Archive for the ‘finding tenants’ Category

Do government regulations inhibit landlords from selecting good tenants? – Radio Interview with Dan Ramey

Monday, July 22nd, 2013

 

In my interview last Friday with the inimitable Dan Ramey (at WBEX 1490 AM in Chillicothe, Ohio) to discuss “Turn Your Home into a Rental House,” he asked the question,

“Do government regulations make it difficult when it comes to selecting good tenants?”

My answer was,

“all landlords and owners are required to comply with the Fair Housing Act. The Act prohibits discrimination based on race, creed, color, disability, among other things. We don’t find compliance with the Act an onerous requirement.  To us, it’s only fair that all tenants should get equal treatment.

The Fair Housing Act does not tie our hands when we select tenants because we can still base our tenant decisions on relevant factors, such as:

1.) Does the tenant have enough income to afford the rent;

2.)  Are their personalities compatible with ours;

3.) Do we think they will take good care of our house; and,

4.) Have they been good tenants in the past;

In short, we screen our tenants carefully, and we’ve only had to remove a tenant one time during our 12 years in this business. Government regulations don’t interfere with our tenant selection process.”

Here is the link to my complete interview with Dan Ramey.

 

Upcoming “Turn Your Home Into a Rental House ” Radio Interviews (most shows can be heard  on the internet)

On Thursday, July 25th, at 7:10 a.m. (central time) I’ll be on Jeff Anderson’s show, KSDR 1480 AM, Watertown, South Dakota.

On Friday , July 26th, at 7:30 am (mountain time) I have an interview with David Gillian, KRSN 1490 AM, Los Alamos, NM.

Wednesday, July 31, at 8:15 (central time), I’ll be interviewed by Rich Petersen, KROC 1340 AM, Rochester, MN.

Tuesday, August 6th, at 8:10 am (central time), I’ll be on Bob Schmidt’s show, WLFN 1490 AM, Onalaska, WI.

Wednesday, August 14th, at 9:15 am (eastern), I’ll be on Dave Kelber’s show, WRNJ Radio, Hackettstown, NJ.

Watch this space for information on additional interviews.

The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants

Friday, August 10th, 2012

The Arizona Network of Real Estate invited me to give a presentation to their group about my book “Fix em Up Rent em Out.”

I thought the video might be available to the general public but it looks as though that’s not going to happen.

However, so that no one feels left out, I am going to provide  a summary of the key points that I hit during the presentation. As someone who was regularly picked last for teams in gym class, I’m sensitive to people feeling left out. Casting modesty to the wind, I am also including exclusive photos of the event.

So here are:

The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants (based on an article by Andrew Stefanczyk)

1. Choose the Worst Possible Area

Location will determine the kinds of tenants you will attract, and how much rent you can fairly charge.

Do you want these bearded wonders as tenants?

The best approach is to identify target areas in your city where you would like to focus your purchases. I like to focus on “transition zones” (where there is a mixture of housing types) which are good for investors because we can purchase properties at lower prices, and there is high demand to live in these areas.

2. Put in the very best of things when fixing up  an investment property

Use new and expensive sinks, doors, refrigerators, light fixtures, etc. Never shop at stores that recycle construction supplies. Spare no  expense.

Of course, the problem is that tenants will not take care of our properties as well as we would,

Habitat Store

so we end up with many broken or worn out items. The better alternative is to shop at used building supply stores, and to purchase good, inexpensive, supplies for our rental houses. One such store is the Habitat for Humanity store.

3. Make sure you have absolutely no experience in make basic repairs

Not knowing how to change electrical outlets, unclog drains & toilets, and replace broken windows will cost quite a bit down the road.

The better way is to:

A. Learn as you go, and comply with EPA regulations

B. Take construction classes at junior college

C. Learn from handymen and contractors

D. Take the Zen approach to  house repair learn to do everything yourself

5. Utilize fix-up books, investing books, & YouTube to find answers on how to make house repairs

4. Do not screen your tenants

Being as uninformed as possible about who you rent to may be the best way to lose money as a landlord. Do not ask for or check references. Do not call previous landlords and ask questions like, did they pay rent on time? How was the condition of the house or apartment when they left? Did they ever disturb neighbors with loud music or shouting matches? How often would you have to make special trips for repairs? Being as uninformed as possible about whom you rent to will make a huge difference and will increase the chances that you will get tenants that will trash your property and refuse to pay rent.

However, the better way is to:

A. Use a checklist for tenants. Decide what kind of tenant that you want ahead of time.

B. Look at their paycheck to verify income.

C. Check county records to see what illegal activities they’ve been up to.

D. Know the Fair Housing Act. Never select tenants based strictly on “race, color, national origin, religion, sex, familial status or handicap (disability).”

E. To find new tenants, use Craiglist, put up arrow signs, and host an “open house.”

5. Make sure you have not learned about your rights as a landlord

Be completely unfamiliar with the eviction process to guarantee long, drawn out disputes with tenants. Don’t keep up to date financial records or copies of correspondence with tenants. Most states provide online information about tenant and landlord rights so avoid reading these.

The better way is:

A. Get an authoritative legal guide like  “The Arizona Landlord Deskbook” by Carlton Cassler.

B.  Copy forms and letters from your legal book to send to tenants.

C. Comply with legal ways to deal with bad tenants.

D. Use memos to communicate with tenants so you have a record of correspondence.

E. Use a month to month lease instead of long-term lease to more easily scrape off bad tenants like barnacles.

F. Reward tenants for paying on time by discounting their rent $25.  

G. Send good tenants Target  gift cards for Xmas.

In Conclusion

Share Your Knowledge

“Each of us has cause to think with deep gratitude of those who have lighted the flame within us.”

–Albert Schweitzer

Carve Out Your Niche Update

My award-winning book on self-publishing, Carve Out Your Niche, is now available in Kindle format.

The Midwest Book Review called Carve Out Your Niche,

“Invaluable for anyone seeking to successfully write, publish, and market their own work.”

 Related Posts

Remove that Garbarge Disposal Now!

Do tenants pay utilities, and how much for damage deposit

Saturday, October 16th, 2010

Here is another letter that I recently received that asks some pertinent and common questions related operating a fixer upper house business, that I would like to share with you.

Dear Terry,

We’re moving along towards renting out our first rental house…and I was reading your month-to-month lease agreement from the Never Sell Your Home book– it looks very good and we plan on using much of it, but I did have a few questions:

1) What % of the monthly rent do you require as a security deposit?

2) Should the Lessee(s) be responsible for all utilities, or should I pay the utilities for them?

Thanks for your help – !

Steve Klausman
Santa Fe

Dear Steve,

Congrats on your progress in preparing to rent our your first house. Don’t get discouraged if it’s rough sledding at first, the first house is the one that you learn the most from.

Security Deposit

In answer to your first question, the amount that I charge for security deposit is the amount of one month’s rent. So if the monthly rent is $900, the security deposit is also $900.

Some tenants may have trouble coming up with both the rent and the security deposit at the same time, in this case, a tidy sum of $1,800. So, I sometimes let them pay the security deposit over the course of 2 months, to make it easier on them.

Since you are just starting in the business, something to do from the beginning is to keep the security deposit and the monthly rental money from your business in a separate bank account from your personal bank account. The IRS doesn’t like to see the funds mixed together.

Who Pays Utilities?

In answer to your second question. I always have the tenants pay all the utilities themselves. Not only does it encourage them to conserve, but it vastly simplifies the process for you. Also, I have the tenants put the utility accounts in their own name, so that I’m not liable for their expenses.

In most states, you can sign up for a “Landlord Agreement Account” with the utility companies that allows you to switch the accounts to the tenants and back, with less paperwork and expense.

As you move along feel free to send me more questions as they arise.

Your (self-appointed) personal rental-home consultant,

Terry

Letter on Selecting Tenants

Dealing with Problem Tenants

Wednesday, August 11th, 2010

Malcom's Dad

In today’s interview with Mark Wayne of WICH Radio in Norwich, CT, the question came up “What if you want to start a rental house business buy you are leery about dealing with tenants?”‘

My response is that some tenants are real pleasures to work with and you rarely even see them. They go the extra mile to maintain your property and get along beautifully with the neighbors.

On the other hand, other tenants require constant attention and supervision, not unlike my own teenagers who like to push me to the frazzled limits of my sanity .

As the dad observed on Malcom in the Middle, “Let’s face it, teenagers are thoughtless, inconsiderate eatingmachines dedicated to putting us through hell and sending us to an early grave.”

Okay, tenants probably aren’t that bad, but that’s a good starting point for discussion purposes.

Some of the common problems that landlords face are:

1. Tenants that pay late or don’t pay

2. Noisy tenants

3. Messy or destructive tenants

Handling difficult situations

If you are using a month-to-month lease, as I strongly suggest, either the tenant or the landlord can cancel the contract by giving the other party one month’s notice. This way, if you need to evict a tenant, you just give them a one month written notice, and they are out the next month.

You don’t even need to have a good reason to remove them.

You are just exercising your right to cancel their monthly contract. It removes the possibility of having to go to court to remove a tenant. Easy as pie.

Here are the steps that I take to remove a bad tenant:

1. Tenant engages in some action that violates the contract, for example, they pay the rent late.

2. Call the tenants to inform them they are in violation of the contract.

3. Follow up immediately with a memo that again tells them of their contract violation, and tell them exactly what I expect them to do. For example, pay the rent at an agreed upon date. Tell them the consequences of not immediately remedying the situation. For example if they don’t pay the rent, I will not renew the month-to-month contract.

4. If they don’t take the appropriate action, of if another violation occurs, send them a form or a memo saying you are cancelling the contract. They must be out in 30 days.

5. If they are not out in 30 days, I can pay to have a deputy sheriff evict them. If they are still behind on their rent when they leave, I keep their security deposit to cover the unpaid rent.

Don’t get the wrong impression, most of my tenants have been good tenants. I have only had one eviction in years that I have operated my business. And the eviction was a fairly easy process because of the month-to month lease.

Upcoming radio interviews

August 17, 7:50 am, Jason Mansmith show, WRPN 1600 am, Ripon, Wisconsin.

August 19, 7:40 am, Gary Sutton, WSBA 910 AM, York, PA.

August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.

August 23 at 8:05 am, the Cliff  “On-Air”  Turner show, KLBN 1450 AM, La Grande, Oregon.

August 25 at 8:08 am,  I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.

August 26 at 11:05 am, the Ron Ross Show, WJBC 1230 am, Bloomington, Illinois.

September 15 at 8:05 am, the Dan Ramey show, WBEX 1490 AM, Chillicothe, Ohio.

How to Find Tenants

Thursday, April 8th, 2010


Here is a recent email that I received from someone who is taking my 7-Week email course, and my response:

Dear Terry,

We bought one fixer upper but are having trouble renting it — any ideas of good places to advertise for a tenant?

Thanks in advance,

Jean xxxx

Hi Jean,

Let me suggest a few techniques that that have worked for me:

1. Place several small For Rent signs on all nearby streets, especially the major intersections. If you get a sign with an arrow on it, you can point the arrow in the direction of your house. I buy the signs at Home Depot or Lowe’s.
2. Hold an “open house” on Saturday and Sunday. People driving by can come in and look around.
3. Contact companies that help people find rental properties. Some will list your property for free. These companies usually contact me.
4. Run an ad on craigslist.org. You can upload photos and describe the qualities of your rental property. The ads are free & I usually get a great response.

I hope you find a tenant soon.

Let me know if you come up with a good technique that I haven’t thought of.

Good luck!

Best regards,

Terry Sprouse

Location, Location, …

One thing I didn’t mention in the letter, but which is perhaps the most important consideration of all in attracting good tenants, is the location of your property. Properties located where people really like to rent are called “opportunity zones” (or “transition zones”).  Just as Baskin-Robbins must offer the flavors of ice cream that the public likes, so you must offer rental properties in the areas of town where people want to live.

If your property is located in an area where people don’t like to rent, you will always have trouble finding tenants. For more information about my philosophy on where to invest, check out my EzineArticles.com article The Secret to Increasing Cash Flow – Invest in Opportunity Zones .

Letter on Selecting Tenants

Monday, August 31st, 2009

Radio Host Mark Maxon Radio Host Mark Maxon

Below is an email that I received from someone who recently signed up for my 7-week informational course based on my book How to Start a House Fix up and Rental Business. I removed the name to protect her privacy.

It was great hearing you on Mark Maxon’s radio program this am. My son is again trying to do what you did. The first one didn’t go well. Can U tell me how U selected your tenants? Also I am in an interest only mortgage & want to get out of it. I applied for a Loan Modification & it’s been dragging on.

Any ideas? It would be greatly appreciated. Thanks again for offering your course to help folks like us.

Sincerely, xxxxx

—————–

My response:

Hi xxxxx,

Thank you for the note.

I think the hardest part of the rental house business is finding good tenants. In many ways, the only way to get good at it is to just do it. You make a few mistakes along the way, but you get better with each passing year.

But, there are also some key things you can do to help get good tenants.

1. Have the tenants fill out an information sheet, requiring them to list previous places they lived, list bank account info, job info, etc. Call all of their references, their bosses, and their old landlords. Verify their salary. You may be able to check county court cases on-line like we can here in Tucson. If so, run a check on their name.

2. Read through the entire contract with them before they sign it. Emphasize the penalties they face if they pay late.

3. Enforce the contract. If they pay late, call them immediately, and require that they pay the penalty (I charge 1% of the total rent per day that they pay late).

4. Get a book that describes landlord rights in your state. These books usually include legal forms that you can mail to bad tenants, to make them comply with your contract, or to evict them.

Sorry, I don’t have any knowledge about getting out of an interest only mortgage, or the loan modification process. There was recently a mortgage broker on Mark Maxon’s show. It might help to contact someone like him.

Best of luck to you and to your son.

Terry Sprouse
Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Five Questions to Identify Motivated Sellers

Friday, April 18th, 2008

,
Thinking about buying an investment property?

Check out Real Estate Investing – The 5 Magic Questions at ezinearticles.com, by Robert Rentalman (yes, Rentalman).

The MARLA formula consists of 5 magic questions that will help you quickly weed out the motivated sellers from the rest of the pack. MARLA is an acronym for Motivation, ARV (After Repair Value), Repairs, Loan balance, Asking price. For more details on the 5 magic questions, take the link above.

Info on Terry’s Book

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Buying in a Down Market, and Finding Ideal Tenents

Monday, April 14th, 2008


Related to the business of investing in fixer upper houses, I’d like to share with you a couple of good articles I came across recently.

5 Tips for Buying a Home in a Down Market
by Bankaholic.com

The subprime mortgage bust has scared a lot of people away from the shaky housing market. The nightly news is filled with images and stories of everyday Americans who are losing their homes because they made greedy and uninformed decisions, they were taken advantage of by predatory brokers, or a combination of these situations. However, the news isn’t all bad. This decline in the market has dropped prices and made housing affordable to many fiscally responsible renters who never considered home ownership to be an option.

If you find yourself house-hunting, make sure that you follow these five simple steps to take advantage of this downturn in the market; if you don’t, you could be the next sad story on your local news. Click here for full article.

What Makes an Ideal Tenant?
by Resty Malia

Who are the Folks That Makes an Ideal Tenant?

Finding the right tenant is a common challenge that most property managers encounters at one point or another in their life. The following bits and pieces of information in this article will allow you to have a better idea in picking the right or ideal tenant.

Searching for the right tenant can be simple or even a challenge sometime, but having an idea of the different types of America’s work force qualities as tenants could help you decide and screen the right and ideal tenant for your property.

So you have done your credit check with your prospective tenant ( you done it, right?) and now you’re probably wondering what part of the demographics would make an ideal tenant.

Generally there are Four (4) Population Strata or Groups where your prospective tenants will be coming from. Click here for full article.

Info on Terry’s Book

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |

Night of the . . . Unwanted Zombie Tenants

Tuesday, October 9th, 2007

If you are in the fixer upper rental house business like me, you want to avoid bad tenants like you would ravenous zombies.

How do you go about avoiding bad tenants?

A good contract and checking out references is a good start to getting good tenants. But, despite our best efforts to weed them out, sometimes we still wind up with a someone who doesn’t pay on time, or who bugs us incessantly with phone calls for knick-knack repairs, or who bothers the neighbors.

Below are my observations on dealing with the inevitable bad tenant.

I give my renters a $25 dollar discount if they pay on the first of the month, or early. If they pay after that, then they pay the full amount of rent. I frame it this way so that it looks like they are getting a good deal if they pay on time.

I received a late rent payment earlier this month from a tenant, but it didn’t include the full amount. I called and he said he thought the due date was the 5th and not the first. I assured him that it was indeed the first. So, if the rent if $900 a month, they pay $875 if they pay on time or before the 1st. If they are even one day late, they don’t get the discount.

What happens if they pay late and don’t pay the late fee? I call them and remind them and insist that they send me the amount they owe ASAP. I usually require a fee of 1% of the rent for each day that the rent is late. If the rent is $700 and they are ten days late, then they pay an additional $70, or $7/day.

Late Pay = More $

I had one tenant who consistently paid 2 to 3 weeks late. The first couple of times he paid late, I sent him a “pay or get out form” legal form so he would get in the habit of paying all late fees. At first, it bothered me that he paid late, but then I realized I was making an extra $150 or more each month from his inability to pay on time. I actually started enjoying getting the late payments each month. I was getting an extra $1,800 a year just because the tenant had a personality flaw that made him always pay late. Of course, if he hadn’t pay the fee, I would have removed him from the house. In general, its best to get the rent on time, but there are times when one should be open and flexible enough to make a little extra money.

Do Tenants Stay or Go?

Granted, when you are renting out several properties at the same time, it can be headache if one tenant is paying late. You have to ask yourself, would you rather remove the tenant and go through the process of fixing up the property and searching for a new tenant, or just continue to rent it out under less than ideal conditions? Since my wife and I both have regular jobs, we usually opt to keep the tenant in the house as long as possible, unless they are not taking care of the property or not paying the rent. We subscribe to the landlord mantra of “the less turnover, the better”.

In a perfect world, all tenants would pay on time and stay in the property for 15-20 years. We’re still looking for that Ned Flanders-esque tenant.

As you might expect, the late-paying tenant left the house without paying the last month’s rent, last April. However, he rented the house for about 18 months, so with the security/clean up deposit that I kept, and all the late fees we received, we still came out well ahead.

You can usually see the signs that certain people are going to be “train-wreck” tenants. When they start off paying late right at the beginning of their lease, you know that’s not a good sign. But, at that point all you can do is stay on top of the situation and enforce the late payment rule until their inevitable departure. After the late-payer tenant left, I started using month-to-month rental contracts, which makes it a little easier to get rid of bad tenants.

Add to Technorati Favorites

Subscribe in a reader

Share this: del.icio.us | Digg | Ma.gnolia | Reddit | Stumble Upon |