Scattered Site Rental Management

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1 U.S. Department of Housing and Urban Development Scattered Site Rental Management April 5 th, :00 4:00 P.M. Community Planning and Development

2 Moderator and Presenters Moderator: Kent Buhl, KB Consulting Presenters: John Laswick, HUD, Peter Werwath, Werwath Associates Bill Brett, Homeport LLC Columbus Housing Partnership (Columbus, OH) Deb Dombar, Beyond Housing (St. Louis, MO) dhousing.org U.S. Department of Housing and Urban Development Community Planning and Development 2

3 Webinar Series Developed as a series that builds upon previous webinar content Webinar #1: Marketing & Disposition Webinar #2 April 5: Scattered Site Rental Webinar #3 April 10: NSP and Land Banking Webinar #4 April 17: Best Practices Peer to Peer and Experts Roundtable 3

4 Introduction Situation: You, the Grantee, have 20 singlefamily homes spread throughout three target neighborhoods across the City. You have tried to sell these homes for 6 months, but you have not found any qualified homeowners, as the housing market continues to decline. Question: What do you do? U.S. Department of Housing and Urban Development Community Planning and Development 4

5 Agenda Our goal is to provide answers to questions like this and hear about participants relevant experiences, following this agenda... Rental management options Development decisions NSP s related requirements Keys to success Case Studies: Beyond Housing (St. Louis, MO) and Homeport, LLC (Columbus, OH) U.S. Department of Housing and Urban Development Community Planning and Development 5

6 Section 1: Rental Management Options U.S. Department of Housing and Urban Development Community Planning and Development 6

7 Rental Management Options Before making the decision to hire a manage company or self-manage the properties, careful analysis of the project s operating budget by an experienced property manager is critical i Option 1: Private Management Company Option 2: Grantee Self-Management U.S. Department of Housing and Urban Development Community Planning and Development 7

8 Private v. Grantee Management Private Management Company Labor costs can be less expensive Careful selection of a management company is required Less direct oversight of properties Grantee Management Higher labor costs typically Staff more knowledgeable of NSP requirements and potential renters More control over properties U.S. Department of Housing and Urban Development Community Planning and Development 8

9 Grantee Management: Things to Consider Capacity: To do this in-house, the organization needs skilled property mana gement staff Difficult for a smaller grantee to develop the high level of expertise needed to have adequate t capacity t to provide its t own property management There may be no viable alternatives in the community, but don t force it it may not be feasible U.S. Department of Housing and Urban Development Community Planning and Development 9

10 Property Managers Roles The in-house or hired property manager must: Oversee management of rentals and ensure compliance with NSP regulations Manage all information systems and maintain data and records Oversee maintenance staff Maintain effective, professional renter relations Collect rents and enforce all aspects of lease Be abl ble to carry out any necessary evictions U.S. Department of Housing and Urban Development Community Planning and Development 10

11 Hired Management: Advantages Using a management company may be the only viable choice if the grantee has no capacity to manage single-family rentals Can broaden reach when working in multiple neighborhoods Provide expertise needed to successfully manage properties May be more cost-eff ffective if company has numerous scattered site properties U.S. Department of Housing and Urban Development Community Planning and Development 11

12 Hired Management: Owner s Roles Hiring a management company requires active oversight by staff with the time and expertise to do so. Plan on: Doing full property inspections annually Regular drive-bys (at least monthly) to inspect the exterior and grounds Reviewing reports, to verify the reasonableness of maintenance costs, to confi firm that cash flow is positive & monitor vacancies/collections Corrective actions may have to be taken U.S. Department of Housing and Urban Development Community Planning and Development 12

13 Question and Answer: Discussion of Rental Management Options U.S. Department of Housing and Urban Development Community Planning and Development 13

14 Section 2: Development Decisions U.S. Department of Housing and Urban Development Community Planning and Development 14

15 Key Decisions at Development elopment Stage Challenge Strategy Geographically dispersed Choose properties in close homes across many target areas proximity and in same jurisdiction to begin with Decentralized property Dt Determine where leasing and management rent collection will take place Lack of economy of scale: Expenses too high Control expenses with energy efficient fixtures, use of data systems U.S. Department of Housing and Urban Development Community Planning and Development 15

16 Reduce Maintenance/Operating Costs Cluster first scattered site rentals in same area Take care of all deferred maintenance during the rehab process and use durable, energy efficient materials (such as ENERGY STAR appliances, solid roofs, furnaces, water heaters) and use Reliable and inexpensive suppli liers and contractors Bulk purchasing and buy same appliance and equipment models for interchangeable parts Require tenants to maintain yards and walkways during lease set-up U.S. Department of Housing and Urban Development Community Planning and Development 16

17 Question and Answer: Discussion of Development Decisions i U.S. Department of Housing and Urban Development Community Planning and Development 17

18 Section 3: NSP Rental Requirements U.S. Department of Housing and Urban Development Community Planning and Development 18

19 NSP Rental Requirements Income verified at move-in only See Guide to Completing NSP Income Certifications at Units that are originally set aside and occupied by households below 50% of AMI must be rerented Use developer agreements for rental projects to eliminate i management of NSP program income While assuring no undue profits U.S. Department of Housing and Urban Development Community Planning and Development 19

20 NSP Rental Requirements Affordability: HOME rent levels and affordability periods are acceptable Can have rent levels lower than the HOME 50% rents if serving even lowe r-income households Setting Affordable Rents: Determine rents at various AMI levels Adjust using local utility allowance schedule U.S. Department of Housing and Urban Development Community Planning and Development 20

21 NSP Rental Requirements Eligible Uses: As a Financing Mechanism (NSP Use A) Example: Soft loan to a purchaser of an existi ting, foreclosed, rental project, with or without rehab (always a loan, must be foreclosed) As Purchase and Rehab (B) or Redevelopment (D) if rehab will be occurring Example: Soft loan to purchaser of an existing, foreclosed, abandoned or vacant property U.S. Department of Housing and Urban Development Community Planning and Development 21

22 Target Market Considerations Tenants Below 50% AMI: Consider what rents are affordable and compare to total development costs If there is not enough net rent to support a loan, must use subsidy financing. Tenants % AMI: Properties may carr y more debt Tend to expect higher quality features Possible stepping stone to homeownership U.S. Department of Housing and Urban Development Community Planning and Development 22

23 Question and Answer: Discussion of NSP Rental Requirements U.S. Department of Housing and Urban Development Community Planning and Development 23

24 Section 4: Keys to Success With Scattered Site Rentals U.S. Department of Housing and Urban Development Community Planning and Development 24

25 Setting Up Property Management Policies and Procedures: Develop a rental operations manual, stringent lease, and management plan and STICK TO IT Financial Management: Assure that the financial structure and projections for the rental properties create enough net cash flow to pay for management, maintenance and any services. U.S. Department of Housing and Urban Development Community Planning and Development 25

26 Tenant Selection In Tenant Selection process, make sure to: Check criminal and rental histories Manage intake, including screening for and certifying NSP income eligibility Consider home visits of applicants In Marketing efforts, make sure to: Follow fair housing rules in any outreach Find quality tenants through targeted marketing and relationships with client U.S. Department of Housing and Urban Development Community Planning and Development 26

27 Use of Data Keep a data book on each home Data on all features, measurements, appliances decreases maintenance and transportation costs Set up now reduce costs later Use specialized property management software to track properties and keep data, if applicable NOTE: Homeport, LLC will discuss data systems later in presentation U.S. Department of Housing and Urban Development Community Planning and Development 27

28 Asset Management The owner has a long-term responsibility to steward the physical asset and the financial structure that supports it Requires... Setting aside adequate replacement reserves Controlling management/repair costs Assuring high occupancy and collections Monitoring to assure quality management Maintaining a good reputation as a landlord U.S. Department of Housing and Urban Development Community Planning and Development 28

29 Question and Answer: Discussion of Keys to Success With Scattered Site Rentals U.S. Department of Housing and Urban Development Community Planning and Development 29

30 Section 5: Case Studies Homeport (Columbus, OH) and Beyond Housing (St. Louis, MO) U.S. Department of Housing and Urban Development Community Planning and Development 30

31 Case Study #1: Homeport Bill Brett, Director of Asset Management Scattered Site Rental Program: 400 properties, Privately managed with oversight from Homeport U.S. Department of Housing and Urban Development Community Planning and Development 31

32 Homeport: Keys to Success 20 properties run with NSP funds and another in the pipeline Homeport oversees the whole process Operating expenses: a lot higher costs because homes are scattered all over the city Talk a lot with management company to reduce windshield time, increase economies of scale Go over the costs and how to reduce them with standardization of materials and fixtures Data System is Key! U.S. Department of Housing and Urban Development Community Planning and Development 32

33 Homeport: Data System Having a database for each one of the units is very important to reducing long-term costs Database features: All appliances, measurements, and other data regarding each property. Software system: Expensive, $3000/property Overall, any database or site book reduces labor costs, maintenance costs, and transportation costs. U.S. Department of Housing and Urban Development Community Planning and Development 33

34 Question and Answer with Homeport U.S. Department of Housing and Urban Development Community Planning and Development 34

35 Case Study #1: Beyond Housing Deb Dombar, COO, Beyond Housing Organization Facts: Self-Managing close to 400 single-family homes. Working through NSP Grantee County of St. Louis to manage NSP Properties. U.S. Department of Housing and Urban Development Community Planning and Development 35

36 Beyond Housing: Keys to Success Resident Engagement: g Property Managers must work hands-on with tenants; communication key Social Service Support the house is not always enough Beyond Housing provides assistance to tenants to start own businesses (IDA s) s), credit counseling, homebuyer training Policies and Procedures: must be in place, enforce lease, don t leave room for exceptions *(See NSP Single Family Rental Toolkit for example documents) U.S. Department of Housing and Urban Development Community Planning and Development 36

37 Beyond Housing: Marketing Starts with Tenant Selection Word of mouth: must have high quality products and services Craigslist; Ads in paper Local Government Site with rental properties Post properties with State Regulatory Agencies U.S. Department of Housing and Urban Development Community Planning and Development 37

38 Beyond Housing and NSP Advice to NSP Grantees: Setting up Rental: Lease must be air tight, compliance procedures in place Align with Mission: Give people a second chance *NSP Homes are higher quality with NSP funds More resources with St. Louis County Good for marketing U.S. Department of Housing and Urban Development Community Planning and Development 38

39 On the NSP Resource Exchange NSP Single-Family Rental Toolkit (Tools from Beyond Housing): hthttps://hudnsphelp.info/index.cfm?do=viewtoolkitshome NSP Scattered Site Rental Training Video: rceid=1157 NeighborWorks Scattered Site Toolkit: U.S. Department of Housing and Urban Development Community Planning and Development 39

40 Question and Answer with Beyond Housing U.S. Department of Housing and Urban Development Community Planning and Development 40

41 Conclusion To succeed with scattered site management, you need: Informed decision between self-management and private management Strong tenant selection procedures Focus on maintaining data for each home Reduced maintenance costs Compliance with NSP regulations U.S. Department of Housing and Urban Development Community Planning and Development 41

42 NSP Resource Exchange Links NSP Resource Exchange Search the Resource Library Search the FAQs View All Training Materials on the Learning Center Submit a Policy Question via Ask A Question Request Technical Assistance Connect with NSP Join the Listserv Visit the NSP Flickr Gallery Visit the NSP YouTube Channel U.S. Department of Housing and Urban Development Community Planning and Development 42

43 Give us your Feedback Answer a few short questions Please click on the link and give us your feedback: Your opinion is valuable!!! THANK YOU U.S. Department of Housing and Urban Development Community Planning and Development 43

Disposition Strategies

U.S. Department of Housing and Urban Development Community Planning and Development NSP Problem Solving Clinic i 2012 Disposition Strategies Workshop Disposition Strategies Agenda A. Disposition Definition