Santa’s Influence & Rental Home Inspections: Naughty or Nice?

 

He's making a list
He's checking it twice
He's gonna find out who's naughty or nice
Santa Claus is coming to town

("Santa Claus Is Comin' to Town" written by J. Fred Coots and Haven Gillespie)

 

Oh, Santa Claus!  He’s the mythical man who causes such delight and fear in the hearts of children (and some misinformed adults).  He can be a best friend who showers good kids with gifts, or a cold, disapproving, gift-withholding coal-dispenser. 

 

Parents have long used Santa’s inexplicable worldwide influence to ply good behavior from their children, especially in the month of December.  There are several proven manipulations:

 

1. Santa the Spook: He’s watching you… all the time… his values are perfectly aligned with your parents… you could blow this Christmas big-time if there are any incidents… he sees all- yup, even that…

 

2. Santa the Bully:  Do you want to get any presents???  Do you??? Then you better be good!  Do you think Santa is playing?  He’s been doing this forever and knows payback better than anyone.  Do you feel lucky, punk???  Don’t try Saint Nick …

 

3. Santa the Eager Rewarder: Santa loves you- he really does.  He wants to get you those Legos… but if you take the screws out of your sister’s bed, how is he going to justify giving you the galactic mother ship when Mrs. Claus asks?  Even the reindeers would revolt if you were rewarded for that behavior.  Just make it easy, be good, and let the Lego ship will fly down your chimney on Christmas Eve…

 

The Santa illustration can be carried over to our bi-annual home inspections.  For clarity purposes, our rental home inspections include an on-site visit of approximately 10 minutes where we have a checklist of things to look at (air filters, smoke/CO detectors, pets, smoking, etc.) and we take some pictures of the interior and exterior.  And, yes, we check our list twice.

 

The question is: “Are home inspections naughty or nice?”

 

As a property manager, I initially wasn’t a huge fan of conducting home inspections and had them on the “naughty” list.  I figured the tenants were going to be staying in the home largely regardless of what we saw (short of some major discovery at the home) for their lease duration, so I wasn’t sure what we were trying to accomplish.  Badgering tenants into compliance also seemed to be a loser’s battle.  And, to boot, tenants did not like the home inspections either and would gripe.  The whole thing seemed like a waste of time and resources to me.

 

But we did them anyway.  As time went on and we had years of home inspections under our belts, visiting the homes twice a year proved to be really beneficial!  At first take, there were some smaller, auxiliary benefits for our owner clients.  We were able to catch some repairs early and head off some more major issues.  We had a good idea of what a home was going to look like after the tenants moved out.  We could eyeball certain tenant complaints in person and see if they had merit.  We built better personal relationships with some of the longer term tenants we would visit.  And we elongated the life of HVAC units as we made sure the air filters were changed regularly.

 

But the largest benefit was that we got the homes back in better shape.  And I would attribute that to the “Santa” influence effect.  If people think someone cares and is actually checking, people tend to put more thought and time into their efforts.  Home inspections are a good reminder that the landlord cares how the rental house is kept and the tenants should too.  And most of them do!

 

Rental home inspections seem to limit naughtiness.  So Santa (and this property manager) now put them firmly on the “nice” list.

 

Merry Christmas & Happy Landlording!

Retired Boomers & Seasoned Tenants: Needing People Who Get Things Done

 

 

 “The information learned while attending college is meaningless to employers; the college degree itself is the prize.  It shows you were smart enough to figure out how to graduate.”

(My late brother, Gregg Furniss)

 

My wife and I were coming back from a weekend trip recently and stopped in for a “quick” bite to eat at a roadside Wendy’s.  Oh, I was psyched to take down my chocolate Frosty. 

 

We were waiting in line inside the restaurant and started to talk to some older gentlemen behind us.  I had my UNC sweatshirt on and they were making some small talk about the upcoming basketball game that night.  They were nice guys, probably retired, as they seemed to have no issue with the 20-minute wait.

 

Me, on the other hand… I tried to game the system and quicken things up.  I popped out the Wendy’s app on my phone and ordered from there, hoping to just nod at the cashier and pick up our order when we eventually got to the front of the line.  But, as it turned out, things didn’t pan out as expected…

 

Cashier: Welcome to Wendy’s!  How can I help you?

Me (smartly): I ordered on the app (and picked up a free large French fry for doing so too) and already paid for it.  It should be under “Brett”.

Cashier: Oh… mobile ordering hasn’t worked in weeks.  Can I take your order?

Me: But I already paid…

Cashier: Oh?  You’ll have to figure out how to cancel your order.

Me: It already ran my credit card.  How does one cancel the order when the app says it’s already in my “order history”?

Cashier: Not sure.

Me: OK… I guess we’ll order and pay again (and forfeit the free fries for mobile ordering…)

 

And when we finally got the food, the order was wrong.  From a customer perspective, it was a fail.  However, anecdotally-speaking for current retail establishments, this seems to be par for the course due to COVID-related employment shortages.

 

I thought of those older guys behind me.  They seemed to be smart (they’re UNC fans!) and unemployed.  And I’d argue underutilized.  I wanted to make a passionate plea- we need you guys! 

 

When Boomer-bashing became in vogue recently, it was largely unfounded.  These guys (and gals) helped build this country.  They’ve got skills we’re sorely lacking right now (especially on the retail front)- they have a track record of getting things done!  Every time I’m getting frustrated trying to buy stuff in person, I’m thinking I want to fill out an application and help the establishment do things right. 

 

But as a Gen Xer, I’m in the thick of it.   I’ve got a job, two young kids, and don’t have the time to take it on.  But our country has millions of unemployed, well-enabled potential workers on the sidelines.  We need you, retired Boomers!  Help us!  Your wisdom and leadership would make a world of difference.  You’ve worked for years in different environments and persevered.  You could help train up broken places of business and be helping co-workers and society in general.  You got things done and we are in a place where we need people to do just that.  And it could be fun!

 

Experience counts.  And it counts with rental tenants too.

 

When looking at rental applications, there are a lot of schools of thought on what to look for to secure the best tenants.  We look at credit scores, criminal background, income, employment, and landlord history.  But as someone who has done this for a while, landlord history trumps everything.  Do they show a pattern of paying on-time and staying around for a while? 

 

For example, if a prospective tenant has rented somewhere for 6 years and has largely paid a comparable rental rate on time, my expectation would be that they would continue to do so in one of our rental homes.  Unless there was something completely out of whack in the other screening checks, I’d take them in a heartbeat.  Low credit score?  If they’ve gotten the rent paid for 6 years straight, they’re probably a good bet.

 

Generally-speaking, most of our owner clients want tenants who are longer term, do small repairs on their own, maintain the property well, and pay regularly.  These seasoned tenants typically have rented for years and know how to be good occupants.  They ask for help when needed, but understand the game.  They take care of their end and we take care of ours.  Everyone wins.

 

As a society, we need good employees.  As a property manager, we need good renters.  People with a history of accomplishment are valuable.

 

Happy Landlording!

Rental Homes: You Break It, You Bought It?

 

   

“The “Pottery Barn Rule” is an American expression alluding to the policy of “you break it, you bought it” or “you break it, you remake it”, by which a retail store holds a customer responsible for damage done to merchandise on display.  It generally ‘encourages customers to be more careful when handling property that’s not theirs.’”

Wikipedia definition of the “Pottery Barn rule”

 

I think every parent has there own story on this concept.  My version comes in “Hobby Lobby” when my young son smashed a glass Christmas vase while “admiring” it.  I was within a 50-yard radius (which apparently puts me in the “bad” or “absentee parent” category); I heard the crash and prayed no Furniss was involved.  I wasn’t so fortunate.

 

The next step was to ‘fess up to a cashier or store manager.  As I searched the available employees up front, I was left with the strategic decision of who to approach:

 

1. The 17-year old (does he look apathetic or one that would stick me with store policy?)
2. The middle-aged woman (does it look like she might sympathize/empathize?  Or is she the type that makes an example of a parent who prioritizes reading “Calvin & Hobbes” ornaments over watching his kids on the other side of the store?)

 

The downside of either was $17.99 + tax and a stern look.  The upside was getting off with a warning.  I approached the front gingerly and dutifully offered to pay.

 

“Don’t worry about it!  It happens all the time!”, the middle-aged woman cheerfully chirped.  “Chip!  Go clean up aisle 5.”  The 17-year old gave me a look and grabbed a broom.  Mercy won out.

 

One of the hardest things of being a property manager is the security deposit dispensation after a tenant moves out.  Homes are rarely left in perfect shape which leaves the owner paying a bill to get the rental home back in market shape.  The question that is left is how much of the bill should the tenant shoulder and how much falls under “normal wear and tear”, which is legally permitted. 

 

The problem is that nothing in a house costs $17.99!  Things are expensive.  Steam cleaning a carpet costs a few hundred dollars; if the carpet needs to be replaced, it’s now in the realm of thousands of dollars.  The costs are similar for painting- touch-up can be much less versus a full paint job, but it’s still in the several hundred dollar range. 

 

Very few tenants ‘fess up and offer to replace the carpet or paint the house after they vacate.  In fact, most say that the “place was like that when they moved in” and not getting their full security deposit back is nothing short of an injustice.  Property managers tend to utilize pictures/videos and tenant-filled out “move-in inspection reports” to document what the home looked like prior to home occupation.  These are helpful to ascertain the truth.

 

Regardless, costs can be high if a home is not taken care of.  And if not, there can be a large degree of sticker shock when a tenant receives a bill for repairs that runs in excess of their security deposit.  How could this happen?

 

The components of homes are expensive.  And someone needs to fit the bill.  The assumption can’t be made that the landlord pays for everything short of a wall being knocked down.  “Normal wear and tear” cuts both ways.  Abnormal wear and tear is costly and the tenant is legally responsible for it.

 

It is a win-win when a landlord can return a non-docked security deposit to a tenant- trust me!  Then no one needs to shell out funds to repair folks and a house can be turned over for another family to move into; this is the most desirable and profitable outcome for all involved.

 

But, with rental homes, if you break it, you bought it.  It may “happen all the time!”, but someone has to pay the piper and most home issues are not cheap to fix.  Smashing a $17.99 Christmas vase is one thing, but see what the “Hobby Lobby” cashier says if your kids clip the branches of their $2K “Super-Deluxe” Christmas tree.

 

Happy Landlording!

Comfort of Old Cars & Non-Perfect Rental Homes: Does Anyone Care?

 

 

“Champagne tastes with beer budgets.”

Common real estate agent lament

 

I drive an old car.  And it has lots of miles (almost 300K!).  I’m reminded of this from time to time:

 

“Dude, seriously?  You’re driving that?  Don’t you want to step things up a little?”

An old friend

 

“You thinking about buying a new car soon?  I only ask because I’m looking to buy a car for my teenager and thought you might be interested in selling… How does it run?”

Pastor at my church when I saw him in the parking lot

 

I get it.  Nothing looks like success more than a new, nice car.  If you want people to think that you’re the “property manager to the stars”, you shouldn’t be driving a beater.  Realtors especially lock into this mindset.  A nice car means lots of closed sales.  “You look good, you feel good, you sell good” as the old salesperson mantra goes.

 

But there are positives to driving a beater.  First there’s an overall peace of mind (if it doesn’t breakdown).  For example, when I take things out of my car, I don’t particularly care if it scratches the paint or rips the seat.  When I walk out of the supermarket and someone has dinged my door, I’m OK.  When my young kids spill something in the backseat, I’m not reading them the riot act.  I’m cool.  No worries.

 

There’s also the financial piece.  There are no car payments.  The taxes are low.  Occasional repair bills are taken in stride as they are lower then having a new car.  Insurance is lower with a “liability-only” policy.  I’m not worried about additional miles detracting from the value of the car.

 

Most people don’t subscribe to my “peace of mind” thinking.  They want to look cool.  I’m OK with that, to a point.

 

I see a similar thought process play out in rental homes.  As rental rates continue to rise significantly annually (in the Charlotte-metro area, newly offered rents increased 16.7% from September 2020 to now per CoStar), the tenant income levels needed to support the higher rents also need to rise significantly.  But people’s incomes are not going up 15%-20%.  This is where all the press about the lack of affordable housing comes from.  Renters are becoming “severely cost-burdened” where over 50%+ of their incomes are going to housing costs.  That’s a huge percentage (which many experts call a crisis).

 

What has contributed to this crisis?  One factor is the decision a landlord is generally left with after their tenant moves out and they are preparing the house for the next tenant.  Do they spend a lot of money to make the rental house look great (full paint jobs, new carpet, new appliances, etc.) or do they try to “let it ride” (minimal to no touch-up paint, steam clean carpets, entry level appliances, etc.)?  I think with all the HGTV housing television shows, many owners decide to fully refurbish their rental homes.  By employing this strategy, they are looking to get top rent when it goes back on the market.

 

This only works when tenants play along.  Tenants need to be willing to sacrifice a higher percentage of their incomes for a nicer, updated home.

 

And they are!  Even when they clearly can’t afford it.

 

When some of our clients “let it ride”, we accordingly price the house lower.  The owner chooses to accept below-market rents to avoid a pricey fix-up bill.  They play the long game; every year that goes by, they use the rents to lower their mortgage payment until it goes away (that’s when the landlord game gets a lot more fun!).  And as a bonus for the tenants, they keep more of their money.  They also get a lot more leniency on their security deposit deductions as the house is already worn, so any mishaps they inflict on the house aren’t so noticeable or costly when they move out.

 

But many tenants choose not to make this trade-off.  “The carpet is stained!  The walls have some scratches!  The refrigerator is old!”  Um, that’s why it is priced lower.

 

Most tenants don’t seem to care.  Frankly, it’s shocking to me.  I’ve expected more tenants to happily make the trade-off for the peace of mind it offers.

 

Old cars may not look cool, but they may allow for a cooler, more peaceful life.  But if this line of thinking has little appeal, I suppose landlords need to give people the housing they want.

 

Happy Landlording!

Do You See Property Management Like Michael Jordan?

 

“Sometimes when I consider what tremendous consequences come from little things, I am tempted to think there are no little things.”

(Bruce Barton)

 

“Catch for us the foxes, the little foxes that ruin the vineyards, our vineyards that are in bloom.”

(Song of Solomon 2:15)

 

A while ago, I was talking to a family member I don’t get the opportunity to converse with very often.  It turned out he owned an out-of-state rental property that he was self-managing and he began to tell me about it.

 

Family Member: So things are going great!  I have a long term tenant who makes her $800.00 rental payment like clockwork every month; she even has it direct deposited into my account on the 1^st!

 

Me: (talking): Reliable long term tenants are awesome.  Congrats!

Me (thinking): $800 a month?  Could that possibly be close to the going rate in this crazily appreciating housing market?

 

FM: And I don’t even have to think about the house.  If she needs something repaired, she calls.  If not, I never hear from her.

Me (talking): Low maintenance tenants are great.  Congrats!

Me (thinking): No on-site inspections ever, not even a heads up from a repair vendor you work with regularly that can let you know if they see something awry?  Are the air filters being changed?  Animals in the house?  Smoking indoors?

 

FM:  And it’s a total win-win relationship!  She doesn’t use the all the space, so she rents out some of the rooms on Airbnb for extra cash.

Me (talking): I guess that ensures she can make rent each month.  Congrats!

Me (thinking): If you are allowing this, are you getting a cut?  That seems like a lot of risk as the homeowner for (what sounds like) no compensation.  Do you know who is coming in and out of your home?  Is there any type of insurance being utilized if a renter is an axe murderer and takes out a few neighbors or starts cooking meth in the house?  And is there consideration for all the people rolling through adding additional wear & tear to the home?

 

When you’ve done something as a vocation for a while, your thinking gets warped and can really make you sound like a wet blanket.

 

I imagine it’s like telling Michael Jordan you put up a shot in a pick-up game at the park.  He sees a different game than a weekend player.  He might ask:

 

Where did you shoot from?  How much space did the defender give you?  Did you jab step?  Was there a lane available to drive to the basket?  Where were your teammates?  Should you have passed it out instead?  What was the score at the time?  Who was sliding back on defense to cover your man if your opponent threw a long pass down court off of a rebound?  What type of loft did you get on the release of your shot- was there potential for a long rebound?  Did you feed the ball to your big man inside first?

 

Whoa!  I thought basketball was supposed to be fun?  That sounds like school with an aggressively tense teacher.  I mean, do these small details really matter anyway?

 

I think so.  When I’m flying, do I want my pilot checking the wind direction or knowing what to do if geese get in the plane’s path (kudos, Sully!)?  Or if my daughter is going to the doctor, do I want a licensed professional who knows what questions to ask and what tests to run to head off any larger health issues?  Of course!  One missed detail could bring dire results.

 

Michael Jordan won six NBA Championships by being detailed-oriented (and really good, of course!).  In the same way, it’s imperative to have a property manager who is experienced enough to ask the right questions and be uptight on the details (even if it makes for awkward conversations with family members sometimes).

 

Happy Landlording!

Lease Renewals: Lock in the $2.00 NYC Breakfast!

 

 

 

 “If I can make it there, I’ll make it anywhere, It’s up to you, New York, New York…”

“New York, New York” by Frank Sinatra

 

I remember living in New York City (NYC) when I was first out of college.  All of the big buildings, happening things going on, the energy, the lights, so many people… it was amazing to behold.  It seemed like everything that was going on in the news was happening right around the corner from my apartment.  It was really cool.

 

But it was really expensive.  Everything cost so much, especially compared to college life.  After my first week of work, I went out with some colleagues and offered to buy the first round of drinks- big mistake! 

 

“That will be $90.00, sir.”

“No, I’m sorry… There must be some misunderstanding.  I only ordered 5 of them and we just got here.”

Weird look.  “Um, it’s $90.00 sir.”

(Gulp)  There goes this week’s money…

 

And that was 20 years ago.  I hate to see what things cost now.

 

However, there was one great deal in NYC- the breakfast food trucks.  You could get a coffee and a big bagel for $1.00 each.  I’d line up every morning before getting on the subway to lock it in before heading to work.  When an apple cost $4.00 at the bodega across the street, this was the way to go (maybe not health-wise, but you couldn’t beat the bang for your buck).

 

I remember one morning being in line behind an obvious tourist who looked like he had just gotten into town.  He asked the food truck proprietor how much a cup of coffee was and did a double-take:

 

“$1.00???  Seriously?  I’ve never paid $1.00 in my life for coffee!”

 

That’s when I knew this guy was about to have the worst vacation in his life.

 

I feel this way about rental rates in Charlotte.  I was recently going through our list of tenants with expiring leases and was struck on how much rental rates had gone up, especially those who were coming off of 2-year leases.  Rents have been climbing up for almost a decade, but have become more pronounced in the past two years.

 

As a landlord, this is great.  Higher rents equal more profits.  The question becomes how much more rent to ask for when existing leases are near their expiration and it’s time to offer the tenant the lease renewal terms.  Is the strategy to ask for market rate (probably 10-20% higher) or keep the increase on the lower end (5-10%)?

 

Generally-speaking (if it is a good tenant), I’m a proponent of keeping the increase offer on the lower end and trying to keep the tenant in the property.  Avoiding all the vacancy costs and keeping the cash coming in is usually the most profitable path, as well as the easiest.  I don’t like good tenants looking elsewhere as new ones are not guaranteed to work out as well.  However, if the tenant still decides to leave, then all bets are off and the house can be re-marketed at the higher market rate.

 

If I was a tenant in this scenario (once again, generally-speaking) with an offer of a lower than market rental rate on a lease renewal, I’d also look to stay and try to lock into a 2-year lease.  Looking at the competition for rental homes now as well as the higher prices, it should be close to a no-brainer.  It’s a win-win for both the tenant and landlord to keep near the status quo.

 

So while the New York City nightlife and dining choices are enticing, it’s probably best to enjoy the vacation and relish the $2.00 breakfast combo.  Good deals in this market are hard to find, so it’s probably best to lock them in without complaint!

 

Happy Landlording!

No 5-Star Reviews? You Took an Oath

“You took an oath, if you recall, when you first came to work for me. And I don't mean to the National Security Advisor of the United States, I mean to his boss... and I don't mean the President. You gave your word to his boss: you gave your word to the people of the United States.”

(Admiral James Greer (James Earl Jones) in Clear And Present Danger)

 

“But Jesus would not entrust himself to them, for he knew all men.  He did not need man’s testimony about man, for he knew what was in a man.”

(John 2:24-25)

 

Property management is a funny business.  Sometimes you are the GOAT (Greatest Of All Time) and some days you are a goat.  Some days you’re told you belong in the penthouse and other days, the outhouse.  It’s like I tell my son we’re going to the pool (yeah!) or to work on his reading (Boo!  Bad Dad!).  Reactions vary based on the popularity of the decisions made.

 

We had a tenant who was very happy with a repair we made for her on behalf of the owner.  She was so happy, that she went on to Google and wrote us a nice 5-star review.  “You guys are really great.  So responsive,  Unequivocally good-looking.  Manly, yet gentle.  Sensitive, caring & responsive.  No one better.  Wowzers!” (that’s not a direct quote, but it was something like that, I think…)  It was a very nice, unsolicited gesture.  “Just doin’ our jobs, ma’am.” (with the accompanying hat tip and suppressed smile).

 

But fast forward 3 months later… the tenant has another repair request, but it can’t be approved.  It’s something the lease says the tenant needs to take care of.   When told of the bad news, there was no effusive praise for our wisdom in enforcing the lease properly.  There was mostly silence with a touch of resentment.  It didn’t taste nearly as good as the 5-Star Google punch she had served us last time.  This tasted more like 1-Star lukewarm water served in a dirty ashtray.

 

And speaking of the 5-Star review, it was gone.  Remanded to the deep recesses of cyberspace, it never graced our profile again.  Its warmth was only with us for a brief season and then- poof- it vanished, nary a goodbye.

 

 “Just doin’ our jobs, ma’am?”

 

Hey, I get it.  You like us when we do stuff you want done.  And dislike us when we don’t.  People can be fickle.

 

At the end of the day, we’d love to be “5-Star” reviewed every time and do every repair asked for.  And we’d love to approve every tenant that applies.  But, alas, we took an oath (aka a signed a property management agreement) saying we would represent the client’s (the homeowner’s) interests.  No, this doesn’t mean we don’t take care of the contractual repairs and impartially view applications, but it does mean that we need to keep in mind who we work for and how they want things done.  Owners don’t tend to want to pay for unneeded or unwarranted repairs or have tenants with unfavorable past records placed in their rental homes. 

 

At the end of the day, we really do want to please everyone, but we took an oath.  “Just doin’ our jobs, ma’am.”

 

Happy Landlording!