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Background Screening Potential Tenants

Choosing the wrong tenant can lead to lost income, litigation costs and damage to your property. Conducting a background check on prospective tenants is a wise way to ensure a mutually successful experience for you and the applicant, and it is an effective risk management tool. Although background checks do present some costs, taking on a tenant without having performed this screening carries significant risk and can cost you a lot more money in the long run.

Why Prescreen?

Many applicants have a criminal record, but they do not disclose this information. Therefore, consider these advantages of pre-screening:
• Discourages applicants from hiding a criminal background or falsifying their credentials.
• Eliminates any uncertainties about applicants.
• Encourages honesty while going through the leasing process.

Extent of Background Checks

At a minimum, it is advisable to review an applicant’s criminal history, as it may be a factor to consider when allowing him or her to become a tenant. Searches for criminal records might include federal, state and county records.
Beyond the basic criminal background check, take a risk-focused approach to determining additional levels of screening, which might include identity verification, employment verification and professional license verification.

Credit Check

An additional level of verification that is essential for a background screening of a potential tenant is a credit check. This can provide additional verification of social security and employment information and can reveal crucial information about the applicant’s ability to make payments responsibly.

Rental Applications

The background check will be more efficient, more valuable and less costly if the application contains certain elements, such as a statement that all information is accurate and that any untruthfulness or omissions are legal grounds for termination of the lease. A standardized format that consistently collects all necessary information will also speed the background screening process. Some other helpful elements include:
• Detailed contact information for references, including contact information for past landlords.
• Any other names used by the tenant.

Using a Background Screening Provider

To simplify the task, you may find it helpful to outsource the process to a background screening service provider. For many screening tasks, such as criminal background checks, outside providers can be faster and more thorough. It is important that when selecting a provider you consider its financial statements and health, its hiring and employment processes, identity theft safeguards and, of course, its service offerings.

One way to streamline the process is to use an online application that requires certain fields necessary for the screening to be completed. The completed fields can be linked directly to the screening provider’s website, which will extract the necessary information for the background check. When a need for revision arises, the form can be easily modified.

Legal Duties

You have several obligations to the applicant under the Fair Credit Reporting Act (FCRA):
• Any applicant on whom an institution performs a background screen must give his or her written authorization to conduct the report.
• If you ultimately deny the application, you must provide notification through pre-adverse action and final adverse action notification letters.

For More Help

Contact Warren G. Bender Co. if you need more information about protecting yourself from liabilities associated with tenants. Our insurance experts can keep you covered and give you peace of mind.

Filed under: Real Estate/Property Management — Jillian Bender-Cormier @ 1:38 pm April 29, 2016

Sacramento Rental Market Q & A

For the month of April, we focused on all things real estate. From safety to important coverages to consider and the current state of our developing urban core. We had the pleasure of sitting down with Julia Freeland, Sacramento IREM Association Executive, to get her perspective on the current situation surrounding our local rental market.

What are you seeing in the rental housing market in Sacramento for the first quarter of 2016?

The rental housing market in Sacramento remains one of the top markets in the United States right now. Limited housing stock keeps driving up rent, especially in the midtown/downtown area where the new Golden 1 Center has sparked a lot of economic activity. (more…)

Filed under: Real Estate/Property Management,Recent Headlines — Jillian Bender-Cormier @ 1:18 pm

Activity in Sacramento’s “Urban Core”

Activity in the urban core (Downtown, Midtown and East Sacramento) has been strong from both a sale and lease perspective.

Of course, leasing drives the bus in commercial real estate whether its office, retail or multi-family residential and leasing in all of these categories has been better than ever. We are seeing comparable lease rates for Office Space approaching record highs (exceeding in very specific instances) in all class categories (A, B and C). Vacancy rates in Midtown and the R Street business district are virtually non-existent. Exposed, authentic spaces are in high demand and spaces meeting that description downtown are pushing rents upwards of $3.00 per sf. Even Midtown is attracting rents of $2.75 per sf and higher for well designed, open space in fully improved condition.

Much of this demand is a result of the excitement generated by the new Golden 1 Center (the new Entertainment and Sports Center) located on K Street between 7th and 3rd Streets. This demand, however, is as much a derivative of the retail activation generated by the Golden 1 Center as it is the center itself. Historically leasing demand in the downtown grid has been driven by Government, Legal, Finance and Real Estate related professions. Demand for Midtown space has historically been driven by local professionals, real estate development related firms and some high-tech. Today we are seeing demand from virtually every business sector seeking to compete for top young professional talent. Businesses are realizing that quality of life in the work environment may be the key variable in selecting which firm to work for young millennials in high demand. The amenity rich and ergonomically sensitive Midtown and Downtown submarkets provide the most desirable environments in the region. We are seeing that employers are demonstrating a willingness to pay a premium for well-designed space in great locations within these districts.

As a result of the increased retail amenities as well as continued relocation and expansion of top professional firms to the urban core we are seeing dramatic increases in residential migration to these same submarkets. Virtually every multi-family property owner from duplexes to 170 unit apartment complexes have waiting lists. Vacancies are immediately responded to with multiple offers.

Leasing demand has led to equally (if not more) active investment demand for available properties within these markets. Any cash flowing leased investment is attracting multiple offers at record low Capitalization Rates and even dilapidated restoration projects are getting more attention and higher pricing than ever. Virtually all meaningful land in Midtown and Downtown is in contract or recently sold. Interestingly, almost all of this land is being purchased to develop multi-family projects. Almost all proposed projects are stick frame over concrete podium construction. Even though activity has increased dramatically and rents are approaching record highs, the cost of construction inclusive of Title 24 standards and current California Code Compliance has risen even more dramatically and the only new projects that “pencil” are stick frame multi-family housing. Even then, the economic underwriting is heavily predicated on current rents, interest rates in the low to mid 3% range and disposition Capitalization Rates in the 4 – 4 ½% range. These disposition rates allow developers the latitude to stabilize projects at sub 7% returns and still exit with a handsome profit. Even record low Cap Rates for office product in the midtown and R Street corridor markets are not enough to offset construction and stabilization costs at current lease rents and land pricing.

Once rents (either retail or office) can consistently exceed $2.25 per sf NNN additional new construction should become economically viable.

Ken Turton
Principal – Lic. #01219637

Turton Commercial Real Estate
2409 L Street
Suite 200
Sacramento, CA 95816
D: 916.573.3300
C: 916.505.8288
F: 916.471.0290

Filed under: Blog,Real Estate/Property Management,Recent Headlines — Jillian Bender-Cormier @ 1:36 pm April 20, 2016

Property Management Professional Liability Insurance

Property managers wear many different hats in the course of their jobs. In addition to overseeing the maintenance, security and overall welfare of the properties they manage, at times they may also function as leasing agents, real estate agents, appraisers, consultants or construction managers. To do so, they must be knowledgeable and up to date on zoning regulations, tenant laws, tax information and property values. In addition, they are responsible for making sure lease agreements, purchase and sale agreements, and work orders are complete, accurate and submitted to the proper authorities when necessary. (more…)

Filed under: Blog,Property & Casualty,Real Estate/Property Management — Jillian Bender-Cormier @ 2:03 pm April 6, 2016