Denver Property Management Update – June 10th, 2020

We received really great feedback from last month’s Property Management update so we thought we would continue to do updates once a month at least until the world starts to settle down. This allows our investor clients can get the inside scoop from professional property managers that specialize in the Denver market. As a reminder, or if you didn’t catch May’s update, we will be focusing on data collected regarding rent collection and trends we are seeing from month to month so landlords can be as educated as possible and know what to expect.

We received really great feedback from last month’s Property Management update so we thought we would continue to do updates once a month at least until the world starts to settle down. This allows our investor clients can get the inside scoop from professional property managers that specialize in the Denver market. As a reminder, or if you didn’t catch May’s update, we will be focusing on data collected regarding rent collection and trends we are seeing from month to month so landlords can be as educated as possible and know what to expect.

We will be focusing on a few key questions to each property manager:

  1. How did rent collection end up for May and what are expectations for June?
  2. What issues are you seeing with tenants?
  3. How has leasing been?
  4. Is it still a good time for investors to get involved or be active in this current market?
  5. What do landlords and investors need to know about the current market situation?

The interviews with each property manager are below. You will see that no matter how many properties these companies manage, and no matter the type of property, these managers are seeing roughly the same results across the board.

Executive Summary:

  • All PM’s reported 95%+ rent collections in May!
  • They expect a strong June for rent collections too.
  • Some had higher rent collected than in May 2019.
  • They all reported strong leasing activity.
  • A very low rate of tenants working the system with the current eviction moratorium going on.

Interview with Annemarie Sunde – Legacy Property Management

Legacy Property Management has been in business for about 6 years and focuses on single family homes. They also have a few condos and small multi family units in their portfolio. They have properties as far south as Castle Rock and as far north as Broomfield and Thornton. The majority of their properties are located in Highlands Ranch, Parker, Littleton, and Golden. They offer leasing and full property management services.

  • Rent collections
    • May 2020 had 2 tenants who paid rent late, but they did pay eventually which means they have collected 100% of total rents
    • June is currently (June 5) in the 90% of rent collection. Rent technically not “late” until the 8th so they expect to be 100% again this month.
    • They do not have any tenants on payment plans
    • The majority of their portfolio are properties paying average $2,700 in rent each month which Annemarie believes helps a lot because the majority of their tenants are not in the service industry which was the biggest sector that was affected by COVID.
    • Annemarie reiterated that if COVID hadn’t happened, they would not be able to handle the amount of requests they received for new property management
  • Tenant Issues or Concerns
    • Communication is key. Asking tenants to be open and communicate if there are issues instead of waiting until rent is late.
    • Conversations about using Stimulus check for intended purpose of rent and groceries, not vacation
  • Leasing
    • Overall been super busy! Usually not busy until March but picked up in February this year and has stayed consistently busy in March, April, May, and June. COVID hasn’t affected leasing.
    • Currently have 15 properties up for lease
    • Still seeing lots of out of town people coming into Denver or moving across the metro area
    • Single Family Homes are still leasing the quickest (30-45 days). Condos are hardest to lease (60+ days)
    • They’ve had to make a few adjustments and lower rents by $100 at times but really more to increase amount of traffic to property.
    • Rental rates are not going up like they did in 2016/2017 but they are not below average
  • How does it look for Investors
    • Still thinks it’s a good time to buy. She actually purchased a rental since last month.
    • Really dependent on the investor’s goals. If you’re in it for long term game, Annemarie still thinks Denver is a great market to invest. If you’re looking for the quick buck, Denver probably doesn’t make sense because we have lower cap rates and higher prices than other markets around the country.
    • Regardless of COVID, Denver’s economy is still strong, interest rates are still low, and people and businesses are still moving here in masses
  • Need to know!
    • Thinks there could be a 2nd wave in the fall (Sept/Oct) where we will see the effects of COVID. If people can’t go back to work or work from home or get laid off instead of the current furlough, they might have issues paying rent
    • Annemarie has been pleasantly surprised that there haven’t been more people not paying rent and she hasn’t really had to pester more people.
    • Thinks new processes for showings and screenings has actually helped weed out people who aren’t as serious or qualified
    • Mortgage Moratorium extended to June 13, 2020
    • Make sure you are not only getting a property management company that is good at their job, but who is also active and knowledgable about what’s going on with the legislation as things are changing and proposals are being made daily.

Website: Legacypmco.com

YouTube Video Interview with Annemarie

Interview with Gray Hall, GK Houses

GK Homes manages properties in 5 national markets and specifically in Colorado they manage properties in Denver, Boulder, and Fort Collins. They have a portfolio in Colorado of about 700 doors and range from single family homes, to small multi units, and apartment buildings up to 49 doors.

  • Rent collections
    • May 2020 rent collection was 98% which was surprisingly up 1% from 2019 (97% collected)
    • Currently (June 5) June collection is at 93%.
    • Rents are late usually on June 3rd but they have several tenants on payment plans which allow rents to be paid until June 15 so they expect remaining rents to come trickling in and end about 97%-98%.
    • Since they have 5 markets nationally, they can compare Denver to the rest of the country and are seeing that regardless of market, collections are within 1% of each other.
  • Tenant Issues or Concerns
    • Even with the eviction moratorium and no late fees allowed to be charged, tenants seem like they want to pay rent.
    • Thinks most tenants realize that it’s not a good idea to not pay. They may not have to pay now, but it can affect them getting into a home down the road.
    • Only 2 tenants out of 650 they manage have not paid, had no communication, and are being unresponsive
  • Leasing
    • Seeing 80% of leases renewed in March, April and May
    • Suggesting to owners that it’s better to keep tenants where they are.
    • Pricing has had slight bump but they are more marketing with the market average rate instead of trying to get top dollar. More worried about qualified tenants
    • Showings and applications have doubled in the last month
    • They are still not doing showings on occupied properties
    • Still seeing high traffic of people moving to Denver
    • Have added a “sight unseen” addendum to leases to protect them from tenants who might complain that the pictures didn’t match real life. GK Homes will of course take care of anything health and safety related but will not repaint a wall because it looked 2 shades lighter in the pictures.
    • Maintenance requests have increased slightly and Gray feels there is still a backlog that will be coming the more people feel comfortable having others in their homes
    • Hoping that tenants still call when there’s something wrong or there will be much higher turn costs
  • Need to know!
    • Do your due diligence! Make sure your screening process is on point. GK Homes isn’t even asking for pay stubs, they are calling the employer directly to make sure applicants are employed and not losing job anytime soon
    • Be careful when buying a place with a tenant already in place. You don’t know what the last screening process was. Tenant might not really be qualified, the previous owner or PM company just wanted to fill the unit instead of holding out for the right person

Website: GKHouses.com

YouTube Video Interview with Gray

Interview with Marc Cunningham – Grace Property Management

Grace Property Management started in 1978 and has grown to manage just under 1,000 doors. They range from single family, to small multi family and also do some commercial property. North Denver to south Denver.

  • Rent collections
    • May 2020 people paid later and there are more delinquencies, but they are still paying. Collected high 90%.
    • June 2020 – expect to see same thing
    • The overall day to day collection comparison from 2019 is down. So rents are “delayed” but still come in to end in the high 90s for collection percentage
    • People who haven’t paid are still covered because eviction moratorium has extended to June 15.
    • 5 out of 1,000 tenants are not communicating and will not pay
  • Tenant Issues or Concerns
    • Regardless of everything going on, tenants are still paying!
    • We are on our way out of this bad situation
  • Leasing
    • Overall, market is really good
    • Out of Grace’s Top 12 vacancies (meaning the properties that have been vacant the longest), 10 are located in downtown Denver, they are condos, and all either 1 or 2 bedrooms (mostly new A class buildings)
  • How does it look for Investors
    • Based on vacancies, and what we have suggested in the past, don’t invest in Class A brand new development downtown. Demand for that has dried up. In hard times, people don’t care about the amenities that during COVID they can’t even use.
    • If Class A units aren’t being rented, rents will have to go down which will domino effect all lower class properties
    • Condo markets always first sign of what’s to come. Not worried about crashing but keep an eye on it.
    • Trends for legislature are making it harder on landlords. Stay educated.
    • No legal recourse for landlords right now and extensions of no recourse keep coming
  • Need to know!
    • If and when you are allowed to file evictions, it will cost more and there will be more paperwork. Part of your fees will go towards providing a lawyer for your tenant
    • There is a suggested Statewide law where a landlord can not consider the source of income when determining acceptance of a tenant. This means that landlords may be forced to accept any all government subsidized programs (have to take section 8).
    • If laws become too hard for landlords, they will pull out of the market which means less supply, it means even more demand, and in turn will create even higher rental rates
    • Landlords need to reach out to their legislative representatives to express concerns about things changing. We need more supply of single family homes so we don’t hurt tenants for having to pay outrageous rates

Website: rentgrace.com

YouTube Video Interview with Marc

Interview with David Weiss – Rivendell Real Estate

Rivendell’s property management division has been in business about 6 years. They currently manage about 230 doors in a mix of apartments, single family homes, and small multifamily properties. About 30% of their portfolio is section 8. The properties are all across the Denver Metro area from Thornton to Castle Rock.

  • Rent collections
    • May 2020 – 96% rent collection. Actually slightly more from May 2019 which was 93%
    • June 8th – Looks to be on track and expect about 95% collection. Rent isn’t technically late until June 10th
    • Most of single family homes are in the $2,000/month range
  • Tenant Issues or Concerns
    • People who typically pay rent, continue to pay rent. People who usually have issues paying, continue to have issues and have 1 more excuse with COVID
    • Hasn’t had anyone flat out say, “we aren’t going to pay because you can’t evict us”. Again, tenants who are paying late have a history of paying late before COVID
  • Leasing
    • Increase in renewals. Tenants feel safer to stay put.
    • Recommending to owners that they not raise rents or raise very minimum level. However, owners who did raise rents have not had much negative feedback
    • Average days of vacancy is 10-14 days including cleaning and maintenance before move in
    • Seems like demands for single family homes outweigh multifamily properties
  • How does it look for Investors
    • Feels that there are opportunities in Denver regardless of market condition. Know your numbers, know good neighborhoods, get good contractors
    • Be aware that with all government help with stimulus checks and government programs, it’s delaying the economic effects of COVID. This means you will want to be careful to not rush into anything too quickly as we may not see those effects until 6-12 months from now.
    • No major red flags, just do your due diligence
  • Need to know!
    • Section 8 is great but know that you are not guaranteed the full amount. Most tenants on section 8 pay a portion of that rent and are just as likely or not likely to pay their portion as any other tenant
    • Section 8 is great but need to have some reserves as it could take a month or two to get the rents set up and into your bank account

Website: rivendellrealestate.com

YouTube Video Interview with David

Interview with Ellie and Devin Reimer – Aerowood Property Management

Aerowood manages 300 doors in the Denver metro area. Their portfolio consists of mainly condos, townhomes, and single family homes. They also manage a few small multi family units.

  • Rent collections
    • May 2020 – Nationally, 93.3% collected. Aerowood portfolio very close at 95% collected.
      • Nationally 1 out 5 people have deferred payments which is right in line with Areowood portfolio
    • June – 95% paid (June 8)
    • Average collection for Aerowood is 97% year after year so a little lower but not by much
    • Admin work has gone up because number of delinquencies has increased which means we have to really be on top of things and babysit every tenant’s payments
  • Tenant Issues or Concerns
    • 99% of tenants want to pay their rent and are doing everything they can to keep it
    • 4 or 5 people have left keys on the table and moved out
    • COVID restrictions are reducing + summer weather = maintenance requests going up
  • Leasing
    • Up 19% more units leased from last year
    • 18 move outs at end of May. 19 move ins within 24 hours
    • If it’s priced right, it’s gone. Sight unseen
    • Highly qualified applicants with 700+ credit score
    • Rent increases are dependent on location and property type but even $25 increases are being suggested for most areas
    • Class C units are struggling with rent increases
    • Keep good tenants even if you can’t increase rents
  • How does it look for Investors
    • North Aurora hard to compete with move in specials
    • Still getting good tenants
    • know your margins but still good market to invest
  • Need to know!
    • Huge portion of applicants are out of state
    • New tenants are demanding cleaning receipts to make sure things are clean and sanitized

Website: rentawpm.com

YouTube Video Interview with Ellie and Devin

Key Takeaways

Overall, you can see that just about all the property managers are seeing the same results through the Denver market. All our property managers were able to collect 95%+ of rents in May and expect the same for June.

Our PMs agree that the panic and concern from property managers and owners that no tenants would pay rents were not only wrong but thankfully the opposite. Just about all tenants want to make sure that in this uncertain time, they have a place to live and will do whatever they can to get rent paid.

Continuing to communicate and stay on top of when rents are due is key especially with several tenants on payment plans.

Leasing numbers are great and every PM said they are seeing increased showings and applicants. The number of out of state applicants is still very high as well.

Investors need to know that Denver is still a great market to invest in for the long term but they also need to keep an eye on all the legislative activity. We need to stay up to date on what is being suggested so we can do our part to keep Denver an investor friendly state.

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Authors
Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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