E-Renter News

Do You Have What it Takes?

The soft housing market is turning homeowners into landlords in record numbers. Rather than wait for years to sell a home, more folks are opting to rent out their homes so they can downsize or move for employment opportunities. Some people become rental property investors to supplement retirement income, or to earn extra income while employed.  For others, it is their sole source of income.

First-time landlords are often unprepared for the headaches and responsibilities that come with the job. Since forewarned is forearmed, here are a few questions to ask yourself before considering becoming a landlord:

Do you have adequate time? Owning rentals is a business, and you must be prepared to invest all the time it needs to make it successful. Landlords are at the beck and call of their tenants—not 24/7, but you should be prepared for late-night calls about plumbing problems or emergencies. You will also need to put in many hours preparing your property for renting, repairing previous tenant damages, and performing maintenance, plus handling paperwork, advertising, screening tenants, banking, dealing with insurance, and legalities.

Do you have people skills? Owning and managing rental property is a people business—you must have adequate management skills to be successful. If you don’t enjoy interacting with all kinds of people, dealing patiently with all kinds of problems, and hearing all kinds of excuses and stories, then you might not be as successful at landlording as you’d like to be.

Can you separate business decisions from your personal feelings? Being a landlord requires tough decision-making. You must follow laws, enforce rules, and treat every tenant exactly the same—no matter how their individual struggles tug at your heart. Establishing procedures is paramount to staying in control of your tenants—or they will soon be the ones in control. If your skills lie in other areas, you might think twice about becoming a landlord.

Do you have a financial safety net? Operating rental property is a costly business. While your rental income should cover your expenses and allow for a profit, you must be prepared for vacancies (with no income) and unexpected expenses. If anything can go wrong with your rental property, at some time—it probably will. Be prepared for the worst and made certain the business sustains itself, so you don’t tap into savings to keep things afloat.

Cash, Check, or Charge?

“Show me the money!” is a mantra many landlords employ. But do they really mean “show me the check?” What is the best tender for landlords to require from their tenants?

Accepting cash for security deposits or rent is not a good habit for landlords. Cash can make you a target for crime—especially if you are known for collecting rent yourself. Carrying around large sums of money is just not the way you want to conduct your business. Besides, do you want the type of tenant who must pay their bills in cash?

Still, you may have good tenants who prefer to pay bills out of a cash account, or who are rebuilding their credit. It is reasonable to ask for rent payment in the form of a money order—which takes the risk off of you and puts it on the tenant. Keep in mind, though, that stop payment orders are available for money orders, too—in case they are lost or stolen. Don’t allow a new tenant to move in until the payment for their security deposit and first month’s rent has cleared your account.

Desirable tenants are stable, have regular income, and bank accounts. They are accustomed to paying their bills by check. While accepting personal checks can be risky, smart landlords always conduct tenant credit checks, so they are aware of any bounced check situations. Again, it’s best to wait until a personal check has cleared your account before handing over the keys to your rental property. Or, you can take the check to the bank it’s written on and have it certified. That way, you know the funds are available and are actually held until the check clears.

Online rent payment is becoming more popular. Some of your tech-savvy tenants probably cannot remember the last check they wrote. They pay their bills and do their banking exclusively online. Rent payment service providers allow landlords to set up accounts and receive tenants’ payments online through credit cards or e-checks.  While convenient to both parties, landlords should evaluate the return on the investment—since these services are not free. But if you're trying to fill vacancies in this competitive rental market, then offering online rent payment is one way to differentiate yourself, while attracting the best tenants.

Important Guidelines

It is vitally important that landlords and property managers apply objectivity when choosing tenants.  The law establishes that people have the right to live where they choose. At the same time, you have the right to run your business in a way that makes sense--and makes you a profit. As a landlord, that means you can choose to rent to tenants who fall below your criteria for affording your rent, taking care of your property, and not breaking laws or your lease agreement.

But you cannot apply different criteria to different groups of people; for example, you cannot run credit checks on one group and not others. To be objective, landlords must handle each tenant applicant as though they did not know  their race, gender, family situation, religion, or disability status.

Valid and objective reasons for turning down a tenant applicant include:

• Bad credit history

• Lack of solid job history

• Insufficient Income

• History of evictions

• Lack of references

Invalid, subjective reasons for turning down an applicant include:

• Don’t like the way they look

• Tattoos and/or body jewelry

• They have children

• They dress differently than I do

• Had a bad experience with another tenant from their country

• They don’t speak English

Remember, establish your requirements before you ever see a prospective tenant—or you can risk discrimination accusations. And, if you must turn down an applicant who is a minority or otherwise protected by the Fair Housing Act, document the tenant screening procedures you followed—and make sure they are the same you apply to every potential tenant!

Fill Vacancies Before the Snow Flies!

What is your busiest time for rental activity? Traditionally, the summer months are when families try to move, in order to settle everyone in a new home before school starts. And weather has a big impact on activity. In the northern climates, winters are very long—but they can be much longer everywhere if you have unfilled vacancies staring at you!

Things in the rental property business do tend to quiet down starting in the fall. People are guided by natural rhythms—so when the days get short and the sun goes away, we are less inclined to pursue activities, much less moving house. It’s just easier when the days are long and the sun is shining!

Holidays are also big influences on rental activity. Any landlord or property manager will tell you that around Thanksgiving and until the Christmas and Winter holidays, there is just not a lot of movement. Many folks would rather concentrate on their annual gift extravaganza, decorating the house, and closing out the year on a semi-calm note.

That means if you have vacancies, now is the time to get serious about filling them. Any prospective tenants who put off looking for a new place until school started have that behind them now. Kids are settled, so the parents could be anxious to get settled before—you guessed it—the fall and winter holiday season starts.

The best tenants are often those who plan well—so market your property aggressively in the next four to six weeks, and you’ll have a better chance of attracting good tenants who want to be moved in before the snow flies!

Protect Yourself with Good Record-Keeping

Smart landlords know that verbal agreements can be the basis of many headaches. Why not put everything in writing up front, maintain the all-important paper trail, and save yourself time, trouble, and money?

Start with a solid rental agreement. It outlines all the terms and conditions of renting your property, and leaves little room to argue—after all, all parties show their consent to the terms with their signature.

The move-in/move-out inspection should also be initialed and signed by both landlord and tenant. Next, present your rules and regulations to your tenant, keeping a signed copy for their file and providing a duplicate for their reference.

For each tenant, establish a spreadsheet or log where you can record all the relevant information pertaining to their tenancy, such as the steps you took during the tenant screening process, the highlights of conversations, and the details on all correspondence: dates, subject matter, delivery method, and responses. Should you need to present evidence of complying with housing laws or your rental agreement, logs such as this will bolster your case.

Get into the habit of recording notes on every interaction with your tenants, to avoid the “he said, she said” accusations that can occur. Notes such as these are not the strongest evidence; however, the fact that you keep meticulous records will likely weigh in your favor.

Rental property records should be maintained for three to five years, depending on the state where you live and/or own property. Any records pertaining to injuries, evictions, or other legal matters should be maintained indefinitely.

Writing an Effective Ad is Job #1

It’s a renter’s market out there. With thousands of homeowners unable to sell and turning to renting, along with condos converting to apartments and higher rental inventories, landlords have more competition than ever.

Writing an effective for rent ad for your properties is the first step to filling that vacancy while simultaneously starting the tenant screening process. Here are a few examples of well-written ads found on Craigslist.org:

$1200. Cute studio apartment on the top floor of an older home. Unit has a living room/bedroom combination; kitchen; bathroom with tub only; 2 small rooms for storage; no laundry facilities; dog ok; fenced back yard; Application fee required. Please contact [phone number]  or our website [url] for more information or to set up appointment to view.

What works: Selling terms like “cute” and “older home” will appeal to a certain tenant. “Studio” lets readers know it’s a one-person unit, and the tub detail prevents surprises. Information on the application fee helps to screen those who might not have sufficient resources.  There is a website for further information, which is helpful to a high percentage of the tenant population.

Here’s another well-written ad:

$950. 3 bedrooms/ 2 baths. Approx. 1300 SF. Across from 1st St. Elementary School. Central Air/Heat. Appliances included (Fridge, Microwave, Stove, Dishwasher). Security System. 1 car garage w/opener. Fenced in backyard. Patio. Very clean home in excellent cond. Well maintained. Ready for move in. Open floor plan, natural light. New sod in front yard, sprinkler system. Lawn maintenance and HOA Fees included. A must see!!

What works: Very thorough description; including number of bed/bath rooms and square footage, will help narrow tenants. Location information communicates convenience to families with small children. Obviously, if your rental unit is not appropriate for children, you wouldn’t advertise a school close by! The security system and cleanliness will appeal to picky, safety-minded renters. This ad is chock full of details and makes the home sound very appealing.

And now for an ad that is not likely to attract any phone calls:

House for rent: $750. 3 bedroom 2 Bath. 2 car Garage. Available soon /will show now.  Contact Dave 555-6360.

What doesn’t work: The ad couldn’t be any more basic. If all the tenant cares about is the price, number of bedrooms, bathrooms, and size of the garage, do you really want them for a tenant? Since that’s all the ad communicates, most desirable tenants will completely overlook this ad.  And what does “available soon” really mean? More detail, please!

In this competitive rental market, if you want your ad to attract the attention of the type of tenants you want in your rental properties, you must do a great sales job. Promote the best aspects of your property, make it sound super appealing, and compel the prospective tenant to pick up their phone and call you before it’s rented to someone else!

It Pays to be Proactive

Tenants fall all along the noise continuum—from the calm and quiet ones to the loud complainers. The loud ones tend to let their landlords know every time a problem comes up: when the faucet is dripping, the AC is not working, or the toilet is plugged up. They’ll be the first to ring a landlord’s telephone if the neighbor’s dog is barking or the kids upstairs are throwing a party.

This can be a good thing, even if it comes wrapped in a package of bothersome calls! Loud tenants give landlords plenty of chances to check in on the unit, make inspections, and see what exactly is going on.

Quiet tenants, on the other hand, pay rent on time, don’t complain, and don’t call the landlord for anything. This can be a problem! We’ve heard about tenants who did not call because they didn’t want to bother their landlord with problems—or who thought they would be held responsible for damages.

Then there are the tenants who just don’t seem to notice issues. For example, one landlord discovered that her “perfectly quiet, no-problem tenant” had inflicted major damages on her property: from water leaks that ruined cabinets under the kitchen sink, to broken shower doors that allowed water to build up under the bathroom floor, to overloaded electrical circuits that had melted the wiring. It was only when the tenant moved out that the landlord discovered these damages.

Another landlord’s “quiet” tenant seemed like a dream, until she gave notice that she was moving. Apparently, while the landlord was busy taking care of other tenants’ problems, he was ignoring the quiet one. Her small issues could have been easily addressed if the landlord had simply inquired about her level of satisfaction. The tenant just didn’t complain, so the landlord let the status quo reign—and lost a great tenant.

The lesson here is to check in on your quiet tenants. Make a phone call every couple of months, and perform property inspections every six months. Check in on the quiet one while you’re fixing the loud one’s latest problem—and always, keep the lines of communication open with all of your tenants!

Improve Tenant Relationships With a Little Effort

You’ve worked hard to obtain the best possible tenants for your rental unit. You pre-qualified them carefully, and performed proper background checks. The lease has been signed, the pre-move-in inspection has already been done, and the new residents have keys in their hands.

Your job is done for a while, right? Well, if you remember that in this market, it’s just as important to keep good tenants as it is to find them in the first place, you’ll want to consider putting forth a little extra effort to make them feel at home. They’ll appreciate and remember the level of care you demonstrate on their first day as your tenants.

Here’s how landlords can help on move-in day.

• Do a walk-through before your tenants arrive. Double check light fixtures, appliances, and general cleanliness. If anything looks dirty, clean it. If light bulbs are burned out, replace them.
• Bring some bottled water for the fridge. Put a roll of paper towels in the kitchen and some toilet paper in the bathrooms. These small gestures won’t cost much, but will be greatly appreciated.
• If you can afford it, a small plant on the kitchen counter is a wonderful gesture. You can find plants at home stores or your local garden shop for less than ten dollars.
• Without being too pushy, stop by and offer your help. Grab a box or two (with permission!) and carry them in. Or, ask if they need help with bed assembly or mattress moving. Of course, take care of yourself with proper back support and don’t lift anything you shouldn’t. If you are unable to lift heavy items, drop by with a snack or drinks.
• If your tenants have pets, welcome them with a treat or two. Inexpensive toys can entertain dogs and cats alike; keeping them occupied on a stressful day is a huge help!
• Supply your new tenants with helpful telephone numbers for local pizza delivery and take-out restaurants, plus your contact information, as well as the numbers of local utility providers. If you are comfortable, include your handyman/plumber/electrician’s numbers so your tenants know who to contact in an emergency if they cannot reach you.
• If your new tenants are from out of town, give them ideas for entertainment. List the best pizza, coffee shops, and parks. Visit your local Chamber of Commerce or Visitor’s Center and stock up on brochures for children’s activities, restaurants, and services.

Maybe Sooner Than You Think!

No landlord or property manager enjoys evicting tenants. Turnover is bad for your cash flow, and there are usually expenses related to eviction, too. Plus, it can be an unpleasant situation for everyone involved.

However, in the rental property business, evictions are a fact of life. Ask a seasoned landlord when is the right time to evict a tenant who is behind on rent, and you’ll probably hear, “the day after the rent is late.”

There are several good reasons to consider swift action when a tenant breaks the rental agreement:

• If the tenant breaks a condition of their rental agreement once, it is more likely to happen in the future. In other words, the situation is not going to get better, so why not replace them with a responsible tenant?
• You must demonstrate fairness to all tenants. Enforcing your rental agreement (the one that the tenant broke) in the same manner to all tenants is the best way to avoid discrimination claims. And, it can make things easier on you: whenever there is a problem, you simply hold up the rental agreement and stand behind what the tenant and you agreed upon.
• You are running a business, not a hobby or charity. It sounds harsh, but do remind yourself that in any business, rules must be followed and risk must be rewarded. You are the one at risk in your business. If you do not protect your interests, who will? It’s difficult to hear about problems tenants have, and while they may very well be genuine, you must stand firm and defend yourself and your business.

If you’re facing a tenant eviction for the first time, seek a property lawyer’s advice to make sure you don’t make common errors that can hold up your case.

Don’t be Fooled by False IDs

Identity theft is a growing crime in the U.S.  Thieves steal another person’s identity for financial gain or to access a good credit rating. Most landlords and property managers require their tenant applicants to provide identification, but how do you know that the driver’s license or state ID that your new tenant provides is genuine?

Landlords beware: just because the photo on Jane Doe’s ID matches the face of the applicant in your office, it doesn’t mean it’s legitimate. Mary Smith, the identity thief, could be pretending to be Jane Doe, the financially responsible, long-term employee with a stellar credit rating, who actually lives several states away and has no idea that her identity has been stolen.

A typical scenario: professional identity thieves rent your property and skip town in the middle of the night, owing you months of rent or even stealing appliances, fixtures, or other property. When you attempt to track down the tenant, you discover the person who lived in your rental unit was not the person on the application.

These days, landlords and property managers must protect their interests, using every tool available. Identity checks should be a standard part of your tenant screening process.