Get your rental house ready for tenants by following my 5 steps.
I also recommend four of my favorite repair books for your real estate library to guide you through the process of repairing appliances, sinks, electrical outlets, and almost any other repair issue that you may encounter.
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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 .
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The search continues for a new investment house. As soon as my wife and I identify & purchase our next fixer-upper, we will move into it and rent out the one we are in now.
A lingering question related to our present house that we haven’t resolved yet is, what do we do with the swimming pool in the back yard? When we bought the house, the pool had already been installed, but it was missing a pump, it doesn’t have a guard fence, and it probably needs to be painted. We have put off the decision of what to do with the pool until last.
Initially, the plan was fix the pool and sell the house. Now that it will become a rental, the question arises “what if a tenant falls in the pool and drowns?”. Wouldn’t it be better to just put a cover over it and not fill it with water? My inclination is the later.
Watch this space for further developments . . .
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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.
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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.
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As fixer upper rental house business owners, its good to know how to do as many repair jobs as possible, however, when a job is too technical and beyond your abilities, or too tedious, like a large painting job, it’s time to contract the job out.
The secret in dealing with contractors is that it’s better to pay by the job instead of by the hour. If you pay by the hour, whoever you contract with can bleed you dry by working many more hours than anticipated. If you can get the contractor to set a fee before beginning the job, he absorbs the cost of working the extra hours instead of you.
This technique works well if you are hiring a non-professional, like high school students to paint outside trim work for you. However, it doesn’t always work so well if you are hiring a highly skilled electrician or plumber. Sometimes they’ll give you a set price, but mostly you pay them by the hour.
I have a highly skilled handy man I call in for jobs over my head, and I always pay him by the hour. He often will make repairs at my rental properties at odd hours and respond quickly to emergency situations. Without him, I’d almost have to quit may day job to keep up with repairs. When you have someone like that, you do whatever you have to, to hang on to them.
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This of Part 2 of my reponse to a question asking, “My background is not in the building trades. How do I learn the required skills to start a business in repairing houses and renting them out?”
How to learn the appropriate skills:
3. Draw on the Past
After I got more involved in the repair work of our houses, I thought back about how my father had taught me a lot by example. I recall seeing him construct screened-in porches on various houses that we had lived in. I was too young to help out much at the time, or to appreciate what he was doing, but looking back I realize that it required a strong desire to learn the basic principals, and a sense of self-confidence to build it. He had no formal training in construction, and didn’t have reference books like I do, but he learned by observing other porches that had been built in the neighborhood.
I also have a friend who has made a career out of living frugally. He does virtually all of his own house repair and car repair work. If he gets stuck, he goes to the library and finds books to help him. It helps that he has a background in teaching vocational eduction. We have helped each other with house repair projects over the years, and he is a source of practical advice when I need help.
You too may have family members, or friends, that you can draw insight and inspiration from when it comes to making repairs.
4.Create a House Repair Library
I like to scour the fix-up book areas at used book stores for good buys. I buy a book as soon as I see it if I know that it has valuable information. In the past, I have waited to purchase the book only to return later and find that the book I had wanted was gone. The price you pay will literally be a drop in the bucket compared to the money you will save. I have books on almost every possible repair topic, including electrical wiring, plumbing, flooring, you name it. Some books that offer information on a wide variety of repairs, such as Reader’ Digest “Fix-it Yourself Manual” and Better Home and Gardens Complete Guide to Home Repair,” are also good to have. See my earlier blog for more infomation on recommended repair books.
When a book is not enough, I can usually get good advice on specific jobs at hardware stores, like Ace Hardware. And, you can sometimes get advice on difficult repairs by doing a Google search.
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I recently received a question asking, “My background is not in the building trades. How do I learn the required skills to start a business in repairing houses and renting them out?”
In terms of how to learn to repair houses, I will answer that question in two parts. The first part today, and the second half of my answer will be in a subsequent blog article.
How to learn the appropriate skills:
1. Learn by doing. When Orson Wells directed his first movie, “Citizen Kane,” he said that he felt “like a kid with a giant train set.” One nice thing about buying a fix-up house is that it’s like having giant practice house, where you can practice learning to do repairs. Since the house is already pretty well beat up, its OK if you make a few mistakes along the way. You can always go back and correct them later.
My philosophy is that the best way to learn is by doing. Granted, you have to gradually work your way up, if your are beginning near the bottom. At first you will have to hire out for most of the moderate or difficult repairs. Make sure you watch, or assist in doing, the repair when you pay someone to do it. That way you can do it, or at least do part of it, the next time you encounter the same situation.
Just last week, I had to hire someone to repair my air conditioner in a house that I am living in and fixing up at the same time. I took time off my 9-5:00 job to be on the roof with the repairman and observe what he was doing. I saw all of the tests that he performed with the multi-tester to identify what was wrong. The problem turned out to be two capacitors that were blown. If a similar problem arises in the future, I will know how to check and replace the capacitors myself.
If you have to pay someone to make a repair for you, make sure that you get your money’s worth by watching the repairman, and learning how to do it yourself.
2. Take community college classes. Most community colleges offer courses in the building trades – plumbing, electrical wiring, air conditioning and furnace repair, and woodworking. For a fairly low price, you can learn how to make repairs like a pro by taking these classes. I have taken several classes and they have been well worth the investment of time and money. Besides leaning the skills in a supervised environment, you also learn how to use the correct tools in the proper manner. As part of the program, students are required to take an 8-hour OSHA course in how to be aware of work site dangers, to do work in a safe way, and to avoid accidents. I highly recommend that anyone who does repair work take the OSHA class.
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Landlording is a tough job, not for the faint of heart. Yet, its worth the time it takes to be a good landlord for the long-term profit we gain.
A pretty good webpage to learn about landlording is mrlandlord.com. They offer both free information as well as services that you can pay for, such as specialized documents, forms, newsletters and credit & background checks. I’ve read the newsletters and they are informative, with good tips on landlording. I bought a sampler pack of 12 back issues for $12. They also have a free page where rental owners ask landlording questions and get answers and tips from other landlords, and a searchable database of discussions on a plethora of topics.
Mr.Landlord advertises instant credit checks for $9.95, but when you get into the application process, it turns out that smaller rental property owners must also pay an annual fee of $59. Another way to get information on potential tenants is through the county courts webpage. In Tucson, you can search by a person’s name to find out any civil or criminal action has been taken against them.
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One of the surest ways to make money in any endeavor is to follow in the footsteps of other successful people. Astronaut Neil Armstrong followed in the steps of John Glenn. Comic actor Ben Stiller followed in the steps of his show biz parents Stiller & Meara. The same is true in real estate. Plenty of people have gone before us.
Buying lower-priced fixer-upper houses, using your own time & effort to fix them up, and renting them out has been a tested and true path to generate wealth & security.
The four chief benefits of purchasing fix-up houses are:
1) if you buy a house in need of repair, a fixer upper house, you pay less for it than for a house in good shape. Since you paid less, you can take out a smaller loan and have lower monthly payments.
2) By doing repairs yourself (as much as you are able to), you save the money you would have paid others, and you learn new repair skills.
3) By renting it out, you get a house that is constantly increasing in value (by an average 5% per year) the same time the rents are going up.
4) When you get older, your loans will be paid off (or close to it) and the rental income you receive are like a pension for your retirement.
Granted, it is hard work to find a house, make repairs and learn how to deal with tenants. But you also learn valuable technical and people management skills that you can use in other parts of your life, and pass along to others. Mostly, there is a great sense of satisfaction in your accomplishments, a stronger sense of security, and more income, which means more freedom.
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"Carve Out Your Niche: How to Live Your Passion, Write Your Book, & Help Others Change Their World"
"As a direct result of reading this book, I finished writing my book and published it as well. All of this took place within the past 30 days. "
Brian V. Menard, Amazon Reviewer
"Sprouse is one of the most practical authors in this genre I have ever read. 'Carve Out Your Niche' is downright inspiring."
Don Blankenship, "Top 50" Amazon Reviewer
"Invaluable for anyone seeking to successfully write, publish, and market their own work"
The Midwest Book Review
