Hope and anticipation for what can be accomplished with a clean slate fill the arrival of a New Year . The New Year seems like a great time for some landlord resolutions and why not? It doesn’t hurt to hear some simple reminders of how to improve ourselves and our businesses.
As a rental property owner you face many unique issues and challenges. You usually make great decisions. Unfortunately, we also see owners make decisions that end up costing them extra time and money. These decisions then negatively impact the real return on their investments.
In the 20 plus years we have been in the property management business many lessons have been learned . There are many more lessons waiting to learn. Why not share a few at the start of a new year?
These experiences make for a great list of New Years landlord resolutions.
Invest in deferred maintenance
For a long time rental owners could find a tenant for any property. Those days are gone. Over the last three to five years Wall Street hedge funds have declared rental houses an attractive asset class.
Rental owners are now competing with funds that have millions and millions of dollars to invest. In many cases, the competition for tenants has been with these massive funds. Rental homes are considered a new opportunity for Wall Street. The Wall Street owned homes are completely rehabbed and rented at rates slightly less than what the market might demand.
If you want to stay in the game, you must compete. Make your home as nice as the competition by investing in appliances, carpet, paint, fixtures, counter tops and whatever else needs updating. Yes, deferred maintenance now means more than having air conditioning and the gutters cleaned regularly!
Move non-paying tenants to eviction quickly
We have all been there before. The tenant who makes partial payments and then is always behind. Or the one who has the sick child and has to pay the Dr. instead of the rent. The majority of us are compassionate people. We want to help. We assume we are being told the truth.
The big issue is that we can’t afford to be social workers. Most local communities and government entities offer temporary assistance to help people who legitimately need help. Let those groups do the work. Send the tenant to find help and ask for the contact information. If help is available then compassion may be appropriate. If the tenant does not qualify, or does not pursue the assistance, don’t let them play on your emotions. Block their phone number, don’t listen to the messages, and call your eviction attorney.
Maintain reserves to handle emergencies.
As a management company we maintain a $300 reserve per property managed. Rarely is this enough to cover an emergency. These reserves are maintained as an equity commitment with our clients. They are not enough to fund the majority of repairs. Owners need to have extra liquid funds. It is not a matter of if they will be needed, but a matter of when will they be needed.
Also, as a side note, home warranties are not the answer. These warranties contain too many exclusions and restrictions on contractors to be hired. We won’t work with home warranties as they take the control away from us and usually cost the owner more money and upset tenants with delayed responses. If you have a warranty, let it expire. If you are purchasing a rental home and a Realtor suggests a home warranty, please just say “no thank you!”
Don’t skimp on using attorneys and legally binding documents.
I like to hear attorneys tell me that we have a good lease. Too often I hear stories of tenants pulling off all kinds of crazy schemes. I usually assume that the owner is not using a good attorney or documents. Sure it costs money to hire legal representation. My experience is it is well worth it.
Find a good real estate attorney and allow them to work over your lease document. Also, have notices prepared with the right legal punch to allow for proper enforcement of your lease.
In the long run it will pay for itself.
Complete thorough screenings
Repeat after me three times. Don’t be so desperate to rent out your property that you accept any tenant who applies.
When taking over the management of occupied properties most of the problems can be traced to little to no screening of the tenants. They may have completed an application but there was little to no verification of what was submitted. Professional screening to cover previous rental history, employment, legal notices and criminal and credit history will save you more than just headaches.
One down side to professional screening. Maybe you won’t have as many applicants. There is a good reason for that. Just remember that a vacant house cost less than a bad tenant.
Treat tenants as if they are customers.
Once you have screened and accepted a great tenant, treat them with the philosophy of the Golden Rule. A tenant has the right to live in a nice home. They are now your customer. As a landlord, resolve to do everything, within reason, to keep your tenants happy.
These are just a few lessons we have learned through the years. You probably already know all of this..it may just be good to hear it again.
So, now go back to celebrating the New Year and your clean slate!