Archive for the ‘apartments’ Category

Have you begun to evaluate the performance of your real estate investments this year?

December 22, 2011

This is a great time to do a little homework concerning your investments and whether they are meeting the return guidelines that you have determined are appropriate for them.

Have you taken on some type of unstated risk and previously undisclosed risks?

Have you taken on too much risk in your investments?

Have your investments revealed that they are considerably more risky then you thought?

Are you being properly compensated for the amount of risk that you have taken?

Have the characteristics of the investment changed in such a way as to put at undue risk the total investment?

Is the investment performing in a way that is in line with its stated purpose?

Do you have a stated purpose for your investments?

Has that purpose changed?

Do you still trust the staff managing the investment?

Is the amount of debt appropriate for the investment?

Are the expenses in line with the budget? If so great is not what should be done to bring them in line or is this a reason to divest yourself of this investment?

What is the exit strategy for this investment?

What is the timeline for the exit of this investment?

How does this investment fit into my investment portfolio?

Is the overall market or demographics for this investment a good one or a poor one?

Are there some other evaluation criteria that apply to your investment that are not outlined above?   If so drop me an email so I can add them!


jobs = rent increases

August 23, 2011

Marcus and milichap has publised their 3rd quarter apartment research report.   I says in so many words that Austin is experiencing a growth in jobs, a reduction in construction, an increase in rents and a reduction in vacancy.    Each of those things combined equals a good time to own rental property.

The report has vacancy rates of 4-6.6% depending upon the submarket and increases in rents from 2.7 to 5.6% over last years rents.   the only cloud on the horizon is contruction permits are up as they should be when things are working this good in a market.   Hopefully they will not over build the market and push it down again in a few years when more product comes
online.   For now things are looking good for the rental market in Austin and the surrounding areas.


Austin Investor Interests also published some data on the austin market.   Their info says that we have achieved a 95% occupancy and rental rates up over 9% to the highest rates ever for the city.    They also have a concern over what happens once the new contruction is finished and those units begin to be offered.   Normally to fill an apartment complex the tenants will get consessions.   (that is a dirty word and now I need to wash my mouth out).   In the current environment those dirty things are having an effect that is taking about 2% off of market rents in the past they have taken a bigger chunk out of the top line
when you consider them over the full year’s rent.

For more information visit the marcus and milichap website at or or call me at my office at 512-782-8982 to talk shop!

property tax protests in austin tx travis county

August 22, 2011

Every year I protest my property tax valuations and almost every year it is time well spent. It allows me to learn something new about how my property is valued and what other property is valued at surrounding my property and is a general adventure in dealing with people.

So this year I started out with the commercial stuff. I sat down with the same guy that I talked to last year. He remembered that I had my son with me last year but this year I happened to have to go on his birthday so he did not come along (“his loss :)” just kidding son ). I asked for my property to be reduced about 15% from where the county had them appraised at. After showing him my p&l for the year he agreed to get me to a value about 7.5% lower then where the county was at. I decided that it was a good enough return and took his offer and our conversation was almost over. He began to work up the settlement and I began to pick his brain. Well it turns out that the county has produced some very important information which is used to determine property values.

One of those reports is a CAP RATE report for apartment transactions for the prior year. This report contains cap rates for sales that took place for the prior year catorgorized by the age of the complex. It can be used to determine value for your particular property and for those around you. Here is why I was surprised by the report: I was surprised because of how low the cap rates were! Or by how high the values were. For example there was a transaction on a building built in 1973 and it had a 7% cap rate. if you had a 20 unit building that was generating a 100K Net Operating Income you could in theory sell it for a prices of 100K/7%= $1,428,571.

Working backward:
If a unit was renting for about 675 per month with a 5% vacancy and the expenses averaged about 35% of revenue after the vacancy you generate a 100K net operating income.
For those of you who don’t know 7% is LOW. My first student loan interest rate was at 8%. I remember when FHA loans were are 8%. So for an older building to sell at a 7% Capitalization Rate is a really low number and a high value.
Say for example that 7% is a fluke and If you used a 8.5 rate the value would be 1,176,470 ! Which is still out of this world! I did not think that our market was that hot! Boy was I surprised!

Eviction Adventures

June 27, 2011

I discovered something new in my land lord adventures last week. Simple evictions can be decided by a jury.

Yes that’s right a Jury!

When I went to court at the appointed time the clerk let me know that our eviction time and date had been changed b/c the resident requested a jury trail. So I went to the legal library and checked out a little info and when back to the clerk and asked if it cost $ for a jury trial. She raised her hand and held up 5 fingers! I said 5 dollars is all it costs for a jury trail! It should cost as much as the initial filing fee!   At least that is how I felt when I realized that requesting a jury trail delayed the court date by 5 days. So after our little delay I show up to court with my family in tow. My family were there for the field trip to see how the legal system works.

There were a few cases before mine. One of the cases involved a tenant who had a dog in his apartment in violation of his lease. He was a young guy and thought that it would be ok to violate his lease in this way. The Judge let him know that in no uncertain terms if his lease says no pets then it means no pets. So he says that he had not paid for this month b/c he did not know how this thing would turn out but that he had the money and he would pay for any carpet cleaning and get rid of the dog and would move. The Judge then asks his landlord if that would be ok if he would do those things within the next week if they could dismiss the case. The landlord says yes the tenant says yes and everyone agrees to work out a solution that could work.

We were next. There were 25 jurors there ready to decide our case but before we begin eliminating some of them to get down to either 12 or six. So the judge says hey lets have a little pretrial meeting to see if we can work some things out. So we both approach the bench. The judge says is there any way we can work this thing out. So the tenant says he is open to working something out and I interrupt him and the Judge and say I am open to settle this and it looks like him paying “Is he prepared to pay today?”

Of course he was not prepared to pay today so I say “lets get ready to rumble!”

The judge then says well I want to take a little break before we get started and maybe you all can work something out. I go back to my wife and she says you could not work something out? I reply

“What! He can’t pay but since you are saying try to do something I will try.”

So the resident and myself go into a little conference room and try to discuss some type of way to work this out. What we come up with is that on monday he will pay 900 and then will get something from the county to help the rest. I reply ok my wife said work out something. We go back into the judge and let him know that we think that we have a settlement. So the judge tells the jurors that he has some good news and some bad news. The bad news is that if they wanted to experience the civic duty of serving on a jury that they would not be able to do so today and the good news is that if they desired to leave here and get back to their lives he was going to be releasing them in a few minutes. After they were released the judge says ok tell me the settlement that you have come up with. So we tell him and says to me that sounds like a good outcome for you Mr Seay as you are able to get something verses getting nothing. This was a Friday so when monday comes along I was very busy and did not have a chance to reach out to the tenant but when Tuesday came I did talk to him and ask him if he had the $900?

 Of course he did NOT!

So very nicely I explained to him that the Judge would only allow me to move his stuff out at the endo of the week, but that I did not want to pay any more money to exercise my rights. I would like for him to move by the following monday and I wished that he could come up with the money an would work with him if he thought that he could but if not then move so that I can move on as well. I wished him nothing but the best and let him know that sometimes thing don’t work out the way we want them too. Did he move out by Monday?

Of course NOT!

However he explained that the self storage place closed earlier on Sunday and all he had was a few things and he would have them gone today. So finally I got my keys and took possession of the property and to his credit he did not leave me any extra furniture, food, clothing, or other accessories.

Do you have some problem tenants and need to know what do next? Are you not sure how the eviction process works? Do you want to what I did wrong in selecting this tenant? Drop me an email ro call me at 512-782-8982.

Energy Audit Update

June 21, 2011

So after the energy audit I got the results which they were not good!   The insulation in the attic was of course terribly inadequate.    The windows being single pane glass of course allow lots of radiate heat into the units.    None of these things were news to me just confirmation of the age of the property.    One of the other things checked included the duct work of the HVAC system.    Not only the exhaust side but the supply side.

SO with the results of the new energy audit we began some energy improvements to the property!   Hopefully they will allow the residents to have a better living experience at the apartments.   We are going to get at least R-30 insulation blown into the attics and get solar screens put on the buildings and lastly get all the HVAC systems and ducts properly sealed.    The total cost being about 13K (ouch) but I think that the buildings will perform better and will make the energy usage lower for all of the residents!   If nothing else we will keep the city from bothering us about poor results of the energy audit and since we have already started making improvements we are far ahead of the game in terms of correcting any poor energy efficiency performance in our buildings.

Will these improvements result in higher rents?   Will they result in a longer stay for our existing and new residents?   Will they result in a higher net operating income?   The answers to these questions are not readily available.    I sure hope that they do.    So far we have gotten a few comments about the improvements and I will fill you in on them maybe on the posting.

Energy Audit in Austin TX

May 23, 2011

So last week I began the process of completing the energy audit that the city of Austin Mandates for all multi family properties inside the city.   The City passed an energy audit ordnance and it says that by June 1 you need to do an energy audit on your property and then you going to need to disclose the results to the prospective tenants.   So after calling a few energy audit companies.   I settled on one David Malone is the owner and they can be reached at  512-762-5000 and his website is

It took them about an hour to do the energy audit they needed to go in each one of the individual floor plans that I have in each building.   Luckily enough for me at my small complex here in Austin. I have four buildings and they each have the same floor plan.   Once inside they look at the insulation in the attic and also do a duct test on the air ducts and also make an observation of the windows to determine what their energy efficiency.   Once I get the City and I get the results we will be able to determine where I can spend some money so that my tenants will save on their energy bill and where the city can reduce energy usage.   (I am still trying to see the return on investment for me I guess I am simple like that!)   My understanding is that if your property does not meet the minimum qualifications for energy usage then the city will give you about 18 months to go through and make some energy improvements and they have some rebate programs right now for property owners to help offset the costs!   I look forward to finding out about the rebates and the costs to complete some of the energy savings upgrades.

I understand that the purpose of the audits is to help Austin save energy and so by having more energy efficient and by building energy-efficient homes the city of Austin hopes to save little bit of energy usage and hopefully prolong having to build a new electric power plant.    Austin is a very “green” city as some of you may well know and so it is doing its best to help the property owners in Austin make energy improvements.   When single family homes are being sold, well before they actually go under contract the owners need to conduct an energy audit and disclose that information to the buyers.   All except the foreclosures, I guess banks cant afford to be energy efficient or cant afford the energy audits so they are exempt! (Of course I feel that if I have to do it then everyone should have to do it!)

Anyway, enough of my ranting about that.   So the audit cost me about $40 per door so not extremely expensive until you start adding up the number of doors!   So I will give you an update on when I know more about the repairs needed and the rebates from the city.   Come back and see how this new adventure plays it self out!

My first eviction saga…….

May 9, 2011

(Normally evictions are a pain but not a SAGA) It all started when a tenant did not pay and performed what I call a Midnight move out. That is when they move at midnight so no one would see what was happening. Well this tenant did not take everything. So I called her and said hey do you want this stuff?

Yes I will get it in a couple of days.

NO you can come get it from the front porch b/c I am setting it out as we speak.

Well you can’t do that, I say read your lease you already abandoned the unit and you already gave me permission to set out your stuff if you abandoned the unit.

((Tenants never read the lease but always know how things are supposed to happen))

So I instruct my staff to set out the stuff and remind them of the general rule of not disturbing the peace if she shows up just be nice and calm and I leave. Well she comes right over with the police!

Of course my staff calls me and says what do we do? I say well don’t argue with her just leave the stuff and tell the police who you are and what not. So they leave and the tenant wants them to put the stuff back inside to which they don’t have to call me for the answer to whether or not they will do that.

NO! They wont put it back inside!!

The next day when I come back I tell them to do it again and of course the police come back again with the tenant. I think her friends who were the neighbors were calling her to let her know if someone was in the unit. I love the neighbors to be friendly I just don’t want them to team up against me!

So the officer comes and tells me that I cant just put her stuff out even though she has moved most of it and just left some junk. He says I have to evict her and I let him know that I will do just that since she is intent upon having her way.

((She does not realize that an eviction will result in a judgment, which is worse then just a collection account from a landlord for her credit))

So I go to court fully expecting to see her. It turns out that she was trying to cancel her lease but instead of reading it she relied upon the info that she got from the Austin Tenants Council concerning canceling the lease.

((I guess this is one of those you get what you pay for situations))

So she missed the court date but I will come back to that in a little while. But she files an appeal and a pauper’s affidavit to go along with it.

Now she has a little problem with this pauper’s affidavit, the jest of it is that she is no pauper!

She bought a new car ((I supposed with the rent and tax return money)) Additionally she has a job!

In the Great State of Texas if you want to appeal an eviction you have to post a bond in the amount of the judgment. That is unless you are a pauper. What is a pauper? I general terms a poor person who cannot pay. Well why would a pauper want to appeal an eviction? If they could not pay in the first place what makes them think that they could pay later?

Since this was a first for me I had to take out my trusty RED BOOK from the Austin apartment association and see what needed to be done about this! The red book said file a challenge to the pauper’s affidavit immediately!

So that is exactly what I did!

When we get to the court for the hearing she is not there, but at the last minute she shows up! Man I am disappointed I thought I would not have to fight and go thru all of this stuff.

Well when she finally comes in after pausing at the door unsure of whether or not to come in we get started in the roughest, meanest, longest paupers affidavit challenge of the century!

Here is how it went down. The Judge swears us in and then says I am going to ask you a few questions about the appeal and paupers affidavit.

Judge: Did you know that you would have to pay the rent in order to file an appeal?

Tenant: No, but …..

Judge: Did you pay the rent?

Tenant: No, but…..

Judge: I was out when this went to court for the eviction and my substitute was here but why didn’t you come to court on that day if there was a problem?

Tenant: Well I was here but your staff sent me to the wrong courtroom. ((A little background here is good. This is the main court house for the county it has 4 floors and at least 25 court rooms and several floors next door with several court rooms per floor as well.))

Judge: Who sent you to the wrong courtroom?

Tenant: Your clerk… Judge: Bailiff go get all my staff in here this minute I want to know who sent you to the wrong court room!

Tenant: I don’t want to get anyone in trouble…..

Judge: Nonsense I want to know who sent you to the wrong courtroom! Staff comes in and one of the clerks recognizes the tenant.

Clerk: Your honor she looks familiar but you know I see lots of people and this was 2 weeks ago, but did you have a criminal case as well on the same day?

Tenant: Yes I had another case as well and I went to that courtroom and by the time I made it back here this was finished.

Judge: What is the docket number for the other case?

Tenant: I don’t know but have the paper work in the car my boyfriend can go and get it.

Judge: Good go and get it but lets work this thing now. You filed this papers affidavit is all of this info correct?

Tenant: Yes….

Judge: How were you paying the car note and rent before this time b/c I don’t see any income on here?

Tenant: Well I have a job but its only part time? And the car note gets paid..

Judge: The car note just gets paid…. Please take a second and fill this out completely.

Tenant: Ok here you go.

Judge: You don’t make enough money to pay the rent and all of the other expenses that you listed and you already said that you understand that to win an appeal you have to pay the rent but you have not done so. So why do you want to appeal?

 Tenant: Well there were some things that did not get fixed in my unit and I sent the landlord notice.

Judge: Ok well I see….

(( Now here is where I am thinking that I will get a chance to SLAM her)) In the meantime I have been just sitting there looking out the window trying not to the speak when I was not spoken to. My mother raised me right (don’t speak when you are not spoken too) I am ready to ask her when she bought the car I already know that it was after her midnight move out so she cant claim that she is a pauper, b/c paupers don’t go buy new cars? Since it was around tax return time I was also going to ask her about that as well, and her boyfriends income since they were living together. Additionally, about her income since she always had the rent until now and where she was staying since she was not paying rent to me she must be paying someone. Etc etc etc

I was ready for war! So I look at the judge for my queue, but he says……

Judge: I don’t think you are credible and I am denying your paupers affidavit! Mr. Seay you are free to go unless you want to stay to see this other stuff

Ron says: No thank you your honor Can I get a copy of your decision today or will it come in the mail.

The moral of the story is dont use your rent to buy a new car!

Texas apartment data

January 31, 2011

Occupancy 93.3%!!!

November was 93.1%

I am full in austin meaning 100% occupancy.   Now I need to get full and paying but being full is a good start.  Check out the write up from about the Austin, San Antonio, Dallas, Houston, and Fort Worth markets.   I attached them as a PDF to this post.aln apartment data 1-11-11

Business Digest: Treasury’s $600 billion bond program still needed, Fed says; New-home sales in 2010 drop to lowest level in 47 years

January 27, 2011

Business Digest: Treasury’s $600 billion bond program still needed, Fed says; New-home sales in 2010 drop to lowest level in 47 years.

Here is what the article says about housing: ”


New-home sales in 2010 drop to their lowest level in 47 years

Buyers purchased the fewest number of new homes last year on records going back 47 years.

Sales for all of 2010 totaled 321,000, a drop of 14.4 percent from the 375,000 homes sold in 2009, the Commerce Department said Wednesday. It was the fifth consecutive year that sales have declined after hitting record highs for the five previous years when the housing market was booming.

The year ended on a stronger note. Buyers purchased new homes at a seasonally adjusted annual rate of 329,000 units in December, a 17.5 percent increase from November’s pace. Still, economists say it could be years before sales rise to a healthy rate of 600,000 units a year.”

The new housing sales are the big number to pay attention to because they are a trailing indicator of economic activity.   The logic goes like this:   New Job, New Car, New House!.   No new houses means that something is broken and has continued to stay broken for the last 5 years.   What does this mean for real estate in your area?   It depends on the local economic activity of your area.   In Austin we are experiencing slow job growth (2% in 2010) and lower unemployment 7.3 (or something like that for 2010).   If new houses are not being built for those new jobs then we should be seeing rents increase or give-a-ways drop off, or a combination of the two.    Have we been seeing those things happen?

YES!!!!   YEAH for the rental real estate game!

I hit a telephone pole that’s why I can’t pay my rent

January 17, 2011

“I hit a telephone pole that’s why I can’t pay my rent. ”   Yep thats the latest excuse that I heard as to why the tenants could not pay thier rent.   They even attached the picture below…..

My advice to them was to follow Ron’s rules and things that make you a better landlord and investor: Rule# 235,876   Slow down and pay your rent in the mail!   

You never hear of the mail man hitting a telephone pole that’s why the rent did not get there on time.

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