07-01-22 | Tech in Real Estate News | 6 Rental Application Mistakes to Avoid

Today we will cover three topics first six rental application mistakes to avoid at all costs. And this is relevant for whether you are currently a landlord or looking to become one. Second, experts don't believe we are in a housing bubble. And there'll be some stats that Zillow pulled from several different experts. Lastly, real estate fund backed by Goldman Sachs acquires an entire community of 146 single family home and we'll dive further into that.

Ariel Herrera 0:00

Welcome to the tech in real estate news podcast where we dive deep on recent trends within real estate and technology. I'm your host, Ariel Herrera, your fellow data scientists and real estate investor with the analytics aerial channel. Today we will cover three topics first six rental application mistakes to avoid at all costs. And this is relevant for whether you are currently a landlord or you're looking to become one. Second, experts don't believe we are in a housing bubble. And there'll be some stats that Zillow pulled from several different experts. Lastly, real estate fund backed by Goldman Sachs acquires an entire community of 146 single family home and we'll dive further into that. All right, let's get started. The first article comes from bigger pockets, and it discusses six rental application mistakes to avoid at all costs. And this is really important because being able to be an landlord and an investor, you need to make sure that you're following laws appropriately, especially if you're going to be managing properties yourself. Laws are completely different from state to state. But this is a good generalization of what you need to look for to follow first discriminatory rental applications. The Fair Housing Act makes it illegal for landlords to refuse housing to anyone based on race, color, nationality, gender, religion, age, disability, or familial status. So for example, you can't have on a replication, this rental property is close to downtown, it is perfect for two young couples that don't have any kids. That sounds nice, but you're basically insinuating that people with families should not be applying and that is illegal. However, it's not against the law to discriminate against a potential tenant based on smoking or pets. But do watch out because if it is an emotional pet, then that can also be discriminatory, second discriminatory rental denial letter. So say if you have a pool of tenants, maybe 10 to 15, you're going to select one. And for the others, you need to give them a reason why they were not selected. So it's not a mistake in the rental application process to disqualify a tenant based on their income references or credit report. If a tenant laws and the application that is a valid reason enough to just reject their application. However, the rental application cannot mention anything discriminatory. For example, you can't deny a tenant say if you have a property that's in a Dominican neighborhood. And your reason is, I think you would feel uncomfortable, because you're not a part of the majority race. And it can be a lot of people speaking Spanish. So I suggest you go to this neighborhood instead, that's completely illegal. That should be their decision if they want to live in that neighborhood or not. Number three, ignoring the law on rental application fees, some states actually don't allow you to charge tenants fees when they're applying to your rental, which to me is mind blowing. But it may be required to refund fees as well if you denied a tenancy. So for example, Massachusetts as of August of 2014, landlords may not collect application fees from applicants, so make sure you follow your state laws, which you could search quickly in Google number four charging too much for the security deposit. Many states have rent control laws that regulate security deposit amounts. These regulations control how you can collect the security deposit, how to hold the money, and when to return it. For example, under a California landlord tenant laws, a landlord may charge a renter the equivalent of two month's rent for a security deposit if the residence is unfurnished, and three months rent if the residence is furnished. This also change based on if the tenant is an active duty service member, where in that case, you can take as much of a security deposit. So again, make sure you check your state's rental laws for security deposit. Number five, setting the wrong rental rate.

This is one of the worst mistakes to get wrong. Remember, we're investors looking to make a profit and rental rate impacts our revenue and profitability. If a rental rate is too high for the market, then it will have a low amount of applicants and thus less quality tenants. On the other hand, if the rental rate is too low, we may not profit at all. What could happen is maybe we're only making $50 A month after income and expenses. And what if the water heater breaks, we're not going to be able to replace it with just $50 cashflow. So make sure that you use sites like rent ometer so that you can see what the rental rate is going for in your area. I like to couple this also with Facebook marketplace, Craigslist, and then also using Zillow as a tool to see what the estimated rent is. And lastly, for six rental application mistakes to avoid at all costs. Number six is accepting illegal or incomplete rental applications. It is necessary that tenants complete every section of the application do not let them skip parts. And also don't let them not fill out the application at all. I've had instances where people have applied and one two, it's a couple and one of the people within the couple says, Oh, I can't fill out the application for whatever reason. But I can give you three months rent upfront in cash. Now, if you're a landlord who has been behind in payments, this could sound very enticing. But this should not be the way to go. I suggest to request tenants to apply via a digital application that way it's standardized. So no matter if they're found your listing through Facebook, Craigslist, Zillow, I always tell them, thank you for showing up. The next steps is to apply via Zillow rental manager there, you can make an application for $30. And you'd be able to apply not just to this listing this property, but to other properties without having to pay that $30 Each and every time. That's really preferable to prospective tenants. So make sure that as you're managing your own property that you're aware of these potential pitfalls, article number two talks about how experts don't believe we are in a housing bubble. And this is super relevant right now as of June 2020, because we've seen interest rates start to skyrocket. Already, we had limited inventory. So now buyers are really constrained. One they can't even find houses that would be preferable to live in and to even if they wanted to make an offer. These houses these properties are now too expensive for them because their mortgage payments would be too high with high interest rates. So a lot of people out there are saying, oh, there's going to be a crash, there has to be some sort of crash that occurs. While the crash will be in real estate transactions, meaning that less deals will occur. So maybe less more agents, lenders, and those who are tied heavily to that business

will have less revenue. But in general, this doesn't mean that home prices are going to dip. So Zillow did a survey of over 100 housing experts, and they found that 60% of them believe we aren't in a housing bubble. Further, the Panel of Experts also believe we will see a short recession by 2024. As well as continued home price growth throughout 2022. Due to strong demand. Remember, we have not that much inventory, we have a lot more people looking for homes than we have affordable housing available. And respondents forecasted that by the end of 2026, we should see housing as a whole across the United States rise 26% from 2022, which would be surpassing the typical 3% Every year, and the value of homes owned by owner occupants hit a new high of just under 40 trillion in quarter one of 2022. And why does this matter? Why does it matter? What the cumulative amount of owner occupied how much equity they have in their home? Well, in our previous recession, back in 2008, people were underwater, so they owed more on the house and the house was worth, we do not have that issue. Now. People are swimming in equity, even though they can't really do anything with it now because you can't refinance and you'll likely go into a worse interest rate. But we should see a lot less foreclosures than we did in the past. And if those are people are falling on hard times, they can pull some equity with that in their home to make things right. Overall, I found this article super interesting. And it goes to show that we can't just rely on headlines of CRASH CRASH CRASH. I've been seeing that for the last five years and we haven't had a pricing crash since. So it's really important to look at the data itself and particularly for your market. Something can be going on in United States as a whole. But if you're in a particular market that had a lot of growth that was mainly because of COVID and temporary shifts, then yes, a pricing decrease could likely come so definitely look out for that. The last article here is about Fundrise teaming up with Goldman Sachs to acquire an entire community of 146 single family homes in Jacksonville, Florida. As a background, Jacksonville, Florida is on the east coast. Just on the upper right hand side of Florida State over the last year, it's had a 25% increase in single family home prices. Fundrise is a site that allows non accredited investors or retail investors to get started in owning fractional ownership of a property for just $10. And this property was acquired for about 55 million. And of these properties 90% of them are already occupied. So there's already tenants inside of these properties, and now their landlord is going to be Fundrise. So you may be thinking, is this good? Or is this bad? Well, from a landlord perspective, if we are looking to acquire single family homes, it shows that we still have a lot of competition with hedge funds and other startups. Second, it also shows that fractional ownership in properties is something that's going to probably be sticking around for some time. And lastly, this still does make it pretty difficult for someone who's a new home owner, because because they're competing against these types of firms that are acquiring these properties, massively, to be able to acquire a whole entire community, not a bunch of property scattered around. But a whole community is pretty significant. Here,

I plan to pivot my strategy a bit to look at small multifamily homes, so between two and four units, so that I don't have as much competition against a lot of these larger companies. So definitely be on a lookout in your market, who is acquiring properties and at what scale. So some upcoming content on actually syncing with someone on Fiverr to help get my real estate investing analysis tool live. And as a quick preview, I've actually had this done for some time, but I haven't published it. The idea is you can pop in a single dress, and right away get information on what cash you need to close what your monthly cash flow would be, what your cash on cash return would be as well, you'd be able to quickly use the sliders on the left hand side to adjust say the property price, or the rent estimate to see how that would change your cash on cash return. And I've used Fiverr before if you're not aware, it's basically a site that connects you to independent developers. You could bring them your project and then they can help you bring it to life. So hopefully I'll be able to have this tool up and running. Definitely the summer but hoping for July, and for weekend plans. I was out the last two weekends in New Jersey spending some time with friends and family up there. But this weekend, I'm back in Tampa. I'm ready to nerd out, get some real estate analysis done, look at some data and super excited about that. Hope you enjoy your weekend. If you haven't already, please join the Facebook group as I will be releasing my tool there first. And if you're a part of the Facebook group, you'll get first access as well. You'll also get the articles that are talked about in these videos sooner. Thanks so much