Why You Should Not Use Excel For Accounting

First, let me confess that I love Excel. Having used Excel for years, I’m fully aware of its strengths, and will continue to use it to create spreadsheets, graphs, and tables. But for some unknown reason, there is a small group of property managers that continue to extol the benefits of using Excel as their primary accounting software.

I have to admit that this has me stumped. The accounting software of today in no way resembles the awkward software of yesterday. Today, most software products are designed with the end-user in mind, and include easy system navigation, intuitive data entry screens, and system tutorials to make it easy to learn your way around the system.

If you’re using Excel to run your property management business, you may want to consider the following:

Excel’s Primary Functionality is NOT Accounting – Excel’s primary function is creating spreadsheets, not processing transactions, or producing financial statements. Yes, it can be used for those things, but typically with accounting software; not in place of it. As a result, users will spend an inordinate number of hours entering Excel data manually, because it does not have the capability to share data. So anytime your tenant pays rent, you’ll be posting that payment in your checkbook, your accounts receivable journal, and your tenant record. With regular accounting software, you post it once.

Propensity for Errors Increases – The lack of a central database and no double entry accounting system in Excel also means a lot more repetitive data entry. And each time you have to re-enter the same data, the likelihood of making an error increases dramatically. Also consider that without the safeguard of a double entry accounting system, it’s very easy to end up with out of balance accounts.

Lack of a Reliable Audit Trail – Accounting software has become valuable to business owners because of the ability to ensure that data is accurate and secure. Excel offers no such protection; meaning that formulas can be changed, entries accidentally (or purposely) deleted, and transactions erased, all without leaving a trace of the original entry behind.

Ease of Use – or Lack Thereof – While it’s fairly simple to create spreadsheets in Excel, making it a functioning accounting program requires another level of skill that most Excel users will never attain. Creating an invoice, printing a statement, or processing a financial statement in Excel can take up valuable time, while accounting software allows you to create those items in minutes.

While Excel will continue to provide a valuable benefit to property managers, it can provide many more benefits and less headaches by using it for what it was designed to be.

Audrey Wardwell, Broker/Owner
36 North Properties, Inc
CalBRE: 01746254
p: 831-320-7116
f: 831-309-5584





Posted on 19. Feb, 2014 by in Business

2015 Rental Market Report

2015 Rent.com Rental Market Report

2015 Rent.com Rental Market Report

October 7, 2015 | Rental TrendsRental Trends and Real Estate News

The seventh annual Rent.com Property Owner and Manager Market Report captures trends in the rental market directly from apartment property managers nationwide.

In the 2015 survey, more than 500 property managers in the U.S., representing thousands of rental properties, and hundreds of thousands of rental units, provided insight on the current and predicted demand for rentals, expected rental rate increases, how property managers are working to retain residents, and the changing demographic profile of American renters.

Rental Inventory Near 20 Year Low

This is the lowest that vacancy rates have been in almost 20 years! According to the U.S. Census, national vacancy rates in the second quarter of 2015 were 6.8% for rental housing, down nearly a full percentage point (from 7.5%) from the same time in 2014. The last time vacancy rates dipped below 6.8% was the fourth quarter of 1985 (6.7%).

Since Rent.com’s first Property Owner and Manager Report in 2009, property managers have reported a steady decrease in vacancy rates, and 2015 is no different. This year, more than 46% of property managers surveyed reported a decrease in rental vacancies.2015 Rent.com Rental Market Report - Rental Inventory Near 20 Year Low

According to Census data, vacancy rates for rental dwellings have fallen steadily since they hit a high of 11.1% in the third quarter of 2009, at the height of the U.S. housing bubble burst.

Fewer Vacancies Leave No Room for Negotiation

As the rental market continues to become more saturated, property managers are having to do even less in order to fill apartment openings.

In 2015, 55% of property managers said that they are less likely to offer concessions or lower rents in order to fill vacancies than they have been in years past. In fact, 64% reported that they are not doing anything different from one year ago, in order to fill vacancies.2015 Rent.com Rental Market Report - Fewer Vacancies Leave No Room for Negotiation

With multiple applicants vying for the same apartments, more than half of the property managers surveyed (54%), noted that it is taking roughly the same amount of time to convert leases, while 33% stated that it is taking even less time, compared to last year.

It’s Less About the Renter, and More About the Benjamins

Despite the fact that property managers currently have the upper hand in the leasing process, 56% reported that the increased demand has not made them become more selective about potential renters.

In fact, only 17% reported that they have become more selective about who they rent their apartments to, regardless of increased demand and limited inventory. Higher credit scores, higher income-to-rent ratio and excellent rental history rank amongst the top requirements from property managers.

What do they care about when it comes to who is leasing their apartments? Money. While they might not be more selective in their screening process, property managers still care about getting top dollar for their properties. In fact, 53% of property managers said that they were more likely to bring in a new tenant at a higher rate, than negotiate and renew a lease with a current tenant that they already know.2015 Rent.com Rental Market Report - It's Less About the Renter, and More About the Benjamins

Expect Rates to Rise by 8% in 2016

An overwhelming 88% of property managers raised their rent in the last 12 months, and there does not appear to be any signs of stopping.2015 Rent.com Rental Market Report - Expect Rates to Rise by 8 Percent in 2016

68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%! This is a two percent increase over the estimated 6% rent hike predicted by property managers back in 2014. 2015 Rent.com Rental Market Report - Expect Rates to Rise by 8 Percent in 2016 !

Unsurprisingly, increased demand and low inventory were the primary reasons for increasing rental rates over the last year, according to 64% of property managers surveyed. Property maintenance costs and remodeling fees were also cited as primary drivers of rental increases (44%).

Renters are Struggling to Make it on Their Own

As a result of skyrocketing rental rates, 43% of property managers reported seeing an increase in the number of applicants who do not meet the income requirements on their own and require a guarantor.2015 Rent.com Rental Market Report - Renters are Struggling to Make it on Their Own

Millennials Deferring Home Ownership and Opting to Rent

Millennials face limited job availability, lower incomes and high student loan debts, making it more affordable and flexible to rent. In fact, 45% of property managers have noticed an increase in the number of millennial renters.

2015 Rent.com Rental Market Report -Millennials Deferring Home Ownership and Opting to Rent

Homeowners are Trading in Mortgages for Leases

More than half of all property managers surveyed (54%) reported seeing an increase in the number of former homeowners seeking rental apartments, thus adding to the already crowded rental space.2015 Rent.com Rental Market Report - Homeowners are Trading in Mortgages for Leases!

This is an increase from 2014, where only 50% of property managers reported seeing this same trend.

Existing Renters Not Giving Up Their Leases

Renters also appear to be staying in their apartments longer, adding to this supply/demand imbalance!2015 Rent.com Rental Market Report - Existing Renters Not Giving Up Their Leases

According to property managers, 34% reported that renters are holding on tight to their apartments and renewing their leases (up from 29% in 2014), rather than trying their luck elsewhere.

Methodology: The survey was conducted among more than 500 of Rent.com’s property management customers, representing thousands of rental properties, and hundreds of thousands of rental units.


Rental Property – How to Project Cash Flows and Returns

If you are thinking about buying some rental properties as investments, you should probably understand how to project cash flows and evaluate the investment returns you hope to achieve on your hard earned invested cash equity.

There are really two types of returns that we can earn on investment property, first is appreciation in value which is the most common hoped for return. Secondly, and much more important but generally overlooked by investors, is the cash flow picture the property will generate.

The vast majority of investors buy real estate with the hope that it will go up in value. This is really a big mistake because many properties, particularly the prize “location, location, location” properties have corresponding negative cash flows on operations that may negate any true increase in wealth from one’s long term appreciation in value.

So a savvy investor needs to look at the cash flow picture and buy properties with positive cash flows, not negative cash flows. As an example of this in Monterey, one could buy a nice condominium for $500,000, which would rent for about $2,300 per month. That rent, minus all the maintenance expenses, HOA fees, insurance, property taxes, and mortgage payment would have a deficit on cash flows of about ($1,000) per month, or ($12,000) per year.

So while a buyer is hoping some appreciation in value will earn him or her a fair rate of return, that appreciation has to additionally compensate for all the money he has to take out of his savings to cover the negative cash flows. Those negative cash flows, on this example, could span several decades and hundreds of thousands of dollars before the property turns positive.

Alternatively, there are many properties that cash flow positive from day one as an investment. A moderately priced house or condominium unit, only a few miles away from downtown in the $150,000 price range, might generate $1,200 per month in rent and positive cash flows of $225 per month. That’s $2,700 per year of positive cash flow. As a side note – the appreciation in value, over the long term, will probably be similar on both properties anyhow. So why not go for cash flow plus appreciation in value!

To calculate a cash on cash return, we divide that $2,700 positive cash flow by the cash equity we invested, maybe $40,000 on the $150,000 property for a cash on cash investment return of 6.75% on our money. And that’s a really good deal! Especially compared to the fancy prize condominium that might generate a negative (8.5%) return on our invested equity.

As a long term investor, I can assure you that positive cash flow properties, so properties that pay all the bills and provide a rate of return on your money, are much better investments than negative cash flow fancy prize properties that just drain money from your bank account. Hopefully you’ll understand this concept before you buy that prize!

Posted on 29. Nov, 2012 by Leonard Baron in Real Estate

The Advantages of Offering Month to Month Leases

While all properties are not well-suited to offering month to month leases, there are a variety of reasons why it would prove profitable for property managers to investigate the possibility of doing so. In many high profile, urban areas, or in cities where international corporations are located, month to month leases are considered a necessity. While residential communities in smaller cities and rural areas may not be a perfect fit, it may be worth investing some time into considering whether the benefits of offering month to month leases are worth the cost. Here are the reasons why properties should consider this option:

You can legitimately charge a much higher rental amount per month. Of course, your property should be located in a metropolitan area or near company headquarters; in essence any place that attracts a lot of transplants. Cities like Chicago, Boston, and Las Vegas commonly offer month to month leases at a premium price. Renters get the benefit of a conveniently located apartment community while property managers are able to charge month to month renters premium rents.

It’s a great way to attract quality, future tenants. If your month to month rentals are happy where they are, they may consider signing a lengthy lease, providing you with a reliable tenant.

It becomes easier to set up partnerships with local corporations and businesses. Local businesses are happy to direct their newly relocated employees with a safe, convenient place to live. Work out a deal that will be good for both of you.

There are some disadvantages to renting units short-term, the most potentially costly being excessive wear and tear on the short-term units. It’s also important to note that many short term renters have less of an investment in a property short-term than they do when they’re staying for a year, so the possibility of damages may increase in these units. Offering month to month rentals will create more paperwork for your office staff. Maintenance staff will also be busier with unit repairs, maintenance and cleaning.

While offering short term rentals is not a viable option for all properties, if your property is situated in a high-profile area, it may benefit your property and your bottom line to consider offering month to month rental agreements.

Posted on 03. Dec, 2012 by Mary Girsch-Bock in Business

Buying Investment Property – What is a “Good” deal?

Let’s look at a tried and true way to measure rental property investment returns and what we as buyers should be looking for in our purchases. Total investment returns in real estate are really comprised of two pieces: operating positive cash flows and long-term appreciation. In today’s world, even though it probably will come, we cannot count upon and should not consider long term appreciation. That leaves positive operating cash flows as our primary source of investment return. Let’s call this: “earning money the old fashioned way.”

So how do we calculate our returns and how do they compare to other investments where we could place our hard earned cash equity dollars? It is quite straightforward to calculate our investment returns, unfortunately few people do this leaving many a buyer to make poor real estate choices.

Most Important – “Cash on Cash return” is the most important measurement. So while the price is important, one’s actual cash equity investment is the vital issue. So for every dollar invested what is our percentage yield return on our equity cash investment. CDs offer 1.5%, Bonds 4.5%, stocks 7.5% and real estate is generally high risk, so we want fairly high returns to compensate for the risk.

If one is buying a $200,000 investment property they probably put down 25% or $50,000 plus another 5% or $10,000 for closing costs, loan fees and rehab costs. So the mortgage is $150,000 and a buyer’s cash equity is $60,000 from the start. Again: The property price of $200,000 is important too, but how much cash equity one invests is much much more important.

See Chart – Using a conservative estimate, depending on the local market, that property might generate $1,800 per month in rent and have 33.3% operating expenses ($600) leaving net operating income of $1,200. Then subtracting the monthly mortgage payment of $900 leaves $300 of monthly cash flow or $3,600 per year.

Divide that $3,600 by the $60,000 of cash equity and this property has a first year cash on cash return of 6.0%. And it should increase a little each year as rental income increases, as do general expenses, but the mortgage stays constant.

That 6.0% is a pretty fair return for real estate and of course there hopefully will be some long term appreciation, tax benefits and a little more yield from the mortgage balance pay down via amortization of the loan.

Be Smarter – It is stunning how many real estate buyers fail to do this simple calculation and buy properties with minimal or negative cash on cash returns – to their own financial detriment. Let’s be a little bit smarter and make sure we take a good look and a conservative approach to real estate investing for our own long term benefit.

Go for the Cash Flow! – As a final note, buyers will find prize properties, like at the beach or fancy condos, generally have very low or negative returns. Skip those! It is the moderately priced units that have decent cash on cash returns. Hence… “prize” properties are NO prize…moderately priced cash flowing properties are the real prizes! Then you will have to figure out where to invest all that positive cashflow….

Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate”, and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.

Moving Into A New Place? One To-Do You Should Never Ignore.

Of all the expenses to consider when preparing to move into a new apartment, is renter’s insurance should be at the top of the list. This necessary, yet inexpensive purchase will protect you and your possessions while you’re living in your new home. Apartment insurance is easy to acquire and will promise you peace and security when the unexpected happens. There are many reasons an apartment occupant should carry renter’s insurance. It’s important you be informed and prepared.

Financial Protection

You need to protect yourself financially. If someone breaks into your apartment and steals your phone and laptop, you will need coverage. If there is a water leak and your favorite couch is ruined, you will need coverage. If there is a fire, and it’s started by another tenant in a different apartment, you will still need coverage. And believe it or not, even if there is damage from Mother Nature, a flood, a windstorm or a disaster, you are financially responsible for replacing your possessions.

Your Landlord’s Insurance Will Not Protect You

The property owner of your apartment most likely has a great insurance policy. But it is in place to protect the owner and not the tenant. His or her insurance will protect the property, but not your stuff. That’s why you need to be proactive and responsible.

Accidents Happen

No one can predict an accident. If you cause an accident that results in bodily injury or property damage, you can be held responsible. You need to protect yourself ahead of time because the truth is, had things can happen and you need to be ready.

Renter’s Insurance Is Cheap

The good news is that it is easy and inexpensive to obtain renters insurance. With one phone call you can protect your belongings responsibly. Most all insurance companies carry this wanted policy.

Emergency Living

If you must move out of your apartment because of a disaster, your apartment insurance will actually pay for you to stay in temporary housing for up to a year. It will even cover living expenses and the cost of replacing your possessions.

What’s Typically Covered?

  • Fire & Smoke
  • Snow and Sleet
  • Explosions
  • Volcanoes
  • Aircraft and Ground Vehicles
  • Windstorms
  • Hail & Lightning
  • Riots
  • Any Civil Disturbance
  • Damage from electric surges
  • Water damage from utilities
  • Falling Objects

See Also: Is renting an apartment a better option than buying a house?

Many renters don’t realize they have a need for this important insurance. But they do. Renter’s insurance makes sense. Do your research and know exactly what is covered. Insurance companies will be glad to give you a quote, so it doesn’t hurt to shop around. Once you have your insurance in place, you can easily move into your new apartment with ease and peace of mind. Don’t move in without it. It’s your stuff and it’s your choice.

by Trevor Henson | on June 26, 2012


Rental advice: As rents rise, what’s a renter to do?

Here’s hoping you found a nice rental last year and locked in a low rate, one that can stick for, oh, about three years. That’s because — and we’re so sorry to report this — the rental market has once again shifted in favor of landlords, with little sign it’s going to swing back any time soon.

In this month’s rental column, we’ll take a look at why and note areas with the sharpest price increases.

But hang in there, because we’ve also got some fresh ideas on what you as a renter can do to avoid getting sucked into the vortex of spiraling rent hikes. (Hint: Being a model tenant helps.)

What might Charlie Sheen say about landlords? ‘Winning!’
Just a year and a half ago, landlords were itching for tenants. The national rental-vacancy rate sat at a peak of 8%, its highest level in nearly a decade, after the recession drove tenants to move in with family or friends.

By early 2010, however, the national vacancy rate had dropped to 6.2%, according to Reis Inc., a real-estate analytics firm. And it’s expected to hit 5.5% by the end of this year.

For tenants, this is bad news. Landlords are yanking the once-ubiquitous “one month free rent” signs and other offers they’d used to draw tenants. They’re raising the rent.

Effective rent — what you pay after compensating for the value of those incentives — rose 2.36% on average in 2010 and is expected to rise an additional 4.3% by the end of this year.

“We haven’t seen that kind of rent growth that we’re expecting in about 10 years,” says Brad Doremus, an analyst at Reis. “I think it’s pretty reflective of strengthening demand.”

And things get worse. An analysis by Axiometrics, an apartment-research firm, found that rents have jumped in markets where employment has resumed and where it hasn’t, which puts the squeeze on renters at both ends of the economy.

“The apartment market really turned around in 2010,” says Axiometrics President Ron Johnsey, who expects rents to continue to rise through 2013 at a national average of 5% to 7% a year. “In some markets, you’re seeing double-digit increases in rent.”

February article in Multifamily Executive, exalting expected record growth in rental prices, says, “Landlords are firmly in the driver’s seat when it comes to pricing tenants.” Author Chris Wood writes: “And for most apartment operators, the question isn’t how high will rents go, but how high won’t they go?”

So what’s driving this?
Here’s a quick look:

  • Fewer rental properties are available. According to Harvard University’s Joint Center for Housing Studies, the number of available multifamily units declined by an average of 240,000 units per year from 1999 to 2009. The reason is twofold: Fewer new apartment buildings were built in the early 2000s, and the existing stock aged out of use.
  • Foreclosures drove former homeowners into the rental market. According to Harvard’s center, at least 3.9 million Americans who owned homes in 2004 are now renters.
  • People are renting longer. Would-be owners who suspect housing prices aren’t done dropping are waiting out the market. In the meantime, add them to the growing number of renters.
  • People moving for jobs are renting. In areas with recent job growth, newcomers are flooding the rental market.
  • Renters are spreading out again. Those who had doubled up during the recession appear to be returning to their own, private digs as the economy picks up, experts say.
  • Mortgages are hard to come by. Banks’ tough lending standards are adding to the glut of renters. Even people who want to buy can’t.

Where renters are most likely to get stuck with a higher bill
Reis tracks rent prices throughout the country. Below are the areas where rent is expected to rise most this year and the weighted average for asking rent after that increase; weighted average takes into account the number of apartments at a certain rent to approximate a median more closely. Percentages reflect the increase in asking rent from the end of 2010 to the end of this year. The increase in effective rent, which includes the cost of incentives, is typically even greater.

  • San Jose, Calif.: Rent is expected to climb 6.85% in this Silicon Valley hub, to $1,635.
  • New York: The forecast is for an increase of 6% in asking rent, to $3,038.
  • Washington, D.C.: Rents in the nation’s capital should rise 5.4%, to $1,521.
  • Greenville, S.C.: Here, where job growth is strong, rents are expected to rise 5% to $677.
  • Suburban Virginia: The areas outside D.C. approximate to the capital should expect a 4.9% increase to $1,561.
  • Portland, Ore.: This trendy town in the Pacific Northwest, which shouldered some of the biggest unemployment numbers in this recession, should see rents rise 4.8% to $879.
  • Suburban Maryland: Rents here are expected to rise 4.7% to $1,364.
  • Chattanooga, Tenn.: The site of a new Volkswagen plant and Amazon.com office should bring workers — and rental-price increases of 4.7% to $659.
  • Orange County, Calif.: Even the county that suffered some of the greatest foreclosure losses is seeing a recovery in the apartment market, with rents expected to rise 4.6% to $1,586.
  • Houston: As healthy job growth attracts new residents, rental prices should rise 4.4%, to $822.

What’s a renter to do?
The news appears even grimmer when you consider that rents have already been rising faster than income for years.

But on a positive note, there are steps you can take to stave off steeper rent.

1. Know your landlord’s competition: One popular piece of advice is to become very, very familiar with the market — essentially, “look harder.” Network through friends, drive neighborhoods, ask about a sale property that’s languishing on the market, and check out all the websites, such as HotPads, Cazoodle and Craigslist.

2. Don’t be a high-drama tenant: Oft-forgotten is that you should think like a landlord. Raising the monthly rent isn’t the only way that landlords maximize their income. They need to minimize expenses, too. That means keeping a unit from sitting empty even for a month. And it means finding renters who not only pay their bills but also don’t call maintenance every other week with some kind of problem or complaint.

“If stuff is broken, absolutely, tell the landlord immediately,” says Dennis Fassett, a Detroit landlord and owner of Michigan Property Solutions.

Beyond that, though, leave the landlord alone, and the landlord will be keen to do the same for you, meaning no rental increase.

“If I don’t hear from them all year and they’re paying their rent on time, geez-oh-Pete, I don’t raise their rent,” Fassett says. “I am more than happy not to raise their rent.”

Even in a big complex, management may recognize good behavior. But you’ll likely have to ask for it.

3. Don’t roll over: Axiometrics’ Johnsey says to not accept a price increase automatically when you’re notified of one. Instead, make an appointment to meet with management in person. Do your homework to see what other apartments are charging. See if your landlords will lower the rate with an extended lease.

“There’s a bunch of costs they’ll incur by not renewing you, so be aggressive,” Johnsey says. “Say, ‘I’ve paid on time, I’ve been loyal, I can pay some increase but not that much. Let’s see if we can work something out.'”

By Karen Aho of MSN Real Estate