Archives for March, 2017

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No Comments March 28th, 2017 Commercial Property, Latest News

The Keys To Implementing An Effective Surveillance System

Whether you have a surveillance system in place or are looking to develop a new one, the world of cameras and security equipment can be daunting to those who aren’t experts in the industry.

When working properly, a surveillance system can improve your response to crimes or other issues that arise.

“If an organization has an on-site security force and a security monitoring center, a camera system can be used to leverage their capabilities,” says Michael Silva, Principal at Silva Consultants in Covington, WA. “One security officer sitting in a control room can monitor an entire campus with the video system. When used with other systems like motion detection and access control systems, it can really leverage what one security officer can see.”

However, when not installed and operated properly, a surveillance system will be of little help. Awareness of some key issues in video surveillance will ensure that you are keeping your facility safe.

Identifying Vulnerabilities

Silva suggests starting with a security risk assessment that diagnoses a facility’s needs by examining risks and threats. He likens this process to having a physical at the doctor; the assessment is about finding problems and developing solutions to address them. Doing so allows you to determine the overall goals of your security program and identify how personnel, procedures and technology will contribute to achieving these objectives.

Specific areas and strategies need to be made clear from the beginning. Jason Maddox, President of Vulcan Security Systems in Birmingham, AL, first looks to identify the intended scope of the security system a client wants.

“On any building, some basics almost always apply. I like to secure from the inside out, and if you have a high dollar asset, we would like to put a camera on it,” says Maddox. “You want to have ingress and egress points to the building covered. That way you always have timestamped video of who came, who left and when they left. Immediately after that would be your server or mechanical rooms, so you know anytime someone’s coming in or out of there and have a record of it.”

Assessing Video Quality

Identifying the particular reasons you are installing cameras can prevent any disappointments. A statement of purpose that clearly defines your goals will help you communicate with surveillance professionals, and they can then address any misconceptions before it is too late.

“You need to communicate fully what you want to achieve in writing and let them design a system to meet those stated needs,” explains Silva.

Set Expectations

Silva suggests establishing reasonable goals when you are planning a surveillance system.

“A lot of people view a video surveillance system as a magic bullet, but once they’ve done this underlying planning and identifying what the solution should be, cameras may or may not be the correct solution.,” Silva explains.

In fact, Silva contends that cameras have become one of the most misused types of security technology because they make people feel more comfortable merely through their presence. An overstated reason to get surveillance is that they provide a deterrent to crime. Silva notes that just because a person committing a crime sees a camera does not mean they will think rationally and worry about the consequences, so they might not be as much of a deterrent as many believe.

That is not to say that a surveillance system won’t help if something does occur. They can provide video documentation of security incidents that can be helpful when investigating crimes and identifying criminal suspects. In any case, it is important to keep in mind that no system is perfect, and that surveillance cameras – like any other technology – are prone to imperfections.

“Usually the biggest disappointment people have is an expectation that they’re going to be able to clearly see the entire area with crisp, high resolution and positively identify someone who on the screen looks to be about a quarter of an inch tall,” says Silva. “Most commercial video systems don’t do that, and if they do, they do it in a very limited area. One of the most important things you can do is actually define what your goals are.”

As with anything else, surveillance technology is going to cost more as quality increases. Therefore, if money is an object, you should identify where coverage is absolutely necessary. Even if a surveillance system does not completely deter crime from happening in your facility, it is also important to consider how else a surveillance system might help to benefit your business or organization.

Maddox has noticed an increase in facility managers approaching HR, life safety and operational issues like slips and falls and worker’s comp with security cameras. Most importantly, these kinds of considerations can help justify the upfront cost. However, no matter the application of security cameras, you should know the technological advancements and concerns in the industry.

Technological Considerations

In the past, analog systems dominated the market, providing systems connected by separate coaxial cables that run from individual cameras to a central recording switch. More recently, IP technology has taken over surveillance, reducing the number of cables – especially in systems covering a number of cameras and buildings. For those looking to add or modify their existing analog system, the good news is that they are not obsolete, but the direction of the industry is and has been unequivocally IP-centered.

“The industry has done a pretty good job of maximizing what they can get out of existing coax cable; it’s basically given the analog systems an extended life. But at the end of the day, it’s still an old technology,” says Maddox. “If someone’s going new, then we’re almost always going to recommend IP because it’s newer, you can get better resolution and do more with it. But the industry as a whole has done a good job extending the life of analog systems.”

If you are looking to develop an IP system, all you need is a network cable connection, which is often accomplished with fiber optics.

“If we’re doing a multi-building campus, we’ll run a single fiber optic cable from each of the buildings to the central building,” says Silva. “At the end of that fiber optic cable in each building, we’ll install one or more network switches. These switches will allow us to connect all of the security devices in those buildings. You need connectivity between buildings, which in most cases, you will have. Security devices can communicate over a segmented portion of the enterprise’s regular network (VLAN) or a separate dedicated network just for security devices can be provided.”

In addition to the sheer convenience of an IP system compared to an analog one, video and image quality are improving.

“You’re inherently capped at right around 2 megapixels for analog, but with IP the world’s really your playground as far as the resolution,” says Maddox. “Higher and higher megapixel resolution cameras are coming out every day.”

Bandwidth and data storage are two of the main areas the industry is looking to enhance. Balancing these two areas with the highest possible video quality can be a challenge under a budget, but solutions continue to become less expensive.

“If your whole system is recording within the building, bandwidth is usually not a problem,” explains Silva. “The other main factor is how much disk space you need to store it. With these newer cameras, you need much more storage, but the cost of storage is going down significantly. In the commercial realm, it still costs money for good storage, but if you want to spend the money, you can get super high-resolution cameras that pump out a lot of data, and you can make that work with high-capacity drives.”

Lighting and Indoor Cameras

Because of advancing camera technology, video quality continues to improve. In indoor settings, users will usually be able to get the best out of their cameras because the conditions inside best facilitate the technology.

“Indoor cameras are pretty basic because in most cases, unless the camera is looking at a door or a window, the lighting is pretty constant inside,” says Silva. “Generally, it’s much easier to do camera installations inside.”

Consistent lighting indoors helps with video quality, and cameras ultimately require less light than it takes for humans to see. Consequently, you can often get away with using a less expensive camera and expect good results.

“You can be guaranteed good video quality indoors probably 90% of the time,” explains Silva. “Outdoors, it is a little more iffy. You can get just as good video, but you have to do a lot of careful planning. You have the elements to worry about – weather, rain, snow, sleet and freezing. Cameras outdoors are usually more expensive, and you have to give a lot more thought to what kind of camera to use and where you’re placing them.”

Weathering the Outdoor Elements

Outdoor surveillance is frequently more difficult because of the variables that affect light quality, which include cloud coverage, darkness, bright lights shining directly into the lens and uneven lighting.

“When you’re talking about an outdoor arrangement, you have a whole different set of conditions because the lighting level outside is constantly changing from super bright sunlight in the middle of the day to a huge variation of lighting conditions,” says Silva.

For example, an outdoor camera on a bright, sunny day can give you a clear, crisp image of a parking lot. However, during the winter, heavy rain or at night, that camera will not be able to provide the same level of picture quality. That is not to say that the camera is unusable in those conditions, but it is important to know that there will be some difference. Lighting solutions can be a productive way to bridge this gap.

“You need to have decent lighting to get decent video,” notes Maddox. “The camera manufacturers are doing a great job when they claim the little light or no light cameras, but you still need decent light if you’re not using infrared or supplemental lighting.”

When you do have lighting within an outdoor space, you need to be aware of the light sources that might interfere with the cameras. For example, the bright headlights in a parking facility might prevent the camera from capturing vital information like a license plate number.

“In areas like parking lots, there are issues with lighting that typically make the design much more challenging,” says Silva. “Different cameras have different abilities to work in different lighting conditions, so in your written goals, you would state, ‘This is the parking lot. These are the light levels that are in the parking lot. Here’s what we want to achieve.’ Then, let the consultant or the vendor come up with the appropriate cameras.”

Planning and setting realistic expectations, like any other part in the surveillance process, will help you get the most out of your system.

Establishing a Surveillance Policy

The advent of new surveillance equipment in a facility often ushers in a series of questions and expectations about use of the camera footage from occupants and even other nearby facilities. If clear guidelines remain unstated, requests for use outside of the intended purposes of the system can generate conflict.

Thus, when installing a new surveillance system or updating an existing one, it is a good idea to institute a written policy that will specifically outline what purposes the cameras will and will not serve. In this policy, you should be sure to address the basic functions of the system and answer questions of access to the video.

Some important areas that should be addressed include:

– Intended purposes of the surveillance system
– Proprietary rights of video
– Personnel who have access to video
– Proper channels to obtain video
– Areas that are and are not covered by cameras
– Cameras are only placed in appropriate locations
– Basic operations of cameras
– Details of archival video footage
– Covert cameras that may be in use

 

Source: Buildings

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No Comments March 21st, 2017 Commercial Property, Latest News

Ten Business Practices To Manage Risk And Avoid Litigation

We see litigation in our daily lives, whether it is depicted in movies and television shows or blasted all over the news, but most business owners don’t stop to think about what it really means for them when they get into a legal situation.

Typically, litigation is settled by agreement between the two parties but it may also be resolved by a jury or judge in court. Litigation is often necessary in some cases where attorneys fight hard to get the best results for their clients. However, litigation can be time-consuming, distracting, stressful and expensive for businesses.

Below are 10 proven strategies to shield against risk and limit the likelihood of litigation for your business.

1. Have Clearly Written Agreements

American film producer Samuel Goldwyn’s famous quote says it all: “A verbal contract isn’t worth the paper it is written on.” No matter how trusting you may be of the other party, a clear written contract is the first and most critical step in avoiding litigation. Parties often differ in opinion on what exactly their obligations were or when they would arise or whether it was conditional on other things occurring first. The terms of any business deal, which clearly set out the parties’ rights and obligations, should be in writing to avoid any misunderstanding in the future.

The cause of many lawsuits is a direct result of contracts between the involved parties either not being memorialized in writing or simply not being clear. A clear, detailed and well-thought-out contract which addresses what happens when a business relationship deteriorates can minimize the cost of resolving the dispute. Any amendments to the agreement or ancillary arrangements should also be evidenced in writing.

2. Retain An Attorney To Review Your Agreements

Engaging in upfront dialogue with legal counsel can help your business avoid costly mistakes.  To save costs, many business owners find it enticing to utilize template contracts they find online for particular transactions.  Typically, these standardized contracts do not take into consideration the specific needs of the businesses involved as well as the laws of the applicable jurisdiction.  A contract that is not legally valid is useless if a business wants to enforce its rights under it in court.

An attorney can advise on whether a nondisclosure or noncompetition agreement would be appropriate. Whether a dispute should be litigated in a particular jurisdiction under a selected state’s laws or through alternative dispute resolution should also be memorialized in your agreement.  Setting aside a portion of a business’s budget toward retaining an attorney to draft and review the agreements you utilize in your business can reduce more costly litigation fees down the road.

3. Read The Agreements

While this is an obvious act, many neglect to fully read and understand the agreement before signing it. Understand both parties’ roles in the agreement before accepting it to ensure the parties are capable of fulfilling their role. Ask for clarification of provisions that you are unsure of or may require further negotiation. Often we see parties falling short of their responsibilities outlined in the contract partially because they weren’t fully aware of their obligations.

4. Be Informed

Contact an attorney when you first see a potential problem arising in the business arrangement. Involve counsel early; the first call to an attorney should not be when you’re already facing litigation.  Inform yourself of the laws and rules that may apply to you and your business. Through the help of an attorney, learn about your rights and responsibilities and the best options for reaching a resolution for any current or future issues. This can prevent you from escalating a problem and provide you with a feasible solution that may ultimately avoid litigation.

5. Think About Whom You Want To Do Business With

There is a temptation, especially for new businesses, to take on any client or business opportunity that walks in the door. It is critical to conduct research on your potential clients, customers, employees and suppliers.  Ask your referral source, speak with people in the business community and conduct an internet search. Learn about their reputation and consider if that individual or company is someone you would want to do business with. At a minimum, conduct a quick Secretary of State database search to ensure that the business is active, which will help reduce your risk. If you find that the company is often involved in disputes and has complaints, think twice about starting a relationship as it might be a business you would want to steer clear of.

6. Have An Employee Handbook

Every company with employees should have an employee handbook that is provided to all employees. Employees should sign a form acknowledging receipt of the handbook. The handbook not only sets forth in writing the employer’s expectations but also provides statements of compliance with federal and state laws and regulations. It is a very important tool for stating reporting procedures relative to discrimination and harassment.

An attorney should be contacted to not only help draft and review the original handbook but also on an annual basis to ensure that the handbook complies with current laws. Having an outdated handbook or no handbook at all can be very detrimental to a business involved in an employment litigation.

7. Obtain Appropriate Insurance Coverage

As it is not just a question of the amount but also the kind of coverage that your business carries, every business should consult on a regular basis with a qualified commercial insurance broker. It can be devastating for a business to be involved in a litigation where there is not the proper insurance in place to defend and indemnify the company against a potential judgment. As your business grows and expands and with changes in laws and technology, your commercial insurance will need to be modified. Commercial general liability and property insurance policies are probably not sufficient.

State law will often require specific types of insurance, such as workers’ compensation. Depending on the nature of your business, you may also need professional liability, errors and omissions and cyber security/data breach insurance, as well as additional coverage suited for your industry.

8. Protect Your Company’s IP Assets

Intellectual property such as trademarks, copyrights and patents are often the most valuable asset of a company.  A business selecting brand names and logos should seriously consider retaining an attorney to conduct the required initial due diligence and legal analysis to identify potential conflicts, thus saving significant money if the business is later confronted with infringement allegations.

Companies should be aware that they have a duty to protect, enforce and “police” their own registered IP assets, including sending out cease-and-desist letters and prosecuting claims against other companies infringing on their IP rights. Being proactive and putting an end to infringing use promptly is more effective and cost-efficient than litigating over it after it has already done harm to your company’s hard-earned goodwill.

9. Record Retention Policy

Many disputes can be avoided if a company is able to keep good records of its agreements, related correspondence and notes taken to memorialize telephone conversations. Businesses should establish an appropriate record-retention policy both for electronic and hard copy documents.  While you work with the other party to solve problems, document how that problem was communicated and what was agreed upon to resolve it.  Also document any satisfaction and praise expressed by the other party, resulting in a written proof of you meeting their expectations.

10. Website Privacy And Terms Of Use Policies

If your company’s website collects and uses the personal information of its users in any manner, it should have a privacy policy that defines exactly the information that is being collected and the precise manner of use the company intends to make of such information. Businesses conducting e-commerce or with a high level of activity online should have a terms of use policy on their website, including having users expressly agree to the terms of use. Such companies should be aware of international e-commerce regulations, privacy laws and intellectual property laws, just to name a few.

By adopting these 10 good business practices, your company can help manage risks and limit time-consuming and costly litigation. It is important to be proactive in protecting your business from possible legal issues. If you find yourself unable to avoid litigation, consult with a qualified attorney to learn the best options based upon your company’s situation.

 

Source: Westfair Online

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No Comments March 14th, 2017 Commercial Property, Latest News

Five Hot Spots for ADA Lawsuits And How To Prevent Them

Do all of your building’s public spaces comply with ADA requirements?

You might be certain that people with disabilities can navigate your facility with ease, but total compliance with the Americans with Disabilities Act is surprisingly rare. You’re likely losing out on people who otherwise want to engage with your organization, not to mention placing your building on shaky legal ground.

“You’re probably related to, are friends with or have something in common with someone who has a disability. As of the 2010 census, 18% of our population is disabled,” explains David Meihls, Principal Consultant for ADA Consultants of Indiana.

Meihls is also a C7 quadriplegic who has visited non-compliant buildings as both a consultant and a consumer.

“If your business isn’t compliant, you’re missing out on a potential sales growth of 18% – and you’re also holding your breath and hoping that nobody sues you,” says Meihls.

These five areas host some of the most common violations. Scope them out to make sure you’re not setting yourself up for a lawsuit.

1. Entrances and Routes

Can someone using a wheelchair or scooter get into your building? If your entrances are only accessible by stairs, you have a problem on your hands that a makeshift plywood ramp won’t solve.

“If people can’t get into your building because you have steps, you have nothing. The second priority is access to the goods and services you provide,” notes William Endelman, Principal and Accessibility Expert at Endelman & Associates, an accessibility consultancy that developed audit software to propose solutions and ballpark costs for remedying ADA violations. “We often see photographs of people who try to put a ramp up the stairs, and it has some enormous slope that wheelchair users wouldn’t be able to use. You need to do some design and get an architect or civil engineer to implement a ramp system, platform lift or elevator.”

This applies even if your building was built before the ADA was established, says Meihls. Buildings are required to keep up with evolving ADA standards wherever reasonably possible.

“I see it all the time when I go to new businesses or restaurants with my family or friends,” Meihls explains. “A new place just opened up, but it’s in a building that’s 30 years old and has steps at the front door. They think there’s a grandfather clause protecting them, but there’s not.”

2. Parking Areas

Accessible parking spaces seem uncomplicated, but they frequently trip up building owners who don’t realize that there’s more to parking stalls than just painting the International Symbol of Access on the ground. Access aisles where wheelchair users can enter and exit vehicles are particularly prone to issues, Meihls observes.

“The aisle has to be connected to an access route that leads to the entrance of the building from the parking space without going into the path of traffic,” explains Meihls. “This is a notorious problem in almost every facility, even new construction. Take a look at the box stores you have in your area and see whether or not there’s clearly an access route leading from their parking to the front door. It’s almost always a no.”

The curb ramp at the head of an access aisle, which helps a wheelchair user move from the aisle to the walkway system, is another common pitfall, adds Endelman.

“More often than not, the slopes of the curb ramp and the side flares, the angled portions on the side, are steeper than the maximum of 8.33%,” Endelman explains. “Frankly, even if it’s designed correctly on drawings, workmanship problems during construction cause a lot of issues. That’s the real challenge – first it has to be designed right, and often it’s not. Then it has to be built right, and that can go wrong too. Slope issues can plague the rest of the parking spot too. With parking stalls, even if they’re the right dimension and correctly striped, we see a tremendous amount of stalls that exceed the maximum slope of 1:48. That’s either because the grading wasn’t done well or because it’s very hard to get asphalt paving level. We also find that catch basins and drains are put in near the stalls – exactly where you don’t want them – and there tends to be a steep slope toward the drain.”

3. Restrooms

Restrooms are tough to get right due to the sheer number of requirements for those spaces, Endelman notes.

“Restrooms practically everywhere have issues, mainly because restrooms have maybe 40 different things you have to get right,” explains Endelman. “Part of the problem is that what seems like a simple variation on height or distance can be hard to fix. In addition to the cost of fixing it – which will end up occurring in some kind of settlement – there will also be financial penalties and the cost of attorney fees and experts. It gets very expensive when you get a complaint, so it’s much better to take a proactive approach and do an ADA survey.”

Restroom-related violations often fall into one of these categories:

Toilet Stalls: The placement and location of dispensers, grab bars and other toilet accessories – not to mention the toilet itself – frequently causes trouble for building owners. “The most common ones we see are the location of a toilet center line in relation to a side wall,” says Endelman. “It’s supposed to be 16 to 18 inches in the new standard and often they’re off from that, which causes issues with the proper placement of grab bars to use the toilet. The width of an accessible stall is often wrong as well.”

Sinks: “Most sinks are not compliant,” says Meihls. “Check the sinks in your restroom and breakroom – they’re required to be a maximum of 34 inches high.”

The height can be thrown off by simple design choices like fixtures, adds Endelman: “Often we’ll find that the countertop is 34 inches high, but it’s a top-set lavatory, and that adds another half-inch to the height. Simple things like that can go wrong.”

Room Size: Restrooms need at least 60 inches of uninterrupted space for wheelchair users to maneuver around, notes Mark Tudor, Certified Access Specialist at ADA Compliance Professionals. A restroom that doesn’t comply with this basic requirement can’t be fixed easily or inexpensively, causing its owner untold headaches if the non-compliance leads to a lawsuit.

Additional resources on ADA compliant restrooms can be found here.

4. Accidental Barriers

Some barriers to access result from deferred maintenance rather than being designed into the building. For instance, a perfectly designed accessible parking stall becomes non-compliant when the striping fades too much to be read or when the blue sign at the head of the parking space is vandalized or stolen.

 “I’ve seen a lot of parking lots that have deferred maintenance for so long that you can barely see any of the lines or signs,” Tudor explains.

Door pressure and speed are both regulated by the ADA so that doors are easy enough to maneuver and don’t open or close too fast, but over time they may need some maintenance to bring them back into compliance, adds Tudor. Employee training can also play a role, so periodically review all spaces to make sure people aren’t accidentally creating barriers.

“If you have a mop bucket that’s left in the wrong place or high chairs are stacked in the wrong spot, for example, you don’t have a big enough maneuvering space anymore,” Tudor says. “In restaurants, one common problem is that the lower section of service counters, which is intended to let someone in a wheelchair wheel up to it and sign a credit card slip, will be non-compliant because of the way staff is using it. People will put a cash register or a stack of menus in that area. That’s just a lack of knowledge and training.”

5. Misunderstanding The Law

Building owners frequently confuse ADA mandates with building code, Endelman says. Code compliance improvements are only required if you’re substantially altering a space or building a new one, but ADA compliance is mandatory even if your building was constructed before the requirements became law.

 “If you have an older building, you should be budgeting dollars every year to remove barriers so that your facility becomes accessible,” Endelman says. “Furthermore, the obligation to remove barriers is unrelated to alteration projects. I have clients say, ‘We’re going to renovate this part,’ and they think they don’t have to deal with the serious issues in another part of the building because they’re not renovating it. It’s a separate requirement to remove barriers if that is readily achievable, which means without great expense or difficulty – and of course, no one can define what that is. People usually define it as ‘I don’t want to spend that much money,’ but that’s not much of a standard. The law is approximately 28 years old now – if you had a complaint and an attorney asked what you’ve done over the last 28 years to make your facility more accessible, and your answer is nothing, that puts you in a weak position.”

This requirement applies to all spaces open to the public, even for spaces that only occasionally have outside visitors, Meihls adds.

“People often think the ADA is about building codes, but it’s about civil rights. Civil rights apply to everybody,” Meihls explains. “If one person from the public is allowed into your place of business, you are required to be ADA compliant. That applies to all but two groups, religious organizations and exclusive clubs that have their own buildings. However, as soon as the church rents itself out for a wedding or the club has a benefit where they want non-members to come in, the ADA applies to them fully, even if it’s just one time.”

Get on top of your facility’s accessibility problems before they become too costly by making a proactive improvement plan, Tudor recommends. Find some examples of places where your organization is vulnerable to an accessibility lawsuit to get decision-makers on board, then start finding low-hanging fruit to help improve accessibility without breaking the bank.

“Replacing old knob-style door hardware with level-style hardware is pretty straightforward,” Endelman suggests. “Restriping a parking lot and providing a vertical pole sign at the proper height is too.”

Bring in an accessibility consultant to conduct a survey of your building and provide recommendations and cost estimates. In addition to demonstrating your facility’s weak points, the survey also helps show that your organization is already taking steps to addressing accessibility barriers, which could help if a lawsuit does crop up.

“Set up some policies, practices and procedures in the meantime. Making sure employees know not to restrict someone with a service animal is a perfect example,” Tudor says. “Be as proactive and compliant as you can given the financial situation you’re in.”

 

Source: Buildings

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No Comments March 7th, 2017 Commercial Property, Storm Preparation

Rental Properties Make Good Investments, But Come With Risk

Maybe your financial house is in order.

Your debt is manageable or paid off. You have an emergency fund and now you’re looking for ways to grow your wealth. Or, perhaps you’re planning ahead by learning about different investments options. Have you considered becoming a landlord?

Rent prices tend to rise over time, providing an inflation-protected income into your retirement years. You also might be able to cash in big later if the unit’s value increases. It doesn’t always work out that way, though. Some landlords wind up with a trashed property after evicting a tenant or lose their savings in a natural disaster. In between the extremes of easy, hands-off income and total ruin are the everyday concerns, benefits and risks that most landlords face.

Landlord Risks

Investment property mortgages tend to be a little more difficult and costly to secure than primary residence mortgages. It can also be harder to take cash out of investment properties – either with a cash-out refinance or a home equity line of credit. In other words, you might not have access to the money during an emergency.

Owning a rental property outright can be risky as well. Especially if you’re placing a significant amount of your savings in a single investment, the lack of diversification could put you in a precarious situation.

Those aren’t the only risks you could face when owning a rental.

  • Finding and keeping good tenants. Landlords learn from experience that it’s worth leaving their rental empty for a month or two rather than pay for an eviction or expensive repairs later. You can pay for professional tenant screening reports or credit reports and call applicants’ references before offering a lease.
  • Covering your expenses. Between taxes, insurance, repairs, maintenance and mortgage payments the monthly and one-off costs can quickly stack up. Some landlords lose money because their rental income doesn’t cover their expenses, but they won’t be able to attract tenants if they raise it. If the housing and rental markets drop, you could be stuck losing money each month or selling the property at a loss.
  • The time or cost of managing a rental property. Becoming a landlord is often far from a hands-off job. When the phone rings in the middle of the night because the roof is leaking, you’ll need to figure out how to solve the problem. You may be able to hire a property management company to take on this work for you, but they often charge about 8 to 12 percent of your rental income or a flat monthly fee.

Even with the risk involved, there are countless examples of successful landlords. Many find the experience so rewarding that they purchase additional investment properties.

Financial Success

What separates the successful and sorrow-filled landlords? Luck certainly comes into play, but you can also take steps to get started on the right foot. Try to determine a property’s capitalization rate, the estimated annual return, before making an offer. To calculate the capitalization rate, divide the annual net income by the property’s purchase price.

Your net income will be your rental income, which you can approximate based on rental prices for similar properties, minus your costs, such as maintenance, upgrades, vacancies and emergencies. You may need to consult an accountant to understand how your new tax situation can affect your costs.

Cap rates tend to change depending on the area and type of property. But regardless of what’s considered “good” in your area, you can use this formula to compare different investment opportunities.

Bottom Line

Many people focus on the positives of owning investment property. An extra income and potential to build equity with their tenants’ money seems too good to be true, and it just might be. If you’re going to be successful, you should acknowledge the risks that come with the territory and plan accordingly.

 

Source: The Gilmer Mirror

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