Manhattan apartment sales haven’t seen this kind of plunge in nearly 30 years. The struggle to find buyers in today’s commercial real estate market is real as buyers sit on their hands and wait out the storm.
For current landlords, the question of, “do I show a property with a tenant currently living in it because I need a new tenant next month?” remains. With COVID-19, showing properties has been one of the major concerns for landlords around the world.
In this latest episode, Andrew Schultz chats about all of the above including what to do with tenant’s belongings after they vacate the premise, what to look for in a property manager, and how to deal with cash rent payments.
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Andrew Schultz: (00:00)
Hey everybody. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 320, and I’m your host Andrew Schultz. On today’s episode, we’re going to be talking about the worst quarter for real estate sales on record in Manhattan for apartment buildings, how to show occupied apartments during COVID-19 what to look for in a property manager and so much more. We’ll get to that right after this.
Voice Over: (00:26)
Welcome to the RentPrep for Landlords podcast. Now your host, Andrew Schultz,
Andrew Schultz: (00:31)
Let’s jump right in with our first in the news article. This article titled Manhattan, apartment sales, worst on records, come up, biggest plunge in 30 years is published by CNBC on July 2nd, 2020, and written by Robert Frank. We’re going to go ahead and read the bulk of this article in its entirety here. There’s a lot of good information, Manhattan apartment sales in the second quarter. So their biggest decline in three decades and the worst quarter on record as the real estate lockdown and urban flight after the COVID-19 crisis, but a freeze on the market. The total number of sales in the second quarter fell by 54%. The largest percentage decline in 30 years, according to a report from Miller Samuel and Douglas element, the median sales price to 18% to 1 million. The biggest decline in a decade, there were only 1,147 sales in the quarter. The lowest number on record, according to compass, while the data was backward-looking and reflect the sudden closure of the real estate market and the New York city economy during the coronavirus pandemic, the extent of the drop shows just how far Manhattan real estate has to climb in order to recover brokers from Barton, from showing apartments from March until June 22nd.
Andrew Schultz: (01:38)
So buyers have only been able to start shopping again in the past week. Keep in mind, this article is from July 2nd. So it’s about two weeks old at this point while deals could take a while to materialize sales contracts also fell in June. The number of new signed contracts for co-op spells 78% in June compared with a year ago and signed contracts for condos. We’re down 74% co-ops and the two to $4 million range were hit hardest in June with an 86% decline. Brokers say that business has come brushing back since the ban on in-person showings lifted last week with a flood of buyers, looking for apartments, agents are going nonstop right now said best Friedman CEO of Brown Harris Stevens, yet many potential buyers, especially the wealthy have left the city for the summer to the camp and the Hamptons new England or the West, and may not return to the market until the fall or later, some may not return given the health concerns and the lasting impact of the COVID-19 crisis on new York’s amenities and infrastructure.
Andrew Schultz: (02:35)
It also remains to be seen whether the discount fields that buyers are expecting will materialize with so few deals analysts say true pricing remains a big unknown. So far sellers are cutting prices. Only on the single digits, we might, which may not entice today’s discount minded buyer. So far buyers are making offers of more than 10% off asking price are mostly being turned down or putting the research from broker Fritz, Frigan F R I G A N of Halstead. Can’t be married to pre-pandemic crisis. Freeman said everyone needs to be reasonable and fair about the new environment. Brokers say the most immediate pressure will be on the rental market since renters can more easily leave the city and fewer renters are moving in. There’s going to be an incredible supply of rentals. Freeman said we’re going to see a lot of negotiating and landlord incentives.
Andrew Schultz: (03:27)
There’s a bit of good information in this article to unpack here. I’m going to take it from the perspective of the market here in Buffalo so that you can kind of see a comparison of, you know, a major Metro market like New York city versus a midmarket city like Buffalo. And you could probably kind of apply these same principles to your own market and see where you come up with things as well. So the one thing I did want to mention is being in New York state, we’ll talk just briefly about the phases because they mentioned phase the phase reopening here, Western New York, where I’m at reentered phase two on June 2nd, which meant that we were allowed to start showing apartments and homes again on June 2nd obviously with a whole bunch of new protocols in place, but we can get into that later downstate was obviously far more impacted.
Andrew Schultz: (04:13)
The New York City region was far more impacted by COVID-19 than what we were up here in Buffalo. So they didn’t enter phase two until well after we did. Which kind of explains what they’re talking about with not being able to show things until July. So whether it was a period of time where our region in New York was able to operate a downstate was still battling with the coronavirus pretty hot and heavy, and they were not able to show. So yeah, I will definitely say that the market up here in Buffalo just like the article mentions in Manhattan, it was so silent. You could hear a pin drop when we were unable to move and unable to operate. There wasn’t a whole lot happening there. Weren’t a whole lot of deals that were continuing to process courts and clerks. We’re still trying to figure out how to record deeds and mortgages and things like that, you know, remotely in a lot of instances.
Andrew Schultz: (05:03)
So that, that definitely slowed things down. Now that we’re back at a point where we’re allowed to show things again. I agree with the article and I would say that the market is on absolute fire up here. It’s been crazy. Then I would say that there’s more pinup demand for on the buyer side now than there had been, even prior to the pandemic breaking out here in Western New York. It was interesting because we were already in a sellers market where the seller basically was getting top dollar for their property. And it seems like that trend has continued and maybe even gotten a little bit more seller-friendly, which I wasn’t even sure that was possible. So we’re still seeing homes here that are on and off the market within days, sometimes same day if you have somebody that goes through and gets an offer.
Andrew Schultz: (05:47)
And quick enough. So I would definitely say that there’s been quite a bit of interest in the market here in Western New York. One thing that this article does mention as that there’s going to be people out looking for deals like the discount buyers. I don’t think you’re going to find a lot of discount deals out there right now. I don’t know how well that will apply nationwide, where some of the other, you know, real estate markets obviously have very different demographics than what we do here in New York. But from what I’ve seen, there have not been a lot of, you know, super stellar deals out there on the market. And we’re looking every single day. So, and we’re, you know, we’re seeing there are the occasional discount deals out there to be had. What we’re finding is unless you are the only one who knows about that discount deal more often than not, you are going in multiple offers.
Andrew Schultz: (06:33)
And the deal that used to be a discount suddenly looks a lot more retail when everybody gets their bids in and you start going through a round of highest and best offers and things like that. So definitely something to keep in mind. And one thing that’s not mentioned in this article, I guess it kind of is mentioned in this article because it talks about whether or not the buyers, especially the wealthy who have left the city are going to come back. And I would say in some instances, they’re just not coming back. We have seen an influx of buyers in our market from New York City. As a matter of fact, we have one of our investor clients who had a vacancy here in Buffalo and lives downstate in New York City. When he was assigned to work from home detail, he actually contacted us and said, Hey, I want to come stay in my apartment for a couple of months.
Andrew Schultz: (07:16)
I don’t want to be in New York City. And we were happy to oblige. We were able to set it up so that he was able to walk into basically a furnished his own furnished rental essentially. And it worked out pretty well. So I would say, yeah, you are going to see people leaving New York City. I don’t know if it’s going to be the mass Exodus that everybody’s talking about, but when you have a city with that many people in it, and you start talking about population density and things like that, especially when you’re talking about the impact that population density has in spreading a virus like this. I think it’s pretty clear to see that that there are some concerns there when you’re talking about such a high population density and with Buffalo, having a much lower population density, even inside the city, you could see where that can be appealing. And then when you start talking about the suburbs, it’s even more appealing, there’s a lack of density once you get out into the suburbs. So I can definitely see where that would be appealing to someone from New York City. Who’s trying to escape that level of population density,
Voice Over: (08:17)
Form quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (08:25)
All right, let’s jump right into forum quorum today. We have two different quorums to take a look at before we do that. I do want to mention that these both came from the rep prep for landlord’s Facebook group. That group can be found at facebook.com/groups/rentprep. And that group is our free resource that you can tie into as a landlord, lots of members in there almost 12,000 members. I believe in that group, all landlords who are looking to help one another. So asking a question in there, we’ll definitely get you some responses from all over the country. So you get a lot of different perspectives on how different people run their businesses and things of that nature. Definitely check that out. facebook.com/groups/rentprep. All right. So onto our first quorum here, how do I deal with a tenant that has good references, but no credit score and just pays by cash.
Andrew Schultz: (09:14)
So I want to preface this one by saying, I don’t think that we have enough information to make a truly informed decision here. The criteria that we look at when we’re screening tenants it starts with income. I’m looking for a net income of three times, the rent that’s specific to our market. Your market may have a little bit different criteria when it comes to income. I’m looking for an employment reference. I’m looking for a landlord reference, verifiable landlord reference whenever possible. Occasionally we will talk to personal references and then the back end stuff, we’re looking at the credit check the background check. And if your state will permit it to do an eviction search, I would certainly recommend getting an eviction search done as well. New York state no longer provides us with that data. So we are limited in what we can look at there.
Andrew Schultz: (09:56)
So based on the question, which I’ll read again how do I deal with a tenant that has good references, but no credit score and just pays by cash? I would say that there’s not enough information here to make a conclusion, to draw a conclusion. You don’t reference the income at all. All that you mentioned is has good references. I don’t know if those are employment references, landlord references, personal references. You know, guy on the corner says that he’s known him for years and that he’s a great guy. It could be anything. So just pays by cash. You know, we do have some tenants that that’s their preference. They want to make cash rent payments, and we don’t personally accept cash either in the office or in the field. What we’ve done rather than accept a cash payment is tell tenants that they need to either go and get a money order.
Andrew Schultz: (10:39)
We also offer a service called Payne near me, where they can pay their rent at just about any seven 11 or CVS locations. So there are options out there for tenants that want to pay cash, but I would definitely say based on the information provided in the quorum here, we just don’t have enough information to say whether or not I would deal with that tenant or not moving on now to our second forum quorum. How long after a tenant vacates a property, can I get rid of their personal belongings if I don’t have a timeframe set in the landlord-tenant contract? So this is another good question here. And I will preface this by saying I’m not the right person to answer this because I don’t have enough information in the question. I don’t know where you’re located is basically what it boils down to.
Andrew Schultz: (11:24)
So the basic rule for something like this is that most states will have some kind of regulation as to how long you have to store a tenant’s personal belongings after they have either moved out or been evicted or whatever the case may be. So in some states, you can literally set stuff out to the curb. As soon as the tenant moves out. In other States, you have to store it for a period of 30, 45, 60 days. You may have to pay to have everything boxed and moved to a storage facility. You may have to pay for the storage facility for the 30 or 60 days or however long. And then you may still have to wind up paying the dispose of it if the tenant doesn’t turn around and come back for their stuff. So that’s definitely a sticky situation. Definitely one of those things where you’re going to need to speak to either local landlords who know what they’re doing, or a real estate attorney that focuses on landlord, tenant issues, one of those parties would probably be better equipped to answer that question for you simply because I don’t know where you’re at, and I don’t want to give you false information on something like this.
Andrew Schultz: (12:25)
One thing that I will mention is that if you’re in a state that requires you to hold belongings for a certain period of time, be very, very certain that you’re following that regulation because we have seen in the past, thankfully it hasn’t happened to us, but to other property managers in the area that we know where they’ve disposed of things prematurely, or assume that something was garbage when it was actually something that the tenant wanted to retrieve. And that just creates a whole bunch of headaches where now you’re trying to decide values on things or, you know, Oh, that was an irreparable heirloom, or I’m sorry, an irreplaceable heirloom that you, that you threw out thinking it was trash or whatever the case may be. It can get very, very sticky very, very quickly. So for that reason, I definitely recommend taking the time, doing a little bit of research, and finding out exactly what it is that is required of you as the property owner. And then following that regulation to make sure you don’t wind up in hot water,
Voice Over: (13:18)
Water, cooler wisdom, expert advice from real estate pros.
Andrew Schultz: (13:27)
So we have two questions here in watercooler wisdom today. Our first question of the day is what should I look for when hiring a property manager? So this is one of those questions, obviously being a third party property manager that I could sit here and talk about for hours, I’m gonna try to give a few different bullet points to look for, and then point you toward a resource that you can access. If you’re in a position where you’re looking to hire a property manager, the first thing I want to mention is licensing just about every state has some kind of a license for property managers. I know that here in the state of New York, in order to manage rental property for someone else and to collect a fee, you need to be either a directly employed by that person as like a standardized employee, a w two employee.
Andrew Schultz: (14:14)
The other option is if you are an independent contractor, you have to be a licensed real estate broker, or you have to be a licensed real estate agent operating under the license of a licensed real estate broker in order to manage property for someone else. At least here in the state of New York that does vary from state to state. You’ll want to check some States have specific property manager licenses. Some states will allow you to do property management without a license, as long as you’re carrying the proper insurances. It really varies all the way across the country. So the first thing I would say is if is required in your state, understand what the licensure is, and then make sure that whoever you’re choosing as your property manager is carrying the proper licensing and insurance. That’s pretty critical as well. So I would say number one definitely has to be both licensing and insurances.
Andrew Schultz: (15:07)
The second point I would mention would be professionalism, a good way to check this is by looking at some of the information that’s being published by that management company, go look for one of their apartment ads and see if the text in the ad is written, grammatically, correct. Look at their website and see if there’s misspellings and grammar errors and typos and stuff like that all over the place, check their reviews on Google, or on Yelp. See if they’ve got a lot of negative reviews from property owners if they have negative property or negative reviews from tenants, read the tenant’s complaint, read the response from the property management company and see if the response it makes sense to what the tenants’ complaint is. A lot of times you’ll get tenants that will, you know, go and put a one-star a one-star review up because they were evicted because they didn’t pay rent for six months or something like that.
Andrew Schultz: (15:56)
Well, yes, that’s going to count negatively against that management companies reviews, but when you read the review and undercover uncover exactly what it is that went down suddenly, it makes it a lot easier to understand why there was a one-star review left. So that’s something to keep in mind as well would be professionalism. The third thing I would mention would be fee structure, understand what the fees are that your property manager is going to be charging when those fees are going to be charged and make sure that all of that is in writing. That leads me to point number four, which would be the contract, make sure that you read your property management contract, and understand everything that’s being said in the agreement. You’re going to find the fee structure in here and make sure that you understand the fee structure and that you’re comfortable with it.
Andrew Schultz: (16:39)
You’re going to read that entire contract. Keep in mind that your property manager is going to be authorized to make decisions on your behalf without coming back to you for every little thing. So you want to understand exactly what they are and are not allowed to decide what the limits are in terms of how much they can spend on maintenance before they have to come back to you and say, Hey, we have a growing concern, something along those lines. Those would be the things that I would talk about first and foremost, when I talk about hiring a property manager, what to look for when hiring a property manager that said, I do have a resource called the 10 questions you have to ask when hiring a property manager, it’s a nice little booklet. I think it’s like five pages long. And it’s just a good little guide for when you’re interviewing property managers to help you find the manager that’s going to best suit your needs.
Andrew Schultz: (17:28)
If you reach out to us over at ownbuffalo.com, you can actually just fill out the contact form right there on the main page with your name and email address and everything. And I’ll email that right over to you. No questions asked free of charge. It’s important to me that people are choosing professionals when it comes to their property managers, simply because I know that there are so many property managers out there that are just simply not professional. I won’t get into all the different things that I’ve seen over the years. Definitely some stories there to be had, but let’s move on to our second water-cooler wisdom. Our second question asks, should I show an apartment? If a tenant is currently living in the apartment and I need to find a new tenant for the next month. So it sounds like what you have here is a situation where you have a tenant.
Andrew Schultz: (18:13)
That’s moving out. We’ll use July since we’re in July, as the example, tenants moving out at the end of July, you’re trying to get a new tenant in for the beginning of August, by the sounds of things you don’t really want a lot of time in between. So you’re balancing a very delicate situation right now is basically what it boils down to because of the coronavirus concerns and things like that. Should I show an apartment if a tenant is currently living in the apartment and I need to find a new tenant for the next month, one thing I would definitely caution you about here is being aware of the fact that different people are at different comfort levels when it comes to having people in and out of their homes during this pandemic. And while you do own the home, you are not in possession of the home.
Andrew Schultz: (18:59)
The tenant is in possession of the home for all intents and purposes here. So you have to work with your tenant in situations like this in order to come to a conclusion that works best for everyone. So if you find yourself in a situation where your current tenant has concerns, or maybe they’re immunocompromised, or, you know, they’re elderly or they’re in a risk group or something like that, it may not be in your best interest or the tenants best interest to show that apartment during this time, you may find that you’re better off waiting until that tenant vacates taking a little bit of vacancy, but knowing that you’re not going to be in a position where you could be contributing to a, a much bigger situation with regards to someone getting sick or something like that. I can tell you that when we entered phase two here in the state of New York, the state had already developed a set of protocols that were distributed to real estate brokerages and to agents so that they understood the universal precautions that they could be taking to work in a safe manner.
Andrew Schultz: (19:59)
Basic universal precautions we’re talking about would be things like wearing a mask whenever you’re showing a property, or, you know, within six feet of someone else hand sanitizer and washing your hands frequently, some people are using gloves and booties. You know, making sure that you walk through with a Clorox wipe or something like that, and wiping down any surface that was touched during the showing. There’s a lot of things that you can do to basically operate in a safe fashion while still being able to get your job accomplished. One thing I will mention is that the protocols here in the state of New York specifically mentioned that you cannot show an occupied property. And what they mean by an occupied property is a property with someone in it. So it doesn’t matter if it’s owner-occupied or tenant occupied, they would have to step out so that the property is not occupied.
Andrew Schultz: (20:48)
If it’s a vacant apartment, obviously it’s a vacant apartment. There’s not really a lot that you need to be as concerned about there, but definitely not just tromping through someone’s home while they’re sitting in the living room or cooking dinner or something like that, making sure that they’re out of the home while you’re in the home will definitely help to reduce the risk of some sort of contamination. So a lot of things to keep in mind right now, when you’re out and showing apartments, showing homes, running your business, it’s definitely a very unique situation that we find ourselves in, do the best that you can to be a good citizen. That’s pretty much all I’m going to say about that. So that pretty much wraps things up for episode three 20 of the Rent Prep for Landlords podcast. If you’re looking to get in contact with me the best way to do it is by heading over to own buffalo.com and filling out the contact form right there on the main page.
Andrew Schultz: (21:37)
You can also find me on Facebook at facebook.com/buffalo foreclosed homes. If you’re looking for tenant screening services, you can find those at rentprep.com and you can also find the Rent Prep for Landlords Facebook group, almost 12,000 members strong over at facebook.com/groups/rentprep. One of the best ways that you can help us out is by sharing this podcast. If you got some value out of today’s show and you think that somebody else might as well, please share this with them, it definitely helps us to grow. And if you’re not subscribed already, please be sure to do so as well. We’ll be back next week with an all-new episode until then. Thanks so much for listening and we’ll talk to you next week.