Often, after receiving a repair quote, landlords have a very similar reaction, “I received a quote for $1,000 to replace a water heater? That can’t be right, I could do it for $300!” There will always be a certain amount of “sticker shock” upon receiving quotes. Effectively managing your rental property is really managing the money related to the rental operations. We take the responsibility you have given us to manage that money conscientiously. While we will not send you a quote that we believe to be unreasonable compared to competitive prices in the marketplace, we are not saying you should take our word for it. We feel it is important to convey to you WHY repairs cost what they do.

We ask you to participate in this exercise. Take a moment and picture what you would expect the “ideal” contractor would be. What qualities and characteristics would he or she have? Most people would say, they would expect a contractor to present themselves in a professional manner (ie. schedule appointments quickly, arrive on time), have experience to diagnose the problem, have the honesty to provide an accurate scope of work to repair the problem and possess the appropriate tools and skills to do so efficiently. And, have the integrity to stand behind his work. You probably would prefer that this contractor be able to communicate in the same language as you, your tenant and/or us to avoid miscommunication and to perform his work effectively. McGrath Real Estate also expects him to be appropriately licensed by the state and county and be properly insured when required.

There may be other characteristics that you would want but those mentioned above are the ones that we look for when we hire contractors on your behalf. With our vision of what an appropriate contractor is, the next question is: What do you think the annual salary of this contractor would be? This is harder to determine but after asking a random sample of homeowners the answers ranged from $40,000-$60,000. If your answer does not fall into this range, you can still use the table below to calculate what the cost per hour the contractor must charge to approximate any salary we choose. We have chosen an annual salary of $45,000 for our model.

In a year, there are 52 weeks and assuming a 40 hour work week, 2,080 possible hours. We are assuming that our contractor will take two weeks of vacation during the year and have six major holidays off so now we are down to a possible 1,952 hours of possible work. Every day there is travel time, training, and other “non-billable” time. Most often the time in preparing estimates falls into the “non-billable” hours category. Even if our contractor ends up getting the job, he still spent time determining the problem and writing up the estimate. Unexpected circumstances can arise, a vehicle breaks down, a family emergency etc. Some weeks and some jobs will be better than others but overall we can say that all these items will take up approximately 25% of our contractor’s time on the days that he works. We are now down to approximately 1,464 revenue producing hours in a work year. In reality that is actually more than most contractors have because we have figured in no down time due to lack of work at different times of year (ex. landscapers have much more work in spring/summer than in winter).

So to satisfy our $45,000/year salary with 1,464 billable hours, this contractor must charge a base hourly rate of $30.74. But, we can’t stop there. On top of his salary, he must pay both employer and employee portions of his social security and Medicare taxes (13.3% of salary) or in our example $5,985/year. That equates to an additional $4.09 per billable hour.  Our contractor must drive a work van and because he goes from job to job each day, a typical contractor puts approximately 30,000 miles per year on his vehicle. Combining gas, maintenance and depreciation (but not any interest if it is not paid for) the IRS tells us his cost per mile is $.505. So before he can pay himself his salary, he must cover $15,150 annually in vehicle operating expenses or the equivalent of $10.35 for each of his 1,464 billable hours. Workman’s Compensation insurance typically runs up to eight percent (8%) of his salary, or $2.46 per billable hour. With these “must” expenses alone, our contractor must bill at $47.63 per hour to earn $45,000 per year. But he’ still not done.

The fact is that this contractor still has to pay for a cell phone at least, advertising to generate business,  purchase a computer and software to operate his business, buy tools to actually perform his trade, do his own billing and hire an accountant to help him determine his income taxes. And we are assuming that he works out of his house. We don’t have any money at all in our model for rent each month!

If our contractor is charging $50 per hour, and paying himself $45,000 per year, he is not even breaking even let alone turning a profit, which is necessary for him to grow his business. Then there is another big one, we have not factored in his retirement, which he must fund from the revenues he produces. We don’t know these costs which is why they are not included in our model but  I think you can see how we can easily reach $75/hour. That’s one guy, with a truck and a cell phone.

For years we have pressed our vendors for preferred pricing due to the volume of the business we provide them. $80-$90/hour for a handyman?  seemed high to us, until we did our analysis. As you can see, it is hard for a vendor to provide a significantly lower rate when factoring in all their costs. Some specialized vendors (ie. HVAC, plumbers, electricians) charge significantly more per hour as their labor costs are higher. We have had more success negotiating discounts with these types of vendors. Where we save the contractor is in advertising.

How Do We Select Our Vendors?

All our prospective vendors begin with an in person meeting with David Buckingham, our Repairs Manager. He gets a sense of their business and locations that they service as well and reviews their rates at this meeting. The vendor also reviews our vendor policies with David at this meeting.  After the meeting, we look at reviews published independently by publications like Angie’s List, Yelp and Yahoo Local.  You are also a great resource for finding contractors. When our clients designate preferred contractors, we try to evaluate whether they will fit into our program.

Once you qualify to do work for us the evaluation process is ongoing.  A large part of our contractor review program is an evaluation survey. Every Friday, we send out a Contractor Review Survey to all renters who had a repair at their home the previous week. The tenant grades them on items such as “did the contractor set up the appointment promptly? Was he on time? Was the quality of work what it should be? Was he professional and courteous? Etc. The contractor receives a grade for the week and we maintain a cumulative grade as well. We can see who is performing well and if there are trends developing, either good or bad. We then share these grades with the contractors every month. Competition is the greatest factor in receiving consistently good service at fair prices and our system of continual evaluation fosters that atmosphere with our vendors. Good property management is good procedures. Nowhere is this more important than in repairs.

McGrath Real Estate doesn’t like to spend your money. Our job is to protect your assets, not deplete them. We’re here to help you run your ‘business’ effectively and profitably and reduce the costs that go along with owning your rental property business. If you have any questions or comments regarding our repair policies or the vendors we employ on your behalf, feel free to contact Dave Buckingham at DBuckingham@McGrathRealEstate.com.

• 60 Days to Return Security Deposit: The number one difference that our renters ask us about is why we allow 60 days to return the security deposit vs. the VRLTA which requires it be returned within 45 days. In some cases it can take two months for McGrath Real Estate to receive verification from utility companies that all utility bills have been paid and closed. In the case of the water bill, the owners are at risk of a lien against their property if that bill goes unpaid. We recommend that once you’ve moved out you provide our Inspections team with a copy of the final water and other utility bills to expedite the return of your security deposit. It is rare that McGrath Real Estate ever has to keep a security deposit for the full allotted time but we encourage our renters to assist us by providing copies of final bill payments.
• Interest is not Accrued on Security Deposits: No interest is accrued, to the benefit of the Renter under your lease.
• Abandonment: Technically under the VRLTA lease, if a Renter “abandons” the property for more than seven consecutive days, the Landlord has the right to provide notice and advertise the property. You would still be responsible for rent until the property has been re-rented. The McGrath Real Estate lease does not make this stipulation and as long as rent is paid, the home is not considered abandoned. We do ask that if you are leaving the area for an extended period of time to let us know and we can periodically check on the property to make sure nothing goes wrong while you are away.

Many parts of the VRLTA are incorporated into your lease to ensure that both Renters and Landlords are treated fairly. Several protect you as a Renter from unfair practices:

• Effect of Unsigned Lease: Under common law, if both parties do not sign the contract (in this case the Lease), then the lease would not technically be valid. If the Landlord collects rent there is an assumption of some sort of contract but it would be considered a “month-to-month” lease. Many of our Landlord clients are Foreign Service Officers and many are stationed in areas thathave limited access to internet, computers and fax machines. In some cases, it can be several weeks or even a month or two before we could reasonably expect to receive a signed and ratified document from our Landlords. We are in the process of incorporating “E-Signatures” to help expedite the process (more information to follow in future newsletters). To protect your rights under the lease, all our Landlords must agree to allow McGrath’s agents to sign on their behalf if needed. We will always try to provide you a ratified copy of all documents within two weeks of your signature.
• Notice to Cure Breach: If there is a breach of the lease (this could be anything from having an unauthorized pet on the premises, smoking inside the home, or subletting the home) under Common Law in Virginia, the Landlord has the right to immediately start eviction procedures. In your Lease and under the VRLTA, we require that the Renter be provided a “21 Day Notice to Cure or Quit” Notice. This provides you 21 days to remedy the default and bring your lease back into compliance. That isn’t to say that if you were smoking in the home, your security deposit couldn’t be deducted because it is likely that damage has already occurred. In the case of a pet situation it would allow you the opportunity to find the pet another home and not face eviction. The best policy in these situations, if you are considering moving out early, subletting or getting a new pet, contact our Leasing Department to get permission from the landlord IN WRITING, to protect yourself. If you ever think you might be in breach of the lease mistakenly, contact our Senior Property Manager, John Bennett to discuss the situation.

Understanding your lease will lead to a smoother and happier tenancy. If you have questions in regards to any part of the VRLTA or your lease, please contact John Bennett, our Senior Property manager at JBennett@McGrathRealEstate.com

According to Chief Economist and Senior Vice President of Research at the National Association of Realtors, Lawrence Yun, this is good news for the housing market. The low construction means that the inventory of homes for buyers to choose from is “thinning out”. With less homes to choose from, prices will start to show signs of stabilization. While many people are still wary of buying real estate, locally we have seen very promising signs of stabilization already, partially due to the availability of jobs in the Northern Virginia and DC Metro area.

Mr. Yun foresees a growth in new construction beginning in 2012 as banks and homebuilders realize the “housing market recovery potential” the economy has caused, though it is doubtful we will see rates like we did in the early 2000’s. For more information, see the original article.

Most obviously, we found that many tenants, in an effort to save money, attempted to clean the gutters themselves. While we were fortunate to never have a serious accident, the opportunity was there for our owners to be liable in case of a tenant fall and injury. When researching cases around the country and state, we found that liability increased if an owner had left one of their ladders at the property and the tenant used it. Now, you may be asking yourself, why didn’t McGrath require a professional to do the gutter cleaning? Many firms have this stipulation and they, as well as McGrath, have found it impossible to enforce and gain compliance. Especially in this economy, most people are looking to save money where possible, and even if they have someone else do the cleaning, it was usually not a professional that meets the standards you and McGrath would expect.

The risks of having a poor gutter cleaning range from minor to severe, including rotten wood, insect infestation (ants and termites thrive in these environments), foundation problems and window leaks. Most people would not notice these issues at the beginning, and the problem could worsen without any notice.

McGrath Real Estate highly recommends having a bi-yearly gutter cleaning from a licensed bonded and insured contractor set up at your property, especially if your home is in a “treed” area . Typically the cost of a cleaning is approximately $65 for a standard townhome and $95 for a single family home. We have several reliable contractors we recommend and can set up the contract for you, if you desire. For more information on gutter cleaning or setting up a gutter cleaning, contract please contact our Client Advocate team at ClientAdvocate@McGrathRealEstate.com

• Starting in May the Owners Portal will be available on the 11th of each month. The portal will show activity from the 11th of the previous month through the 11th of the current month. For example, the May Portal will be for April 11th-May 11th. The benefit of posting the portal on the 11th is that you will be able to see your owner payment on the 10th. This is a direct result of YOUR feedback!
• The Owners Portal will have both current and past Owner Packets. These packets are the monthly owner statement, work orders and corresponding invoices/pictures. You have the ability to download these packets at any time in PDF format.
• A valuable benefit that we provide to you is the Owners Portal. The portal is very unique in that it does not require a username and password to login. It can be a challenge to remember a username and password every month. Instead, the Owners Portal requires your email address to gain access.

To sign into your owner portal please follow these directions:

1. Open an internet browser and go to http://mcgrath.appfolio.com/portal
2. Enter your email address and click the send access email
3. Go to your email program and click the one time link in the email you receive from us

When you click the link, you will be signed into your secure Owners Portal and have access to your reports. 

The Owner Statements are uploaded the day after the owner payments are disbursed, therefore you are able to see your owner payment and then you are able to check your bank account to verify the payment did in fact go through. You also will be able to see all invoices and pictures that were paid in that corresponding month’s statement.

If you ever have any questions about your monthly statements or the Owner Portal, please don’t hesitate to ask our Accounting Department at Accounting@McGrathRealEstate.com.

• I want to touch on the neighborhood safety part. Due to Fair Housing Law, Realtors cannot comment on the safety or makeup of a neighborhood. All Realtors will instruct you to look at your surroundings and see if you get a bad “vibe” but what many people don’t realize is that police reports are public information. You can run a search on the specific county’s police website and it will map out any police reports filed and what the report was for. This is an invaluable tool especially for those moving to an area they are not familiar with. Also, your Realtor should talk to you about “Megan’s Law” which essentially says you as the buyer are responsible to do your own diligence in finding out if there are predators in the area.

I took my mom to see it again the next day and after getting her blessing, decided it was time to put in an offer. I contacted my lender and he prepared my “Pre-Approval” letter. The home was priced a little below the market value but I asked for a “Seller Subsidy.” This has become more popular recently but in essence, the seller pays all the buyer’s closing costs (these can be quite substantial, another thing you need to consider when first discussing buying a home and something you should talk about when looking for a lender). That Thursday, I put together my offer. The contract was contingent on the appraisal, a home inspection and financing. I was getting an FHA loan which means I had to put a minimum of 3.5% down, more than manageable with my savings and budget. After speaking with the listing agent and telling her a little bit about my life situation, I wrote a letter to the owner and submitted my contract to be considered. An hour later, I received a call from the listing agent informing me that another offer had been submitted and she was expecting another one the following morning. She said that all offers would be presented at 5pm the next day (Friday) and that she would be in touch. Then the waiting game began.
I have always been the type of person who can’t stand waiting. Sitting by the phone on a Friday night was excruciating! When I still hadn’t heard anything by 8pm I started to get anxious. Finally at about 9:30 I got an email, they’d chosen another higher offer. I was devastated. I had counted my chickens before they hatched and become emotionally invested in the property, “I’m going to paint this room light blue and put the white couch over there” that kind of stuff. All I could think about was how the whole process was going to start again. It had taken me three months to find this place how long would it be until somewhere else came along?! I took a week off and didn’t look at a single listing, view any house or even talk about it in general. I needed to clear my head and it gave me a chance to evaluate my priorities. A week later I was speaking with one of my fellow Realtors at McGrath and he asked me, “Why are you so set on Reston?”
“That’s where I want to live.”
“Why?”
“…”
At this point I didn’t really know what to say. Why had I been so fixated on living in Reston, was it to be close to the Town Center? Was it that I liked the area? It took some soul searching but I realized that I had been missing out on great homes all because they didn’t fit into the little box I’d put myself into. I broadened my search, to include Herndon, Falls Church and Vienna. At once I could tell that there were some great houses, some for much less than what I had been looking at! By this point it was the beginning of October, and on October 10th (10 is my lucky number and I can be a little superstitious so I took this as a good sign), I went and viewed several homes in Herndon only to finally visit THE one. Because I had been looking in Reston, I had resigned myself to know I would live in a townhouse, except in this Herndon neighborhood, I could get a real house at the same price! It had a huge backyard, all new floors, cabinets, countertops and appliances. My commute was going to go from 40 minutes to six! I fell in love, submitted an offer and had a ratified contract a week later.
We had some back and forth negotiations but I won’t bore you with that part. Over the next month and a half I had the home inspection done. Be prepared to set between 2-3 hours aside for this one! For those of you who haven’t’ experience this before, the home inspector LITERALLY tests every single thing in the entire house. He walks through the whole exterior, checking for rot all along the side, goes up on the roof and makes sure there isn’t anything up there. He looks at the gutters, the heating & cooling systems, he tells you about water drainage and if it will affect your yard. On the inside, all appliances are checked, attic is inspected, water pressure and temperature are checked and much, much more. A good home inspector will show you how to do things you might not have had to do before like turn down your water temperature, where the emergency water turn off is, etc. The home  inspection went fairly well except that I needed a new roof. We negotiated again and I was able to up my “Seller Subsidy” by $2,000 to cover a roof replacement in the spring. Next, we had the pest inspection done and the appraisal completed, those went smoothly with no problems. The most stressful part was the loan process. Even working with a lender that I know personally and trust, I was being asked for documents literally until the day of closing! Due to the real estate recession, lenders have become MUCH stricter when writing loans. They are going to look into every possible aspect of your financial history and keep asking you for papers and reports; just be patient. They are trying to make sure you get a good loan that you can afford, we should all be thankful for that. Make sure that you have all your W2’s, tax returns, bank statements and paystubs ready for the lender though I’m sure they will ask you for more information.
The day before settlement, I performed my final walk through making sure that all items had been fixed and that everything was still working. The next day, bright and early my father and I went up to settlement. It turned out that the sellers were not even going to be there, they were signing later at a different location. This is becoming increasingly more common. I went from viewing the house, submitting an offer, ratifying a contract and settling on a house and I never met the sellers OR the other agent in person! That afternoon it felt like a huge weight had been lifted off my shoulders and when I pulled up to the house for the first time I could not have been any happier. It was MY home. There is a feeling you get when you look at a house and know that it’s yours, it really fills you with an amazing sense of pride; I hope everyone reading already has or will get to experience that feeling someday. I could not stop smiling!
When it was all said and done I knew that I wanted to share my experience with others. I learned a lot not only about myself but also a lot about the profession. As a Realtor I thought I knew what I wanted and I was going to get it myself. What I realized is that I didn’t know what I wanted and that is the single most important part of a Realtor’s job, to help you find what you want. Whether you’re looking to buy a house in 2012 or it’s not even on your radar yet, I want you to keep one thing with you: Trust the person you are working with to really get to know YOU. You don’t realize it but you don’t know what you want yet. It is your Realtor’s job to help you discover that. Having someone with you to guide you, listen to you and broaden your horizons is imperative in the search for your dream home. McGrath Real Estate employs a team approach to our relationships and want every client to feel like part of our family. You can trust in family, through the good and the bad, to always be there for you and McGrath Real Estate would love you to be part of our family.  —Written by Lindsay Curtis, Realtor and Marketing Associate at McGrath Real Estate

Like you expect your tenant to live up to his responsibilities in your home, you plan to live up to yours as a landlord. It may seem like common sense, but the more understanding and cooperative you are with your tenant in most cases it will increase their good will towards you and encourage them to treat the home as if it was theirs, which is one of your goals. So what does it mean to be a “good landlord”? This means providing the home in an acceptable condition for move in, granting reasonable requests and addressing repairs in a timely fashion. (McGrath Real Estate Services, Inc. does not recommend conceding to every tenant request just to gain some good will but there is a benefit to being reasonable.) The last point is the reasoning behind our recommendation to not have a home warranty. Home warranties prolong repairs and oftentimes require multiple trips before the job is satisfactorily done. Below are two recent and prevalent examples of McGrath Real Estate’s clients’ home warranties gone awry:

• McGrath received an emergency repair request for an air conditioning unit that was not functioning. While this is not considered an emergency, we do try and prioritize A/C requests to alleviate discomfort of the tenant. The property was identified as having a home warranty. Dave Buckingham, head of the Repairs Department, contacted the home warranty company and informed them of the issue, at which point we were informed that this particular contractor was a week out on maintenance calls and would not be able to go to the home for at least seven days. When they finally did visit the property, the contractor found that a dirty air filter caused the air conditioning to malfunction. The warranty company would not pay to have it fixed because this issue was not under warranty. The unit was still not working, 10 days after the initial request. McGrath then sent out one of our preferred contractors who had the problem fixed and the tenant was charged.

The relationships that McGrath has made with our contractors over the years allows us to make our requests a service priority. McGrath, now managing over 650 homes, offers a huge supply of potential business for our preferred contractors and while our vendor policy is in place to protect your interests, it does provide several benefits to our contractors including quick payment upon receipt of their invoice.

Our contractors are also keenly aware of determining whether the repair is a defect or tenant caused and will inform us of their professional opinion of who should be responsible. As you can see from the above example, not only was the issue not fixed in a timely manner, upsetting the tenant who had no A/C in the summer for two weeks but as the owner, you still had to pay a deductible for the initial warranty that did not cover the issue.

• We received a repair request for a broken dryer. The home was identified to have a home warranty so the warranty company was called. The contractor went out and determined that the dryer vent was dirty and just needed to be cleaned. This was done and assumed that the issue had been resolved. A couple days later the tenant reported that the dryer was still not working. When we sent out one of our contractors he determined that in fact the dryer had a defect and would need to be replaced. Again, the owner paid a service charge for an incorrect diagnosis, the tenant was charged for cleaning the vent which turned out to not be the issue and the repair would take another week to be completed.

When a contractor receives a work order from a warranty they only receive a repair deductible typically between $60-100. The reality is this makes contractors working with warranty companies look for the “quick fix” instead of identifying the actual issue and correcting it. All of our contractors sign our vendor policy which states that not only do we require them to provide us detailed before and after pictures to prove the repair was done, but if it is determined later that they did not perform the job correctly and to our satisfaction, we can leverage our relationship with the vendor to go back out and bring to our standard. McGrath holds all of our contractors to a high standard and are constantly implementing new policies in our Repairs Department to ensure that repairs are handled professionally, quickly and at a good value price point. To learn more about the Repairs Department read the Spotlight on the Repairs Team.

We could go on with several more examples but in the end home warranties in a rental home tend to cost the homeowner more than if they had relied on the property manager’s contractors. McGrath understands the appeal of the home warranty and appreciates your desire to keep the home in working order while you are away, but we believe that a home warranty is not the best way to accomplish this. Our job is to protect your interests and through years of experience we know we can offer our clients the lowest prices at the highest quality. If you ever have any questions about a home warranty or the management of your home, please contact our Dave Buckingham of our Repairs Department at Repairs@McGrathRealEstate.com

Expansion tanks are used to prevent water leaks from your hot water heater. When your hot water heater turns on, the water within the piping system begins to expand. Without the expansion tank, the expanding water can create too much pressure on the heater and potentially fail. If you have an expansion tank the expanding water enters the expansion tank.

The expansion tank contains compressed air and a rubber “bladder” that holds the water until needed. Eventually, the hot water is drawn from the system thru a faucet and the expansion tank releases the extra water into the piping system to be used by you.

Fairfax County recently passed a new  county code requiring that all hot water heaters have an expansion tank installed if any maintenance is done to the water heater.

What does this mean for you? If your hot water heater needs maintenance for any reason, the contractor sent out will be required to note that there is no expansion tank and will be required to install one if any work is done to the hot water heater. Depending on the size of your water heater, this installation (parts and labor together) typically runs between $150-$250.

In Loudoun, Arlington and Alexandria counties the expansion tank is only required if the whole system is being replaced. Most water heater specialists will recommend you install the tank but it is not required.

The diagram shows you what a hot water heater and expansion tank look like and how they work.  If you have more questions regarding the mechanics you can reach out to our Client Advocate department who will direct you to a professional water heater specialists.

It may seem like a hassle to worry about but the expansion tank has some great money saving benefits you may not even realize. Not only are you preventing future leaks with this investment, you’ll also see a reduction in your water bill each month! The extra water that you don’t use is no longer pushed back into the water main supply, instead it is held in the tank for your later use!

Investing in a expansion tank could be one of the easiest, cheapest, “bang for your buck” home improvement fixes you can make. While your home is tenant occupied it is important to consider their safety as well as yours when you return. For a very low price you could potentially be saving your family from a disaster. For more information please contact our Repairs Department at Repairs@McGrathRealEstate.com.