SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Memphis, TN

Rent Report For February 2019

by

Zumper.com has published a compilation of average rents for one and two bedroom units from across the United States.  How is your location doing?  Memphis, TN experienced a dip in overall rental amounts for these units, but it is the slow time of the year.

From the report:

“While most of the top markets had another flat month, there was some movement toward the bottom of these 10 cities. Miami fell out of this group, being replaced by Santa Ana, so now 6 of the 10 most expensive rental markets are in California (again).”

Read the rest of the report and check out the data on rent amounts here.

 

Rents On The Rise In Memphis Tennessee

by

Rents are on the rise in Memphis Tennessee and have been for a while now.  This article from the Commercial Appeal examines the rental market here in Memphis and compares it to other areas in Tennessee and the United States.

If you invest or plan to invest in residential real estate in Memphis, check it out.

To find out more about what other areas in the United States are experiencing, this article on what the rent did in 2018 provides an overview.

 

Memphis, TN – A City of Renters

by

There is a reason why the rental market is so strong here in Memphis, TN and why they keep adding more rental properties to the market.

We are a city of renters.

Here is a snippet from a recent article in the Memphis Business Journal.

“Memphis had the largest increase in renters among the 50 largest metros in the U.S., going from about 45 percent of residents who rented in 2006 to 56 percent in 2016.”

You can read the entire article here.

What Does Normal Wear and Tear Mean?

by

Most landlords collect security deposits as a part of their lease to ensure that tenants do not harm their property.  When a tenant moves out, deductions can be made from a security deposit to repair harm that is above normal wear and tear.   But what does normal wear and tear mean?  How is it different from damage?

It is important for landlords to be able to distinguish between normal wear and tear and damage because it is often a point of contention.  Tenants and landlords often differ as to the amount of damage that has been caused.  Tenants will assert that damage is just normal wear and tear while landlords assert the opposite.  The line between the two however is not often clear, nor is it easily defined.

Do State Or Local Laws Provide The Answer?

Many landlord/tenant relationships are governed by state or local laws.  Here in Memphis, Tennessee, we use The Uniform Residential Landlord and Tenant Act.  But, this Act does not provide a definition of “normal wear and tear” and I suspect most other state statutes do not either.  It is just too hard to nail down.  The Act does not even use the term “wear and tear” anymore.   Instead it discusses “damage” caused by the tenant.  Does the Act define “damage” then?   Nope.  Again, it is too hard to nail down.   So, how does a landlord know what the difference is?

Getting To A Meaning

Black’s Law Dictionary provides some guidance.   It defines the terms “normal,” “wear and tear” and “damage.”   I use a law dictionary because word meanings in a court of law can be different from their common, everyday meaning.  And a court of law is where landlords have to think things (not just wear and tear cases, but everything they do) may end up someday.

Normal is defined by Black’s as:

According to, constituting, or not deviating from an established norm, rule or principle; conformed to a type, standard or regular form; performing the proper functions; regular, average, natural.

It defines “wear and tear” in part as:

…deterioration or depreciation in value by ordinary and reasonable use of the subject matter.

Damage (as opposed to damages) is defined in part as:

Loss, injury or deterioration, caused by the negligence, design or accident of one person to another, in respect of the latter’s person or property.

So What Is Normal?

With these legal definitions we get closer to an answer.  There are two types of wear and tear,  one type caused by reasonable use and another type above and beyond reasonable use somehow caused by the tenant.

How does this then translate into real life?  What is normal?  Every situation can’t be spelled out, but here are some examples.

  • Paint fading or chipping from furniture being pushed against it. It is normal for people to have their furniture against the walls.
  • Flooring showing a trail from the paths folks use every day. It is normal for carpet to wear out after constant use.
  • Older appliances and fixtures eventually quitting. It is normal for the refrigerator to just stop working one day.
  • Plumbing starting to drip or leak. Fittings and washers wear out.  It is normal for things to leak occasionally.

You cannot charge the tenant for this type of wear and tear.  It is not their fault.  The stuff would have worn out anyway no matter who the tenant was or what they did.  However,

  • Crayon drawings all over the walls are not normal.
  • Painting the walls black is not normal.
  • Wine stains on carpet, iron burns on hardwood and cracked ceramic tiles are not normal.
  • AC coils covered in dog hair and ceiling fans pulled from the receptacle are not normal.
  • Cracked toilet tanks are not normal.
  • Doors pulled from their hinges and broken windows are not normal.

You can charge the tenant for these types of wear and tear because it is above and beyond normal.  It is damage that is the tenant’s fault.

See the difference?

Ultimately a judge or jury can define what normal wear and tear means in your particular case, but you do not want to let it get that far.  It is much easier and better for everyone to understand on the front end what normal wear and tear generally means.  Smarter landlords set the expectation with their tenants on how they expect their property to be returned to them and how tenants can expect to get their security deposit refunded at the very beginning.

Setting up those expectations is a the topic I will discuss in the near future.

Have you ever had a dispute with your tenant (or landlord) over “normal wear and tear?  Please share with your comments below.

 

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

Calling It A Boom

by

I came across the following headlines today:

“It’s time to stop calling this a recovery, and start calling it a boom,” writes Noah Smith for Bloomberg.

And this:

“Thirty-five percent of homebuyers in the U.S. aren’t even visiting the property before they put in a bid, amid torrid competition in a tight market, according to the latest survey by Redfin Corp.”

Both headlines got me thinking about an experience I had yesterday here in Memphis.

I went to look at a foreclosure being offered for sale that needs a significant amount of work.   For the 45 minutes that I was there, three other folks along with their realtors came to look at at it.  Can you say buying frenzy?

Is it even worth the bother to make an offer?  We will see.

If you are thinking about selling, now is the time.

But hurry, before the boom bursts.

Any of you out there seeing the same in your area?  Let me know with your comments.

 

The SmarterLandlording Podcast – Is There a Good Property Management Company?

by

The SmarterLandlording Podcast – Episode 8 – Is There a Good Property Management Company?  With Real Estate Investor and Broker Emeritus – Richard Scarbrough

 

 

Links We Mentioned

Memphis Investors Group – The Memphis Investors Group is the local REIA club here in Memphis.  This group has been very valuable to me over the years.  It is where I met people like Richard and where I am able to learn, share ideas, make deals and commiserate with other investors.  If you are here in Memphis, look us up.  If not, check around for a club in your area.

First American Home Warranty – Richard uses this company to place home warranties on his property and has eliminated 90% of his maintenance calls.  Will it work for you?  Check it out.

Richard’s preferred contact info – Call him on his landline 901-753-3491.  Sure its old school, but he knows his stuff and he can help you buy, sell or just give advice.

 

Like the Intro Music?  Check out my good friends in the band Kitchens and Bathrooms (Kind of fits right!).  They write and play some awesome, original music from right here in Memphis, TN.

Home Flipping at 11 Year High. Memphis Leads The Way

by

According to a report at attomdata.com, home flipping in 2017 was at an 11 year high.

From the report:

“207,088 U.S. single family homes and condos were flipped in 2017, up 1 percent from the 204,167 home flips in 2016 to the highest level since 2006 — an 11-year high.”

Plus, Memphis leads the nation in the rate of flipping, with the Memphis zip code of 38116 (otherwise known as the Whitehaven neighborhood) leading the pack. Over 31% of all home sales in that zip code were flips in 2017.

I can tell you from personal experience here in Memphis that prices are increasing as there are multiple bidders for every single property. To me, It is beginning to look a lot like 2006/2007.   Back then, I basically had to sit on the sidelines and watch as I continuously got over and outbid by folks willing to take a 1% cap rate. Lots of things did not make sense back them and they are beginning not to again.

My advice, stick to your numbers folks. Numbers do not lie. If the numbers make sense then buy.  If not, pass.  Do not get caught up in the exuberance and do not make a deal just because you have not made one in a while. The market will clear eventually. Don’t get caught on the wrong side of that clearing.  I picked up a lot of decent properties in 2009 and 2010 after the last crash.  Seems like I may get to do that again in the not so distant future.

Just Graduated? Where Should You Move?

by

Group of young people having fun together at home.

Trulia recently published a study that tried to answer the question: Where is the best place for a recent college grad to move? In this study they developed something they call the Graduate Opportunity Index. This index looked at 40 major cities across the United States and ranked them based upon the number of jobs available to recent college grads, rental housing affordability and the number of millennials living in that city with a college degree. How did your city rank? Check out the study here.

Memphis unfortunately did not make either the study or the list, but perhaps it should have. I can tell you from anecdotal experience that Memphis seems to be doing a much better job of attracting these recent college grads. For one thing we are renting to a lot of recent college grads lured here from all over the country and the world. Plus, I am just meeting more and more young people who have just moved here from out of state. Much more than in the past, but maybe that’s because I am getting out more :).

What’s bringing them here?

A lot of things are actually. But top notch organizations like FedEx, St. Jude, International Paper, AutoZone, Service Master and Smith and Nephew are high on the list.

What’s more, Memphis is perhaps the most affordable city in the United States to live in when it comes to real estate. It is very hard to get more bang (or square feet and amenities) for your buck anywhere else in the country.

And how can you beat Graceland, Beale Street, The Grizzlies and so much more?

Sure we got our problems just like everyplace else. But I think Memphis has a lot going for it and the younger folks who have recently moved here, that I talk to, seem to agree.

How Much Space Does $1,500 Get You?

by

How much square footage does $1,500 of rent get you in America’s largest cities? It’s pretty good if you live in Memphis, but what about other cities? Check out this interesting post from Rentcafe to find out and compare.