Commercial Real Estate Due Diligence
After having a great discussion during my last class on Commercial Real Estate Due Diligence, I wanted to take this opportunity to share with you some of the key takeaways. This article is intended mainly for apartments/multi-family, however many of the same principles will apply across different areas of commercial real estate. I’ll start with a brief overview, then dive into each topic a bit more, and finally leave you with my powerpoint presentation that gives an overview of the topics I covered in my class. It is my hope you will add many of these ideas to your property analysis toolkit.
What is Due Diligence?
Due Diligence is a necessary part of any real estate transaction.
- It is the process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk.
- Applying a consistent standard of inspection and investigation to determine whether actual conditions reflect the information represented.
- The process by which you confirm that all of the facts of a deal are as they have been represented to you by the seller.
Conducting proper due diligence can be the difference between turning a profit or suffering a financial loss in a real estate transaction.
If you’re new to commercial real estate transactions, I recommend that you consider bringing in someone with more knowledge. It’s OK to admit you need help. Getting help from an experienced commercial real estate broker can add a lot more money to your pocket and make the process much easier for all parties involved.
Start With Initial Due Diligence
Once you’ve found your target property, begin by requesting all of the information in the seller’s possession (expense reports, property records, profit and loss statements, etc…). Often you will find on smaller to mid-sized apartment buildings that owners do not keep detailed records. This means you will need to do a little more investigating to get the accurate expense numbers.
Talk to the current tenants about things that are wrong with the building. Ask how long have they been there, if they are happy with things, what’s the neighborhood like, etc.… Current tenants can be a tremendous resource for learning about a property. If there is a current property management company in place, ask the tenants how responsive they are to their needs. A lot of times it’s easier to keep the same management company in place for the first few months of acquisition if they are doing a good job. Talk with the maintenance people about matters not tended to or problems that will have to be fixed in the future. They are often going to be more honest than a seller would about the actual condition of the property.
Financial Due Diligence
- Review the profit and loss statements (P&L). Make sure you pay extra attention to any areas where significant gains or losses occurred and try to spot any discrepancies.
- Underwrite the property. Never take a seller and brokers provided pro forma at face value. Their numbers are usually a smaller look at the property and might not reflect how the financial performance of the property in a few years time.
- Look at rent and sales comparable in the area.
- Since your evaluation of the property will depend upon income today and tomorrow, the accuracy of the historical data, as well as the validity of projections, will significantly alter your potential financial return.
- Look into the rent roll and leases including the terms, deposits, and payment history.
- Be aware of handwritten changes to the leases
- Get written confirmation or an Estoppel Certificate from the tenants if you can’t read the document or if the statements are unclear.
Tenant Estoppel Certificate
- An Estoppel Certificate is a statement signed by the landlord and tenant that states that particular facts are correct, that there are no defaults, and that rent is paid on a specific
- Look for rent concessions
- Are the security deposits mentioned in the lease the same as those outlined in the rent roll? (This is usually a problem area)
- Cross check the rent roll against the income statement.
- Get a lease abstract. This is a summary of the essential financial, business and legal information that exists in a commercial real estate lease. It should bring to the reader’s attention any important lease provisions, financial obligations or other issues of importance.
- Always add your property management fees back into your expenses. Quite often, the current owner could be managing it and won’t factor that cost into their expenses, which could make the NOI appear higher than it would be if you bought it.
- Reconstruct the financials on your own… add things back like long-term capital improvements (HVAC, electrical, roof, cabinets)… then show how that would affect your financials as you spread those costs out over time.
- Recommend taking CCIM classes for understanding the financials and underwriting a property.
If you’re an expert in the location you’re interested in; you may still feel comfortable buying a property without the expense reports because you’re familiar with what expenses should look like. This is another reason why having an experienced broker could help because sometimes you will find properties that could be good deals but may lack proper financial reports.
Make sure you’re comfortable with the deal above all else.
Here is my quick financial due diligence checklist
Physical Due Diligence
- Walk every unit. It sounds like common sense but make sure you take a look at everything.
- Don’t trust the seller/broker to tell you the unit is in perfect condition.
- As you walk the units, I recommend using a “walkthrough sheet.” I have included a sample in my PowerPoint, which you can find at the end of this blog post. If you would like the full checklist, please let me know if the comments below.
- As you walk the units, assess the overall condition of them. Take inventory of things that need to be addressed, breaking it into what must be fixed and then a “wish list” of items you’d like to get to eventually.
- Look for any warning signs or safety concerns.
- Are there any tenant concerns? Things like hoarding, multiple pets, an excessive number of occupants, unapproved alterations, illegal activity, …
- Building inspectors are never a bad thing to have. Often you’ll get your money back in the deal.
Legal Due Diligence
Here are some necessary things you’ll need.
- Title inspection and survey
- Environmental inspection (typically paid for by the buyer)
- Inspection for building code violations. This is critical for understanding any potential hazards or areas that need immediate addressing.
- Checking to make sure that the property is in zoning code compliance
When using AIR Commercial Real Estate Forms
- Seller Mandatory Disclosure Statement (SMDS)
- Property Information Sheet (PIS)
- Tenant Estoppels (TEC)
- Commercial Property Owner’s Guide to Earthquake Safety (pre-1960 buildings)
AIR is a leading, member-owned real estate network. From contracts to networking and education, they’ve been helping commercial real estate professionals for years. Developed by top commercial real estate experts, AIR CRE Contracts are recognized as the industry standard, and the most efficient way to close a deal. I highly recommend you look into becoming a member as they offer over 50+ contracts that you can use and edit to your own needs. Learn more by clicking here.
When using CAR (California Association of Realtors) Residential Income Purchase Agreements
- Know Material Facts
- Seller property questionnaire (CAR Form SPQ) or Exempt Seller Disclosure (C.A.R. Form ESD) if TDS-Exempt
- Commercial Property Owner’s Guide to Earthquake Safety (Pre-1960 Buildings)
- Tenant Lease Agreements
- Tenant Estoppels (TEC) if agreed in the contract
- Survey, plans and engineering documents, if any, prepared on seller’s behalf or in seller’s possession.
- Permits and structural medication documents – if in seller’s possession
When using CAR Residential Income Purchase Agreement (cont’d)
- Lead-based paint pamphlet and form
- Applies only to residential property built before 1978
- Natural and Environmental Hazards
- Seller is required to disclose if the property is located in a special flood hazard area; potential flooding (inundation) area; very high fire hazard zone; state fire responsibility area; earthquake fault zone; seismic hazard zone; and (iii) disclose any other zone as required by law and provide any additional information needed for those zones. These are satisfied with an NHD Report.
- Withholding Taxes
- Seller shall deliver to the buyer or qualified substitute, an affidavit sufficient to comply with federal (FIRPTA) and California withholding law (C.A.R. Form AS or QS)
- Condominium/Planned Development Disclosures
- Seller has seven days (standard) after acceptance to disclose to the buyer whether the property is a condo minimum or if its located in a planned development or other common interest subdivision.
Click here to download the CAR Sales-Disclosure-Chart
The California Association of Realtors (CAR), is real estate trade association to develop and promote programs/services that enhance a member’s ability to conduct business with integrity and competency. They have many tools designed to help you thrive in your real estate career. From their zipForm transaction tools to their education courses and more, they are a great resource. Learn more by clicking here
Thank you for taking the time to read this article. I hope you found it helpful. As always, please leave any thoughts or comments below. We hope you will join us for our next class on “Don’t Take Cap Rates At Face Value” on Thursday, May 31st.
Stay up to date with all of our upcoming real estate classes by clicking here. We offer one class a month that covers relevant and important commercial real estate topics.
Curtis Gabhart and Gabhart Investments, Inc – 2018 All Rights Reserved
The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of Gabhart Investments, Inc. The material contained in articles that appear on gabhartinvestments.com is not intended to provide legal, tax or other professional advice or to substitute for the proper professional advice and/or commercial real estate due diligence. We urge you to consult a licensed real estate broker, attorney, tax professional or other appropriate professionals before taking any action in regard to matters discussed in any article or posting. The posting of an article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.
IÂ have gotten a lot of request for the rest of the tenant manual that goes along with my lease and here it is the second part to the resident welcome manual post & a copy of the manual. We give this to all of our residents with there lease agreement and other forms like drug & smoke free housing, maintenance addendum (click for the post on the maintenance addendum), lead based paint, etc.
I didn’t write or invent this just modified it for my own use (I am all about making things better than creating things from scratch). If you make it better please share with me.
Consider using all or some of this for you tenants. I hope it improves your operations, increases retention, decreases misunderstandingÂ and improves your residences experience.
If you don’t have the time or energy to do these things and are tired of the grind of owning apartments let’s talk and see if I may be interested in buying them. If you want or have to keep your property this should help.
We Would Like To Welcome You
We would like to welcome you as our newest resident and look forward to having you with us.
To achieve a successful tenant/management relationship, we prepared the Resident Handbook to assist you with your tenancy. We recommend that you keep it in a convenient location so that you can refer to it easily.
You will find maintenance guidelines, rental payment instructions, general information, safety tips, vacation guidelines, emergency instructions, holiday tips, and more.
We have also included forms for you to use when necessary. We want you to be prepared throughout your tenancy. Therefore, we want to provide important information and documents that you may need in the future.
If you need to contact us when you need assistance we have listed how on page 6.
If you have questions or concerns on any of the information contained in this documentation, contact our office at any time. We are here to help you.
We wish you a successful and enjoyable tenancy in your new residence.
We have a complete staff to assist you. We have found â€œTeamsâ€ effective for assisting tenants during their residency. You should know your team at this time, but if you need more information, contact us for more information.
- Management Team: We may have assigned a management team to your account, consisting of a Property Manager, onsite manager and or Assistant Property Manager. They concentrate on assisting you with all the details of your tenancy. Contact them to answer your questions.
- Office Team: We ask that you contact the Management Team regarding questions concerning Tenant issues. The owners are available to assist you in verifying receipt of rent, any necessary forms, and basic information if your Management Team is not available.
||Phone + Ext.
|| Curtis Gabhart
On the next page, we have provided general office information, and we have just covered the teams on the previous page. Communication makes a difference in any area of life, and it can only enhance your tenancy by letting us know what you need.
Use the telephone, email, the property website email access, or written correspondence to contact us. What is important is that you DO contact us when you need assistance. Remember we are here to help you
Telephone Calls during Office Hours
During office hours, listed on page 8, there is normally a live person to answer your call. Please state the reason for your call, so that someone can assist you, or direct your call to the right party. Your team may not be available or in the office, and one of the office team members may be able to help you with your request.
If, during the day you reach our voice mail system, use the extension number for the party you are trying to reach, and if they are not available, leave a message, complete with your name and the telephone numbers where someone can reach you, both day and evening. Someone will return your call. The benefit of a voice mail system is the ability to leave a message twenty-four hours a day, seven days a week.
After Hours Calls
Of course, the voice mail system will take all messages after hours (please refer to the hours on the next page).
During normal office hours, immediately state if you have an emergency. If you reach the voicemail system during office hours, or after the office is closed, immediately choose the emergency option, xxx-xxx-xxxx or if not available call xxx-xxx-xxxx
Please remember that all Work Orders must be in writing, unless it is an emergency. This is in your rental agreement. You can access a work order online at the property website, www._______ at the our office, and in this tenant handbook.
Change of Information
It is important that you notify The Landlord of any changes in telephone, fax, cell numbers, or email. An information change form is located in this handbook as well.
Email is a great way to communicate and we request that you send your email address to 4157menlo@gma. We will put your email address in our database. This enables your team to contact you quickly and efficiently, and when needed, send you important information
Please note that although communication by email is encouraged, We do not accept notices to vacate by email. You are required to give any notice to Vacate in writing, and this form is included in the back of The Tenant Handbook.
The The Landlord website, website address ____, contains important information for tenants. Visit it regularly to use the Tenant services. There, you can easily download a work order request and The Owner has posted their tenant newsletter, on the site. You can also send emails to The Landlord directly from the website under the â€œcontact usâ€ page.
General Office Information
||7667 Vickers St,
||San Diego, CA 92111
||7667 Vickers St,
||San Diego, CA 92111
||Monday â€“ Friday AM
||9 – 12 am
||Monday â€“ Friday PM
||1 – 5 pm
||By appointment only
||Call 619 or 858 emergency option
Protect Your Rental and Credit History
|Copies of contracts (or $.50 per page)
|Mail box key duplicate
|Lost key duplicate
|Smoke detector battery
Some day you will eventually move out of the property. It is important that during your residency, you care for your rental history and credit. Most likely, you will either rent again or purchase a home. In either case, you will need good rental references and a good credit report. Avoid late rent payments, care for the property, and move out properly. Give The Landlord the pleasure of being able to provide a good reference for you when you vacate the property.
You received a copy of your rental/lease agreement, including maintenance instructions, move in checklist, and any other necessary documentation. We recommend that you keep this paperwork with this Handbook for easy reference. Please always remember a rental/lease agreement is a binding agreement. If you have any questions regarding your lease, please call your TheÂ management team.
There is a great checklist in this package for when you are moving. You will find the Moving Checklist in the back of this handbook.
When you rented the property, The owner cancels the utilities, on the 1st day of your rental agreement. To avoid discontinuation of service, contact the utility companies immediately. The move in checklist contains the telephone numbers of the utility services.
Rent is due on the first of each month and late if not received by the fourth. If you know that you will have a delay or problem paying by the due date, contact your management team immediately. Lack of communication can affect your payment record.
The Landlord receives rental payments by:
- Through the onsite manager
- By using ACH (Automated Clearing House) – this automatically takes your rental payment directly from your bank and deposits it into the Landlords bank, saving you time.
The Landlord does NOT accept rental payments in:
- Rolled coin
- Credit cards
- Debit cards
- Post-dated checks
If you fail to pay rent on time and in full, you could incur the following charges:
- Late fee â€“ the late fee is ten (10) percent if rent is not received by the fourth.
- Service fee â€“ The service fee is $ 50.00, if a notice to pay or quit is served because your rent is not received in a timely manner.
- Maintenance charge â€“ you may be billed if you have made an appointment with a vendor but failed to meet them at the scheduled time. If The Landlord receives a service call billing, you are responsible for reimbursement.
Generally, a vendor is assigned to perform the work you request in your residence. However, if you have contacted management or ownership and requested to perform a minor maintenance item and The Landlord has agreed to reimburse you:
- Pay the bill and send the receipt to The Landlord. The Landlord will reimburse the amount due to you.
- Do NOT deduct the amount from your rent.
Care of the Property
Getting To Know Your Residence
When you move into a property, it is helpful to know where important items are located. Take the time to know or locate the:
- Main circuit breaker in the event power goes out
- Gas shut off valve â€“ turn off during emergencies/disasters for safety
- GFI plug(s) â€“ so you can check them if your plugs or appliances in the bathroom, kitchen, patio or garage fail to work
- Electric and/or gas meters to check your utility bills
- The main water shutoff valve in case of major flooding
- Water shutoff valves below the sinks and behind toilets in case of water leaks
- Method of cleaning for the oven so you use the right products
- Time bake knobs on the oven â€“ in the event the oven will not work, these may be on.
If you are uncertain about any of the above items, contact your the management team for help.
When you rented the property, your lease contained detailed maintenance instructions. Please review them before requesting a work order. The Landlord has more tips in this handbook.
It is our policy that tenants do not do repairs or alterations. You agreed to this in the rental agreement/lease. If you do want to make a special request for renovation or repair to the property:
- Submit your request in writing before making any changes.
- Do not proceed with any work until you are notified to do so.
- If the request is acceptable to the owner, tenants must do one of the following prior to vacating the property:
- Leave the alterations if this is part of the ownerâ€™s condition to accept the alteration/repair.
- Return the property to its original state if this is part of the ownerâ€™s condition to accept the alteration/repair and pay for any necessary repairs to restore the alteration/repair to its original state.
- Sign a The Landlord agreement regarding the alteration/repair.
Tenant Maintenance Responsibilities
We have a duty to maintain your residence to uniform codes of safety for landlord/tenant law. Therefore, The Landlord has provided you with Work Order Requests when there are legitimate repairs. We want you to report maintenance items.
However, there are items that are the tenantâ€™s responsibility and we have listed them again (please refer to the 5-page maintenance addendum for more details on the list below):
- Replacing smoke alarm batteries
- Replacing light bulbs with the correct size, including the front porch light if it goes out.
- Replacing furnace filters, if applicable, every 6 months, and every 4 month if there is smoking in the property
- Reporting non-functioning smoke alarms immediately if batteries do not solve the problem
- Reporting all necessary repairs
- Professional steam cleaning and spot cleaning of carpets while residing in the property
- Normal insect control
- Normal rodent control, such as mice
- Reporting lack of landscape cleanup if a service IS provided in your rental agreement
- Reporting malfunctioning irrigation systems or sprinklers, even if it is the responsibility of an association
- Disposal of all garbage in the proper receptacles and using the weekly pick up service
- Disposal of animal feces on the property even if you do not have a pet
- If the residence has a fireplace, use caution and care when operating the fireplace and disposing of ashes or coals. Do not dispose of coals in the fireplace until they have cooled outside for a week.
- Check to see if damper is open before starting a fire in the fireplace.
- Disposing of toxic waste properly in accordance with local and county laws
Procedures for Requesting Maintenance
Before calling The Landlord
- Determine if there is a true emergency or a non-emergency.
- Check to see if you can determine the cause of the problem that you are experiencing, unless you have an emergency. Read examples of various problems in your maintenance addendum.
If There Is an Emergency
There are few emergencies. An emergency is a life-threatening situation such as a fire, flood and/or uncontrollable water, electrical problem, smell of gas, etc:
- Emergencies causing immediate danger such as fire, call 911
- Emergencies involving gas call the gas company and if necessary, 911
- Emergencies involving IMMEDIATE electrical danger, call the utility service or 911,
- After contacting one of the above sources, then call the office and report the problem.
- Emergencies such as backed up plumbing, call your onsite manager. If you canâ€™t get a hold of them call 619-928-2878 The Landlord, and if necessary, call 911.
- An emergency is NOT heat, but The Landlord recognizes this is important and will make it a priority with vendors to have the heat working as soon as is possible.
- An emergency is not air-conditioning, non-working dishwasher, sprinklers, etc.
- Fill out a tenant â€œwork orderâ€ request form. Fax, mail, or email the request to the office.
- Work orders are available in this handbook, on the property website, or we can send it via email.
- A representative will assign a vendor to contact you.
- We do not give vendors keys to the residences.
- Vendors are required to make appointments with tenants.
- Remember, this is a NON-EMERGENCY item and in most cases, the vendor will not be able to make an appointment immediately.
- Failure to show at an appointment can mean a charge to you. Therefore, be certain to call the Landlord office as soon as possible if you are unable to make the appointment.
- If you do not hear from a vendor or repairperson within 5 â€“ 7 business days, call the Landlord office and inform your management team or a staff person that a vendor has not contacted you.
- We will contact the vendor to find out the cause of the delay, and then inform you when to expect the vendor to call.
- After a repair has taken place, if you have trouble, call us and let us know that you had a recent repair but there is still a problem.
- Recent repair means within the last 60 days and pest control work means within 30 days.
- If you fail to report an unsolved recent repair, and there is further damage or expense, you may be responsible for the cost, per your rental agreement.
Preventative Cleaning Tips
Cleaning tips were included in the maintenance addendum with your rental/lease agreement. Here are more tips:
Cleaning is easier when you use a â€œpreventative approach.â€
- Always put away food and wipe up food debris.
- Clean pet bowls regularly to avoid attracting ants and other insects.
- Do not allow grease to build up in kitchens; use a sponge and soapy water regularly on counter tops, stovetops, and hood filters.
- Avoid cooking with very high heat. This will add to more grease build-up and cause damage to appliances. It can also be dangerous.
- Avoid mildew by venting rooms and bathrooms properly, particularly after baths and showers.
- Clean bathroom tile or other surfaces regularly to prevent the buildup of grime.
- Clean toilets regularly to avoid build up of grime, rings, and mildew.
- Mop tile, wood, and linoleum to avoid â€œdust bunniesâ€ and the buildup of grime.
- Do not use wax on linoleum or tile.
- Do not use â€œcleaning productsâ€ on tile
- Vacuum all flooring regularly, particularly carpets. This will save in carpet cleaning bills.
- Regularly pick up debris and pet feces in outside areas.
Additional Cleaning Tips
It is not always necessary to purchase expensive cleaning products. Vinegar, baking soda, ammonia, and salt are some inexpensive cleaning products with many uses. They also are helpful for people who have allergies to cleaning products. They can be better for the environment than commercial products
- Air freshener:
- Place a bowl of vinegar in the kitchen or bathroom to absorb odors
- For a great once-a-month drain cleaner, pour 1/2 cup baking soda into the drain, follow with 1/2 cup white vinegar — it will foam. Cover and let sit 30 minutes and then flush with cool water.
- For stubborn, slow-running drains, pour 1-cup baking soda and 1-cup salt down the drain. Follow this with 2 quarts boiling water. Let sit 30 minutes, and then flush with cool water.
- Tile countertops:
- To clean ceramic tile, where mold and mildew accumulate, use a combination of 1/4 cup baking soda, 1/2 cup white vinegar, 1-gallon warm water, and 1-cup ammonia.
- Alternatively, regularly clean kitchen surfaces by using a spray bottle mixed with Â½-cup vinegar and a quart of water.
- Glass cleaner:
- When glass-cleaning products leave residue on bathroom mirrors, mix 3 tablespoons of vinegar with a quart of water in a clean plastic spray bottle.
- Spray glass and wipe with a clean paper towel.
- Empty the dishwasher, pour in a Â¼ cup of vinegar, and run the dishwasher again.
- Even if you prefer not to use the dishwasher, run at least once a week to keep seals from becoming hard and cracked.
- Clean regularly and place a cup of baking soda in a bowl on a refrigerator shelf to absorb odors.
- A cup of dry unused coffee grinds can also absorb odors when placed on a refrigerator shelf.
- Washing machine:
- A half cup of baking soda can be added to the washing machine with regular detergent to help with mild odors
- Remove waterline marks in the toilet bowl by pouring in 2 cups of white vinegar. Let soak overnight, then flush to rinse. If this does not work, rub the waterline mark with a wet pumice stone.
- Carpet stains:
- Vacuum the carpet if the stain is dry.
- If the stain is still wet, blot gently to remove excess â€“ blot, do NOT rub.
- Lightly soak the carpet stain with clean water first to remove the stain â€“ blot, do NOT rub.
- If the stain remains, mix a 3 Tablespoons of vinegar with a quart of water in a spray bottle and spray the stain; blot again; do NOT rub.
- If this fails, consult a professional carpet cleaner immediately; the longer you wait may mean the stain may not come out.
- Carpet odor:
- Regular vacuuming cures most carpet odors, but if carpet odors persist, lightly sprinkle the carpet with baking soda and vacuum thoroughly, removing all baking soda from carpet. Repeat if necessary.
Energy Saving Tips
Saving water is important for the environment and can mean a lower utility bill for your residence as well:
- Always report water leaks to The Landlord as soon as possible
- Report water dripping under sinks
- Running toilets are big water wasters
- Report malfunctioning sprinklers
- Report standing pools of water
- Report malfunctioning water appliances such as dishwashers and washing machines that come with the property
- Run the dishwasher when it is fully loaded.
- Replace your old washing machine with an energy efficient one â€“ you could save the cost of the machine in water and energy bills.
- Check water hoses on washing machines for leaks; change hoses every three years.
- Adjust the water level to match the load, using less water for small loads.
- Avoid using flushing toilets to dispose of ordinary trash.
- Take shorter showers.
- Avoid letting the water continually run while shaving, brushing your teeth, or washing your face
- Be sure your water heater temperature is set properly. Note: do not turn the water heater up to â€œhigh,â€ this is a dangerous temperature level.
- Counsel all children on how to prevent wasting water.
- Do not â€œover waterâ€ landscaping; it is not healthy for plants and simply wastes water.
To lower air-conditioning bills:
- During warm or hot months, close the windows and doors to your home early in the day to â€œkeep cool air in,â€ particularly when the air-conditioner is running.
- Close window coverings on the sunny side of the house during different times of the day; this can lower the temperature dramatically.
- Replace the air filter often and with the right size, at a minimum of every three months, monthly if you smoke. A clean filter helps the air-conditioner to run more efficiently.
- When leaving your residence, turn the air-conditioner up a few degrees, a closed house without activity normally stays cooler. This is particularly important when going on vacation.
- There is no reason to keep the residence in a frigid state while you are gone, but do not turn the air off on very hot days â€“ it will only take longer and more energy to cool down.
To lower heating bills:
- During the cooler months, keep all windows and doors tightly closed.
- Report any major drafts to the Landlord office.
- Use a â€œreasonableâ€ level of heat in the residence. Sometimes, turning down the heat just a few degrees can reduce an energy bill.
- Turn the heat down during the night and use warm covers and comforters.
- When leaving home, turn down the temperature on the thermostat.
- Do not turn the heat completely off. It will take more heat for a cold house than it will save. In addition, this could cause pipes to freeze, which will cause more problems.
- If there is a fireplace, close the damper if you are not using it, but please be sure to open the fireplace if you do start a fire.
- Replace the furnace filter often, at a minimum of every three months. A clean filter helps the furnace to run more efficiently
Property owners generally carry a standard fire and liability policy, and have additional coverage with â€œlandlord/rentalâ€ insurance, but they normally cannot cover the contents or possessions of the resident. The reason that insurance companies do not provide this type of coverage is because they are â€œnon-ownerâ€ occupied properties. Therefore, it is very important for you to have adequate insurance coverage for your contents.
If you think it is not important, sit down and write out a list of your possessions in one column. In a second column, list how much it would cost to â€œreplaceâ€ them. You will be surprised how the list can really add up.
Contact an insurance agent if you do not have renters insurance. You can find them in the telephone directory, search the Internet, or ask a friend. The Internet can also provide both information and comparison-shopping. To avoid a loss, acquire renters insurance now.
The safety of you and your family is important to The Landlord and many things can affect it. Here are some tips to follow:
- Unplug all heat-producing appliances like toasters, irons, and coffee makers when they are not in use to prevent fire hazards.
- Never leave a stove or oven unattended; turn off all stove and oven appliances when you leave the house.
- Never leave heating pads and electric blankets on indefinitely and turn them off when you leave the residence to prevent fire hazards.
- Never leave water running unattended in a plugged bathtub or when leaving the residence.
- If you have an upstairs bathroom and you see water in the ceiling below, particularly in a light fixture, report the leak immediately to The Landlord.
- Do not operate electrical appliances while standing or sitting in water.
- Avoid using blow dryers, curling irons, radios, TVs, or other appliances while in a bathtub or over a sink filled with water.
- If you have small children, use child protector plugs when you are not using outlets
- Do not overload extension cords with too many appliances.
- Place lamps on level surfaces and use the correct wattage.
- Avoid running extension cords over walkways, under rugs, or any other place that could cause tripping.
- If you suspect an electrical problem, report it to The Landlord immediately.
- Do not remove smoke alarms, particularly if they are beeping. Smoke alarms are for safety and removing them can endanger all residents and guests. Change the batteries if needed.
- Do not allow children to leave toys on walkways and sidewalks.
- Replace outside light bulbs so you can utilize lights properly when it is dark.
- Report any exposed tree roots to the Landlord office
- Keep a portable fire extinguisher in the kitchen and the garage; they are available in hardware supply stores.
- If you use a grill or BBQ, use common sense, never leave grills unattended.
- If you have a fireplace, be sure to store hot ashes and coals away from the residence. Do not place ashes in garbage receptacles unless certain they are cold.
- Do not store fireplace wood against the residence.
- Always be certain the damper is open before starting a fire in the fireplace.
- Do not build â€œroaringâ€ fires in the fireplace; build reasonable fires suited to the size of the fireplace.
When going on vacation, here are items to check before leaving:
- If going out of town for an extended period, please notify The Landlord how long you will be gone, and supply an emergency telephone number. Then should any problems arise concerning your residence, there is someone to contact.
- Check your rent payment to ensure it will not become delinquent. It would be a sad thing to come home to a late notice and charges.
- Notify all necessary parties such as your next-door neighbors, the paper delivery person, the post office, or any related service people. By doing so, you will avoid any panic that something is wrong.
- Select someone to pick up items on your doorstep to avoid giving signals to dishonest people.
- If leaving a vehicle in the driveway, remove any valuables and garage door openers that can be stolen, giving access to your home.
- Put garbage cans away or arrange for someone to take care of it.
- Place valuables and jewelry in a safe deposit box.
- Avoid leaving a message on your answering device telling people you are out of town and for how long.
- Set timers on interior lights, to deter burglars.
- Be sure to check all windows, window locks, and doors before leaving.
- If you have an alarm, be sure to set it.
- Turn off the water valve to your washing machine.
- Turn off all appliances, large and small, such as stove burners, coffee pots, irons, curling irons, etc.
- Unplug TVs and computers in the event of lightning or power surges.
- Turn your water heater to low or â€œvacationâ€ setting, but do not turn the water heater off.
- Anything else living in your house besides you, such as plants or pets? Then be sure to water plants and have someone take care of your animals. Do not leave pets in the residence unless a reliable person is going to care for them daily.
Everyone enjoys the different holidays, but it is important to exercise care during the celebrations and remove decorations when each season is over.
- Hang lights and decorations properly and carefully.
- Before hanging, check for bad plugs and loose wires. If you find defects, dispose of the lights.
- Only use lights and decorations during holiday seasons; remove them immediately when the season ends.
- Dispose of holiday trees properly; never burn them in a fireplace.
- If you use extension cords, do not overload, do not staple them to the residence, and if outside, use only cords approved for outside use.
- Never leave holiday lights on when leaving your residence to avoid fire danger.
- For fireworks celebrations:
- Do not use illegal, dangerous, or explosive devices.
- Only buy legal fireworks and check where you can use them.
- Use common sense safety rules with fireworks.
- Do not use fireworks in or around your residence.
- Keep all fireworks away from any dry grass, trees, or roofs.
- Attend a fireworks celebration instead of buying them and enjoy the fun without the responsibility.
Unfortunately, emergencies and disasters happen all around the world. The best solution is to be prepared. In the back of this Handbook, you will find a convenient Emergency/Disaster Checklist that has items to do before and during an emergency/disaster.
There are different emergencies
- Maintenance emergencies:
- The Landlord outlined in the 5-page maintenance addendum that you signed during your move in what to do for emergencies such as flooding, electrical, gas, etc.
- We have also reviewed them on page 9 of this handbook.
- Please follow the maintenance instructions and call The Landlord when appropriate.
- The Landlord requests that you treat the Landlord staff courteously while under stress of the situation â€“ we will do everything we can to help you as soon as possible.
- Area emergencies or disasters:
- Be prepared and use The Landlord Emergency/Disaster checklist enclosed with this information.
- When major emergencies or disasters such as a hurricane, tornado, earthquake, or some other force of nature occur, everyone experiences great inconvenience and difficulty. Remember this and be considerate of others and the degrees of different problems.
- The Landlord requests that you call emergency services first in a disaster.
- Then notify the Landlord office as soon as possible what has happened.
- The Landlord will assign priorities to work and during an area emergency/disaster, will work to assist you as much as possible
- When calling the Landlord office, we ask you to be patient and calmly state what problems you are experiencing. We will handle the problems as quickly as possible.
Drug Free Housing
The Landlord has a drug-free policy for tenants and it is a requirement of your tenancy as outlined in your rental agreement. However, people can encounter drug problems from other residents from the lowest income neighborhood to the highest. We want you to be aware of signs of potential drug problems in any neighborhood.
- Do not approach a house or building if you smell a strong chemical odor. Report it to the authorities. Drug houses may contain volatile chemicals and can easily explode.
- Do not pick up abandoned purses, suitcases, filled bottles, or packages. People place â€œmeth labsâ€ in objects of many shapes and sizes. They are highly explosive and dangerous; report any unusual or abandoned object to the authorities. Do not attempt to examine it yourself.
- If you see constant pedestrian or vehicle traffic in your neighborhood at all times of the day and particularly at night, it could be a drug house, particularly if you observe high security precautions surrounding the property.
- First, report unusual and disturbing activities in your neighborhood to the authorities, and then notify The Landlord of your suspicions as soon as possible.
- Educate and train children of all ages for the signs of drug activities or a drug house.
- Be aware and be alert â€“ a drug house or drug activities are a danger anywhere and to everyone.
Frequently asked questions
We have put together a list of the most frequently asked tenant questions that may answer many of your concerns in advance.
Why did I receive a notice when I paid the rent on the 5th of the month?
- As outlined in this Handbook before, the rent is due on the 1st and late if not received by the 4th of the month. Once the 4th of the month passes, we begin preparing Notices to Pay or Quit. Obviously, we served the notice before we received payment. Notices arebased on state landlord/tenant law requirements.
Why can I not clean the carpet myself?
- We require professional steam carpet cleaning to preserve the life of the carpet. Home machines do not handle the deep cleaning necessary.
Can I install extra telephone lines?
- You can install extra telephone lines if you pay the expense and disconnect them when you leave. However, you must notify us and obtain written permission to install the lines.
Can I have a satellite dish?
- Yes, you can have a satellite dish. However, you must submit a request to us and sign an agreement prior to installing the dish. You also must take responsibility for removing the dish and repairing any damage. Call for details.
I did not have a pet when I moved in; can I have a pet now?
- Notify us in writing of your request for a pet. Do not move a pet into the property without permission. If we allow a pet, an increased security deposit will be required and a pet agreement signed. If the owner says no, abide by the decision and your rental agreement.
What happens if my pet dies or runs away, can I have my increased security deposit back?
- No, all security deposits remain in effect until all tenants vacate the property. Until a property is completely vacant, there is no way to check the entire property thoroughly.
What happens if I want another pet?
- Notify us of what pet you want. If we allow a pet, an increased security deposit will be required and a pet agreement signed.
My roommate wants to move, but I want to stay. What do I do now?
- Your roommate needs to submit a partial notice to vacate. We will need documentation from you to show you can support the property by yourself. We will not partially refund part of the security deposit to your roommate since it is a condition of your rental agreement. You and your roommate will have to settle any funds owed to each other, including any or all of the security deposit. Have your roommate use the Partial Notice to Vacate included in this handbook.
I want to add a roommate, now what do I do?
- The prospective roommate will have to submit an application and we must approve the person PRIOR to them moving into the property. You can obtain applications at the office. If The we deny the applicant, they cannot move into the property. If approved, you and the approved applicant must sign new rental/lease agreements.
Why do the owners want to see the property?
- We are showing responsibility toward the maintenance of the property, the condition, and our investment. We respect that it is your residence. It is also nothing to fear. This is why we have contacted you first to set a date and time.
When it is time to move
Giving Your Notice
Eventually, you will move, and we want you to be prepared when this is necessary. Tenants are required to give a 30 notice prior to moving. We have provided in this information a â€œNotice to Vacate from Tenant Formâ€ to be used when you anticipate moving.
Before giving notice:
- Check your rental agreement/lease to see if you are eligible to give notice. It will specifically state when you can give notice. A lease is a binding agreement for a set period and you may still be bound to the lease.
- If you need to move and you are still committed to a lease period, contact your us to discuss your options.
- Notices must be in writing. The day the notice is received is the date the notice begins. For example, do not fill out a notice with the current date and mail it five days later, thinking the date you mailed is the notice date.
- We do not accept notices by email because of lack of signature; We do receive notices by fax.
- We do not not provide rental history to other landlords/property management companies unless tenants submit a written Notice to Vacate and the tenant gives the authority for us to give out rental references.
- The Notice to Vacate form for the Tenant contains the authorization for allowing us to give out rental references. This form is included with this information.
Setting Up Your Move-out Appointment
- After you submit your Notice to Vacate, We will send you a three-page letter. This will instruct you on what to do during the notice period, and how to set up your move out appointment.
- Appointment for move outs during weekdays is by appointment only between 8-3 pm on the weekdays
- It is the responsibility of the resident to deliver all keys and openers to us, either at the move out appointment or delivery to the office.
- Failure to deliver keys and openers could incur additional charges.
- Remember to supply a forwarding address and telephone number for your security deposit refund.
- Use the Moving Checklist so you remember important details.
Preparing the Property
When you are ready to move, if you have questions on how to prepare your residence, please call your management team, and discuss your concerns with them. We want your move to be a pleasant and successful one. The following are the steps to take for your move.
- Have the property clean throughout the interior and the exterior.
- This includes vinyl or tile floors, windows inside and out, window sills and door casings, mini-blinds, wiping out drawers and shelves, all appliances, sinks, toilets, bath tubs, showers, vanities, light fixtures, fireplaces, removal of cobwebs inside and out, etc.
- Tenant caused dirt is not normal â€œwear and tear.â€
- Pick up debris and animal feces on the exterior of the property and place them in the proper trash receptacles.
- Carpet cleaning depends on time lived in the property for normal wear and tear, whether you have had pets, and also if the carpet cleaning exceeds normal wear and tear.
- You will be charged 100% at all times, if you have had pets and/or you have soiled carpets exceeding normal wear and tear.
- Up to one year: carpets will require cleaning. Tenants incur charges if tenant does not have carpets professionally cleaned. One to two years in the property, you will be charged 50% of the cleaning of normal wear and tear.
- After two years, there is no charge for normal wear and tear. However, there is a charge for carpet damage and stains.
- Do NOT rent carpet-cleaning machines, use home cleaning machines, or employ chemical cleaning companies. Only professional truck-mounted steam cleaning from a reputable company is accepted.
- Call The Landlord for a recommendation on a carpet cleaner who will give you reasonable rates on carpet cleaning.
- If you hire another carpet cleaner, the carpet cleaner must guarantee their work to the satisfaction of The Landlord, and a receipt is required during the walk through inspection.
- Tenants, please note: The Landlord will not reimburse for any carpet cleaning contracted by tenants.
- Do NOT wash draperies.
- You are not expected to dry clean draperies unless:
- You have caused excessive soil or allowed water damage from open windows. Draperies with water stains could require replacement. Discuss this with your management team.
- You have not been using the draperies provided and/or have not kept them in good condition
- Wipe all mini blinds â€“ do not use harsh chemicals on the blinds.
- Clean all windows inside and out.
- The following must be in working order to avoid charges when moving out:
- Burned out light bulbs
- Non-working smoke detector batteries
- Missing doorstops
- Furnace filters – change the filter just before you vacate the property, and make sure you use the correct size.
- If you have a pet, leave an adequate supply of insect/flea foggers. The minimum required is four (4) foggers. If you have three bedrooms, two baths, and 2-car garage home or larger, you must supply a minimum of six (6) foggers. There is a $10 charge per can if you do not leave the foggers unopened in the property.
- If you do not have a pet, you do not need to supply foggers unless you have not been exercising minimum insect control. If a property is found loaded with ants, spiders, cobwebs, etc., you can incur pest control charges. Therefore, follow the proceedings for using the foggers.
- All foggers must be left unopened and given to agent during walk through inspection.
- The Landlord will place and discharge them after the walk-through.
- If you fail to leave the proper number of foggers, there will be a charge.
Landscape Clean Up Where Applicable
- The outside area is to be neatly mowed, trimmed, pruned, fertilized, and watered for outside areas that apply in your rental contract.
- Remove all trash and debris, placing in the proper receptacles.
- Remove grease or oil drips; dispose of motor oil properly â€“ it does not belong in the garbage receptacles.
- Pick up any animal feces whether you have an animal or not.
- If you have trash that exceeds the normal pickup, you are to arrange to have it hauled away at your expense.
- Place all other trash within the appropriate trash receptacles for normal trash removal.
- Do not overflow trash receptacles.
- We request that you do not spackle, putty, or touch up paint unless sure the paint will match.
- Charges can occur if unnecessary painting is required due to tenant painting.
- Charges for painting depend on whether it exceeds normal wear and tear, and the length of time in the property.
Your Security Deposit Refund
When you follow the move out procedures leave the property in good condition, it simplifies the task of refunding your security deposit. The Landlord remits security deposit transmittals within 21 days in accordance with Californiaâ€™s landlord/tenant law. Remember, We want your move out to be a pleasant and successful process.
Additional Tenant Forms
We have put together the following forms that could be useful to you in the future. If you need more forms, contact the our office. We have also included a copy of your rental agreements with your handbook.
- Moving checklist/utility numbers
- Emergency/disaster checklist
- Tenant ACH request
- Work order request
- Add roommate request
- Cable/satellite/TV request
- Request to add pet
- Partial notice to vacate
- Notice to vacate
We hope that you have found the The Resident Handbook useful and informative. It is our goal to prepare you for a successful tenancy and a pleasant move out when this occurs. If you have any questions on the enclosed information, please contact us.
Have a successful residency.
7667 Vickers St., San Diego, CA 92111
(Bus) 619-928-2878 * (Fax) 619-374-2903
For the most updated information & news on real estate & Gabhart Investments go to our facebook & twitter pages
Ok I have not posted lately because I have been focused on business planning and operations but I wanted to take a few moments and share a good maintenance addendum to add to your leases. As part of the last few weeks I have been updating my policy and procedures for our rental and flipping operations.
I am a huge believer in systems and processes. Anything that is going to be done multiple times I want to have a process in place that is documented so it can be done the same way each time. This is also known as Standard Operating Procedures or Policy and Procedures.
These become very helpful when
1 – Certain things may not be done each day and when they come up it will prevent you from having to start all over and try to remember how exactly you did it last time. This is particularly important in things like property management because of the potential liability of omitting certain documents or disclosures to tenants or transactions.
2 – It helps make your business more scale able. If you have these systems documented it is easier to bring someone on if you get busy and they can hit the ground running. It is also good if you have people working for you so that if something were to happen to them you would know how these items were done.
3 – It makes you more efficient and allows you to improve quicker by allowing yourself to see over time how you are or were doing things which makes it easier to build upon previous systems.
4 – You add checklists to everything you do.
As part of our lease agreements with tenants we add an addendum called maintenance instructions. This let’s our resident know in advance what is expected of us as the owners and of the tenants and helps reduce questions that frequently come up. This is part of our resident welcome package which incorporates the lease, addendum and a 30 page document on making there stay with us more enjoyable and helping alleviate many misunderstandings that frequently happen between the landlord and the tenant.
Disclaimer – I am in San Diego, California so check out all your laws & speak with an attorney etc. wherever you are at before taking advice from someone like me (more…)
Well I was posting on one of my favorite Real Estate forms www.sdcia.com getting some feedback on the San Diego rental market and some ideas about the best ways people were renting their apartments because all of a sudden I have quite a few vacancies to fill.
Until recently it has been pretty turnkey because most of my units had been filling by the time the previous tenant had left. I probably took my eye off the ball a little bit because I had been so focused on flipping properties that I have not paid attention to talking to fellow investors in the market I own units.
Apparently, I missed the memo that said for everyone to move out because all of a sudden I had 2 vacancies in December (they were on 12 month leases that I signed the December before. I remember thinking that it would suck if they moved out next December and here you have it, Merry Christmas Mr. Landlord)
As usual there was a lot of good feedbacks and comments and the thing that stuck out to me was that you needed to call people back immediately, especially in weak markets like we are heading into and with today’s 24/7 world when everyone expects instant gratification (especially me!). I knew if I didn’t call them back to rent one of my competitors would.
One of the posts was by someone I respected who thought that if you called the tenants back at their whim you were setting a bad precedence and it got me thinking (can you spell the burning rubber?)
A lot of people (including myself more than I would like to admit) fly by the seat of their pants when managing properties and don’t have many mechanisms in place to run the operations efficiently.
One of the things we do that I feel is very helpful once we have found the resident in place is a resident welcome manual to spell out how the relationship is going to work. We did not make it up, but we purchased it from a company that creates property management operations manuals and forms and modified it to meet our needs (why reinvent the wheel? I’d rather make a better ball bearing to make it go faster.) Post a comment or send me an email if you would like their info.
So anyways I starting posting my response at click here and was pasting my table of contents of our resident manual and I had technical difficulties and it wouldn’t let me post so guess what! Yes, I am posting it here with a link to our TOC which will hopefully shed some light on a way to set the tone from the beginning.
Here is the Table Of Contents from my resident Welcome manual
GII resident WELCOME Manual
GII Welcomes You 4
GII Personnel 5
Tenant Communication 6
Telephone Calls during Office Hours 6
After Hours Calls 6
Emergency Calls 6
Maintenance Requests 6
Change of Information 6
General Office Information 7
Address Information 7
Office Hours 7
Protect Your Rental and Credit History 8
Rental/Lease Agreement 8
Moving Checklist 8
Utility/Cable Companies 8
Rental Payments 8
Maintenance Reimbursement 9
Care of the Property 9
Getting To Know Your Residence 9
Tenant Renovations/Alterations 9
Tenant Maintenance Responsibilities 10
Procedures for Requesting Maintenance 10
If There Is an Emergency 10
Preventative Cleaning Tips 11
Additional Cleaning Tips 12
Energy Saving Tips 13
Renters Insurance 14
Safety Tips 14
Vacation Checklist 15
Holiday Tips 15
Drug Free Housing 16
Frequently asked questions 17
When it is time to move 18
Giving Your Notice 18
Setting Up Your Move-out Appointment 18
Preparing the Property 19
Carpet Cleaning 19
Draperies/Window Coverings/Windows 19
Pest Control 20
Landscape Clean Up 20
Your Security Deposit Refund 20
GII Additional Tenant Forms 21
Moving checklist/utility numbers 21
Emergency/disaster checklist 21
Tenant ACH request 21
Work order request 21
Add roommate request 21
Cable/satellite/TV request 21
Request to add pet 21
Partial notice to vacate 21
Notice to vacate 21
If anyone has any questions or suggestions please post your comments. Writing this blog helps me just as I hope it helps other people to.
For the most updated information & news on real estate & Gabhart Investments go to our Facebook & twitter pages