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How Much Has The Rent Gone Up?
This is an interesting graphic from foreclosurereport.com showing how much rents have increased across the country by state between 2000 and 2011.
What did I miss in Nebraska?
Click for a larger image.
Tenant Moving Out? Insist On A Written Notice
Ever been told someone’s name and then instantly forget it a few minutes later? Have you forgotten to pick up something from the store because you did not need to make a grocery list? Of course you have, we all have. It is human nature. We are so busy that it is hard to remember everything we need to remember.
We landlords are no different. We have so much going on that sometimes it can be hard to keep track of what day it is. This is why you should never take a verbal notice from a tenant that they are moving out.
Most often, a tenant will call to tell us that they are moving out. They often think that is enough of a notice. But really it is not. It does not really protect them or us (plus it may not be legal in some states). As I said above, we are all busy and things can be easily forgotten.
Tenant move out’s are very important. You as the landlord need to get that property back as clean as possible and re-rented as quickly as possible. The tenant needs to protect their interests as well, making sure they conform to the provisions of their lease. That is why anytime we get a verbal notice from a tenant that they are moving we ask them to also send an e-mail, or at the very least a text message.
With a written record, there will be much less chance of the following:
- I thought you were moving out today? No, I said Monday.
- You did not give us 30 days notice as required in your lease.
- I never received your move out notice.
Plus, once you receive a written notice, it should prompt you to send your move out kit to help you get your unit back in tip top shape.
So please insist on a written notice anytime a tenant wants to move out. Yes, your tenants will moan and groan but it is worth it to both you and your tenant.
Not Everyone Likes Section 8
If you missed it, the last Smarter Landlording Podcast featured longtime real estate investor Arnold Dormer discussing the Section 8 program. Arnold has been participating as a landlord in the Section 8 program for the past two decades and has done very well. “The rent is direct deposited in your account at the beginning of every month” said Arnold.
But Section 8 can be a controversial and unwanted program. Some homeowner associations in fact, like these around Boca Raton, Florida, are banning Section 8 recipients. Are these bans a result of discrimination or of communities simply trying to maintain their property values?
It could likely be argued either way, but these bans are likely to generate a storm of criticism to say the least.
The things to glean about the Section 8 program from the info posted above is that the program, while potentially profitable, is definitely complicated and may be controversial depending on the location.
Smarter Landlords should be fully aware of the pros and cons of the Section 8 program and proceed accordingly.
Stay tuned for the next episode of the Smarter Landlording Podcast, coming at you soon after a bit of a summer break.
How to Fund Your Rehab
It takes money to make money, right? Yes and no.
So, I’ve proven that seller financing is out there. You can truly buy a home with no money out of pocket. After that, what do you do about repairs? We are way to new to real estate game for our private lender to trust us with any more than we needed. I’m still baffled that we were able to convince her at all!
So, we had to get creative in financing the rehab. Of course, that includes doing a good bit of work yourself. Elbow grease is hard on your back but easy on your pockets!
The first thing we did was went to Home Depot and applied for a consumer credit card. It was inevitable, right? Home Depot allows you to make interest free purchases for 6 months-24 months, depending on the dollar amount of your purchase. The minimum dollar amount is $299 (pre-tax). We decided to lump our purchases together so that we never fell below $299.
If we really only needed a shower rod to complete a unit, we would couple that with the purchase of a gift card, so that we met the $299 threshold. Couple this with a healthy practice of returning unused items and making sizable monthly payments, and it’s not too bad!
Just make sure that you pay off the balance before your 0% financing term expires. If you fail to do so, Home Depot charges you interest retroactively!!
Home Depot also has a project loan which allows you to finance large renovations with extended low-interest financing. Given our rapid growth though, we did not qualify for any more credit than we were already awarded. Waamp waamp.
I should note that Lowe’s has similar financing options. It just happens that Home Depot is incredibly close and convenient. Both retailers employ local contractors as well. So, if you need to finance a project but can’t do the work yourself, this might be an option. Please consider all of your options though; I’ve heard horror stories.
What are some of the creative ways that you have financed your rehab?
Include Utilities? No Way
In Episode 4 of the Smarter Landlording Podcast, Arnold Dormer and I were talking about screening tenants and what we look for in a good tenant. One of the points that Arnold made was that the tenant had to be able to get the utilities turned on in their name. I could not agree with Arnold more.
Yes, I know some landlords keep the utilities in their names and then add the cost onto the rent. Or they charge a higher rent because the utilities are included. Personally and professionally, I do not prefer to keep the utilities in my name. Here is why.
- It Creates Extra Work – If you keep the utilities in your name and then bill the tenants you have just given yourself new jobs as a bill processer and collector. You now have extra paperwork, more phone calls and more hassle to deal with. I do not need this extra work. I already have enough to do.
- It Is Not Worth It – Instead of billing the tenant every month, you can just charge higher rent to cover the utility costs. Yes, you may cover your costs and you may even make a little money but I doubt it. Your tenants will have no incentive to save energy and will run the heat and air full blast, with the windows open and acting as a thermostat. This all acts to increase the wear and tear on your equipment and increase the costs. But the real reason it is not worth it is because the….
- Tenant Quality Seems To Be Lower – Tenants who cannot get utilities placed in their own names usually have had some sort of financial trouble and either have not paid their bills or are just hanging on. These types of tenants, in my experience, tend to be more trouble than they are worth. They are unstable and will generate more problems, more phone calls, be late in paying their rent more often and just be more trouble. And I do not want more trouble.
So do you include utilities? If you have, what has been your experience? Has it been similar to mine and Arnolds? Let me know with your comments.
The Worst Landlord/Tenant Law?
Does Arkansas have the worst landlord/tenant laws in the country?
How should the eviction process work?
Check out a short video on the topic here.
The Smarter Landlording Podcast – Episode 4 – The Section 8 Landlord
The Smarter 
Landlording Podcast – Episode 4 – The Section 8 Landlord
“I work for every penny in that check!”
Links and Forms We Mentioned
Requestfor Tenancy Approval (RTA) Form
Top Section 8 Inspection Fail Items
MemphisInvestorsGroup.com – Stop by on the 2nd Thursday of every month and meet myself and Arnold.
Check out all the podcasts at iTunes on the Smarter Landlording Channel.
Like the Intro Music? Check out my good friends in the band Kitchens and Bathrooms (Kind of fits right!). They write and play some awesome, original music from right here in Memphis, TN.
Is There A Rent Bubble?
I saw this article the other day and I thought it asked a very good question considering the rise in rental rates we have witnessed over the past few years. Are we witnessing a “Rental boom, or rental bubble?”
I tend to think we may be entering bubble territory. Rising rents have been driving up the prices of rental properties. I read about it across the country and am seeing it here in Memphis, TN. Rising rents have also spurred a number of new apartment projects across the United States. Here in Memphis, I can think of several new and planned apartment projects that will be hitting the market in the near future.
All of this makes me wonder; how many more renters are out there to fill up these new projects and how much more can they afford? Honestly, I don’t know and I do not think anyone else does either. One thing I do know, the old adage is true, what goes up must come down. When? That is anyone’s guess.
What is a smarter landlord to do in potential bubble territory? I can think of three things.
- Be conservative with your rent estimates when buying new properties. Remember that cash flow is king. If there is a bubble and it does burst it will drive down rents. You do not want to be in a negative cash flow situation. This strategy may make deals harder to find but it is better to have no deal than a bad deal.
- Sell! Since the value of an investment property is based upon the income it generates then now may be the time to sell. Several properties in my market have sold for what I thought were exceptional values. Perhaps now is time to sell.
- Sit on the sidelines and wait. I did this back in 2006/07. Values had gone crazy high and out-of-state investors were willing to reap a 1% cap rate! I cannot and will not compete with that so I just waited. Waited for the bubble to pop. I knew that when it did those out-of-state folks would be in bad shape. When the bubble burst, they went belly up and I was ready to buy. So you might want to wait, wait until there is blood in the streets. That is when the best deals are made.
So what do you think? Are you seeing the beginnings of a bubble in your market? What is your strategy? Let me know with your comments.
Coming Soon – All About Section 8
Sorry for the lack of posts lately. It has been a bit busy around here. Sometimes real estate investing gets in the way of writing about it. 🙂 But that does not mean I have not been working to bring you quality material.
In fact, coming soon on Episode 4 of the Smarter Landording Podcast, I have an in depth interview with an expert Section 8 landlord. If you do not know what Section 8 is, if you are thinking about joining the Section 8 program or want to learn how to better manage your properties already in the program you will not want to miss this podcast.
