Archive for the ‘tenants’ Category

Silent Wealth Generation with Rental Properties

Thursday, January 12th, 2012

When you own a rental property, two silent forces at work to increase your wealth:

1.) principal reduction, and

2.) increasing equity.

With each mortgage payment, you decrease the amount that you owe on a home loan as you reduce your principal. When your property is rented out, your tenant pays your loan for you. At the same time, equity goes up as property values appreciate over time.

Let’s assume that the original mortgage (loan) for a property is $150,000, which is also the original value of the house. As time goes by, the value of the house may increase to $300,000, due to appreciation. At the same time, the amount owed on the mortgage is reduced to $20,000, due to the mortgage being gradually paid down. At this point, the amount of equity (or value) that you have in the house would be $280,000.

If we don’t allow periodic dramatic rises and falls in home values to shake our confidence, we can count on steady, long-term, profits from our investment properties.

Carve Out Your Niche” Radio Interview Tomorrow

 Related Posts

Remove that Garbarge Disposal Now!

Background Checks for Tenants

Wednesday, December 28th, 2011

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.

3 Books that Changed My Life

Are You Big Enough to Pay it Forward?

Make Sure You Have a Good Lease for Protection Against Bad Tenants

Tuesday, December 20th, 2011

There are two common types of leases: 1. year-to-year lease and, 2. month-to-month lease. You may think that you are locking in a tenant for a year, in a year to year lease, but you are also locking yourself in, and it is much harder to remove a tenant with a year to year lease.

The Value of a Month to Month Lease

My policy is to use a month-to-month lease whenever possible. This way, if you have a tenant that you want to get rid of, it’s easier to do. These are tenants who are disturbing the neighbors, they don’t take care of the place, or they consistently pay late. Just cancel the contract and the bad tenants must be out in 30 days. No court fights, no mess.

Modify Your Lease

Feel free to modify a lease contract to make the tenants behave the way that you want them to. Nothing is set in stone. It’s your contract. Mold it into something that works.

For example, I found my tenants making oil changes and auto repairs in the driveway of one of my properties. I didn’t want to encourage that type of activity, so before the next tenants move in, I just added a sentence to the lease contract saying that those things are not permitted.

Some of the key components of my lease include:

• tenants are responsible for paying utilities (electricity, gas and water). If the landlord pays any utilities you are encouraging the tenants to be wasteful;
• tenants cannot paint or make any significant changes to the landscaping without permission;
• no smoking is allowed inside the house;
• and, tenants must maintain outdoor plants.

How to Be a Guest on Radio Shows

How Take Care of Tenants for the Holidays

Thursday, December 15th, 2011

How should your treat tenants? Treat tenants the way that you would like to be treated.

Think about it, at some point we have probably all been tenants. When I was a tenant, I wanted the landlord to respond to my problems around the house, I didn’t want rate increases, and I wanted to feel that the place that I was renting was my home.

Most tenants are just like you and I, and they deserve our utmost respect, especially over the holidays.

Here are my 4 key tips on how to keep good tenants

1. Practice good communication

The desires of most tenants are fairly common, and easy to identify. Good tenants don’t like noisy neighbors, appliances or other items in their rental property that don’t work, and frequent rent increases. Fortunately, good communication can take care of most of these problems.

One great pet peeve of tenants is when they have landlords who are as slow as snails to respond to their needs. Does it take you 2 hours to watch the television show “60 Minutes”? Then maybe you’re too slow.

If you are slow to respond to your tenant requests for help, you will be perceived as uncaring. The reason for this perception is because you don’t have good communications with your tenants.

Any time a tenant calls me, I will almost immediately return their call. Even though I work a regular 8:00 to 5:00 job, I can still manage my rental house business by having my cell phone with me everywhere I go. This way, I can deal quickly with tenant issues that may become exponentially worse (like a broken water pipe), if I waited to deal with it until I got home from work.

A phone call is good when you need to quickly get in contact with your tenant, but if it’s not an urgent matter, my preferred means of communication with tenants is by sending them memos by regular mail.

For example, if the tenant is not keeping up the yard work around their rental property, I will write them a note in a calm and respectful manner identifying the problem. I make a reference to the section of the contract that requires them to keep up the yard, and asking them to take care of it. A phone call could easily turn into a heated conversation, but with a memo, the tone stays calm and the point gets made. And, I have a written record of what I have told them that I keep in the tenants file folder.

I keep our tenants informed about activities that I have planned for their property. I will send a memo out and let them know well ahead of time if I plan to do some preventative maintenance, on the roof, for example. If a plumber cancels an appointment, I’ll call them so they are not waiting around all afternoon for no reason. It’s really just practicing common courtesy.

2. Timely responses to repair requests

I’ll admit that when I first became a landlord in 2002, this was a low priority on my list. I used to cringe when I’d answer the phone and a tenant would be on the line with a repair request. I knew I was going to have to spend some of my valuable time and hard-earned money to deal with a maintenance request. I would sometimes let the repair linger instead of jumping right on it.

Now, I look at it as an opportunity to show the tenants that I take their problems seriously, and I respond to their concerns immediately. I have a busy schedule, but my tenants have busy schedules too.

Keeping my good tenants happy is my highest priority because it directly affects my profits. The less turnover I have in my properties the more money I make.

What has helped me to respond quickly is that I have accumulated a list of good repair professionals over time. I have plumbers, an air conditioner company, handymen, and other professionals that I trust, on the speed dial of my cell phone, so that I can get them working on a repair without delay.

3. Rental fee Increases

I know that many landlords feel the need to regularly raise tenant rental fees. For obvious reasons, this can stir up the resentment of tenants and may cause them to think about looking for a new property.

I don’t have this problem because the only time I raise rents are when one tenant moves out and another one moves in. My philosophy is, why give the tenants any reason to look for another place to live?

In the case of rent increases for extremely long-term tenants, I think that tenants don’t mind paying a fair and competitive price, as long as it doesn’t seem like an exorbitant increase to them.

4. Warm Their Holiday with a Gift (card)

I may have said this before, but it bears repeating, remember your tenants during the holiday. The holidays are a great time to build the relationship that you have with your tenants. I have established a holiday tradition of buying my tenants a gift card from Target.

Don’t be a Grinch, at the very least, send a nice card.

For more information on giving gift cart for tenants see:A Holiday Tip for Keeping Good Tenants

Are You Big Enough to Pay it Forward?

What to do if your tenant wants a pet?

Sunday, October 2nd, 2011

“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.

Read the new review of “Carve Out Your Niche” by Sharon Vornholt at Louville Gals Real Estate Blog

5 Tips to Attract Tenants to Your Rental House Like Elepants to Peanut Butter(video)

Saturday, January 8th, 2011

In these 5 Steps you will master my secrets of how to drive tenants to your rental property. Learn which signs work best, where to advertise, and how to word ads and flyers so as to reduce unnecessary calls for information.

Hit a Holiday Home Run for Your Tenants

Wednesday, December 15th, 2010

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.

How to Prepare a New Rental House for Tenants (video)

Sunday, December 12th, 2010

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.

 

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

Getting Started with Fixer Upper & Rental Houses (Video)

Friday, September 10th, 2010

I think that buying fixer upper houses and turning them into rental properties is the easiest way to make money in real estate. You can do it in your spare time and still work your 8:00 to 5:00 job. And, rental houses can create a steady new income stream, that could even allow you to retire from your regular job, as I did.

This video which provides a general overview of the process for starting up a fixer upper and rental house business.