Charlotte Property Management Weekly: Money Back Guarantee on Rental Homes?

A fact of life is that sometimes people are not happy with what they buy. Sometimes they buy fruit and it is not as sweet as they like. They buy bread and it is not fresh enough. They buy Charlotte Bobcats basketball tickets (prior to them trading away their best player for basically nothing) and the team is not good enough.




And so it occasionally goes for rental homes. People sign a lease, move in, and then decide that they do not want to stay there for a myriad of reasons. As a result, property managers sometimes receive e-mails like this:



Dear Sir/Madam,


We were excited about moving into this home but it is a complete disaster! We visited the property during the day prior to signing the lease and everything looked great. Little did we know that the next door neighbor slept during the day, and only did his animal sacrificing in the dead of the night! The screeching animals prevent us from getting any sleep and my 9-year old daughter is so traumatized she won’t even look at animal crackers anymore! We’ve had to take down our bird feeder to keep the neighbor from hopping the fence and our beloved outdoor cat has been relegated to an upstairs, windowless room. Help!






We need to get out of our lease immediately and are demanding reimbursement for all moving expenses, therapy sessions, and a pet security detail during the move.






Signed-


Moving Now (Unhappily)






P.S. We hate you.



No one likes getting letters like this. Believe it or not, property managers want tenants to be happy, almost as much as the tenants do; so do the owners of the rental homes (without exception in my experience)! It makes the job of securing payment from the tenant (and consequently paying the owner) a lot easier! No non-masochist property manager is trying to pull a bait and switch on anyone; I mean, guess who would be fielding unhappy calls daily for the life of the lease? It would not be worth it!



That being said, I believe that the right rental home exists for the right person. There is not a one-size fits-all rental home in existence. This truth is why tenants need to visit the property, talk to neighbors, and develop a comfort level with the home prior to signing a long term lease!



So back to the facts of the example situation: The property manager works for the owner of the property. The tenant wants out of the home. The owner needs to make a decision on what they want (or can afford) to do.



Let’s look at the money back guarantee possibility from the one who has to pay for everything (the owner). If the tenant is allowed to move out and is reimbursed expenses, the costs that will accrue to the owner are as follows (note: some costs are one-time and others are on-going):



1. Reimbursement of tenant moving expenses and miscellaneous

2. Turning and keeping on utilities

3. Monthly mortgage payment and HOA fees while rental is not under contract

4. Cleaning & repair

5. Preparing marketing materials (pictures, ad copy, and home information)

6. Advertising costs

7. Property management fees (Yes, sorry. The non-profit property management companies (aka www.PropertyManagerInYourState.org)) don’t seem to last.

8. Real estate agent commissions for bringing in the tenant

9. Monthly mortgage payment and HOA fees while under contract (the time the house is taken off of the market and the tenant is ready to move in- someone has to pay for this time…)



This turns out to be a lot of money! This is why money back guarantees on rentals are not financially viable!



At the end of the day, it’s not a good situation for anyone. The owner and tenant both feel they are getting bilked. So what to do?



The best solution is avoidance! Property managers and owners should represent the property as accurately and completely as possible. Tenants should go in expecting that they will be living in the rental for the life of their lease and should perform extensive due diligence accordingly.



Then, even without a money back guarantee, property managers can start getting letters with the postscript of “I love you” a little bit more!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)