Update on “Best Real Estate Investing Blog” Contest
The results are in for the Best Real Estate Investing Blog Contest, and while I did not win, I took the loss in stride, with a minimal of gratuitous moping and whining.
I want to express my heartfelt gratitude to all of you who voted for my blog. Thank you for your support!
Congratulations to Susan Lassiter-Lyons at The Investor Insights for winning the blog contest!
Memos and Tenants
A light, tender, sensitive touch is worth a tone of brawn.
However, my wife and I do everything in our power to keep them from ever even consider moving. We want them to stay forever! It’s the best way to keep our business operating smoothly and profitably.
In the rental house business, we use a light touch when communicating with tenants. A phone call is good when you need to quickly get in contact with your tenant, but if it’s not an urgent matter, our preferred means of communication with tenants is by sending them memos by regular mail.
Use the low-key approach
For example, if the tenant is not keeping up the yard work around their rental property, as agreed upon in the rental contract, we will write them a note in a calm and respectful manner identifying the problem. We may make a reference to the section of the contract that requires them to keep up the yard (but only if they are a repeat offender), and describe what needs to be performed to meet the terms of the agreement.
A phone call could easily put them in a defensive position, and turn into a heated conversation, which is the last thing we want. With a memo, the tone stays calm and the point gets made. And, we have a written record of what we have told them that we keep in the tenant’s file folder.
Keeping tenants informed
We keep our tenants informed about activities that we have planned for their property. We will usually call and let them know well ahead of time if we plan to do some preventative maintenance, on the roof, for example. If a plumber cancels an appointment, we’ll call them so they are not waiting around all afternoon for no reason. It’s really just practicing common courtesy.
As an example, here is a memo that I recently sent to two of our best tenants:
MEMO
Date: November 5, 20xxTo: xxxx and xxxxLocation: 2551 N. Banyon Blvd.Re: Yard work
This is just a friendly reminder that the front yard looks like it might need a little maintenance. I noticed that the weeds were starting to take over the yard a little.
If you could tidy it up a bit, I’d appreciate it. If you need a weed wacker just let me know. I’d be happy to loan you one.
I’m very grateful to have you as tenants. You have been really great about taking caring of the property.
If anything comes up where you need any help with repairs or anything else, please don’t hesitate to contact me.
(If you have already done this yard clean up, please disregard this letter.)
Eventually, tenants experience that “feeling I get when I look to the west, and my spirit is crying for leaving,” which Led Zeppelin describes, and they move away.
When this happens, you will want to make the transition of the tenant out of the house as smooth as possible. The best way to do this is by telling the tenant what you expect from them. We send a letter that clearly spells out the checkout process. This way there are no misunderstandings, we are all on the same page, wavelength, sheet of music, or stairway to heaven.
Move Out Information Letter to Tenants
Some key things that we mention in our letter are:
1.) How much of their security deposit will be returned.
2.) There will need to be a review of their check in sheet (and attach a copy for them).
3.) What you expect in terms of house cleaning.
4.) Reminders to contact the utility companies to disconnect services in their name.
5.) Reminders to cancel newspaper and other subscriptions, and to provide the Postal Service with a change of address form.
6.) Reminders to contact us when they are ready for the final house inspection.
7.) A note that if keys are not returned, they will be charged.
8.) Any costs that we must pay to repair the house will be taken out of their security deposit, and we will refund the money due them within 10 days.
(The link to my letter may not work on Internet Explorer. It seems to work fine with Google Chrome.)
Why be lenient with the damage deposit?
In general, we are pretty lenient when it comes to charging tenants for little things on the checklist. If they move out, and they have been good tenants, we are going return to them most, if not all of their security (or damage) deposit back, barring some obvious big broken item.
Our perspective is that we made a lot of money from the tenants over the years, and we don’t want them to leave on a sour note just because they thought we might have overcharged them on some ticky-tack repair.
Men of the World Unite!
John and Todd over at FearlessMen.com are staging a mustache and beard growing contest to help raise funds for charity.
I have confidently signed up to participate in the contest, and I have every intention of winning!
I invite you to join me.
The rules are simple:
1. Starting November 1st, start growing you mustache or beard. In the process they will encourage others who see them as they selflessly promote this great cause, to donate to the selected charities.
2.December 1-16 the contestants will have their photos posted at Fearlessmen.com so everyone can vote on said mustaches and beards. On Dec. 17th, the winner will be announced
3. The winner will receive prizes.
For complete details, charge over and read John’s article:
In the fixer upper and rental house business there are many perfectly legal ways to maximize your rental profits, which don’t require drawing a gun or subtly displaying the threatening DVD cover of The Clan of the Cave Bear.
Keeping tenants satisfied = more $ for your
Putting the comfort of your tenants first can result in you making more money. Three things happen when you increase the value (or usefulness) of a property:
1.) You attract more and better tenants;
2.) Tenants stay longer; and,
3.) You make more money.
Things to do make a property more valuable
Catzilla makes tenants complete
1.) Provide a clothes washer and dryer;
2.) Have a refrigerator;
3.) Add a carport to protect tenant cars from the sun;
4.) Install security doors;
5.) Put a storage shed in the back yard;
6.) Allow pets. Many people consider their pet a member of their family, and in some cases, make their decision on which home to rent based on the likely comfort of their pet.
Maybe pet owners cross the line when they refer to themselves as “mommy” and “daddy,” and maybe pets cross the line when they start marking their territory before you even get a chance to go through the checklist.
But in general, allowing pets is a win-win situation.
These types of things increase the value of a property for tenants, and may set our property apart from other rental properties. They also allow us to charge a higher monthly rent.
The more satisfied a tenant is, the more they are willing to pay a little extra rent.
Coming Soon!
How to Turn Your Home into a Rental House, Instead of Selling It
The issue of respecting tenants’ privacy is really close to my heart, based on a perplexing experience that my wife, Angy, and I had.
Shorty after we were married, Angy and I were experiencing marital bliss on a our honeymoon in Mexico. We rented a house near the beach, and after a few days we mentioned to the landlord that the kitchen sink was draining too slowly.
The next day was Saturday, and we still in bed that morning. Angy was sleeping and Terry was reading The Hitchhikers Guide to the Galaxy, when we heard the back door opening. It sounded like two people were entering.
A happy Spongebob-ish called out, “We’re here to fix the sink.”
Terry yelled, “Hey, why are you guys here so early? We’re still in bed.”
The Spongebob voice said, “Sorry, we have a tight schedule to keep. It’s not easy being a handyman you know.”
“What did he say?” whispered Angy.
“He said its not easy being a handyman.”
“Well, that’s his problem isn’t it?”
“I would have thought so.”
Terry shouted out, “Can you guys come back later? We’re not prepared right now. And if you could avoid unloading your burdens on us we’d really appreciate it.”
“Come on,” said the cheerful voice, “we can fix this pipe in two shakes.” We could hear random tools dropping on the floor and bouncing around, followed by an exclamation of “Oops.”
“And we are really good guys. I read poetry and I’m good at carrying on interesting conversations.”
“And, I write novels,” the other one with a goofy, Patrick-ish voice chimed in, “although I haven’t had any published yet.”
Objections to the contrary, we had our sink fixed and the handymen did turn out to be pretty good guys. They became our friends over the course of our stay.
Although this was just a light-hearted incident, it was also an example of violation of tenants’ privacy. Not only is it wrong from a courtesy perspective, but it is also against the law to enter the premises without the tenant’s permission, except in an emergency.
The more you can make the tenants feel it is their home, like keeping a handyman poet and a Pulitzer Prize wannabe from showing up unannounced to their private living space, the better your relationship with them will be.
Tthe 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.
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.
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.
With the annual approach of summer rains, now is almost the last chance to make rental house roofs water proof before the watery onslaught. As someone who has a sworn aversion for arriving too early to parties, I subscribe to the time-tested philosophy of “better late than never.”
This morning I applied some black roofing cement on some areas on one of my townhouse roofs. I had located some cracks upon my inspection of it about 2 weeks ago.
The first photo shows the area in question, where I had previously applied a small amount of plastic roofing cement, but today I was going to put on some more and cover a broader area.
The second photo shows the application of the plastic roofing cement. We apply one layer of cement, then put a white membrane on top of that, followed by a second layer of cement. The membrane allows for more cement to be applied.
Below is the “after” photo. You can see that in addition to the corner, we hit a few other cracks with our roofing cement on the sides of theroof. Later, we’ll come back with white roofing paint to cover the black cement.
A good rental house
My wife and I purchased this 2 bed 2 bath townhouse in 1993 and lived in it for 10 years before moving on to a bigger house (to accomodate our growing family), and turning this property into a rental house in 2003.
Its been one of our best rental houses because it is in a “transition” zone (aka “opportunity zones”) where there is heavy demand for housing, and it is easy to care for because it is compact (1100 sq ft with small front and back yards). The townhouse perfect for single people or small families.
Tenant screenings is the way to go if you want quality tenants and most landlords come across potential tenants who are either not what they claim to be or have serious behavioral problems. This article takes a look at the funniest screening stories landlords have had and their aftermaths. So sit down, relax or better still grab a cold bottle of beer to nurse while you go through the experiences below.
The Estranged Wife
A couple with no kids moved into a 4 bedroom duplex in the suburbs, the house and environment provided the perfect scenery for the couple but there was only one problem and it was that of meeting up with their mortgage payments. So they decided to put a room up for rent. The necessary adverts were created and finally a prospective client came knocking, he was the perfect tenant for he claimed to be single, had no pets, did not smoke, drink, do drugs and had a well-paying job. This obviously was too good to be true so the couple decided to hire an agent to conduct a little screening on him. After two days, the agent returned to tell the couple that they had been invited to have dinner with the previous landlord of their prospective tenant. On getting there, they were told that the tenant usually preys on sympathetic landlords and if you fall into his trap by renting a room to him, he would move in, behave for some days but a week later a woman who would claim to be his estranged wife would come visiting for some time and then finally move in with a cat. They would then proceed to co-habit like pigs, steal your property and when rent is due, disappear like thieves in the middle of the night.
Ghost Tenants
A couple responded to a landlord’s accommodation advert, they came to see the Landlord and professed that they loved the apartment and would be willing to rent it for the long term. The landlord was convinced that they were the perfect tenants so when the wife came calling the next day without her husband (due to the supposed fact that he works late) to ask for the keys to the apartment so she could look through it, the landlord duly obliged. A day passed, the lady did not return, two passed and she was still missing. The landlord quickly called his agent who conducted a quick search only to find out that the woman and her husband had already moved into the apartment. The police was called and the couple quickly evicted.
Dead beat Prospective Tenant
An agent once recommended a tenant who had the best recommendations ever; he had a good job, perfect credit and good relationships with his previous landlords. A meeting day was fixed and the prospective client shows up with a dead beat car and the attitude of someone who was one step ahead of the law. The landlord who needed to rent his facility out as soon as possible, overlooked this tell-tale signs and had agreed to lease the apartment to the tenant. The recommended signatures had already been traded and an upfront deposit had been made but as luck would have it, a police officer who was driving randomly through the neighborhood spotted the prospective tenant, felt his face was familiar and got down to trade some questions. Suddenly, the tenant bolted and a foot race began. The tenant was finally apprehended and the landlord discovered that the name, details and personal information given by his perfect tenant had nothing in common with the tenant.
The Thief
A couple came with an agent to view a landlords property, after going through it, they decided it was perfect and would be signing the necessary papers the following day but there was just one issue, they needed the house repainted. The landlord obliged, carried the necessary equipment to the house and started painting. He painted into the night and decided to spend the night there instead of returning home late. In the middle of the night, he began to hear strange noises at the side of the house, quickly he got up to investigate and on getting there, he found his prospective tenant trying to detach an A/C unit.
These stories show that conducting an in-depth screening which should include: former landlord credit checks, recommendations and past criminal activities are highly recommended.
This is your way to verify that the impressions you have of your applicants are true. Everyone who wants to rent my house has to fill out an application form. I will select usually the top one or two candidates, based on the processes mentioned above, and then call all the references and former landlords listed on the application form.
Always try to verify the references by telephone. You wouldn’t be the first landlord to be given a fake reference, and people will often give more candid opinions when you speak to them.
I don’t run credit checks, but I do like to see copies of their paychecks. I do a criminal background check by searching county court house records, and I check the sex offender’s registry list.
A high priority for me is that they make enough money to pay the rent. Don’t go by what they say; go by what their paycheck says.
They may say, “So anyway, my wife/girlfriend is going to get a job in a couple of weeks, and we operate a successful E-bay business, so the rental payments won’t be a problem.” Weeks turn into years and all the while they will have trouble making their monthly payments. Someone who has a stable, good paying job is an ideal tenant.
“In my day, we didn’t have dogs or cats. All I had was Silver Beauty, my beloved paper clip.”
- Jennifer Hart
I received a call last week from a fellow investor/friend. She had a tenant living in a house and the tenant said he would like his girlfriend and her dog to move in with him.
My friend knew that her tenant was on the verge of having some trouble making the monthly payments and it seemed like a good idea financially to have the girlfriend there too, two incomes being better than one. Of course, the girlfriend would sign the rental contract too, in case one of them moves out.
What stuck in the craw of my friend is that she recently put new carpet in the house, and did not want pets in there who might destroy the carpet. Her question to me was, should she allow the dog?
My answer was, let the dog stay too, but charge a fee of $20 per pet per month, and here’s why:
1. Not all rental properties allow pets, so the more accomodating you are in the area of pets, the more tenants that you can attract. And, many people experience a more rewarding life when they have a pet. So, the happier the tenant, the longer he stays.
2. The tenant is receiving a benefit from having their pet with them, and as mentioned, not all rentals allow pets. So, from that perspective, the tenant has not reason to be upset with a small monthly fee for the pet.
3. If the pet does a number 1 or number 2 on the carpet, the landlord still has the security deposit of one month’s rent, to repair the carpet. When the tenants move out the landlord is still covered.
Under my scenario, the tenants receive the benefit of the girlfriend moving in and the psychological benefit of having a pet. The landlord receives a slight benefit of a small additional amount coming in. Everyone is happy.
The only other consideration is to make sure the dog is not Cujo. I would’t allow a dog breed that is known to be aggressive. Otherwise the landlord is setting herself up to be bit with liability issues, if the dog gets out of the yard.
For another excellent article about pets, check out the article Allowing Pets in Your Rental Property by Sharon Vornholtt at http://LouisvilleGalsRealEstateBlog.com.
Remember your tenants during the holidays with a gift card. This shows them that you are in it for more than the money.
When I was a Peace Corps Volunteer in Honduras, the people I worked with went out of their way to make me feel I welcome and cared for. I try to do the same with my tenants.
Be kind to your tenants and treat them the way you would like to be treated and they will return the favor by taking care of your property, and by providing you with financial security for years to come.
"With the wit of Will Rogers, this book provides simple guidelines for restoring homes, and sanity to our crazy lives." M.D. Matlock, Ph.D., P.E., C.S.E.
"Great information for anyone starting out in the fixer-upper business. The author has served his apprenticeship in the trenches." "Fixer" Jay P. DeCima
"You probably couldn't find a better place to start if you are considering investing in a rental property than Sprouse's witty and concise book. " Joanna Daneman, "Top 10" Amazon Reviewer
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