Philadelphia Property Management: Business privilege License and housing inspection license

Philadelphia Business Privilege License and Housing Inspection License

ATTENTION: THERE HAVE BEEN SOME IMPORTANT UPDATES TO THE CITY OF PHILADELPHIA LICENSURE REQUIREMENTS SINCE THIS POST WAS WRITTEN IN 2012. FOR THE MOST UP TO DATE INFORMATION VISIT JG Real Estate’s Resource Center.

 

The Business privilege license and Housing Inspection License are two items which many Philadelphia real estate investors know little about, and in my experience, don’t fully understand.

 

The business privilege license is required for ALL businesses operating in Philadelphia. Yes, you as an individual real estate investor, with only a handful of properties, qualify as a business. Therefore, you must get a Business privilege license. There are a couple of options, either a Business privilege license which must be renewed annually, or a lifetime license. The Annual fee is $50, whereas the lifetime is $300 – so if you plan to operate for at least 6 years (which I sincerely hope you do) it makes sense to go for the annual license. Also, there are a few restrictions which are discussed on the city site if you opt for the annual license.

• Note, the City website states: “A Business Privilege License (BPL) is not required for owner occupied 2, 3 or 4 unit dwellings.  Section 101 D (8) of the Revenue Department’s Business Tax Regulation states “doing business shall not include rental income generated from real property which is the principal residence to the owner and consists of three or less residential units.”

 

The housing inspection license is required on a per unit basis for all rental properties. Unfortunately with this license, there is no lifetime fee option, but only an annual fee of $50. Click here for instructions on how to fill out the form for your Housing Inspection License. The license is renewed every February, and the city of Philadelphia does not prorate the license fee (example: You purchase the housing inspection license for the first time in October, you still pay the full $50, and then pay $50 again 2 months later when the license renews).

• Note: If you own a condominium unit, this fee has most likely already been paid for you. Condominium associations are typically invoiced by the department of licenses and inspections directly, and pay this fee on behalf of their owners. Some associations will then back-bill owners for the expense.

 

WHY THE BPL AND HOUSING INSPECTION LICENSE ARE IMPORTANT

So, I’ve told what you’re required to get, and where to find them (links at beginning of post). But the real burning question you likely have is “Why do I even need to get these licenses? I’ve been operating for a while without them.” With regard to the BPL, the answer is simple. You are operating a business in the City of Philadelphia, and you’re subject to taxation. Your accountant will certainly advise you to obtain the BPL, and eventually not having it will catch up to you. Concerning the housing inspection license, most landlords find that the only time they really need this is when they need to evict a tenant. From experience handling evictions for my own properties, you need a few things when you make that dreaded visit down to landlord tenant court:

• Copy of the lease
• Copy of your pay or quit notice (adequate time will need to have elapsed prior to filing, unless there is a waiver of notice built into your lease, which I highly recommend)
• and yes…..a copy of your housing inspection license (which can only be obtained once you have a BPL by the way)

 

Hence the need for the housing inspection license! It’s good to be prepared at any given time, should you need to take legal action. If you’re mailing your applications in to the City of Philadelphia, it could take 4-6 weeks in processing time. Additionally, if there are errors on your applications, they may be sent back to you which completely restarts the process! The other option of course is heading down to the municipal services building yourself and getting the licenses in person. However, if you choose this option, be prepared to spend up to 5 hours being shuffled around between various lines and departments. Not a fun way to spend a day off from work!

 

Since the writing of this blog post, the business privilege license has been renamed the “commercial activity license”, view a blog post about this change by clicking here.

Philadelphia property management – rental application credit checks

Philadelphia property management – rental application credit checks

TIPS ON APPLYING FOR PHILADELPHIA APARTMENTS WITH POOR CREDIT

“Can I still rent an apartment in Philadelphia with bad credit?” We hear this a lot, and the answer is not so straightforward.

 

Rental applications are reviewed as a whole. This means that your income, employment, prior rental history, references and yes, your credit are all taken into careful consideration. The final decision on whether or not to approve the application comes from the property owner. Different owners have their own minimum qualifications that they look for. Some have very specific minimum credit score requirements; most don’t. So can you rent an apartment if your credit isn’t great? Yes, it’s possible, but here are some suggestions for improving your overall rental application:

• If you know you have poor credit, don’t lie about it. Being upfront about something you know might be an issue will not only show that you’re honest, but also that you’re aware and concerned about the situation. Someone who is actively monitoring their credit is probably also someone who is actively trying to fix it.

• Get references from prior landlords. A responsible owner or Philadelphia property managementcompany will call prior landlords anyway, but it doesn’t hurt for you to already have a written reference letter in hand. Did you pay your rent on time each month? Were any utilities included in the rent? How many people were you living with? In what condition was the apartment left when you moved out? These are all important questions, and the answers could be the deciding factor on approval.

• Prove that you can pay. This is probably more important than credit – a property owner wants to be sure that you can afford the apartment for which you’re applying. Submit multiple paystubs, print out a bank statement showing that you have a substantial amount in savings – the more evidence you can provide in your favor, the better. According to the U.S. Department of Housing and Urban Development, as listed on Trulia, you should be paying no more than 30% of your gross income for housing and utilities.

• Offer to pay an extra month for security deposit. This might be a requirement for tenants with low credit scores anyway.

 

 

Philadelphia Apartments – Why Credit Matters

But why does credit score matter? The landlord doesn’t know you. Your credit report is your financial fingerprint. Sure, you might be a very responsible person who made some mistakes in the past and has since learned from them. Unfortunately, there’s really no way to prove it. Would you lend someone money who was known for never paying people back? I would be hesitant to do so, even if that person was a friend.

 

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Philadelphia landlords – Do you have minimum scores that you look for? Have you ever accepted an applicant with bad credit?

 

Philadelphia tenants – If you have found it very difficult to rent an apartment in philly, we’d love to hear your point of view and ways you’ve tried to get through a strict application process.

Philadelphia Property Management tool

Rat Zapper – Rodent control for Philadelphia Property Managers

Never heard of the rat zapper? Well, neither had I until a meeting with a client of mine yesterday; and she swears by this product as a much needed weapon in her landlord arsenal. So, as a “quick tip” to my clients who handle Philadelphia Property Management themselves, click on the below link.

 

Check out this effective property management tool here

 

I just ordered two for select properties. As most know about the Philadelphia Property Management business, rodent control can be difficult at times. My first move is usually to seal all possible openings with expanding foam and steel wool, and then exterminate. Prior extermination methods have included traps (sticky and snap) and poison. However, the rat zapper gives me hope that there is a more humane, effective, and cost sensible approach to rodent control.

We’re expanding at JG Real Estate!

Check out the picture; that’s the new addition to our Fishtown office which has been framed. After being open for only a few months, we’ve taken on many new clients and signed up quite a few existing clients for Philadelphia property management services. As a result of this rapid increase in business, we need to expand the office to allow for more staff members!

 

The addition we are putting up is a great example of our construction expertise and project management skills. Greg and Jared designed the addition themselves, and Greg’s nearly got the thing completely built after only 3 days on the job – now that’s efficiency. You can expect the same when you choose JG-Real Estate to manage your property: efficiency, timeliness, and vast savings, all of which increase your bottom line.

Investment properties: Pay down debt vs leverage

This blog comes about as a result of a recent conversation I had with my brother, who is also a real estate investor. We have two very different mindsets when It comes to real estate investment, and our ultimate goals. Mid conversation, I of course was convinced that my own strategy was superior. However, sitting on the plane back home, I am mulling over the potential merit to his argument. I’ll summarize here:

 

My brother’s strategy: Acquire a limited amount of assets (in his case a few apartment complexes) and systematically pay down the debt linked to these buildings. His ultimate goal is to own the buildings free and clear so that he has no debt service and can pocket nearly all of the monthly rent, minus normal operating expenses of course.

 

My strategy: Fully leverage all properties by taking as much equity out as possible to fund the purchases of more properties. I typically see very high rates of return on my investments, between 10-20%. So, to me, it absolutely makes sense to pay 6% on a commercial note on property “A” to fund the purchase of property “B” which is going to bring in a return of 15%.

 

Which strategy you go with, in my opinion, largely depends on your place in life. After all, making additional investments, even if they promise to offer you more of a return than simply paying down debt on another property means additional work. It’s possible that either the investor does not want to take on additional work or they are operating at capacity, and would need to hire help . If help were needed to manage the additional properties, either an employee could be hired, or the more sensible solution would be to hire a property management company. Management companies typically charge between 5 and 10% of gross monthly rent for their services, in addition to leasing fees when necessary.

 

With this in mind, I began to look at each of our situations. I own a Philadelphia real estate brokerage which specializes in Philadelphia property management; whereas he is a full time attorney, who also invests in real estate. When I bring on an additional property, I already have the infrastructure in the place to take care of that property’s management needs, considering I manage a good number of properties on behalf of clients. In his case, at a certain point, he will need to hire help out and that is going to cut into his bottom line – potentially leaving him in a break even situation.

 

Questions and comments are welcome, I’d like to hear from other investors about the strategies which have served them well, and the strategies which they are considering implementing.

Why use a property manager? 5 compelling reasons.

At JG Real Estate, we often hear  “Why should I use a professional property manager? I’ve been doing OK on my own until this time”. Of course, the answer to that question largely depends on the client’s unique position, however here are a list of reasons why property management makes sense for many property owners, and the majority of our clients.

• You’re not a professional property manager, you have a job which you’re good at just like we do: What’s your profession? Painter, photographer, architect, lawyer, doctor? You are good and effective at your job. Sure, I could learn to be any of the above professions, so that I could attend to my own legal, medical, or architectural needs – but is that efficient and sensible? Of course not. On the same note, if you own investment property, wouldn’t you prefer to trust professionals to manage it? Dictionary.com defines efficiency as “accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort”.
• Overall increased profitability:  Sure, there are fees associated with having a 3rd party company manage your single family home, condo, or apartment building but let’s think about that fee in relation to not having effective management in place. Too often I see self managed properties go vacant for 1, 2, 3, or in extreme cases even 4 months between tenants. Every day which a property continues to sit vacant is lost revenue for the owner! My personal philosophy and business strategy is to start showing properties approximately 3 months before they go vacant, so that I have a new tenant lined up to go in the very first day possible! Let’s use a hypothetical scenario: Tenant’s lease ends 3/1/12, JG Real Estate starts showing the property 12/1/11 and has a tenant lined up to move in 3/5/12. This 4 day grace period gives our maintenance team enough time to take care of turnover issues such as touch up paint, caulking, new batteries in smoke detectors, etc. Let’s assume rent is $1,000 and that the property otherwise would have sat vacant for a couple months – you do the math!
• In house maintenance with no mark-up: Going back to the scenario in #2, how much is the average property owner paying for turnover maintenance between tenants? $1000? $1500? Is that owner calling a general contractor who is going to add his 25% on top for coordinating? A good Philadelphia management company is going to have their own in-house maintenance staff , JG Real Estate certainly does, and we bill at cost. So, on a typical turnover an owner is only looking at a few hundred dollars or whatever it costs us! Again, you do the math on that one!
• Elimination of tenant headaches: If all of the above wasn’t enough, especially the vast savings, you don’t have to deal with the mundane tasks of being a landlord. These include; fielding tenant phone calls at 2 AM, sending late notices, pay or quit notices, setting up security deposit escrow accounts, tracking expenses, keeping a rent ledger, and much more. Again, this isn’t your profession, so you’ll need to research exactly how to do all of the above, while complying with local laws and regulations.
• Portfolio is at a point where it can’t grow anymore without a 3rd party manager: Finally, what if you’re a serious real estate investor? Maybe you have  10 units, and you also have a full time job? You’ve been self managing so far (maybe semi effectively since you can’t full concentrate) but you can’t possibly acquire more units without bringing on some help. You’re way to small to hire a full time staff member to work for you, because that would completely eat up your profits and probably even put you in the red. The  next logical step is to bring on a property management company so that you can continue acquiring and building your portfolio.

 

Are there more reasons to hire a manager which I’m missing on this list? Or maybe you don’t agree with one of my points? I would love to hear readers comments !