SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Tenants

The Best Gifts a Tenant Can Give

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When you read the title to this post, I bet you thought I was going to say “the rent.”  But “the rent” is not a gift.  Rent is simply a contractual obligation.  Rent is paid in return for a place to live.

Gifts on the other hand are given without any expectation of a return.  A gift is freely given.  No one forces you to give a gift and no one will evict you if you do not give a gift.

Since this is the season for giving, what are some of the best gifts that a tenant can give?

  • Their Continued Tenancy – There are a lot of choices out in the market place.  We know you have a lot of options.  You could move but you choose to keep renting from us.  Thanks!
  • A Good Reference –People still need to move sometimes.  When they do, we want to get those vacant units rented as quickly as possible and a good reference from a good tenant goes a long way.  Your recommendation to your friends means a lot to us and we do appreciate it.
  • Return Business – Every once in a while, we have a tenant move only to have the situation that caused the move not pan out.  More than once these tenants have wanted to come back and rent from us again.  That says a lot.  Again there are a lot of choices in the market place and we appreciate your repeat business.

Want to get more of these types of gifts?  Here are some tips.

  • Keep Your Properties Maintained – Nothing says “run away” or
    ”I don’t really care” more than a poorly maintained property.
  • Respond Quickly To Tenant Concerns – Be it noisy neighbors or a leaking roof, at least acknowledge the concern.  If something needs to be fixed, fix it.
  • Be Firm, But Fair – Have policies in place that treat everyone equally and do not play favorites.  Be sure to explain what is expected of your tenants and hold them to it.  Trust me, they like to know that that are a part of a tightly run ship.
  • You Can Catch More Flies With Honey – This old phrase is really true.  Sure you can yell and scream.  You may even be 100% correct, but where will yelling and screaming get you?  Will you really “win” the argument?  Remember a little kindness can go a long way.  We are all human and that brings ups and downs.  Try not to add to the downs.

Remember that landlording is ultimately a people business.  Take that extra step for your tenants and many will give you one in return.

Happy Holidays Everyone!

Online Rental Payment – A Must Have Tool

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I have a question for you.  What is the one thing we landlords want?  I’ll give you a hint. It usually comes on or about the first of the month.  Yep, you guessed it, the rent.  We want to collect the rent.

So here is another question.  Why do many of us in this day and age make it so difficult for the tenant to get us the rent?  Think about it.  How many of you still require your tenants to mail you a check?  Why do you make your tenants go through the process of finding an envelope, stamps and a check month after month?

There is an easier way.

Set up a system to allow your tenant to pay their rent online.

Almost nobody writes checks anymore.  In fact, your tenants are already paying most of their bills online anyway.  They do not have to find stamps for their utility bills or car payments.  They don’t write checks at the grocery store.  I’ll bet many of them do not even carry much cash and instead use electronic debit payments for almost everything.

Setting up a system for online rent payments is easy to do.

We used a system at clearnow.com for many years.  I highly recommend them.  We would still be using it today but our cloud based property management software has an electronic bill payment system included.

The clearnow.com system is a great tool all smarter landlords no matter what your level of experience or how many properties you have.  Using this system will save you, and your tenants, time and effort.  There are many other benefits as well.

  • It is a great marketing tool for the landlord.
  • Rent payments get directly deposited into your bank account.  No more running to the bank every time a check arrives in the mail.
  • Rent collection is much easier.
  • You get a heads up e-mail if a tenant cancels their automatic payment.
  • You can set up different debit days working with your tenant’s pay schedule.
  • Tenants can build their credit histories.

On the down side, there is a small fee charged for this service, but I believe the fee is well worth it for the amount of time you will save.  Plus, this service will not work in all markets or with all segments of the population.  Some tenants simply are not going to have checking accounts.  Tenants in those markets will still need to bring you a money order.

Online rent payment is the wave of the future however.  Philly.com for example reports that rent payments made online have increased by over 66% in the last three years.

So do yourself and your tenants a favor.  Set up on online rent payment system today.  Once you do, you will never look back.

Are You Prepared?

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So I am sitting here in Memphis the evening before a major ice storm is expected to hit.  We have been through one of these before, back in 94 an ice storm wrecked havoc in the city, shattering limbs, and knocking out power for days.

As a landlord, these winter events can cause another types of havoc.  We have to worry about our properties.  Limbs can fall on roofs or even worse utility lines.  If utilities go out, you then begin to worry about freezing pipes and bursting water lines.  Icy roads mean utility crews, work crews and other repair crews may not be able to get out very quickly.

So what is a landlord to do?  How do you prepare?

You can do several little things, but it all must be done beforehand.  Try to keep limbs trimmed.  Make sure pipes are insulated well.  Perhaps have a few water cutoff valves installed so problem areas can be isolated.

But for the most part, you just have to wait.  You have to wait to see how bad the storm gets.  You have to wait to see what breaks or busts.  You have to wait to see what damage is done.  You have to wait for conditions to improve so you, your workers and utility crews can get out and fix the problems.

Your tenants can be a really big help.  Asking them to prepare for potential bad weather and help protect the property through a simple e-mail or text is key.  No tenant wants to be without power and water.  So if they can help keep those services on, they generally will.  Ask tenants to keep faucets dripping and sink cabinet doors open because running water generally does not freeze, thus protecting pipes and keeping the water on.

When you tenants move in, you can begin to get their help then as well.  Showing tenants where their electrical circuit breakers are and how they work is important.  As is showing them how to turn on and off water and gas supplies.  They might just save you a trip out on an icy road.

No matter what happens, do your best to get things back to normal as quickly and as safely as possible.  Communicate with your tenants.  Let them know you are aware of issues and working on the problem and hope for the best.

They Can’t See Your Vision

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Recently, Jenna wrote a post describing her experiences showing an apartment and getting it in rent ready condition.  She mentioned that she was showing the property before she was finished with all of the repairs and that one person “shared her vision” and signed a lease for the unit.

First, let’s congratulate Jenna on getting a unit rented and then ready.  She deserves it.  This is her first property and I saw it not long after she bought it, so I know the amount of work and time that was put into it.

Now, let’s use this opportunity as a teaching opportunity.

You see, I think it is a waste of time to show the property before it is rent ready because in my experience, most folks cannot or will not see “your vision.”

Yes, Jenna did find someone who saw through the unpainted walls, the missing appliances, the unfinished floors, the wet paint, the drop cloths, the extension cords, the tools lying around everywhere, etc, etc.  So again, let’s give kudos to her.  But I think her experience was the exception rather than the rule and it would have been a better use of her time to focus on getting the unit ready.

Why can’t potential tenants “see your vision?”  I think for several reasons.

  • They have never touched a paint brush much less done a major rehab so they just cannot conceive of “your vision.”  All they see is the mess which screams “RUN AWAY!”
  • They can’t see past the mess.  The mess prevents them from seeing where their TV, bed, sofa, computer, etc. will go.  In their minds, they cannot see this as their “home” because it is not put together.
  • The unfinished nature of the unit will highlight the imperfections rather than the benefits and charm of the property.
  • They do not want to worry about whether or not you will be finished when they are ready to move in.  Will they have time to finish?  Will they run out of money?  They don’t need to worry about that when there is another unit ready to go just down the street.
  • They want to move and be done.  Moving is stressful.  They do not need the landlord coming in to “finish up a few things.”
  • They are afraid you will not do what you say you will do.  They have been burned by other landlords before.  Why go through that again?

Obviously there are exceptions as Jenna has demonstrated.  Some will “see your vision” or will really like the location or some other factor.  But most will not be able to see through the mess.  Why watch them cringe and frown?  Save your time.  Save your energy.  Focus on getting it done, then show.  Your pool of applicants will likely be larger, giving you the added benefit of being choosy.

Top 10 Rental Lease Agreement Provisions

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The lease is perhaps the most important landlording document.  It is the legal document granting possession of a property from you, the landlord, to a tenant for a specified price and a specified period of time.

Smarter Landlords take care when drafting their lease.  They have it reviewed by a local attorney familiar with the local landlord/tenant laws.  Be aware that not all laws are the same.  Every jurisdiction has their particular quirks.  Even here in Tennessee the laws change drastically if I drive just 30 miles or so east to the next county.

Despite these local differences, most leases will say essentially the same thing.  So what basics should you have in your lease?  Here are my top ten rental lease agreement clauses:

  1. Amount of Rent and When it is Due – Remember this is a legal document and you have to spell out even the most basic of information especially when rent is due.  After all, how else can you determine if the rent is late?
  2. Lease Term – How long will the lease run?  One year?  Two?  A month?  Will it be renewable?  Will it run month to month?  All items to consider and spell out.
  3. Address of the Property – Seems simple, but simple things are easily forgotten.  Be sure you include where the tenant is going to live.  If you get in front of a judge with a lease without an address you may just be out of luck.
  4. Late Fees – How much are they?  When are they due?  Be sure to check you local laws here.  Most states will regulate how much and when you can charge.
  5. Security Deposits – How much are they?  Where will they be held?
  6. Occupants – You need to list the names of all occupants over the age of 18.  These are the folks who are legally entitled to be in your property.  Anyone else can be accused of trespassing if necessary.
  7. No Alterations – Unless you want your walls pink, black or purple (yes they will paint them black) you need to specify that the tenants are not allowed to do any alterations of any kind.
  8. Quiet Enjoyment – This is a legal terms that means the tenant has a right not to be bothered by you and other tenants.  It also states that the tenant has a duty not to bother other tenants with their loud music, late night parties, etc.
  9. Eviction – You should spell out when you will begin the eviction process.
  10. Attorney’s Fees – Be sure you have a provision that all attorney’s fees incurred to enforce the lease (to evict or otherwise) will be paid by the tenant.  If you do not have such a clause you will not be able to recoup these costs later on.

So there you have it, my top 10 residential lease provisions.  You can use these to form the basis of your lease, but again be sure to have any legal document reviewed by a professional.  A lease can of course contain many other provisions as well. But I will save those for another post.

Breaking Rule #1 – Update

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Remember how positive I was about our experience with renting to a friend? Well, the old proverb proved to be true after all.

Our tenant friend told us last week that he will need to move out before his lease is up. He’s in nursing school and would like to devote more time to study and less time to work. We shouldn’t worry; he will do us a favor by staying until January 1st.

Grrrr. Thanks—but no thanks.

So, let me recap for you. We have one vacant unit that is rent ready November 1 (later than expected), and now an impending vacancy after a 3-month occupancy. If I don’t get these units occupied ASAP, I could be footing the mortgage with $0 cash flow for a couple of months. No. no. no….

It makes me anxious.

So, I told our tenant friend that we would start marketing the property immediately. He seems flexible enough to move mid-month if I find a tenant with the desire to, but he would need a couple of weeks’ notice to move his things.

Oh, and we have to prep the apartment of course. Remember those custom colors he requested for his living room? What a mistake!

Needless to say, we won’t be renting to friends again. I’ve found that I can’t be blunt or forthright about how this is not acceptable. I’m so friendly that I will most likely refund him part of his security deposit, which of course would be out of the question for the average tenant.

Where is that silver lining you ask?

It could have been a lot worse. He did give us ample notice, and he has taken care of the place. I don’t think I would say that it worked out to our benefit though. Even though we were able to gain cash flow earlier than we would have, we reorganized our work schedule to get that unit rent-ready first. That was probably a mistake—along with buying custom paint.

 

Commence face palm:

  1. Know where your palms are.
  2. Take your palm and move them towards your face. (Speed of contact varies from situation)
  3. Take 10 seconds to breathe and recuperate your thoughts.
  4. Slowly slide your palms down your face.
  5. Give evil glare.

Growing the Positive Cashflow Money Tree

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Positive cashflow is the key to becoming a successful, smarter landlord.  Without positive cashflow, your time as a landlord is limited. Smarter landlords are always looking for ways to grow the cashflow money tree.

Here is how you can grow yours.

Reducing Your Expenses – There are all kinds of expenses associated with rental properties including utilities, maintenance, and upkeep.  The trick is to save while not skimping on necessary maintenance.  Some tricks include using the same brands and materials in all of your rentals.  Use the same paint, faucets, tiles, etc.  This should cut down on repair costs and the time to do it (remember your time is important too).  Use energy efficient lighting and install low flow water devices to save on utility costs.

Increasing Your Revenue – Sure you can raise rents every year but that may increase turnover.  There are other ways to raise revenue.  Put in coin laundry.  Put in a soda machine.  Rent out the basement to your contractor for storage.  Build some storage space cages in the attic and rent them out to your tenants.  Include cable or satellite dish service as part of your rental package.  Get creative to get those revenues up.

Managing Your Tenants – Tenant turnover is a cashflow killer.  Tenants move either because of a life change or because they feel they are not getting good service.  For those that have to move, ensure you have policies and procedures in place to get your property back as rent ready as possible.  For those that simply want to move, you may need to look at your customer service skills.  Are you responding to their requests adequately?  Are you fixing things that need to be fixed?  The longer tenants stay, the better it is for your bottom line.

Managing Your Property – You have to actively manage your properties or manage your property manager.  You can’t just collect the rent and forget it.  Otherwise little problems can get swept under the rug or become bigger, more expensive problems in a short matter of time.

Fixing it Right the First Time! – Don’t cheap it out because you will just be fixing it again in no time.  Do you really want to pay to fix the same thing two or three times?  Spend a little more upfront on better materials and quality contractors to do the job.

Positive cashflow is the key to being a successful landlord.  But generating positive cashflow is not just about collecting rents.  Sure, that is the biggest part of it, but there are many other facets as well.  Use these tips to fine tune your business and improve your cashflow.

Every Landlord’s Nightmare!

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The following story describes every landlord’s nightmare.  You have to read it to believe it.

Smarter Landlords screen their tenants and verify everything they say.  Save yourself the time, aggravation, frustration and money, screen your tenants or risk something similar happening to you.

 

 

By Barry Carter/Star-Ledger

He looks like an attorney in his crisp gray suit, white shirt and red patterned tie.

Not only does he dress the part, Mark Newton knows the law. In fact, an exhaustive Star-Ledger review of his court filings shows that for at least 19 years he has made Superior, chancery, federal and municipal courtrooms his virtual offices, representing himself in hundreds of court battles — though he has no license to practice law.

His specialty? Avoiding eviction. And he is relentlessly effective.

Read  the rest of the article here.

 

H/T to Josh at Biggerpockets.com

Breaking Rule #1

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I used to have a best friend whom I knew from the day I was born. We hit every milestone together—and so did our parents.  When we were both looking for a place to rent at the same time, it seemed like a no-brainer. Who else would make a better roommate than my best friend?!

It was quite possibly the worst mistake I have ever made. Within a month, our friendship was damaged. She didn’t like my cat. I didn’t like her make-up mess. We bickered, we fought, and we never recovered.

So, when I read all of the real estate blogs (including this one) about NEVER renting to family or friends, it resonated with me. I knew there was truth behind the warning, and I swore that I wouldn’t do it.

All of that changed when I jumped neck-deep into a triplex rehab. Suddenly, I found myself reevaluating my options—reweighing the pros and cons.

If I rented to a friend, then I could do the work while renting out the unit. I could start building cash flow to help fund repairs. The logic was persuasive.

In the end, we decided to rent to our friend at a discounted rate for one year, which still equals more than if we had held it vacant an additional month. He agreed to paint himself and to allow us free access to his property whenever we needed to fix something. Given that his unit needs the most work, this felt like a decent deal. I conceded; we signed a lease.

It’s now been over a month since we signed the lease, and I have to say, it’s not that bad.

PROS:
The tenant helped with the carport demolition
I have a tenant that I know, like and trust
I’m collecting rents earlier than expected
I don’t have to paint

CONS:
I have to work around stuff: furniture, appliances, dishes, etc.
I feel imposing, especially since he works 3rd shift
It seems like I always have friends over now
I’m more distracted when working

So far, the pros greatly outweigh the cons. We discovered a massive leak in the kitchen wall shortly after signing the lease, which meant that our tenant received brand new cabinets, sink and faucet. We were happy to have him as a tenant throughout the kitchen rehab, which proved to be messy and time consuming. It would have been an awful inconvenience for a new tenant. Plus, he’s happy to have a new kitchen.

I would do things a little differently though, like be more specific!

For example, I told my tenant that I would purchase the materials if he painted. That seemed fair. However, I failed to mention that I had envisioned white paint in all rooms. So, when he brought me the color swatches that he had picked up from Lowe’s, I felt compelled to go with his plan. Had he been an average tenant, I would have responded with a heartless “Sorry but I failed to mention…” Since he was a friend (and had been so great throughout the kitchen debacle), I coughed up the extra cash for the colors he wanted. I’m always looking for the silver lining though. Our tenant friend feels almost as much invested in our rehab as we do.

That has to be good news, right?

Has anyone else ever cautiously rented to friends or family? I would love to hear your thoughts, especially since my grandparents are getting older and inquiring about a one-bedroom.

Teach Your Tenants to Help You

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I wrote previously about tenants being the eyes and ears of your properties.  Tenants can really save you some serious time and money if you listen closely to what they are saying.

In this post I want to talk about another way your tenants can help you save time and money.  All it takes is a little bit of teaching and training on the front end at  move in.

The key here is to understand that tenants are not homeowners.  They likely have never owned and therefore never learned about a house and its systems.  They do not know how the electrical and plumbing systems function.  They also don’t know how appliances work except that you push the “on” button to make it go.

Your job as a smarter landlord is to teach them about some of the basics of these systems.  Once you do that they will be able to help you solve minor problems which will in turn save you time money and even aggravation

So here are some of the basics we go over with new tenants to help them help us.

  1. The Breaker Box – Do not assume that your tenants know how to work breakers or even what a breaker is.  We show our tenants the electrical breaker box and how breakers work.   We explain what a tripped breaker is and tell them what it causes.  We then show them how reset it the breaker.
  2. Gas Cut Off Valves – We show our tenants how to shut off the gas.  We explain what gas smells like and instruct them if they notice a faint smell of gas to shut off the gas and call us right away.
  3. Water Cut Off Valves – We like to show our tenants where the various water cut off valves are located and how they work.  Surging water can cause major damage really fast.
  4. Appliances – We explain how to run the washer and dryer.  Many just do not know that you cannot wash all of your rugs at once.  They also do not know that a clogged lint trap or vent pipe will prevent the dryer from heating properly
  5. HVAC System – Believe it or not, we once got a call that a tenant’s heat was out.  After going over there, the only problem was that she had hot turned the thermostat to the heat setting.  Now, we show them how to the thermostat works.   Plus we explain the importance of changing filters and also leave a few filters near the HVAC unit.
  6. The Toilet – I once got a call late one night from a tenant telling me the toilet had broken completely and was unusable.  When I got there the pull chain from the flush handle had come off.  The toilet was certainly still usable.  So now in addition to the cut off valve, we also explain the inner workings of the toilet tank.

By showing tenants these few items you can really save yourself some time, money and aggravation.  Your tenants will now be able to flip that tripped breaker, turn off the water until you get over there tomorrow to check it out and not ruin your washing machine by washing every towel at once.  It does make things a little bit easier.  Helping them learn helps you.