Charlotte Property Management Weekly: Too Many Repair Requests? 5 Methods To Stop The (Cash Flow) Bloodshed

As a property management company, we work to maximize the cash flow of our clients. Period. We don’t have a problem admitting that.




Sometimes things break in rental homes and that decreases the cash flow our clients receive. They don’t like it, and we don’t either. However, it is part of the game (pardon my street talk), so it is a necessary expense. Sometimes.



Normally if a repair policy is explained to tenants properly at the lease signing, there aren’t any problems. The landlord is responsible for operational issues; that is, if there isn’t any evidence of negligence by the tenant (if there is, the “Sorry if you smashed your toilet because your girlfriend dumped you for being volatile, but the bill goes to you…” message is sent). Then the easy stuff (changing light bulbs, air filters, etc.) is taken care of by the tenant. It’s simple stuff and everyone gets along grandly.



If the home is on the newer side and maintained, there just aren’t that many maintenance calls. Most people want their homes to operate properly (“hey, it’s nice to have the dryer dry clothes in less than 3 hours, so maybe I’ll clean the lint filter occasionally”), so they do the small things to keep it that way.



However, there are some tenants that seem to discover an awful lot of problems that they want the owner to fix. And when they are compared to other tenants, their identity becomes painfully obvious. The calls and the e-mails of their problems continue month-after-month. It gets to the point that everyone involved with managing the property has the tenant’s contact information memorized (“Oh, 704-xxx-xxxx? Mrs. X must be calling from work today.”) Sometimes, the repair requests are a string of bad luck and legitimate; often the tenant is trying to take advantage of the landlord’s altruism and is under the impression they don’t have to lift a finger because someone else will take care of them.



Repairs really hurt cash flow. But if the repairs aren’t done, unhappy tenants also hurt cash flow by trying to use their seemingly one point of leverage (holding back rent) to get what they want done. So what to do?



Before getting to some techniques to ward off unwarranted repair requests, I want to first iterate that almost all tenants (that I’ve worked with, at least) are reasonable with their repair requests. Most have busy lives and can’t be bothered will illegitimate claims. It’s not a huge problem on a whole. I find that doing the repairs that are requested builds trust and keeps everything running smoothly. So requested repairs should usually be done.



For the tenants that abuse the repair system, here are the top techniques to stop the illegitimate request flow:



1. Recalibrate expectations on repairs: Before the next repair is done, a meeting should be set with all principals on the lease. The purpose of the meeting (or call) is to reexamine the lease and go over exactly what is covered by the landlord and what is not. Also, it is probably time to schedule a walk-through of the house to make sure the maintenance agreement is being followed.

2. Alert the repair vendors that fraud is suspected: Vendors who visit the home should be put on alert. They can provide information about what claims are legitimate. If a claim is due to non-compliance with the maintenance agreement or rough play, the tenant needs to be billed for the issue, not the landlord!

3. Push back: If it was your house, what would you be calling a repairman fix, and what would you be doing yourself? That question is a good start to figuring out what repairs may be unnecessary for the landlord to cover.

4. Keep at code: The landlord is responsible, by law, to keep the rental home at building code. Nothing more. What is being requested beyond that?

5. Relocation: Maybe it’s worth asking the tenants if they would be more comfortable in someone else’s home?



Though this issue isn’t overly common, it can be uncommonly expensive and will continually siphon cash flow. If you find yourself signing over the monthly rent to the handyman month-after-month, it may be time to try something new!



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!)

Charlotte Property Management Weekly: “Free” Repair Quotes on Rental Homes Can Cost You Money

Everyone wants to save money! But to what lengths (and for what) does it make sense to find “deals”? It really depends on the urgency level of the need. Here are three scenarios of high, middle, and no urgency:




High urgency (nurse): “Your daughter needs the heart transplant now! Do we have your consent? …I don’t know how much it costs, sir… it will be itemized on your bill later, I suppose… No, there is no AAA discount on this procedure… I’ve never seen a coupon like that- it looks like you typed up ‘50% OFF’ and then wrote 'Group-On' on top of it… No, I suppose we don’t want to lose your business to a competitor… We’re losing her!! Yes, we do validate parking.”



Middle urgency (property manager): “The house needs one bedroom painted, the carpets cleaned, and the outside power washed before we can put it on the market… You said you want 3 quotes per repair?”



No urgency (sales clerk at Best Buy): “The new iphone detachable screen is really cool! You’re a loser if you don’t get one! We only have 10 million of these left, but when they’re gone, we’ll call our factory in China to make more… $199 for a screen to put on top of your screen (that already works) is a bargain. This is as cheap as it gets (until next week when ‘Detachable Screen Mini’ comes out). There is no discount; it’s under $200 bucks already, man! Go to another store then! …Fine, don’t call me crying when you are shunned socially and professionally for your weak iphone accessorizing…”



So the point of these scenarios is to illustrate that “high urgency” scenarios need to be acted on immediately, with no time to haggle. And “no urgency” scenarios allow time to shop vendors for price; time is on your side (yes, it is)!



But what about “middle urgency” scenarios? We run into these sometimes when tenants move out and the rental home needs to go back on the market. Houses need to be repaired, and some landlords want to quote out every repair multiple times to get the lowest price. This sounds reasonable, even prudent. The repairs do need to be made in a reasonable time, but not tomorrow or next week. Time is on their side (yes, it is?) to get repair quotes. Right?



Well, it’s a “middle urgency” scenario (not a “no urgency” scenario) because there are other factors in play. Every investment home has some combination of costs that accrue every day it’s vacant: mortgage payments, HOA fees, lawn care, utilities, property taxes, etc. For easy math, let’s say these come to $900/month. $900 split into a 30-day month is $30/day. This is a very real cost; the meter is running daily.



For this example, let’s say the initial repair quote comes in at $500. After getting 3 quotes per repair item, the repair quote is whittled down to $400. Congratulations- that’s a 20% savings of $100!



But, wait, is it really? Getting those additional quotes took 10 days. 10 days of vacancy multiplied by 30 days equals $300. So, to save $100, it cost $300. The net loss is $200, plus all the time and headaches it took to coordinate vendors and sort through repair quotes.



Unfortunately, this is not the totality of the loss sometimes. Empty homes are risky! Talk to any police officer and ask them whether they have any problems with vacant rental homes being broken into in this economy. If this happens, stolen appliances and break-in damages escalate the costs upward substantially. Remember: the longer the home is vacant, the higher the risk.



“Free” repair quotes can cost a lot! Don’t over-quote yourself into a financial loss!



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!)

Charlotte Property Management Weekly: Recruiting Great Tenants- Your Team Is Only As Good As Your Players

It’s been said the most important part of major college coaching is recruiting. A team’s ultimate potential can be limited to their talent level. Sure, good coaching can make good players better, but great players are the reason teams win championships and are consistently good.




I started thinking about this the other day when a friend of mine called. He told me that a friend of his bought a property management company in Charlotte and it is proving to be a nightmare. The company he bought has sloppy books, awful employees, and a large cache of substandard properties that are in disrepair. But most importantly, they have a lot of tenants that have not been paying rent and have stayed in the houses rent-free for months. His friend is watching his investment go up in flames as he tries to salvage what’s left.



This made me think. What would be the characteristic that would be most important to measure the strength of a property management company? Is it good employees, growing cash flow, long-term contracts in place, sound business procedures, or something else? They are all obviously very important. But what’s the ultimate key to success?



As I thought more about it, my head began to hurt and my mind drifted to sports:



Why did Coach Nick Nolte agree to buy Ricky a new truck in the movie, Blue Chips? Why are there so many recruiting scandals in college athletics? Why do I read about “tampering” charges in the professional leagues when teams illegally contact players when they are not allowed? Why are college coaches only allowed to send potential recruits a limited number of text messages and are restricted on how often they can call them? Why do coaches work harder in the offseason traveling to visit recruits than they do during the season? Why do the Charlotte Bobcats think they can rebuild the team with late round draft picks?



Then the answer occurred to me. The players are the most important thing. They directly dictate the success of a coach. If a team has great players, they will be a good team (no matter the coaching quality). That is why recruiting is so important and organizations are willing to push the envelope on wooing potential stars.



As a rule, every top-tier athletic team puts a premium on signing great players. And this is the same mentality that top-tier landlords and property managers, like you, must have to build a strong property management company and investment portfolio. It’s about getting great tenants for your properties. They will directly dictate your success.



When a great tenant applies for a property, it is imperative to let them know that you want them. You need them. You will treat them like gold if they would just sign with you (on the lease). Text and call them every hour (there are no contact restrictions in business, only the weirdness factor of over-communication). Add incentives. Buy them the pony they always wanted, as long as it is munching the grass in your rental home’s yard! Let them know your love will never end if they can out down a deposit today.



Great tenants provide so many great benefits! They pay on-time and in full providing consistent cash flow. They take care of the properties so they don’t fall into neglect. They let you know if your employees are lacking or slacking. They even take care of minor repairs on their own!



Your team, investment, and/or company is only as strong as the players it has signed. Maniacally pursue the best, get them under contract, and rest will take care of itself!



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!)

Charlotte Property Management Weekly: With Obama & Landlords, You Can’t Legally Withhold Payment

Taxpayer: “This country is going down the drain quickly with no end in sight! Obama is proving himself to be a bum like the rest of them. “Change to believe in”? I’m laughing too hard to retort. You wanna know what? I’m not funding this incompetent government anymore and will not be a party to it. I’m not paying taxes until this country is fixed!”




Tenant: “This house is killing me! This week the faucet broke. A month before it was the air conditioner. It took 48 hours for the landlord to get the maintenance guy to fix it in 98 degree heat! 98 degrees my family put up with! My sweet daughter, Abby, must have gone through at least 20 popsicles. “Daddy, why is it so hot?” she quietly bleated as she read “Seventeen” Magazine with a cold washcloth lain across her forehead (with the few remaining ice cubes that our (too small) freezer could muster). The landlord should be paying us to live in this house! I’m certainly not paying him this month! Next month’s payment is “under review” too; we’ll see how the faucet repair goes.”



Obama and (diplomatic and highly educated) landlords: “I feel your pain! Once, my radiator broke in my dorm room at Harvard and it just wasn’t fair that it took over 72 hours to repair! The economy is weak and jobs are scarce. Injustices like this need to be made right! But… like with all things that are dearest to us, these things sometimes take time. In the meantime, if you don’t pay me, your house will be taken away.”



The point of these fictitious quotes is that tenants and American citizens do not have to like what is going on with their house or country, respectively. But they still have to pay.



There seems to be a common misconception that home repairs and rental payments are linked. Legally, they are not. If the house is falling apart, the lease still stands. If the country is (hypothetically) suffering high unemployment and being financially run into bankruptcy, citizens still have to pay their taxes. It’s the law.



However, this is not an open invitation for landlords to not complete necessary repairs in a timely fashion. Slow and incomplete repair work makes tenants very unhappy; keeping tenants as happy as possible is paramount to having them stick around! Plus, there are other painful avenues unhappy tenants can take to legally have a home that is functioning to building code. It just can’t happen through rent abatement.



But I’ve seen this played out. Tenants go to court thinking that repairs not being done to their satisfaction will get them a free pass from eviction from a judge. This is just not the case. They find out quickly that their repair issues (even if extremely legitimate) are a moot point in an eviction hearing; these arguments are not heard because it’s not the place for them to be arbitrated. In an eviction hearing, it comes down to one question, “Do you have payment or proof of payment?” If the answer is “yes”, the tenant wins. If the answer is “no, but”, they don’t.



Rental payments and repair work are two separate issues. Tenants are obligated to pay by contract. That’s it.



You don’t have to like Obama, but you don’t want to try not paying him!



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!)

Charlotte Property Management Weekly: How To Handle Evictions And The Reasons To Avoid Them

Handyman: I was over working on your property and your tenant seemed to be really happy.




Owner: You would be too if you were living rent-free.



When tenants don’t pay, it is not good for anyone. Inevitably, things get put in motion. The owner gets upset and wants to know why they haven’t gotten their money. The property manager is spurred to issue threats to lower the hammer on non-payers. The tenants typically try to go “dark” (incommunicado), as Jack Bauer (and those in the spy game) would say.



I think of the Tupac song that I was mistakenly listening to a few years back. It talked about the deep pride he felt about having the ability to pay the rent. I believe that people do want to pay, but they can’t give what they don’t have. Life happens and things cost money. If the rent is not getting paid, it is never the only expense that is being neglected.



Unfortunately, there really isn’t much to do as a landlord but file for eviction if the rent money doesn’t come in. However, due to the costs, stress, and actual time, it is something o be avoided if at all possible! There are two common avoidance techniques that have minimal success:



1. Payment plans to catch up on rent: I’ve been burned on these! If the tenant is on a fixed income and is living paycheck-to-paycheck, there is really no way for them to get out of the hole. The plans seldom work. I really have to have history with the tenant and think highly of their character to entertain these.

2. Negotiated exits: this allows the tenant to leave without an eviction and saves the owner money for the court stuff. The only problem with this is, “How does the tenant have money to pay another landlord when he’s not paying you?”



So, how does one file for eviction as a private landlord? Well, in NC, this is how a normal eviction goes:



1. Make sure the tenant always receives a rental statement with what’s owed on the first of the month (this is your “demand for rent” letter). We e-mail them.

2. The first day evictions can be filed is the 11th of the month. You’ll need to go down to the courthouse with a copy of the lease, a few stamped envelopes, and cash. Ask someone where evictions are filed, go there, wait in line, fill out the paperwork and envelopes, and give these items to the clerk.

3. Once you receive the nod from the clerk, exit stage right (or left); just get out of there. Hanging out at the courthouse isn’t that fun. Or cool (unless you’re a high-priced lawyer working for Lockhart-Gardner).

4. Wait for the eviction court date to arrive in the mail in one of the envelopes you provided. The show up to court on that day 20 minutes early to fill out the paperwork that you’ll need for the trial. Do what the judge says. You should “win”.



You are now thinking, “Yeah! It’s over! I won! I knew I should have forgone mortuary school (stupid “Six Feet Under”!) and been a lawyer instead!” Uh, no. Not quite. The next steps which cost more money and take a month to complete are as follows:



1. Wait 10 days to file a “Writ of Possession”. This can be accomplished at the same desk at the courthouse. Please bring a new stash of stamped envelopes, cash, and the eviction notice you received in the mail from the court. You’ll repeat basically the same process for the eviction in step #2 with the new “Writ of Possession” paperwork.

2. Get out of there. Don’t mingle. Your head needs to be down and a beeline made for your escape vehicle. Pretend to be talking on your cell phone while speed walking. Wipe profusive sweat off of your brow. Wear a hood to cover your head, if weather appropriate.

3. Wait for the sheriff to call you to let you know when they will be at the house to change the locks. This takes a week or two. After they call, you’ll need to call a locksmith and schedule them to meet you at the house when you meet the sheriff.

4. Show up and be really uncomfortable. Watch the sheriff remove tenants from the home and the locksmith change the locks. Give the locksmith cash after he hands you the new keys.

5. The tenant now has 10 days to remove their things. They will call you to schedule a time for you to let them in the house. If their things are not removed within 10 days, you are required to store anything of value at your expense if they want it later (because you’re so nice (!) and it’s the law).

6. Begin the process of fixing up the house to get it in market shape.



I hope this is enough evidence showing that evictions are not desirable! To avoid these costly evictions, utilize thorough tenant screening procedures upfront!



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!)