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How Soon Can A Landlord Evict?

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How soon a landlord can evict will be dependent on state and local laws.

Residential landlord/tenant laws are for the most part set by the states in the US. It can get a bit tricky however knowing what the law exactly is. Why? Well, first there are fifty states, each has differing laws. Some states will have laws specifically written for residential rentals, others (such as Arkansas) will not, some will write laws for specific parts of the state. Then, counties and cities can add requirements on top of state laws.

Here in Tennessee for example, residential rentals are generally governed by the Uniform Residential Landlord and Tenant Act (T.C.A. 66–28). I say generally because the Act only applies to certain counties which are populated above a particular number. Thus, in more rural Tennessee counties (most of the State), the Act does not apply.

The Tennessee Act deals with, among other items: lease clauses, tenant abandonment, necessary repairs, when tenants can not pay rent in order to make repairs, security deposits and of course, eviction procedures. But because of the population threshold, the law that applies in one county may not apply to the county right next door. It can all get very confusing, very easily.

That said, evictions in Tennessee can be done fairly quickly. A landlord can file for eviction, serve the tenant notice, have a court hearing, gain a writ of possession and set the tenant out in less than a month if everything goes the landlord’s way. In other parts of the country, the eviction process is more involved and thus may require more time. It all depends on the state and local laws. So if you are evicting or facing an eviction, consult appropriate counsel in your area.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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5 Ways To Keep Good Tenants

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A recent post delved into some of the reasons tenants move and the concerns it causes when they do.  In this post I want to look at how we can keep our tenants, especially the good ones.  

If I had to guess, I would say that about 95% of my tenants have been good and ones I have wanted to keep. What do I mean by good?  By good I mean that they pay their rent on time, they do not cause any problems or drama, they keep their places nice and clean and they let me know when something is wrong.  Otherwise, they mind their own business and keep to themselves.  These are the types of tenants I want to keep.  And keeping them requires some effort on the part of the landlord.

Fix It

This is likely the number one reason that tenants move.  You can read it again and again on blogs, on forums and in the headlines – “My landlord never fixed anything.”  Now I get that some tenants are overly demanding and some will never be satisfied.  Those tenants I happily let move on to become someone else’s problem.  But, by not fixing things you can actually induce good paying, low drama tenants into moving.  This turnover costs money.  Money on top of the fixing the things that you did not fix. Maintenance is hard and can be expensive, there is no doubt about that. But, vacant units that constantly turn over are even more difficult to your bottom line.

Be Responsive

Do you hate waiting on the phone to speak to customer service with your cable or wireless provider?  Do you feel like you are noting but a number to them and that they could care less about your problem?  Your tenant does too and the last thing they want is to get the same experience from their landlord.  Customer service is a part of this landlording business.  I’m not saying you should always bend over backwards to please your tenants, but just being a bit responsive can go a long way.

Work With Them

Good tenants sometimes have bad things happen to them.  When they do, they often have to make a choice between paying the rent, fixing the car, perhaps keeping the lights on.  If you have a tenant who has been good to you, perhaps it is wise to return the favor when they hit a hard time.  Yes, I know, I do not like being a bank or providing incentives to not get paid, but the costs of a good tenant moving can be so high that it might be worth it to you.  How far you work with your tenants is up to you.  In the past we have worked with tenants to set up payment plans to help them over a bad hump and get them back on tract. Small business landlords can be real flexible, while larger landlord operations may not be able to do so.

Don’t Nickel And Dime Them

No one likes to feel they are being taken advantage of.  And people hate it even more if they think that they are being unfairly exploited. While rents are on the rise most everywhere (along with our costs as well) it is perhaps not the best policy to consistently raise rents as often and as high as you can.  Sure, you could try to squeeze every last dime out of your tenants, but they can also get fed up and move out as well.  There is often a fine line here.  Think and tread carefully before crossing it.

Do Not Be Their Friend

Your tenant is not your friend and you as the landlord should not try to be theirs.  I’m not saying that you have to be surly or unkind.  What I am saying is that what you have with your tenant is a business relationship, not a personal one.  You should strive to keep things on that level. Tenants want to feel like they are been treated in a fair and consistent manner. Trust me when I say that they will notice when other tenants get special or privileged treatment.  You will be tempted to give special treatment if you become overly friendly with your tenants. They will expect it!  Avoid this situation by not becoming too friendly and by being firm but fair.

Working to retain our good tenants is an essential part of our business. Tenants can make it hard sometimes, but we landlords can also make it hard on ourselves.      

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Security Deposit Insurance?

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The City of Cincinnati recently passed an ordinance requiring many landlords to accept security deposit insurance as opposed to an actual cash security deposit.

You can read more about the ordinance and what it’s sponsors hope to accomplish here and here.

It is too early yet to know the full impacts such an ordinance will have upon landlords. But one thing is for sure, others cities will be watching so something similar could soon be coming to a city near you. This type of ordinance will have to be watched.

What Is Your “Golden Rule” Of Real Estate Investing?

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My “Golden Rule” of real estate investing is this – The numbers never lie.

If you do not like what the numbers are telling you, move on to the next investment. Do not try to make the numbers fit or make the deal work by “fudging” the numbers. I have witnessed more than one real estate investor think they can keep repair costs down, tell themselves rents can be increased higher than the market will allow, or believe their vacancies will be less than similar properties. All in the excitement of getting the deal done.

Those are the properties that I end up buying. Why? Because those investors that fudge the numbers end up losing money. When they lose money, the property often goes into a death spiral. Losses accumulate every month. Repairs and maintenance are not done. Tenants leave. Losses pile up even more with the decreased revenue until the bank forecloses or the owner gladly sells at a loss.

Real estate investing is all about the numbers, and the numbers never lie. Ignore them at your own peril.

Why Are Your Tenants Moving?

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Why are your tenants moving? If as a landlord you have never asked yourself that question, you need to. It is an important one to ask. Finding answers to why your tenants are moving will improve your business, your cash flow and your quality of life.

Some Stats

Don Beck, a master landlord, stated in a presentation that the average length of a tenant stay is 3 to 4 years. Three to 4 years is not really very long in the overall scheme of things. Beck continued by stating that 80% of tenants will move to someplace within a 7 mile radius of their current rental. Plus, 85% of tenants who move will end up paying more than they were paying you.

So many tenants move frequently, not far from where they currently live and end up paying more rent.

A Cash Flow Killer

As landlords, we have to ask ourselves why we could not keep these tenants. Most of them do not move out of the locale and they decided to pay more in rent. Why did they leave us and pay someone else more? Why could I not somehow capture that?

Analyzing why your tenants move is important to us because tenant turnover is a cash flow killer. Not only does your unit become vacant, which translates into lost rental income, but think of all of the other expenses and time involved. There are advertising expenses and there is time spent on showings. Rehabs and repairs must be done. It all can end up being very expensive and crimping your bottom line. Especially if you have a lot of turnover.  Trying to figure out why your tenants move is no different from other businesses trying to figure out why customers do not come back.

Why Tenants Move

Tenants move for a variety of reasons. Some of which are out of your control. They may take a new out of town job or may want to be closer to family. But if 80% move within 7 miles of their current homes, these factors only account for a few tenants. In my experience, it is much more likely for people to move due to changing family conditions. Children come along and parents move to attend certain schools. Getting married, divorced and other significant life changes also likely account for many local moves.

Like I said, we may not be able to help some of these moves. There is little we can do if we are not in the right school district or someone gets hit by Cupid’s arrow. But, many tenants move to separate themselves from their current home or landlord and these are likely reasons we can tackle to reduce tenant turnover.

Ask Them

To find out why they are moving, you have to ask them. Otherwise you will never know. Make this question a part of your move out process. You can ask directly, by e-mail or as a part of your move-out checklist. By asking, you may find that there was not much you could do. But you may also find that there was.  

What if a tenant gets a raise and wants to move into a “nicer” place?  Could you perhaps offer to upgrade an appliance or redo a bathroom?  Sure there would be some costs involved but you may have to do these things anyway if the tenant leaves.  Plus, think of the cash flow you keep if the tenant stays a couple more years.

What if your tenants say they are leaving because things never seem to get repaired?  Some tenants are surly never satisfied and we are actually happy to see those tenants go. But if you find this response is repeated over and over, then you need to take a hard look at what you are doing. That money you think you are saving is actually costing you in the long run.

We landlords have to also remember that we are providing a service – housing. We are asking our tenants to part with their hard earned income in exchange for that service.  This process can be difficult to manage. But, we cannot ignore our tenants or think that hearing nothing means all is OK. Instead, periodic contact through inspections or even e-mail helps significantly and can make tenants feel more appreciated.  

Think About Where You Invest

Some markets foster tenant stability more than others. School districts are an example as parents will be reluctant to pull their kids from the school. Areas near employment centers may also see a steady stream of tenants who wish to remain close to their jobs.

On the other hand trendy and hip areas, while attracting a steady stream of good applicants, are often prone to higher turnover. Why? Folks who live in trendy areas are often younger and in that stage of life when things change. Jobs change. People get married. They have children. All of which are likely to cause a move.

We can never really know all of the subjective reasons why our tenants move, but we should at least as entrepreneurs and business people try to anticipate why tenants are moving and determine if there is something we can do to reduce it.  It just pays to do so.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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What Credit Score Should Landlords Use?

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Landlords use many different items in their rental standards, which are the criteria used to determine if an applicant will likely be a good tenant. One of those items may be credit score. But, the actual score or number that a landlord uses to approve or disapprove a tenant will differ. In fact, credit scores may not even be used at all.

Rental markets vary. The pool of applicants in a particular rental market will generally have characteristics that differ from the pool of applicants n another market. I am speaking here of items that affect someone’s ability to pay, stay and respect a landlord’s property. These items include things such as income amount, rental history and credit history.

Thus, a landlord in one particular rental market may have a credit score of 550 and up listed as one of their rental standards. While a landlord in another may not examine credit scores at all. This landlord may instead examine income amounts and work history.

Due to this variety in rental markets it is impossible to saw exactly what credit score number a landlord should use or even if it should be used at all. No matter what criteria you use to screen tenants, be sure to have them written down and available for any applicant to see. Doing so will help them determine if they should apply and may just keep you out of legal hot water.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Do I Have To Send My Plumber A 1099?

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Tax season is upon us.  We landlords will soon be totaling our expenses and calculating depreciation. Before that however, the IRS requires us to send out Form 1099.  Who should receive this form?  Do I have to send my plumber a 1099?

What Is Form 1099?

Form 1099 is used to report the amounts paid to contractors and others for services rendered to our landlording business over the past tax year.  It is a fairly simple form, listing the taxpayer receiving the payment, their tax ID number and the amount they were paid.  Copies are sent to the taxpayer and the IRS. One copy should be retained by you.

Why Are 1099’s Necessary?

The IRS basically has all of us as a part of their compliance team.  By requiring us to fill out and send these forms, the IRS is able to compare income claimed by the taxpayer with the amounts others claimed to have paid them.  If there is any large discrepancy, the IRS can investigate the taxpayer further.

Do I Have To Send My Plumber A 1099?

Maybe.

A Form 1099 is required to be sent to almost anyone who received $600 or more in compensation over the past tax year.  This compensation includes almost everything, from regular pay, to parts and gifts.  Thus, if your plumber did over $600 worth of repairs for you, which really does not take much to hit, then yes, you have to send them a Form 1099.

And it is not just plumbers, but almost everyone you did over $600 worth of business with. This includes both contractors and other professionals such as attorney’s and accountants (The IRS does not trust anyone!). One exemption is if the taxpayer was employed through a “C” or “S” corporation. But most folks work for themselves or perhaps through an LLC, thus a 1099 is required.

It Is Not As Easy As It Should Be

If needed, Form 1099 is required to be sent by January 31 so there is just a little bit of time left. However, you should know that you cannot just download the forms off of the IRS website. You have to purchase special forms that can be scanned by the IRS computer system.  I have no idea why, I suppose the IRS computer system is a bit dated.  

If you need to order Form 1099, you can do so here.  Hurry however, time is running out.  Not only can you can be fined $50 per form, but your contractor may be relying on their tax refund, which they cannot get until they have all of their 1099’s.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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What Are The Transfer Taxes When Selling Real Estate?

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Transfer taxes are assessed when you sell a home, or any other real estate. A real estate sale is completed by transferring the rights of the property from the seller to the buyer through a deed. That deed is subject to transfer taxes.

This deed is then recorded in the public records of your local register’s office so that all of the world can see who owns the rights to a particular piece of property.

A transfer tax then is a tax on the amount of the sale or the value of the property (depends on the jurisdiction). This tax is collected by the local register’s office when the deed for the sale is recorded or placed in the public records.

How much a transfer tax will be is difficult to answer because the tax (here in the US) will vary from state to state, then from county to county and then even from city to city. After that, it may depend on the type of deed you are recording. In general however transfer taxes usually run from a few hundred to a few thousand dollars.

The title company, closing agent, attorney or realtor that you are using to facilitate your side of a real estate sale should be able to help you calculate local transfer taxes. If you are not using one of those, talk to your local register of deed’s office for assistance. If you are in Memphis, Tennessee like I am, you can determine your transfer taxes at this link.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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A Problem With Money Orders

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Money orders are a common method used to pay rent. Usually a money order is quick and easy for everyone.  A tenant uses their cash to purchase a money order, gives it to the landlord, landlord deposits the money order, all is good.  Well, maybe.

What if the money order gets stolen?  It then becomes not so easy.  For both you and the tenant.

As a landlord, I generally appreciate money orders.  They are basically money in the bank. They can’t bounce because the money has already been paid. Plus, we are not lugging around large amounts of actual cash, which can be a pretty tempting target.  

But if lost or stolen, money orders can be pretty difficult to replace.  Money orders are not like checks which can be easily canceled and then rewritten. A money order has to instead be reissued, which often takes cash the tenant does not have.  

Think about it.  Your tenant saves up money all month.  The tenant then uses this money to purchase a money order to pay you the rent.  The money order then gets stolen, leaving both you and the tenant high and dry.  It can be difficult for some tenants to catch back up, and do you really want to evict an otherwise good tenant for something that was not really their fault?  

The money order provider can perhaps cancel the money order, perhaps not.  They may eventually refund the money or re-issue the money order to the tenant.  But it is up to the tenant to demonstrate that the money order was stolen by providing a police report and then following up with the procedures of the company that issued the money order.  Trust me when I say that this is not as easy as it sounds.  

The above scenario does not happen very often, but it does happen.  And it has happened to us more than once.  The best solution for us landlords is to stop accepting checks or money orders and require tenants to go electronic with a service such as clearnow.  We used this service for years and it worked great.

Some folks are however “unbanked,” meaning they do not use banks.  Yes, even in this day and age people still run to the post office or wherever, wait in line and purchase money orders. These folks will not be able or want to use a system like clearnow.  But the costs of trying to clean up messes which occur with stolen money orders, may mean that unbanked tenants will just have to select another landlord when looking for some place to live.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Will My Property Taxes Go Up Every Year?

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Not necessarily. In most places in the US, there are two ways the amount you pay in property taxes could increase. The first way can be done every year, the second, generally only every few years.

The first way your property taxes could increase is done by your local property property taxing authorities. You will likely have at least one of these authorities but could have several. These taxing authorities could be a city council or a county commission. They could also be a board responsible for some type of public improvement or service. Fire management districts, water management districts and sewer and water boards are good examples.

Each of these property taxing authorities is authorized to levy a tax on all real estate within their jurisdiction. They do this by setting an annual property tax rate, usually when they pass an annual budget. These property tax rates are often expressed in terms of a dollar amount per $100 of a property’s assessed value. For example, if your property is assessed at a value of $100,000 and a property tax rate is set at $1.00 per $100 of assessed value, then your annual property tax amount will be $1,000.

$100,000/$100 = 1,000 — 1,000 x $1.00 = $1,000.

These property tax rates can be raised (or lowered) every year. Thus, if the tax rate is raised to $1.50 per $100 the following year, your property tax bill would increase to $1,500.

$100,000/$100 = 1,000 — 1,000 x $1.50 = $1,500.

The second way your property taxes could increase is if the assessment, or value, of your property is raised. All property taxes are supposed to be based upon the “fair market value” of the property. Somebody however has to determine what what “fair market value” is and set it for all of the property taxing authorities to use. That person is usually an elected property assessor. The property assessor for each jurisdiction examines the local real estate market and assesses a value for every parcel of property. The property assessor would be the one that sets the $100,000 value in the above example.

These property assessments are usually not permitted to be done every year. Thus the value of your property (and your property tax bill) cannot be raised every year in this way. In my jurisdiction for example, a reassessment is permitted by the property assessor only once every four years (Of course when a building is built, added on to, or the property is sold a new assessment may be allowed in between that assessment period).

Thus if your property is located in a robust real estate market and was valued at $100,000, it may be reassessed to $150,000 the next time assessments are permitted. Assuming the property tax rate per the above example stayed the same at $1.00, you would experience an increase in your property tax bill due to the increased assessment amount.

$150,000/$100 = 1,500 — 1,500 x $1.00 = $1,500.

Assessments may not always go up however and tax rates are not raised every year. I had several assessments reduced after the real estate crash in 2008/09. Properties simply lost value and the property assessor was required to reflect that in their 4-year reassessment. My tax bills actually went down in some cases due to the real estate crash. Plus, political bodies do not like to make the public too angry too often with tax increases, so they often do not raise rates every year.

When your property taxes do increase there is usually not much you can do about the property tax rate increase except make a protest at a public meeting or write a letter to a city councilperson. But you can often challenge a property value assessment if you feel it is too high. Contact your local property assessor for more information.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.