“Unverifiable” Rental Tenants Can Be Like Rudolph and Save Your Christmas

“All of the other reindeers used to laugh and call him names.  They never let poor Rudolph play in any reindeer games.

 

… then all the reindeers loved him, and they shouted out with glee (whoo-pee!).  Rudolph the Red-Nosed Reindeer, you’ll go down in history!”

Rudolph the Red-Nosed Reindeer by Billy Gilman

 

Rudolph had a tough gig before becoming a legendary Christmas icon and saving Christmas one year.  Piecing together various biographical sources on Rudolph, it is clear he had a privileged, yet difficult, childhood.  Through his envied bloodline (the son of famed Donner and the beautiful doe, Mrs. Donner), he had both the connections and proximity to Santa to have a great life and career.  But the dreaded red nose seemingly doomed him to a life of ridicule and parental shame leading to his estrangement from the North Pole elite.  He found solace in the company of societal undesirables (among them a dentist!) before the serendipitous approach of uncommon foggy weather one Christmas Eve.  Santa took a chance on him and it paid off in spades.  The rest, as they say, is history.

 

When Rudolph was on the road with the undesirables, no one really knew his skills and upbringing (the bloodline, the advanced reindeer training, his untapped flight ability, etc.); they just knew he was sad, unwanted, and unloved.  He couldn’t pull out his press clippings from his pockets (no pants) or pull it up on the internet (no Wi-Fi on the Island of Misfit Toys).  And he didn’t really want to talk about his past, which recently included not even saying goodbye to his girlfriend, Clarice, the only one who really liked him for who he was (red nose and all).  He only had his focus on the future as he was trying to find himself amidst new circumstances.

 

Rudolph was a great reindeer; he just couldn’t prove it.

 

As Charlotte property managers, we get applicants who could be great tenants, but they can’t prove it.  And we want to be sure they would be before we approve them to live in one of our client’s rental houses, but the applications sometimes don’t reveal much.

 

For example, on our four main tenant screening requirements, we may receive a prospective tenant application with the following information:

 

1.  Credit report: very little to no credit history

Tenant explanation: “I don’t like debt.  I pay everything with cash.”

 

2.  Landlord history: scattered to none

Tenant explanation: “I lived with family or moved in with a significant other.  I was not on a lease or a mortgage.”

 

3.  Criminal report: nothing comes up

Tenant explanation: “I’m an outstanding citizen!”  (Kudos!)

 

4.  Income: no paystubs available

Tenant explanation: “I’m a small business owner or do work under the table.”

 

So what to do?  Much like Rudolph, there’s very little information to go on.  The tenant is basically “unverifiable”.

 

This is where it is easy as a property manager to punt and just reject the applicant.  There are a lot of fish in the sea and a verifiable tenant will probably be in contact soon.  Besides, there is a lot to lose.  If the unverifiable tenant pays rent and everything goes fine, then everyone is happy.  But if things go south, clients will understandably ask for details about the tenant screening.  “What do you mean you accepted a tenant with no verifiable information?  Remind me why I hired you????  Did you flip a coin on whether to approve them?”

 

So what to do? 

 

1.  Verify everything you can.  Get bank statements and W-2s.  Money is usually traceable in some form.

2.  Collect 2 months security deposit and as much upfront rent as possible in certified funds.

3.  Ask a lot of questions and do Google searches.  Unconventional tenants can require unconventional screening methods.  What does their social media accounts say about them?

 

We’ve found some great, long-term tenants that other landlords have rejected due to them being unverifiable.  We’ve also walked away from some that we just couldn’t get a good read on.

 

Santa gave Rudolph a chance, and Christmas was saved.  It is sometimes wise to give unverifiables a second look so rent is coming in during Christmas on your rental home.

 

Happy landlording!    

 

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, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Too Much Sympathy Can Kill Your Rental Business

“Moderation in all things, especially moderation.”

Ralph Waldo Emerson

Over the years as a Charlotte property manager, I’ve gotten a lot of calls from landlords who tell some version of this story:

We had placed a family of tenants into our rental home and everything was going great!  They paid on time for the first 8 months and were really a joy to interact with.  I mean, Brett, when minor repairs were needed around the house, they took care of it at their own expense- they would just call and ask if it was okay with us if they made the repairs!  They really were a beautiful family; you should just see their youngest daughter, Cybil- she reminded me of my granddaughter!  But, I digress…

The problems started when they were late in July.  Apparently there was some mix-up with accounting at their work and the paychecks weren’t cut correctly that month.  I was okay with it (things happen); they wound up paying on the 15^th that month and I didn’t charge them the late fee that I could have.  They assured me this was a one-time thing and they wouldn’t be late again. 

August 1^st came and went and there was no rent.  When I called to ask about it, I started getting voicemail.  Two weeks went by and I was wondering if I needed to start thinking about evicting them, but then they returned my call.  They said their car had broken down which left them without transportation to work, so they had to choose to pay for the car repair instead of rent (you can’t earn money to pay rent if you can’t get to work).  They said that was also why they didn’t call me back immediately; they didn’t have the funds to pay their cell phone bills either.  After apologizing profusely, they asked if they could wait until the 1^st of September to pay.  “Of course,” I said.

September 1^st came and we got a check for about a quarter of the rent (for August).  They said the rest would come from the paycheck on the 15^th.  When the 15^th came, they called to explain that it was either paying back rent or paying the light bill, and the children couldn’t live without heat.  And they also had to pay for Cybil’s dance recital which she had been looking forward to all year.  “Our kids need to come first.”  Then they told me what a great landlord I was and said they were so appreciative of my understanding.

Brett, this story goes on, but I’ll bottom line it for you.  The tenants are 5 months behind and I am beside myself and out of patience.  I wish they would just get caught up!  Where do I go from here?

First of all, there is nothing wrong with being a nice, understanding person.  We have enough jerks in the world.  And what’s done is done; it’s a sunk cost and it’s time to deal with the facts on the ground.

If the tenants are 5 months behind, it’s time to evict.  There is no way that they can get caught up at this point.  Find an eviction attorney (ask a property manager for a recommendation if you need one) and get the ball rolling ASAP.  In NC, you could be looking at 6-8 weeks if the tenants prolong the process (and possibly longer if they know how to play the game).  You need to get your house back and stop the bleeding.

A caveat- I don’t ever want to evict anyone.  It’s expensive, it’s time-consuming, and it is a lose-lose-lose proposition (owner/property manager/tenant).  At lease signings, I communicate to tenants that if they are having payment issues (life happens), to contact me immediately so we can work something out.  Whether that means a payment plan, negotiated vacancy, or something else, we need to talk it out and negotiate a workable plan.  We’ve worked things with tenants in the past that has made the best out of a difficult situation.  Everybody needs a place to live.

But we’ll never get to 5 months of non-payment.  It just can’t happen.  Sympathy, at that point, turns into taking advantage of home owners, which isn’t fair.

Though every tenancy situation is different, there are a few non-negotiable parameters:

1.  Non-payment can never get past 30 days.  That’s 2 pay periods and past the point of return for most tenants.

2.  If a payment or negotiated vacancy plan is agreed upon, it is set in stone.  If the plan is breached (for any reason), eviction must be filed. 

3.  Don’t take it personally.  Rental properties are a business and sometimes business stinks.

I am all for sympathy.  But with rental homes, sympathy can kill your business if not used with moderation.

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, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

The Miami Heat Big 3 & Your Property Management Maintenance Team

The Charlotte Hornets opened up the NBA season the other night against the Miami Heat.  For NBA fans, this is exciting stuff!  The Hornets hope to replicate some of the past success of the Heat, while the Heat are looking to find success again.

 

How well have the Heat done in the past 5 years? 

 

2011: Eastern Conference Champions

2012: NBA Champions

2013: NBA Champions

2014: Eastern Conference Champions

2015: Missed playoffs altogether

 

So things were rolling from 2011-2014.  Making the NBA Finals every year (and winning twice!) is unbelievable excellence.  How did they achieve this?

 

It started with the Heat picking up two great players, LeBron James and

Chris Bosh, in free agency after the 2010 season.  When they paired them with Dwayne Wade, their existing All-Pro, they had the talent to take on anyone in the NBA.  And through hard work, they bonded together and had immediate success. 

 

Along with the “Big 3”, the Heat had a good bench of role players, which changed often from year-to-year.  But as long as Bosh, Wade, and King James were pulling the scoring load, the Heat’s role players were able to offer enough support to make them champions.

 

The Heat’s success also translates into winning property management maintenance.

 

90% of property maintenance issues with rental homes can be handled by another kind of “Big 3”:

 

1.  HVAC company: Air conditioning and heat are a big deal for tenants.  Having a reliable and timely HVAC company on call is huge.

 

2.  Plumber: Sanitation, leaks, and hot water heaters are also very important.

 

3.  Handyman: For the “miscellaneous”- Broken windows, doors, drywall repair, paint, power washing, gutter cleaning, etc., etc. 

 

If the maintenance “Big 3” are intact, the rental home should be in good hands for landlords.  They will handle most of the on-going issues. 

 

But never underestimate the role players; they are called less often, but play vital roles.  Vendors such as pest companies, roofers, electricians, painters, house cleaners, carpet cleaners, lawn care, and others are important to have on your team as well.

So what, you may ask, happened to the Heat in 2015?  King James left the team as a free agent to go back to play for his hometown Cleveland Cavaliers.  Bosh and Wade both missed many games due to injuries.  And the remaining, healthy role players around them couldn’t shoulder the load themselves without them.

 

Having the “Big 3” is important to property maintenance success.  If one is lost, making sure a worthy replacement (Kevin Durant to the Heat in 2016?) is imperative!

 

Happy landlording!

 

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, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Charlotte Section 8 Leases: Should I Renew Them?

“Enjoy Free Rent!”

(Former advertisement to entice landlords to put their houses in the Charlotte Section 8 program)

Q: My Section 8 tenant’s lease is set to expire next month.  Should I offer to renew it?

A: Maybe…

As a Charlotte-based property manager and real estate investor, I’m a huge proponent of renewing leases.  I think it makes unbelievable financial sense; there is no missed rent from vacancies, no fix-up and holding costs, no management costs for landing new tenants, and it provides the ability to raise rents to stay around market rate.  And it also saves everyone a lot of work.  Whew!!

It really takes a lot of chronic tenant wrongs for me not to recommend renewing a lease.  Besides situations where an owner wants to move into their property or sell it, I can count on one hand the number the tenants I’ve not recommended renewing.  If a tenant wants to renew at market price, I’m asking where I should send the new lease.  It’s typically a done deal.

So when I was asked the other day whether I’d recommend offering to renew a client’s Section 8 lease, my fingers naturally wandered to the “Y”, “E”, and “S” keys on my laptop.  Then they stopped and I felt my stomach cramp up.  Can I really recommend this for this property?  The issues:

1.  The rent is not close to market rate even after filling out the moderately arduous Section 8 paperwork for an increase every year.  The Section 8 paperwork says we can ask for a maximum 5% increase a year; we’ve only been getting approved at 2% increases ($800.00 rent turns into $816.00- woo-hoo!).  And this is after increases were frozen a year or two ago, while private market rents (aka non-Section 8) have been going up by 10-20% for the past few years. 

2.  Annual Section 8 inspections are a hassle and seem to always result in a “fail” for trivial issues.  A true example of a recent “fail”: “paint is peeling on the ceiling.”  In a non-Section 8 world, if peeling paint on a ceiling was bothering a tenant, they would be told they were free to grab the extra paint can in their garage and touch it up.  In a Section 8 world, that is a “landlord responsibility” and a handyman must be sent out or rent payments will go into “abatement”.  Abatement is a very bad place to be as no rent comes in and past payments are clawed back (which would never happen in the private sector).

Unfortunately, landlords and property managers have figured out that:

Less Money + More Expenses + Government Regulations/Paperwork = Bad Deal

It’s not just Charlotte.  In Austin, Texas, there was a law made (that was later repealed) that required landlords to accept Section 8 tenants.  A study the city commissioned said that 90% of Austin landlords would not accept Section 8.  Due to the fact that most landlords are investing in real estate to maximize their financial return, this is not surprising.

So as property managers whose job it is to maximize our clients’ ROI, we stopped recommending Section 8 as a source of new tenants several years ago.  As discussed, the financial numbers didn’t add up.  However, we did allow Section 8 tenants who wanted to stay to continue to renew their leases if they chose to.

But should we continue to recommend allowing renewals?  It really comes down to whether the owner wants to expend the funds to fix-up the property and take the hit of vacancy until a new, non-Section 8 tenant comes on board.  Some, including me, have continued to renew the Section 8 leases until the tenant decided to not renew and vacate;  and then, once vacant, go exclusively to the private market going forward.  But if the rent differential continues to grow between Section 8 and market rate rent, the auto-renewal policy will need to be revisited if the Section 8 tenants still want to extend their leases.    

It’s tough to disrupt rental continuity and I don’t usually recommend it, but it may ultimately pay to take a closer look at the numbers before rubber-stamping your Section 8 lease renewal!

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, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Do You Want to Rent Your Charlotte Rental Home to Anthony?

Who needs a house out in Hackensack
Is that all you get with your money
It seems such a waste of time

If that's what it's all about
Mama if that's movin' up
Then I'm movin' out
I'm movin' out

“Movin’ Out (Anthony’s Song)” by Billy Joel

People move out and relocate for many reasons- a new job, real love (isn’t that sweet!), real love that really isn’t (not so sweet), the need for new scenery, the need to get out of town (Jack Bauer fleeing the US for the UK in Season 9 of 24), Anthony getting out of Mama’s house, etc…

And most of them, like Anthony, need to find a place to live.  So property managers get rental applications from out-of-town folk and need to screen them.  It seems like it would just be business as usual.  But there are more factors to consider.

We’ll start with the basics:

1.  Credit check: Anthony saves his pennies, so I’m optimistic.

2.  Criminal check: He seems frustrated, so we’ll have to see on this on.

The income check seems straightforward; people make what they make.  But figuring out how much free cash flow is available can be muddled if the prospective tenants have financial baggage where they are coming from.  For example, are they homeowners?  That’s another house payment they are responsible for, and one that could rival where available funds would go if things got tight (pay for the house they own or pay rent for the one they don’t?).  If they make enough to afford two house payments, that’s great.  But most people don’t and it adds a layer of risk.  Renting out or selling their out-of-town homes is an uncertain thing and can provide short and long term cash requirements.  However, Anthony lives with Mama, so he’s good there with no extra house payment.

The employment screening also adds a potential issue.  Unless the prospective tenant is in largely the same work position with the same boss at the same company, there is uncertainty on how things will pan out.  When a prospective tenant has been in a job for a year or two, it shows they can get along, handle the job, and fit into the corporate culture.  New jobs in new cities are a step into the unknown.  And that creates a greater amount of risk.  Is Anthony transferring to Charlotte with a position with the same grocer or does he hope to latch on with the local Harris Teeter?  This adds some uncertainty to his application.

A quick caveat: “Risky” doesn’t necessarily mean bad.  When I think of our best all-time tenants (sigh… love you guys!), many of them were relocators with the “issues” described above.  

So what to do about Anthony?  His credit score will be a big indicator.  If he is in the 700-800 range, this tells me he knows how to handle his finances well and can make things work through potential adversity.  If it’s in the 500’s, I’m more nervous.

And cash is king.  How much in liquid assets does Anthony have?  He can send bank/brokerage statements that can prove he has funds to fall back on or tide him over until he’s up and running in Charlotte.

Anthony may want to get out of the Tri-State area, shun Hackensack, and come to Charlotte, but smart landlords will want to check Anthony’s application closely.  He may still need to stay in Mama’s house for a little longer to save more money, line up a job in Charlotte, and pay his bills on time to improve his credit score.

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, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

You Break It, You Bought It! Avoiding Rental Home Repair Costs

The dreaded scenario…

 

You enter the “4^th Century Priceless Vases” store with your 3-year old child sleeping in his stroller.  “While he’s sleeping I might as well find a birthday present for Uncle Milt,” you quietly say to yourself as you peruse the priceless artifacts (surprisingly all with prices on them…).  As you turn to the shop owner to ask if there is a chance that the price of the orange vase had mistakenly had too many zeroes added to it (a simple clerical issue could happen to anyone!), you hear a crash behind you.

 

Looking at the shards of glass on the floor and your giggling, (temporarily) smiling son, you realize this could be an expensive trip.  The shop owner, with arms crossed on his chest, points to the antique sign on the wall:

 

“You Break It, You Bought It!”

 

Ouch!  

 

A better scenario for everyone would be that “4^th Century Priceless Vases” decided years ago to elevate every shelf in the store to a minimum of 4 feet off the ground and added a feather-coated floor.  The most expensive vases were put behind locked glass and could only be accessed by store personnel.  This way they were able to decrease breakage and save money.

 

On a similar vein as a Charlotte property manager and fellow real estate investor, it pains me (sad, but true) when I get repair calls from tenants on things that could have been avoided.  By spending money on features (“being nice”), it winds up costing in service calls and replacements for years.

 

My 3 main culprits on optional home amenities that always seem to break:

 

1.  Icemakers on refrigerators (ugh!!)

2.  Washers & dryers

3.  Gas fireplaces

 

Most leases say that if something is working when a tenant moves in, it is the landlord’s responsibility to pay to keep it working (aka “promptly repair all appliances and facilities” under Landlord Responsibilities in the NC standard Realtor lease).  This costs money.

 

But what about if you took a page out of the “4^th Century Priceless Vase” store’s playbook and made breaking these things close to impossible?  Sounds good!  But how?

 

Don’t own them!  Nowhere in the lease does it say you have to have these things in your rental house.  So don’t!

 

I see no rent difference in Charlotte single family residences in whether you have these niceties or not.  So, I would highly recommend dealing with my main 3 culprits in the following manner:

 

1.  Icemaker on refrigerator: when you replace your refrigerator, get one without one!

 

2.  Washer & Dryer: sell them on Craig’s List the next time your house is vacant

 

3.  Gas fireplace: turn it off and let the tenant know it is not to be used.  If they insist, let them know they are responsible for its upkeep.

 

Some parts of maximizing rental home ROI is addition by subtraction.  It’s tough to break expensive vases when you can’t get to them, and you don’t need to perform maintenance on items that aren’t there.  When there is less to break, there is less to be bought!

Property Management Wisdom: Pass That Peace Pipe with your Tenant

If you're feeling mad as a wet hen,
Mad as you can possibly get, then
Pass that peace pipe, bury that tomahawk
Like those Chichamecks, Cherokees,
Chapultepec's do.
That cold shoulder never solved a single complaint.
When you're older, you'll wipe off all of that war paint.

(Hugh Martin - Pass That Peace Pipe Lyrics | MetroLyrics)

https://www.youtube.com/watch?v=wCNa-AT9hOQ&feature=player_embedded

Blessed are those who find wisdom, those who gain understanding,

for she is more profitable than silver and yields better returns than gold.

She is more precious than rubies; nothing you desire can compare with her.

Long life is in her right hand; in her left hand are riches and honor.

Her ways are pleasant ways, and all her paths are peace.

Proverbs 3:13-17 NIV

When I was a younger property manager starting out in Charlotte, I was all about the letter of the law (or in this case, the lease).  “Follow it, or else!”  “According to section 7.6, you are in breach of contract!  Better get a lawyer!”  “No payment yet?  I’m sick of excuses!”

Property management can turn you into an ugly person.  It’s really set up in a way that promotes divisiveness.  Property managers are in one corner sparring for the owner’s (their client’s) interests.  The tenant is fighting to protect their interests.  Who pays to replace a burned out light bulb?  You do!  No!  The thing was already burned out when I moved in!  You should pay!

What I’ve found over the years is that being a stickler and jerk isn’t effective.  It’s bad policy, both professionally and personally.   

Through the years (much like King Solomon’s advice above), I’ve found the wise path is to take actions that promote pleasantness and peace, whenever possible.  It’s more profitable and much less stressful!

To keep the peace, keep the following in mind:   

1.  When e-mails start getting negative, stem the tide and pick up the phone.  The game of “who is smarter/snarkier” in e-mails with your tenant is a game of LOSERS played by LOSERS.  If you must, save your “clever writing” for a novel (or your property management blog).  

2.  “Seek first to understand, then to be understood.” (Stephen Covey).  We argue about problems.  Problems need solutions.  Listening to the tenant’s needs and thoughts provides more information to formulate peaceable solutions with.  Enough said.

3.  Real professionals come up with compromises that can work for both parties.  This is where property management becomes art, as opposed to robotic, Draconian ruthlessness.  No one said property management has to be a zero sum game where one party loses and the other wins. He who lives by the sword, dies by the sword.

So, bury the hatchet and try to work issues out nicely.  Pass the peace pipe with your tenant and enjoy the rewards!

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!

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!