5 Important Steps Not To Forget After Locking In Your Rental Tenant (With Extra Credit)

I finally did it!  I found a tenant!  Now good times are here!  I can just sit back and spend the rent money.  Oh yeah!

(Landlord reaction after placing a tenant into her rental home)

It is a good feeling getting your rental home filled!  The house preparation, the marketing, the showings, the rental screening, the deposit collection… it’s exhausting, but usually means that you are in the clear from doing it again for at least a year.  That’s something to celebrate!

Great tenant placement is about 75% of the heavy lifting good property managers do.  Getting past this hurdle is a great accomplishment!  If high standards were kept throughout the screening process, a fruitful, peaceful tenancy is extremely likely.

But after the bubbly has been consumed, the noise makers silenced, and the euphoric feelings have subsided, a question sometimes starts to gnaw at your innards:

What have I forgotten to do?

This is a perfectly normal reaction.  And, fortunately, it has a very easy answer.  Here are 5 important steps not to forget after you’ve locked in your rental tenant (with ways to earn extra credit):

1.  Make sure the new tenants know where, to whom, and when to send the rent checks.  Priority #1!!

Extra Credit: Send a reminder 7-10 days prior to the due date every month (I like e-mail).

2.  Call your insurance company and let them know you need to change your policy from a home owner to a landlord.  I haven’t seen any price changes personally from doing this.  Extra Credit: Make sure your tenant has a renter’s insurance policy.

3.  Make sure all utilities are scheduled for shut off when the tenant moves in. 

Extra Credit: Allow 3-5 days after the tenant’s move-in date to schedule the shut-off.  It’s tough to live without utilities and moving time is busy.  It’s perfectly decent to be thoughtful!

4.  Cut off the lawn service after the tenant moves in.

Extra Credit: Have the lawn mowed the day before tenant move-in.  It’s a nice gesture and sets a precedent on how the lawn should be kept.

5.  Exhale and put your feet up!  You’ve done it!  Never miss an opportunity to celebrate!

Extra Credit: Head to your nearest Caribbean island ASAP.

    

Brett Furniss is the head property manager of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Genie Property Management? 3 Thoughts to Determine Viable Tenant Repair Requests

“Honey, before you go out golfing today, there are a few things I’d like you to take care of around the house.  The air conditioning is out upstairs, the front door squeaks, the gutters needs to be cleaned, the back latch is sticking, the front bushes need to be trimmed…”

(Cutting his wife off while rushing out the door) “Can’t you just put it in an e-mail and send it to the landlord?  I assume that’s why we pay rent around here!?!?  That nonsensical interruption may have just cost me a few practices hits with my new driver!”

I wish things worked for me like that.  Something in my house breaks?  Send an e-mail to the landlord and wait for the repairs to be addressed at no cost.  And now that there is Wi-Fi on the golf course and the pool, this whole delegating thing would be even easier!  Renting would really trump owning, that’s for sure.

I refer to this as “genie property management.”  Get the lamp out, rub it a few times, and get countless free repair requests.

But much like a genie, this is (or should be) fiction.  Landlords are not genies.  With that being said, my three thoughts to determine viable tenant repair requests are:

1.  The landlord needs to keep the house at code.  The major systems that worked (including appliances) should continue to work throughout the tenancy.  That’s written into most leases to protect the tenant.  Stay on the right side of the law!  Plus, it’s the right thing to do.

2.  Myth: When renting a home, a tenant will never have to pay anything outside of rent and utilities for the house.  That is very false.  This expectation should be expressed explicitly during the lease signing.  Both parties have responsibilities to each other.  As it has been said, it takes two to tango.

3.  A good maintenance addendum to the lease is paramount to ward off even the scent of genie property management.  Tenant repair and maintenance responsibilities should be spelled out explicitly so everyone is on the same page.

So that brings up the inevitable question: so (ha ha ha), you’re a proponent of “slumlord management”, are ye?  Hardly!  When tenants move into a home, every major system should work!  If there was ever an expectation that something major wasn’t going to work, the tenant should know about it before signing the lease.  And if one of the major systems breaks due to normal wear and tear during the lease, landlords should address it at their expense immediately.  I would want that done for me if I was renting.

But what I’m not a proponent of is “slumlord tenancy” (ha ha ha?).  Houses are expensive and need to be maintained.  If a home inspection uncovers that the air filters have never been changed, the yard is unkempt, leaves are spilling out of the gutters, all light bulbs are burned out, etc. this is an issue!  These are not landlord responsibilities.  On-time rent is great (thanks!) but it doesn’t give a tenant license to ignore the other responsibilities in the lease and maintenance addendum.  And if something breaks due to misuse (pouring hot oil down the garbage disposal, anyone?), I don’t think it is fair to expect the landlord to pay for it.  That’s not normal wear and tear and it seems unreasonable for the responsible party to expect the landlord to pay the bill for that. 

Yes, if I was renting, I would wish my landlord was a genie!  But having Santa around to bring my family gifts in December each year would be a nice thing too. 

Alas, all is not lost.  It still can feel like Christmas year round.  When each party does their part, the house stays maintained, things work well, and the Christmas spirit will abound for all!

BTW, the e-mail response to the tenants from their repair request:

Dear Valued Tenant,

Thank you for your e-mail sharing your repair issues.  I’m sorry to hear about them.  See my notes below:

1.  The AC upstairs- we will send someone out to fix it ASAP.  Can the technician call you on the 5641 phone number we have on file?

2.  The front and back door: please try some WD-40 and spray the locks.  That usually does the trick!

3.  The clogged gutters and front bushes: per the maintenance addendum signed with the lease, this is a tenant responsibility.  Can you make sure they are taken care of ASAP?  If you could e-mail us a few pictures after they are done, that would be great.  The owner appreciates you taking care of the home and we need to make sure we are no one is fined by the HOA for non-compliance.

Thanks & have a great weekend!

    

Brett Furniss is the head property manager of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Sometimes It’s Cheaper to Keep Her: Why You First Need Reserve Funds Before Renting Out Your Home

 

 



You tied up, you better stay tied up
Cause it's cheaper to keep her, this is from T, who says
It's cheaper to keep her, it's cheaper to keep her

When your little girl makes you mad
And you get an attitude and pack your bags
Five little children that you're leavin' behind
Son, you're gonna pay some alimony or do some time

That's why it's cheaper to keep her (Help me say it, y'all)
It's cheaper to keep her (It's cheaper to keep her)

 

(“Cheaper to Keep Her” by Johnnie Taylor)

 

Marriage can be the best thing in the world.

 

Marriage can be the worst thing in the world.

 

But breaking up is really hard on several fronts and is certainly never cheap.

 

Much like a bad marriage, we get calls from potential clients who want to break up with the houses they live in and rent them out to someone else:

 

“I’ve lived here for 20 years!  It’s just time to move.  And the hour commute each way to my new job is killing me!”

 

“This neighborhood has been going downhill for a long time.  It’s time to get around a better class of folk.  I’ll rent it until I can afford to sell it.”

 

“Things are breaking everyday in my house.  Mentally, I feel like I may be next if I don’t relocate.”

 

And as a Charlotte property manager, we like it when people want to move.  It keeps our doors open!

 

However, there is a difference between good and bad property management business.  Good property management business makes potential clients aware that renting out their home costs money and that they should have access to a reserve fund (2-3 months of rent at least).  Renting out a home can be costly upfront and things can get worse if things go wrong during the tenancy. 

 

Wait- I thought investing in real estate makes people millionaires!  I’m supposed to make money, not lose it.  What costs money?  And what can go wrong?  Here’s a very partial list:

 

1.  Preparing the home for market (steam clean carpet & a professional cleaning at minimum)

2.  Vacancy costs (utilities, HOA fees, monthly mortgage, lawn service)

3.  Property management fees (Sorry!  But well worth it! J)

4.  Things break (HVAC goes down, garage door breaks, etc.)

5.  Tenant stops paying and eviction is necessary

 

A good property manager will keep these costs to a minimum, but is never able to eliminate them entirely.

 

We sometimes get inquiries where there is an impression that as soon as there is a move-out there will be incoming rent covering the entire next month’s mortgage.  That is never the case.  And we don’t want to take business that puts our clients in untenable, stressful situations.

 

Don’t get me wrong; we’d love to rent out your house for you.  But change comes at a cost!  If there are not reserve funds available, as Mr. Taylor eloquently says, it is just cheaper to keep her. 

 

Holding rental homes can be a great path to long term wealth, but can drain liquid resources (especially in the short term).  If you want to break up, first make sure you are financially able to pull it off!   

 

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!



 

Wealthy Living Paycheck-To-Paycheck? More Pressure on Tenant Screening

When you hear the term "paycheck to paycheck" you probably think of low-income households struggling to make ends meet. That's even the title of a new HBO documentary highlighting the plight of America's working poor. But a new paper released at the Brookings Institution's BPEA conference Friday finds that a sizeable number of wealthy households are living paycheck to paycheck, too.

"The Wealthy Hand-to-Mouth," by economists at Princeton and New York University, finds that roughly one-third of American households -- 38 million of them -- are living a paycheck-to-paycheck existence. These are families who hold little to no liquid wealth from cash, savings or checking accounts. But a staggering two-thirds of these households are not actually poor; while they resemble poor families in their lack of liquid wealth, they own substantial holdings ($50,000, on average) in illiquid assets. Because this money is locked up in things like their houses, cars and retirement accounts, they can't easily dip into it when times get tough.

Christopher Ingram (Washington Post 3/21/14)

When running tenant rental applications, property managers and landlords are largely looking for one thing: tenants who will pay on-time and in-full every month (while not committing felonies in between “House Damage” parties).  We are looking at credit scores, criminal background checks, income, and landlord history.  But is this sufficient?

Based on the article above, prospective tenants that we once thought looked great on paper may be riskier than we thought.  For example, a house renting for $2K/month may draw the following applicant:

Married couple

Husband makes $96K/year

Wife stays home with 2 children

No criminal record besides 2 speeding tickets in the last 5 years

760 & 720 credit scores

Owned a home in their old town which they sold to move here for a job

They look like great candidates!  But let’s dig deeper with a back-of-the-napkin calculation when we delve into their credit report and specifically, their monthly cash inflows and outflows:

$8,000.00 Salary

less taxes (approx 40%):         ($3,200)

2 car payments:                       ($1,000)

Rent:                                       ($2,000)

Utilities                                   ($300)

Student loans                          ($200)

Private school (children)         ($600)

Credit card balances               ($100.00 minimum payment)

Car insurance                          ($250)

Food??
Activities??

Gas??

With $7,650.00+ in estimated monthly expenses, making $8K/month turns out to be tight.  If something happens unexpectedly (sickness?) or job loss (just moved here for a job), this could get bad in a hurry.  We know cash flow will be insufficient to cover the rent, so the question becomes how many assets do they have?  And how liquid are those assets?

And then the line of questioning turns into “Do we know?  Did we even ask?”

At the end of the day, the rental application can’t really devolve into a mortgage application-like colonoscopy.  It’s too painful for everyone involved and takes too much time. 

The good news is that a run-of-the-mill credit report is pretty thorough.  The credit report screening starts with looking where cash flow is going monthly and then factoring in the other common monthly expenses (car insurance, gas, utilities, cell phones, etc.).  If large credit card balances are present, it’s probably indicative that their expenses are more than their incomes.  Using a back-of-the-napkin look at their income and monthly expenses (coupled with alarm bells for any large credit card balances) will give a good idea of how risky the applicants are.  If there is sufficient cash flow left over each month, approve them and move on.  If it looks to be too close for comfort, ask more questions.  Ask for more documentation of assets.  And then reject the application or ask for a bigger security deposit.

Applications are about present qualifications, but also about future vulnerabilities.  Few things always go perfectly for everyone; this is real life we are talking about!  And if things don’t add up, it would behoove you to get to the bottom of it as opposed to just taking the path of least resistance.  High income and credit scores may not be grounds for fast track application approval anymore.  Times change and we need to change with them.

Happy tenant screening! 

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Fighting With Tenants: Are the Colorful Stories Worth It?

“Don't knock the weather. If it didn't change once in a while, nine out of ten people couldn't start a conversation.”  (Kim Hubbard)

I sometimes feel that the same could be said of landlords about their rental tenants.  Landlords love to tell stories about how they outsmarted their tenants in their latest dispute.  And, conversely, renters love to do the same.

Example:

Landlord: So my tenants say they want to paint a room… they can’t even change a light bulb without calling me, and they want me to trust them to paint my house?  Yeah, right! 

Envious Landlord Friend #1: (excitedly) So what did you say to them?

Landlord: I told them I would graciously allow them to paint (self-congratulatory pause), but would need to see their handiwork afterwards; if it’s not up to snuff (and, as you know, I have high standards!), I would reserve the right to fix their painting and take the cost from their security deposit.  And if a drop of paint even hits the carpet, I let them know I’d add some new carpet and padding to their tab. (smug laugh)

EL Friend: Wow!  You really laid down the law!

Landlord: In cases like this, you don’t have a choice; business instinct just takes over.  I mean, the last time I was inspecting the house, I saw the tenant’s daughter coloring a picture… her crayon scrawls were completely outside the lines!  I hope this isn’t passed down in the genes!

EL Friend: Ha, ha!  I can’t wait to get a rental property so I can have clever stories to tell at parties like you! 

And from the tenant perspective:

Tenant: My landlord is crazy!  I want to paint a room and she is giving me the 3^rd degree!

Tenant’s Non-Envious Friend: Well, two can play that game; call her about changing a light bulb again the next time she goes on vacation…

Tenant (laughing): Right!  And I have a feeling my toilet may be stopped up around midnight sometime this week…

TNE Friend: Too funny!  But are you sure you want her back in the house after the weird way she kept staring at your daughter last time?

The landlord-tenant relationship is like any other relationship.  If the landlord chooses to be vindictive and disrespectful, it will usually become a two-way street producing unnecessary stress and anger.  And, sadly, it is usually a more expensive venue to take as house maintenance is then often ignored by the tenant and leases are not renewed. 

But what if landlords choose peace and harmony?  It’s certainly more profitable!  But I know it’s not as sexy and it can make landlord party stories sort of boring:

Landlord: I sent my tenants a Ruby Tuesday gift card for renewing their lease again!

Non-Envious Landlord Friend: Hmmm… that’s great, really great.

And

Tenant: A gift card!  How thoughtful of her!  I need to remember to pick up air filters on our way to Ruby Tuesday’s tomorrow because it’s about time to install new ones.

Envious Tenant Friend: I wish my landlord showed that he appreciated me…

There’s a reward for being nice!  Unfortunately, it’s not payable by great stories.  But all is not lost!  The weather changes all the time so there’s always something to talk about at parties.

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

March Madness: How to Pick a Great Bracket & Great Rental Tenants

Everybody loves March Madness.  Even property managers!  Chances are the only repair calls will go to the cable television companies if their television screens start to flicker.

 

But now the hard part starts; trying to predict who will win each game of the NCAA tournament.  Picking a perfect bracket is tough; no one did it last year after millions of entries.  The odds are seriously stacked against getting them all right.  And, inexplicably, it’s even tougher if you’re a serious college basketball fan!  The men’s college basketball fanatics, who watch all the games year round and know that Duke should absolutely kill Mercer, wind up picking the wrong team to win.  Meanwhile, the clueless non-fans who turn on Mercer Street to go to work everyday and choose Mercer to win, wind up getting the pick right.  Go figure!

 

To make good picks, fans rely on statistics and past performance versus other opponents.  And then they look at other, intangible signs.  Are their players healthy?  Are they experienced or are the teams filled with unproven freshmen who might wilt in the big game?  How did they do against big teams during the year?  How about fast teams that like to run?  How well are they playing now?

 

Much like fans, property managers are tasked to pick the best tenants when they get many applications for the same rental property.  Some, like Kentucky this year, seem to fall in the “no-brainer” category.  Great credit scores, great landlord history, make plenty of money to afford the rent, and stay away from trouble with the law.  They don’t seem to have any weaknesses and look to be a shoo-in for application approval.

 

But what about if Kentucky’s starting center gets hurt and can’t play?  Or in the rental game, you read about a company starting layoffs in the department where your “no-brainer” tenant has worked for the last 10 years.  Is that a cause for concern?  Yes, but how much so?

 

That’s a judgment call.  Kentucky has enough other talent to steamroll most teams on most nights even without their center.  And the prospective tenant could be just fine as she has plenty of cash reserves and a robust Rolodex where she could get hired anywhere in town with a quick phone call.  Or she might be in real trouble as she was living paycheck-to-paycheck and hasn’t updated her resume since college.

 

The other prospective tenants aren’t as polished (lower credit scores and income), but have dual incomes in disparate industries.  Would they be better bets?  How does a property manager know who to give the approval to?

 

There is no right answer.  Much like picking a bracket, some of it comes down to raw data and past landlord performance.  But some of it comes down to the experience of selecting tenants for many years.  I wish I had it down to a perfect science and could put it in a training manual (that I could sell for millions of dollars…).  But no matter how good a property manager is, no one can get them right all the time.  As my 3^rd grade teacher said emphatically, “that’s why pencils have erasers!”

 

So, what to do?  The right answer is closer to reviewing the raw data thoroughly and then looking for other signs.  Do they have a pattern of paying people on time?  Did their past landlords have good things to say?  Do they make enough money to afford the property with some excess funds still available if their car breaks down or they face unemployment?  Have they recently attempted to hurt anyone seriously (I’m half-kidding on this one)?

 

As for other signs… how did they sound on the phone?  Did they get the application materials back to us in a timely manner?  Are they pleasant to talk to?  Were they forthcoming and truthful with everything asked in their application?  Did they return our calls in a timely fashion?  Were they evasive in any way?  There’s a certain feel involved.

 

The other signs are tough to quantify.  But that is when picking good tenants turns from a science into an art form.  And that’s when the experienced know in their gut that Lehigh has a chance to take down Duke, even though they are a huge underdog.  And that North Carolina, despite an up-and-down season, seems to be peaking and can take it all this year. 

 

Picking tenants and the NCAA brackets isn’t as easy as picking all the favorites.  Experience counts.

 

Good luck with both and enjoy the tournament!                

 

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Tenants Love Rental Showings?

Continuing with the theme from our last blog, below is another letter (this time from a tenant) entitled, “I’m Lonely, Please Send More Visitors.”

Dear BDF Realty,

I was disappointed to give my 30-day notice to vacate the other day.  You guys are the greatest property managers (BDF side note: Wow!  Thanks!) and it will be depressing to leave the rental home.  I mean really depressing.

But much to my joy and amazement, I started getting calls from your showing service saying that people wanted to come to MY house to see it!  Here I am, bored at home with no reason to get out of the house, and I start getting call after call with people who want to set appointments to come over!

I mean here was my typical schedule before I gave my notice to vacate:

8 AM – 8 PM: bored at home-nothing to do

8 PM – 10 PM: “Arrow” comes on TV, followed by “The Flash” (Wednesday’s only)

BUT…after giving my notice:

7:40 AM: need to clean home before a Realtor showing

8 AM: leave home while Realtor shows property

8:15 AM: return home

8:45 AM: leave home for showing

9:00 AM: return

11:30 AM: leave home

11:45 AM: return

And that’s just the first morning!  I can’t wait to see how many people wind up stopping in when all is said and done.  I feel like the President! 

Thanks again!

Lonely

Okay, I’ve yet to get a letter like this and never expect to.  Tenants dislike rental showings for good reason.  Who wants strangers trudging through their homes?  Then having the expectation to keep the home clean while packing up boxes to move?  And then being asked to leave the home during the showings (that they are paying to live in, nonetheless!)?  I wouldn’t!

So why would tenants be asked to do this?

For several reasons:

1.  Usually it is a condition of occupancy that they sign on for in a proper lease

2.  It allows other renters to find a home for their families too.  The tenants were probably looking at some inhabited rentals during their rental home search.  This could be viewed as renter common courtesy.

3.  Being a team player for the owner with a slight mix of sympathy/empathy.  Vacancy costs money.  The less time the rental home sits vacant, the less financial and emotional strain on the owner.  Maybe they are renting out their house in another state and can empathize?   

Of course, to make it work for everyone, there are common courtesies that should be exercised.  A 24-hour notice should be honored.  If there are guests visiting or a child is sick, there should be leniency in allowing the tenant to cancel showings.  And I believe in giving the tenant final approval on scheduling showings; “It’s not a good day” is a valid excuse on occasion, though this shouldn’t be abused.  And no one should EVER just show up on the doorstep expecting to get in.

We’re all people and no one really likes allowing strangers into their home.  However, if done respectfully, all parties (tenants, owners, and property managers) should be able to live with them. 

Most tenants won’t “feel like the President” when dealing with multiple showings at their house, but even President Obama has to deal with things he’d rather not sometimes.  It’s a necessary evil in the rental game.

Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!