detailed background check on their prospective renters beforehand. Writing a clear lease that leaves nothing to chance and ensuring that your tenants are familiar with the terms before they move in are keys to a happy landlord-tenant relationship. Summary To sum things up, as a landlord whose lease with the tenant is soon to expire, you certainly have many options. You can try renewing their lease in one form or another, offering cash for keys so that they will move out faster, or try to evict the lease-expired tenant who won't leave. The best way to handle any stressful situation with your tenants is to be proactive about things and prevent any unpleasantness. Screen your tenants, create a thorough lease that works for both parties, and approach any case involving your tenant with an open mind: Having an honest conversation with your tenant and finding a win-win solution together trumps any other option on this list.

Renting out property can be a great source of income, but it isn’t always smooth sailing for the landlord. Aside from rent collection and potential disputes over maintenance costs, there are a few other scenarios that can complicate the landlord-tenant relationship. One of these is guests overstaying their welcome.     These are individuals who stay at a property for an extended period of time without the landlord’s explicit permission. That’s why it’s important to answer the fundamental question: when does a guest become a tenant?   Everyone has friends that need a place to stay while they’re between jobs or family members that fall on hard times. But the lease should always reflect the presence of individuals who are living at your property for several months. After all, these long-term guests are a liability for both the tenant and the landlord. Keep reading to learn how to identify and deal with these situations.  Guest vs. Tenant - Is There a Difference? Tenants typically have a lease or at least a verbal agreement with the landlord, which obliges them to pay rent and permits them to make maintenance requests. Guests don’t. A guest visits occasionally and doesn't have any financial or legal obligations. Depending on their agreement, tenants can welcome guests and allow them to stay over for a certain period of time without the landlord’s approval.  The lines get blurry when the term “occupant” comes into play. While some see occupants as anyone staying the night, the main difference between a tenant and an occupant is that the latter might reside at a property, but the obligations of the lease still fall exclusively on the tenant.  Occupants are most commonly children. You aren’t under any legal obligation to add them to the lease, and they cannot be treated as tenants. Whatsmore, everyone is clear about the fact that they are covered by the tenant’s rent.      Guests, on the other hand, can overstay their welcome, especially if the costs of them living on the property start piling up. So whether you want your partner or an old college buddy to stay at your place for a while, it’s important to ask: how long can a tenant have a guest?.  Here, it’s important to make a distinction between a few scenarios that may cause confusion. For instance, if a college student comes back home every winter/summer break but always returns to school when the vacation is over, he is just a guest. However, if someone moves in because they’re no longer in school, that person becomes a tenant. Also, anybody visiting their children or helping out with a newborn is a guest. That’s not the same thing as an elderly person moving in with relatives because they’re incapable of living on their own.  How Many Days Can a Tenant Have a Guest Visiting in the Home? The answer to this question usually depends on the agreement between the landlord and the tenant. The rules should be outlined in the guest policy section of the lease. Most landlords don’t allow guests for more than 14 days during a six-month period. However, landlords can have stricter rules, and it’s within their right to put them in writing. And while most property owners will request permission to conduct a thorough screening of their tenants, this isn’t an option with guests due to existing legal constraints. That’s another reason why communication with the landlord is essential. Tenants who plan to host someone for a longer period of time should get prior approval from the landlord. How and When Does a Guest Become a Tenant?   The most common way for a guest to become a tenant is by adding their name to the lease. However, in practice, the courts can recognize many different circumstances as proof that a guest is actually a tenant. For example,  if a landlord accepts money or another kind of compensation from a guest for their stay, the guest automatically earns the rights of a tenant. Additionally, if someone enters into a verbal agreement with the tenant and is covering part of the rent, they can be considered tenants. In some states, any guest who stays for longer than two weeks is considered a tenant by default.  Can a Landlord Prohibit Guests? Technically, landlords can’t prohibit their tenants from having guests over. However, they can add sections to the lease that cover the tenant’s rights concerning visitors. But there are a few other factors to consider. For example, federal occupancy laws tell the landlord how many people are allowed to stay in each bedroom, while zoning laws can even limit the type of relationships that those renting in certain areas can have.  That said, most landlords don’t really care how many guests the tenant has as long as they don’t receive noise complaints from neighbors and there isn’t any illegal activity going on like drug use. If any of these guests are thinking about establishing residency in a home, the landlord needs to be notified, and the lease agreement needs to be updated.    Talk to the Tenant  Every situation is different, and the landlord needs to be open to the tenant’s side of the story. The guest can be a family member or a friend who needs a place to stay until they get back on their feet. It could be someone trying to escape an abusive relationship or a special somebody who wants to move things to the next level, but the tenant isn’t sure about adding such an occupant to a lease yet. After talking to the tenant, the landlord can do a number of things depending on the situation: Add the Guest to the Lease If the tenant is willing to allow the guest to stay on the property, then the best course of action would be to add the guest to the lease. It’s vital to integrate long-term guests into the agreement so that all those living in the property are liable for what happens there. The lease agreement protects all the parties. If the guest is having mail delivered to the tenant’s address, bringing in their furniture, or parking the car in the unit’s parking spot, it’s time to add them to the lease and increase the rent to cover an additional person living on the premises.  This isn’t a violation of the tenants’ rights to have guests. It’s just a way of binding people living on the property to the terms of the lease. If the tenant shares the landlord’s concerns about their guest’s long-term stay, they may decide to take on the role of the landlord and evict the guest themselves. Of course, if the tenant doesn’t want to agree to any of the aforementioned options, he is effectively breaching the terms of his lease, which is grounds for eviction. Evicting the Tenant If tenants continually host occupants who are not on the lease and who aren’t covered under the terms of the original agreement, landlords have little option but to evict them.  Landlords can serve their tenants with an eviction notice for breach of lease because of unauthorized guests, though this can be hard to prove in court. The best course of action is to serve the tenant with a notice of non-renewal, which tells them that you won’t be renewing the lease. If the tenant is paying rent on a monthly basis, you could have them out before the start of the new month. All in All Communication is usually the key. However, if the landlord and tenant can’t come to an agreement, the landlord should consult with a lawyer. Considering the fact that each state has its own laws on tenancy, legal advice may be necessary in order for the landlord to resolve the situation. In some cases, the best solution may be to come to a temporary house guest agreement that benefits all parties.

If you are renting out residential property such as a house, apartment, or vacation cottage for the first time, you may expect that your homeowners’ insurance will cover all the costs in case of a natural disaster, accident, or any other damaging event. Such an assumption is a recipe for disaster. Luckily, there is a type of coverage for landlords that can protect you from all threats related to renting out a property. But what is landlord insurance, how does it work, and do you actually need it? Keep reading to find out. Why Do You Need Landlord Insurance? Landlord policies offer protection similar to homeowners’ coverage, such as dwelling insurance in the event of a fire or burglary. The main difference between the two types of insurance is that most homeowner policies only apply to owner-occupied properties. Should you start renting out your real estate to someone else, the coverage will no longer apply. Landlord policies are uniquely written to protect you against risks you may face as a rental property owner, such as injury liability or loss of income. Considering that tenants are rarely held liable for significant appliance malfunctions, burglaries, or forest fire damages, you could be left with serious consequences caused by such misfortunes. Therefore, getting landlord insurance makes a lot of sense. Still, given that these policies come in many different shapes, we advise that you take your time to figure out what you need to ensure that you get the right landlord insurance policy. Types of Coverage for Landlords Based on the length and frequency with which you rent out your property, there are three main types of insurance policies for landlords: Policies for long-term renters: Also called a rental dwelling policy, a long-term renter’s policy is designed for homeowners who rent out their house or apartment for a minimum of six months on end. Although similar to homeowners insurance, this type of insurance is designed to protect you against losses you may face as a result of hosting a tenant for an extended period. Policies for occasional short-term renters: Property owners who rent out their primary residence for short periods and only occasionally may not need to buy additional landlord home insurance, provided that they have an existing homeowners policy. They need to confirm that coverage with their insurance company, though, as some insurers require an additional rider when the home is rented out, even though the coverage type still falls under the homeowners’ insurance category. Coverage for frequent short-term renters: Homeowners who rent out their primary residence regularly for short-term periods (e.g., Airbnb hosts) are typically labeled as business owners by their insurance company. In these situations, property owners cannot count on traditional homeowners insurance policies. Instead, they need to find a good commercial policy for their rental property insurance needs. What Does Landlord Insurance Cover? Most landlord policies come with three core protections: Property damage: Much like dwelling coverage offered by home insurers, landlord insurance protects you in the event of damage to the structure or furnishings of your home due to perils such as a natural disaster (fire, wind, hail, snow, or earthquake), electric/gas malfunctions, vandalism, or irresponsible tenants. Here’s a piece of advice - try and get a policy that covers replacement costs instead of providing a predetermined lump sum of cash or the actual cash value (especially if your furnishings and appliances are old). Note that landlord insurance for a rental property typically doesn’t cover your tenants’ belongings. Liability protection: Your landlord policy's medical coverage or liability clause covers medical or legal costs associated with injury claims made on your property due to a property maintenance issue (such as an insect hive or an architectural collapse). Furthermore, this type of insurance can also come in handy if a landlord is found responsible for damage to the tenant's property. Loss of rental income: Also referred to as rental default insurance or rental reimbursement, this clause in your landlord policy protects you from losing income if your property is damaged and uninhabitable due to a fire, severe storm, rat infestation, or severe case of mold. While most policies for landlords offer this type of coverage, it’s better to be safe than sorry and ask your insurance agent if rent-loss insurance is included in your policy. If not, make sure to add it as an optional rider. Additional Coverage There are a few more common riders that help form comprehensive landlord insurance policies. Although not as important as the aforementioned provisions, these optional endorsements could come in handy and potentially save you a lot of money in the long run. Here’s a list of the most popular optional riders offered by most insurance companies: Guaranteed income insurance: Unlike rent-loss insurance, this type of endorsement covers the landlord if a tenant doesn't pay the rent for one month or comes up short on the payment. Even if you take the time to perform a credit check and background screening for your tenants, you can never be completely sure that they’ll always make rent on time. Flood insurance: Keep in mind that some landlord rental insurance policies don’t include flood damage related to municipal plumbing or natural disasters, so opting for this rider can prove invaluable for properties in a flood-prone zone. Additional construction expenses: Also referred to as building code coverage, this type of protection will cover the expenses of bringing your building up to current codes after it has been damaged. Emergency coverage: This protection type comes in handy if a tenant asks you to do minor repairs or gets accidentally locked out of the property. You can use the emergency protection rider on your rental home insurance to cover some or all of the costs of getting to the property and resolving the issue. Non-occupied dwelling endorsement: If your property is uninhabited for more than a month, note that your insurer may deny you coverage for any claims that arise while the home is empty. Adding the non-occupied dwelling rider will extend your coverage to cover periods of vacancy. Creating a Real Estate LLC A real estate LLC deals with buying, selling, or renting residential and commercial properties. Creating an LLC for a rental dwelling is a smart choice for any property owner, as it can also work as a type of landlord’s insurance for the rental property. Not only does a limited liability company structure separate your business and personal assets, it reduces the owner’s liability and comes with the benefit of pass-through taxation. Another great thing about turning your rental into an LLC is that it’ll give you more credibility when approaching new partners or clients - no matter if you work as a real estate professional or just have a single property you want to rent out. How Much Does Landlord Insurance Cost? Now that we’ve answered the question “what is landlord insurance,” it’s time to talk about the cost of this coverage type.  According to a report by the National Association of Insurance Commissioners (NAIC), the average cost of homeowners insurance was $1,211/year in 2019, although the prices varied widely from state to state. However, given that rental properties are more prone to accidents and damage, you shouldn't be surprised if insurers ask 15% to 25% more for landlord coverage than they would for homeowners insurance of the same property. Here’s a tip for shopping around for landlord coverage: Remember to ask your home insurance provider for bundle options. If you sign up for homeowners’ and landlords’ insurance through the same company, you may be eligible for a discount.

If you’re facing potential property foreclosure, one of your many worries is probably what happens to the tenants currently renting it. Will they be evicted? Can they sue you? You’re not alone - with one in 12,448 properties in the US getting foreclosed, this scenario is far from uncommon. That’s why it’s always advisable, not just for the tenants but for the landlords as well, to get acquainted with the topic and learn what happens to tenants when a property is foreclosed, their rights and obligations in such cases.  What Is a Foreclosure and How Can You Avoid It? No one wants to see their property foreclosed. There are various ways in which you can attempt to avoid it. The good news is that house foreclosures typically don’t happen overnight. Instead, the process can take up to a year or even longer, allowing landlords enough time to find a more palatable solution by, for example, resorting to debt consolidation. Like any foreclosure, foreclosure on a rental property typically happens when the homeowner has violated the terms of a mortgage loan, either by failing to make timely payments or by defaulting. It is, in essence, the repossession by a mortgage company of a property that is being leased to a third party.  What happens in foreclosure is that the homeowner receives the legal foreclosure notice, after which the property is seized and sold at a public auction. The mortgage companies can start the process as early as 60 days upon a missed payment, which is why it’s vital to stay on top of your mortgage payments.  Foreclosure can be avoided provided that the landlord takes action as soon as possible. This is, altogether, the least painful option not just for the homeowner but for tenants facing eviction from a foreclosed home as well. One of the first things you can do is contact the mortgage company and try to reach an agreement to avoid foreclosure. You may also not be aware that the Coronavirus Aid, Relief, and Economic Security Act, passed by Congress to help people get through the COVID-19 pandemic, allows homeowners to claim forbearance and freeze their monthly mortgage payments for up to 12 months.   However, if foreclosure is imminent, it’s important to know the exact tenant rights when the landlord is in foreclosure and what role they have in the process. After all, these tenants have most likely been carefully selected through thorough tenant screening procedures and have been regularly paying their rent. One could argue that their indignation at the prospect of being evicted is entirely justified. That’s why in the next section, we’ll go into detail about the legislation protecting tenants’ rights, possible sanctions awaiting landlords, and what you can do to avoid them. Heads-up: Being open and honest in your communication is the best way to handle the situation. The Protecting Tenants at Foreclosure Act of 2009 From 2009 until 2014, the PTFA regulated these situations, with the principal premise being that the lease comes first. Under this act, regardless of what happened with the property, including foreclosures, the lease terms were to be followed in full. Even month-to-month tenants and renters without a lease were covered, as the new buyer had to provide them with a 90-day notice before asking them to move out. There was a slight exception for people looking to live in the property they bought at a foreclosure sale that was already occupied by a tenant. Namely, what happens to tenants when such property is sold is that the new buyer, although they are obliged under the PTFA to issue them the same 90-day notice (the notice length is even longer in some states), doesn’t have to wait for the lease to expire.  There is also the “cash for keys” option that new owners might offer renters. Within this deal, renters would get paid to vacate the property early. Note that, in some states, the new owner must initiate an eviction proceeding against the renter - and it takes a judge’s warrant to start the eviction process. No one would be able to hold this eviction process against the renter for renting a foreclosed home, which is important to note if one is worried about having an eviction on their public record. In fact, in some states, such as New York and Illinois, the records are sealed so that no one can use the fact against the renter, and it won’t come up even in the best background checks. Using the information against the tenant in the future is also prohibited by the law. The Abolishment and Reintroduction of the PTFA When the PTFA was done away with in December 2014, many were left wondering or even panicking about being a tenant in foreclosure, as the rules depended mainly on the state the renter lived in. The main understanding was that if the original landlord sold the property regularly, the new owner must respect the lease, but that the lease would end in case the property was foreclosed. Luckily, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law on May 24, 2018, brought back the PTFA permanently. Many misconceptions circling the internet and outdated information caused some panic, but in reality, the PTFA still protects tenants’ rights in  foreclosure.  What Are Tenants’ Obligations During a Foreclosure? As mentioned before, foreclosures typically don’t affect tenants until eviction notice goes into effect. In this light, tenants are still obliged to pay rent on the property, and the landlord, in return, is still obliged to make repairs and maintain the property in a habitable condition.   However, in particular circumstances, a receiver might be appointed to handle the tenant-landlord agreement while the foreclosure is in progress. In those situations, the receiver takes on the landlord’s duties, including collecting rent after foreclosure, managing repairs, and other tasks usually handled by the landlord or property management company. Occasionally, the new owner of a foreclosed home doesn’t even establish any kind of communication with the tenant, which can pose a problem, especially with maintenance. Under these circumstances, the new landlord still has the right to collect the rent and any repair receipts. This way, the tenant can negotiate the costs of repairs against the rent due with the new owner.   Further Reading When Does a Guest Become a Tenant? What Is a Sublet, and Should You Be Subletting Your Place? “How Long Can a Tenant Stay After the Lease Expires?” and Other Questions About Holdover Tenants Communication is Key Since what happens in foreclosures is not pleasant for either the landlord or their tenants, good communication between the two parties is essential.  One of the tenants’ legal rights is to sue the old landlord in small court for any expenses they may have to pay to relocate, such as moving costs or the difference between the rents for the remaining months of the lease. You might be able to avoid this if you inform your tenants of foreclosure as soon as possible and try to communicate a solution even before the official process.

Property management is an excellent business niche for more than one reason. The requirements for starting and succeeding in this industry are not high, and one doesn’t need a sizable up-front investment or years of experience in the field. However, as is the case with any business endeavor, there are several things one should consider and do to ensure success. So, if you are wondering how to start a property management company properly, let’s get right on it. Below, we’ll cover everything you need to know about starting such a business - from what property management is to how to draft a business plan - so that you can confidently make this your career path. What is Property Management? Property management involves managing and overseeing one or more properties. It could be any kind of housing: residential, student, commercial, or community association. Most of the time, the duties coincide with those of the landlord or the property owner. However, not everyone has the time, experience, or will to handle the tasks themselves. Some of the responsibilities property management companies can take off landlords’ plates are marketing rental units, hosting an open house, or simply showing the property to prospective tenants and collecting their applications. Screening new tenants and getting the paperwork set up for the selected ones is another service these companies can provide. Once a tenant moves in, the property manager is the one responsible for collecting rent, handling maintenance, and inspections. If you are up for it, let’s talk about how to start a property management company in more detail. Here is a step-by-step guide you should follow to ensure your business gets off the ground. Step 1: Legal Structure  The first step is establishing the legal structure of your business. Typically, these firms are founded as limited liability companies (LLC). Occasionally, they can also be registered as incorporated businesses (Inc.). You can accomplish this task online yourself or hire a respectable LLC service company to handle it for you. If you can fit it into your budget, going with a service provider is the better choice because it will save you a lot of time.  Step 2: Business Plan This is probably the most daunting task you’ll encounter on your way to a successful property management business. However, drafting a business plan early on will help reach your company’s goals as it will keep you focused and make you take a systematic approach to what needs to be done to get everything up and running.  You’ll want to ask yourself some critical questions as you embark on this journey. For instance, what kind of services will you provide to your clients? Should you focus on a specific type of property? How should you handle maintenance? Once you get these answered, you’ll have a clearer picture of what you need to do to have a successful property management company.  If you are worried about what should be included in a formal business plan, Small Business Administration (SBA) lists the following sections as must-haves: Executive summary Company description Market analysis Organization and management Service or product outline Marketing and sales Funding request Financial projections Appendix  You should consider reading up on all the SBA’s business plan guidelines if you are writing such a document for the first time. Alternatively, you can hire someone to write it for you.  Step 3: Employees When starting a property management company, you’ll likely be your only employee until you begin getting paid for your services. Once the business starts bringing in money, you’ll be able to hire someone to help you out with the workload. As you might not be able to afford a big team, at least not at first, you should think about what fields of expertise your company would benefit the most from. Also, it could be cost-effective to have external service providers handle certain operations for you. Hiring an accountant or subscribing to a good accounting and bookkeeping online service is something every “How to start a property management company” guide should advise you to do. A good accountant is a must for every business, regardless of how small it may be. You’ll also need legal services as you’ll want to make sure your company’s operations comply with the law. That’s why having a real estate lawyer in your ranks or signing up for online legal services should be another priority. Once you have the essential services pinned down, you should go back to your business plan and determine whether you need more employees and whether you need them to work full-time, part-time, or per contract. Don’t worry; by the time you have a big enough budget to start hiring people for your property management firm, you’ll know which aspects of the job require a full-time commitment and which need attention only once in a while. Once your business starts expanding, you can hire additional property managers, payroll and accounts payable clerks, showing, move-out, and service coordinators, and leasing agents. If you plan to advertise your services online, you should consider finding reliable marketing experts and IT professionals.  Step 4: Technology Speaking of IT, you should keep in mind that there are plenty of programs - some of them even free - that could handle certain tasks for you. Therefore, it would be wise to dedicate some time to exploring property management software solutions, as these could take a lot off your plate and help you provide better property management services. The best ones will allow you to manage your business with just a couple of clicks. Many other solutions will prove invaluable when you can’t yet afford an entire team. If you don’t have a lot of paperwork to handle, you can take advantage of free accounting software, for example. Once you start hiring people, you should consider payroll software, too.  Finally, it would be best if you also went for one of the marketing tools available online. Putting up your business’ website yourself with the help of a good website builder can save you a lot of money, which can then be used for paying for the services you can’t handle on your own. Step 5: Pricing Structure Determining the prices of services your property management company will provide can take some time, as you need to work many details into the calculation. You need to earn enough money to keep your business not just afloat but growing further. First, you should consider your competition’s pricing plans and use them as a point of reference. When you’re just starting, your prices need to be competitive. On the other hand, you need to earn enough to cover the expenses of running your business.  So, to determine the pricing structure when setting up a property management company, your first step should be to go undercover and give the competition in the neighborhood a call to get informed about their price ranges. Once you estimate the standard prices in your area, you will get a better idea of how much you should charge for your services. Keep in mind that whatever you calculate in, you must not forget that you should never compromise the quality of your services. Your good reputation is your main selling point, as this business is all about trust and relationships. So, even if you have to charge a bit more to provide a better service, don’t hesitate to do it, as this is the key to professional property management. To help you format the pricing structure, we’ve laid out some of the most common fees property management businesses charge their clients. Setup Fee   This is a typical fee most service providers include, and this niche is no different. You would apply the setup fee when you sign up a new client, and the amount usually goes up to $300.  Leasing Fee Another one-time payment, a leasing fee is something you should charge for getting a vacant property leased. Most companies charge the equivalent of one month’s rent or at least half of it, and the amount should be clearly stated in the property management agreement. This fee covers numerous services provided, starting from listing a vacant property to you using one of the tenant screening services to find the right person to move in. Lease Renewal Fee  You should consider adding this optional fee to your pricing structure, as it covers renewing the lease with an existing tenant. It is typically up to $200. Eviction Fee  Another optional but strongly recommended fee you should consider adding to the list is the eviction fee since you can be called on as an official representative if an eviction process involving the property owner is set in motion. Ongoing Management Fee  This fee is the one that will keep your business in property management growing. It’s essential to include it in your pricing plan as it will cover all the daily operations, from collecting rent and conducting inspections to handling repair or maintenance requests. A set percentage of the monthly rental income is used to calculate this fee, going anywhere between 3% and 10% - the actual rate typically depends on the local market.  Step 6: Marketing Strategy Once you get the basics down, you need clients. Figuring out your marketing strategy is not going to be easy, but it is one of your business’ aspects not to be disregarded.  For example, as we’ve mentioned before, you’ll need to set up an online presence and start advertising. After all, if someone is looking for property management firms, they will most likely do it online. Also, your website will be where your commercials and marketing efforts will lead to, and having a good one will add immensely to your credibility. If you’re on a tight budget, you should think about making it yourself. There are many great website builders available online. You might need to roll up your sleeves a bit, but considering how expensive some companies providing these services are, it is certainly worth the effort. Still, if you want to ensure your website is done professionally and you have enough funds, hiring someone to create one that will be not only pretty but also useful is a good path, which many entrepreneurs in the property management industry take. Of course, your site’s primary purpose will be attracting new customers and allowing them to get in touch with you quickly.  You’ll also want to have someone create and implement an online marketing strategy, manage social media campaigns, and use all other available promotional tools to increase your online visibility and reach as many landlords and owners as possible.  Step 7: Networking While online marketing is a must, don’t forget that networking is the easiest way to gain new clients and sign them up for your services. If you are running a commercial property management business, you should pay a visit to your local business organizations. Establishing good relationships in such places will undoubtedly lead to your services getting heard of and recommended to a number of prospective clients. Also,  It would help if you got in touch with local real estate clubs and contractors. With every new customer, your business will prosper. That is why it is fundamental never to stop networking, thus finding new clients and properties, but also ways to provide better service and keep your old clients satisfied. Further Reading “How Long Can A Tenant Stay After The Lease Expires?” And Other Questions About Holdover Tenants When Does a Guest Become a Tenant? What Happens to Tenants When a Property Is Foreclosed? What Is a Sublet, and Should You Be Subletting Your Place? The Costs of Starting a Property Management Company Starting a business in this field is not an expensive endeavor, as it usually takes between $2,000 and $10,000. While it might sound like a nuisance, it is crucial to keep track of every expense you make from day one. By doing so, you will be able to set financial goals and stay out of trouble.  The most common expenses you will incur as you build your company are administrative ones, including salaries and benefits (along with payroll taxes), office supplies, and various services such as advertising or legal counsel. The price of any software you might use to help you get started is not to be forgotten either. Getting a Property Management License In the US, whether you need such a license usually varies from state to state. Most of them won’t require you to get a license or any other advanced degree. However, getting a real estate or property management certification will undoubtedly prove useful on your way to success.  Many US programs offer courses for licensed agents to get property management certification. Although these are by no means mandatory, completing some of them is also bound to help you learn the ropes of the business.

Whether you’re temporarily relocating because of a dream job or going on a summer holiday, subletting is a great way to make back some of your rent money. So what is a sublet arrangement, and what exactly does it involve?  Unfortunately, not everyone has the right to sublet their apartment. Before renting the property to another party, make sure you aren’t breaching the terms of your lease. These agreements are legally binding, and breaking a lease can get you evicted or have other serious consequences.  To find out more about the potential pitfalls and what it takes to be a short-term landlord, check out the following guide.   What Is Subletting?   Also known as a sublease, subletting is when a tenant rents out either all or part of the property to a third party before the original lease ends. So what does a sublease mean for cash-strapped renters? In short, it can be a beneficial arrangement for those looking to redeem some of their rent money. Renters can make back up to 80% of the cash they are spending on the lease.      Although there are leases that don’t permit subletting, most simply require you to notify the landlord and get approval for any changes. If the original lease agreement makes no mention of subletting, it’s usually permitted, but it’s always better to get your landlord’s permission in writing.  The best way to shield yourself from any legal entanglements is to ink a sublease agreement with both the subletter and the landlord. This is especially useful if the tenant’s contractual obligations under the original lease agreement include covering the costs of any damage to the property. Additionally, an in-depth background check of potential subletters is a good way to root out those who have a history of not paying their bills or people on sex-crime registries.  How to Sublet an Apartment? If you decide that subletting your apartment is the way to go, there are a few other things to consider. Subletting can be an excellent solution, as long as you are well-informed about the entire process and don't rush into things. Here is a complete checklist you need to cover before entrusting your place to someone else. 1. Re-check your lease agreement The first step is reviewing your existing lease. You need to make sure you are allowed to sublet the property and under which terms. Keep in mind that individual states have their own laws when it comes to subletting.  Any constraints on subletting the apartment should be outlined in your original lease agreement. That’s why it’s absolutely essential that you read it thoroughly before embarking on this journey. And even if your local municipality permits subletting, your landlord may have his own reasons for prohibiting the practice. In such instances, it’s probably best to explore alternative options. 2. Call Your Renter Insurance Company Before subletting, check whether your renter's insurance extends to subtenants. Some insurers do cover sublease apartments, in addition to providing standard coverage for your belongings in case of theft. If yours doesn't, and you can't sign up with those that do, then it’s probably a good idea to remove your personal belongings from the apartment you're subletting. Keep in mind that you are the one who paid the security deposit. In other words, the money from your pocket is covering any damage to the property unless you get adequate insurance.  3. Market the Apartment Next, it’s time to start looking for a subletter. That typically involves posting an ad somewhere. Make sure that your quest to sublet an apartment goes through legal websites. You can also share your ad on social media platforms.  A good approach is to have all the relevant information in your ad, including the rent, list of amenities, and any other relevant details about your apartment. High-quality images of the property can also be very helpful in attracting the right candidates. You should also make sure to avoid any typos, grammar errors, and incorrect information if you want to attract serious subtenants; everything should look professional.  4. Schedule an Open House/Interviews With Prospective Subletters While trying to figure out how to sublease an apartment, most tenants will immediately start weighing the risks. To avoid any horror stories, get to know the prospective candidates by setting up an open house and following the same procedure you went through when you were looking for a place to call home. When planning an open house, it’s essential to get the timing right and make the interior of your property look pleasant.  Aside from screening potential tenants online, this is a great way to get a sense of whether someone is affable. Remember that these were some of the same hurdles you had to go through when you were renting, and by definition, subletting transforms you from a tenant to a short-term landlord.   That said, landlords are increasingly reliant on social media profiles when determining whether their applicants have suitable lifestyles for the property being rented. With the help of social media, you’ll quickly be able to determine if the subletter owns a pet or likes hosting loud parties. These sorts of details will help you choose one candidate over another. The last step is to check any references on the applications. While this may seem like a waste of time as it’s unlikely anyone would list previous landlords with whom they had an unsatisfactory experience, you should do it anyway before you sublet an apartment. Ask a few questions and keep your ears open; if there were any disagreements between the two parties, you may be able to pick up on it during the conversation. 5. Sign the Needed Agreements When you find the right subletter, it’s essential to cover yourself with a written agreement. You can find a sublease template for sublet agreements online, and you can further customize them to fit your own arrangement.  It’s also a good idea to ask your landlord for help on what should be in agreement. They can help you with suggestions on what to add or omit in the contract. Ultimately, once all parties involved sign the sublet agreement and you've received your first payment, you have officially sublet your apartment.  The Pros and Cons of Subletting The most obvious advantage of subletting is the money. If you’re renting a property that you aren’t living in, you’re pouring cash into an empty apartment. Subletting enables you to fill that financial gap. This is especially helpful if you’re temporarily relocating for work or taking an extended vacation while your lease remains intact. In these situations, sublease, by definition, allows you to retain your original lease.  Of course, a lot hangs on finding the right tenant. While tenant screening services can help, finding a trustworthy and reliable individual can be challenging. If you choose the wrong tenant, bearing the brunt of potential theft and serious property damage.  Subletting Alternatives  Subletting comes with a certain level of risk, and therefore, it might not be the best option for everyone. Before going any further, you need to ask yourself one key question: what is a sublet arrangement that you can afford to live with? If you can’t find the right subletter, you should consider alternatives.  First of all, you might be able to negotiate better terms with your landlord and see if there is another solution while you are away on vacation, for example. Your lease might already have the answer to all your problems in the form of an early termination clause. Either way, if you’re uncomfortable with the idea of subletting your space, you should explore the aforementioned options first.

Bookkeeping is the process of collecting and organizing data on all of your business’s financial transactions. Every expense, payment, as well as any profit is accounted for. This includes sale invoices, payroll ledgers, accounts receivable, assets, and liabilities. Bookkeeping is essentially your business’s cash flow management. It shows how well the company is performing and which areas need attention. Documenting all cash flow in detail gives you a complete overview of your financial activities and your business’s financial state. This overview of the types of bookkeeping will touch upon the difference between single-entry and double-entry bookkeeping, what methods of bookkeeping exist, and how important regular recording of financial transactions is for running a successful company. Basic Bookkeeping Transactions Incoming and outgoing finances are the two main types of business transactions under your bookkeeping.  Incoming finances are your income/revenue, which is all the money earned, sales, and profits. In turn, they become assets, which are all the existing property owned by your business. Any preexisting cash and property are also included.   Outgoing finances are the company’s liabilities - mandatory payments, taxes, and loan installments - and expenses: money used to pay for services, employee salaries, and operational costs.  After these two main bookkeeping categories, we have equity or the difference between the company’s assets and liabilities. How Does Bookkeeping Differ from Accounting? Bookkeeping needs to be done first, before the accountant can analyze the company’s books. It is an essential part of any business finance management. Accounting is the later process where all collected and complete financial data - the trial balance - is analyzed. Accounting includes drawing financial statements based on which timely business decisions can be made. Accountants are also responsible for financial advice and tax returns. Methods of Bookkeeping and How They Work Let's take a look at the specifics of the single-entry and double-entry method. Single-Entry The single-entry method records individual transactions as they happen. Once a sale or payment is received, or an expense is made, it’s documented as a stand-alone entry, plus its minimal details. This bookkeeping method is best suited for smaller businesses. It’s also adequate for operations where there’s little to no physical sales or inventory involved, i.e., digital transactions, services, and those with little or no physical goods to exchange.  Single-entry systems offer multiple advantages: They are simple and therefore save you time and money. Besides, they usually don’t require additional staff or training.  Of course, there are some downsides as well. These include possible loopholes that can be exploited to cover up mistakes and fraudulent transactions, especially if no software or app is used and everything is manual. Furthermore, there is no fast way to check for balances, liabilities, and on-time payments, which can result in penalties and late payments. Also, arithmetic errors in the account totals are relatively common. Using these simple bookkeeping systems for small businesses is a feasible solution, but it most likely won’t be enough for complex operations, where ready financial snapshots are often necessary to help make informed and timely decisions. Double-Entry Double-entry systems are more complex since every transaction is entered twice: in the left-hand account under Debit and in the right-hand account under Credit. Double-entry bookkeeping is used for larger and more complex business operations, and it works like an error-detection tool since the sum of debits must always equal the sum of credits. If it doesn’t, it points to an error. Using the double-entry system makes it easier to monitor all activities and ensure all your books are balanced. The rough total of your capital gap is easily determined.  However, it’s a time-consuming and costly process, and utmost accuracy is needed when making entries. It usually requires extra training, staff, and software for it to be fast and effective. Also, due to the complexity of the system, finding where the error is and correcting it can be challenging.  Compared to the single-entry bookkeeping system, double-entry is a more thorough, time-consuming approach to bookkeeping. Most smaller businesses don’t have time, resources, and extra people to work on detailed bookkeeping. But the results help companies cover everything being exchanged. It also provides instant access to all data.  These are the two basic systems a company can use for bookkeeping. In the past, all entries had to be made manually. With the advancement of technology, various kinds of accounting software and apps have come to the bookkeepers’ aid. Digital Bookkeeping Systems Businesses can reap many benefits from using bookkeeping apps. All primary operations are automated and can be carried out remotely from your phone anytime, anywhere. The main features and automated functions of these apps include: Tracking all outgoing payments and fund transfers Digital tracking of all incoming finances Reports available anytime for mass sending Encryption of financial and confidential business data Apps for both iOs and Android devices Affordable monthly rates starting at $9 External functions such as e-filing and online banking Bookkeeping software such as Quickbooks, Freshbooks, and Zoho have basic accounting features in addition to their comprehensive tracking and management systems. Smaller businesses employing the single-entry method can use these apps to speed up the process further and increase accuracy. If you own a small business and are bent on cutting costs, the chances are that with one of these apps, you won’t even need to hire a bookkeeper - you’ll be able to do the bookkeeping yourself. Virtual bookkeeping means that independent, remote bookkeepers will manage and balance your books instead of a physically present bookkeeper. This is often a time- and cost-saving option for companies. A virtual bookkeeper can manage and monitor your finances in real time beyond office hours. It can be a good solution for companies with a bigger budget allocation specific to these tasks, covering many departments and their complex financial dealings for the company. Often, there are inventories and accounts payable and receivable that need to be checked and prioritized. How Bookkeeping Benefits Your Business There are many advantages to bookkeeping. Financial insights from tracking all your financial transactions will help you manage the business, maintain supplies and payrolls, and keep payments on time. This way, you’ll avoid costly penalties and other negative consequences of late payments.  All numbers will match when your books are balanced at the end of a month, quarter, year, or another specified period. These detailed lists of numbers may look complex and intimidating, but when laid out and checked, they’ll enable you to easily assess priorities.  Even just a simple bookkeeping system can help detail the financial state of your company. Your working capital gap is a good indicator of this - it’s the total difference between your assets and liabilities.  Positive cash flow is maintained and received on time. From here, you can allot budgets and give priority to specific expenses or additions to inventory or assets. Being able to execute the business’s balances correctly and on time will help the company deal with loans, bank payments, and other obligations more efficiently. All of the bookkeeping methods discussed here will help you control your company’s finances and can be a big help to avoid penalties and bigger financial issues when going through an audit process.