Several days ago I read a great post by Michigan landlord, Dennis Fassett, in the Biggerpockets blog section (article). It would have been hysterical if only it wasn’t so true. He discussed what he called The Boyfriend Disorder. He wrote about what happens when a prospective tenant shows up to view a property and has her boyfriend tagging along. In between the laughs, I cringed.

Having spent two decades as a real estate investor, half of that time as a landlord of properties in a blue-collar mining town, I thought about some of the trouble I’ve experienced along the way. Mind you, I had a plan and procedure to minimize bad tenants – it didn’t matter. Problem tenants seem to have an innate resourcefulness, if only they used it for good instead of evil.

What to Believe?

The first line of defense against bad tenants is your screening process. It starts with a rental application. The information on there is used to do a background and credit check, verify employment, previous rental history, and personal references. With all of that information, what could possibly go wrong? Believe it or not, everything.

A clean criminal background check could just mean that the prospective tenant hasn’t been caught doing anything illegal yet. Credit reports are rarely perfect and tenants usually have a good excuse for whatever is on there. Confirming employment seems straightforward enough, but what if your applicant has arranged with a buddy to lie about his job? Previous landlords may be reluctant to bash a past tenant but they will usually drop hints if you listen carefully. (If you do get a bad report you should immediately be reaching for the giant rubber stamp that says “REJECT.”) Personal references are just about useless; what applicant would put down someone who wouldn’t give a glowing report? All of the above has happened to me at some point.       

Trust Your Gut

I’m not suggesting that you don’t carefully evaluate rental applications, just understand that they aren’t enough. Every one of us has an internal screening device to send us warning signals – ignore them at your own peril. Call it intuition or gut instinct. The feeling in your stomach develops from past experience and you should listen to it. Have you ever been tempted to accept an application from a marginal prospect because a property has been vacant for too long and you absolutely need to get it rented? I have, trust me on this one – don’t do it. Ever get the feeling that the sweet looking couple is lying to you? They usually are, your gut probably picked up subtle signals that your conscious mind has missed. This is a time you should listen to that voice in your head.  

Anyone even remotely thinking about becoming a landlord should rent a copy of the movie Pacific Heights. If you still want to proceed after watching that then you may have what it takes. Don’t get me wrong, being a landlord has been very good for me. I’ve learned to handle the ups and downs and can avoid the pitfalls most of the time. If given the opportunity for a “do over” I absolutely would do it again. Now it’s time to meet with a young lady about a rental – I hope she brings her boyfriend!

 I sold my house this week. I got a pretty good price for it, but it made my landlord mad as hell. – Gary Shandling  

Photo Credit: http://www.flickr.com/photos/ishane/3509419604/sizes/m/in/photostream/

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

So You Want to be a Landlord? Really?

Now, I have to admit that there have been several times where having the ability to “help” myself to an eviction, especially while using a forklift, might have crossed my mind, but better judgement seemed to always prevail.

The first question that should be crossing your mind is: “Is this even possible”?

The short answer is YES! The longer answer is that in the residential world it isn’t, but in the commercial world it is possible. Obviously this guy didn’t get the message. I would bet huge sums of cash that most landlords reading this article have had similar thoughts of creative ways to evict, even if they won’t admit it!

What is this self-help eviction thing?

Based on specific wording in your lease agreement, when a tenant has defaulted on the lease (this default is usually for not paying rent), the landlord, with proper notification and within specified time frames, can evict the tenant without having to go to court.

Regrettably, this works sometimes in the commercial world, but you would be putting yourself in severe jeopardy, as the guy in the article did, to pull this trick in the residential word. With that being said, it amazes me how often landlords put themselves in jeopardy by taking actions, that for all intents and purposes, look like self-help evictions.

Here are a few examples of things that you should NEVER do as a landlord

1. Lock the tenant out of the property.  This is a big NO-NO.  By locking them out you are depriving them of the use of the property, and so long as a court has not agreed that they can be evicted and said eviction has occurred, locking a tenant out of the property will not end well for you.
2. Remove tenant belongings prior to an official eviction.  Again, the courts look at this as you obstructing the tenants right to live in the property without harassment from the landlord.  Even if the tenant has moved out prior to a scheduled eviction and they have not turned the keys over to you, don’t remove anything from the property.  First the courts will not view that as a prudent move, and you can bet the tenants will claim that their uncles very expensive Rolex was in the property the last time they, the tenant, were there.
3. Do not turn off the utilities.  Again, this action will be viewed by the court in very unfavorable terms — for you!
4. Do not intimidate or harass your tenants.  While there may be a fine line that exists regarding this scenario, remember that just because the tenant is violating the lease, (most likely not paying the rent) doesn’t mean that you now have carte blanch to make their life miserable.

Remember… every action you take regarding a tenant must stand up the scrutiny of a judge — more so in today’s world than at any other time. Unfortunately, landlords are by the very nature of what we do, often judged to be the bad guys!

Self-help is not a good thing!  Don’t give your tenants extra ammunition that could end up with you spending time in jail, and if you don’t believe that is possible, you are only fooling yourself.  Just ask the guy in the story above.

Best of luck!

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Self-Help Evictions: What You Should NEVER Do as a Landlord

As a real estate investor and landlord you need to have a strong and trustworthy team in order to have a strong and vibrant business. Operating as a one-man-band is fine at first and a majority of successful people probably started just that way. However, trying to manage all aspects of your business while taking it to the next level can leave you about as efficient as a one-armed paperhanger, it’s messy and rarely works. A strong cadre of  real estate professionals is essential to your real estate empire. Unfortunately when a member of that team turns out to be a thief chaos often ensues.

Last year I wrote a series of articles detailing the trouble I was having with a property manager. I (part I) described how this individual started having financial problems and his solution was to rob Peter to pay Paul. This soon got out of hand and he could no longer repay Peter. He was collecting rent from tenants but not giving it to me and other landlords. I then wrote about uncovering others who had been victimized (part II) and how I fought back (part III). Now it’s time for the rest of the story.

A Quick Recap

Let’s quickly recap the steps I took after realizing what was happening. The first thing I did was terminate his services as property manager by having my attorney send a letter that also demand immediate payment of funds owed. I contacted the tenants and informed them that they were to send future rent checks directly to me. I filed a formal complaint with the state’s Real Estate Division. I also initiated a criminal complaint with the local sheriff. I didn’t stop there.

Through my real estate connections I got in contact with other victims. I advised them to file complaints with the state and sheriff as well. Surprisingly a number of people “didn’t want to get involved” even though they were victims. Fortunately a number of them did. The state investigator was able to build an iron-clad case and the sheriff was given plenty of evidence.

Last week I received a letter from the State of Nevada Real Estate Division. The property manager was made to appear to answer the charges. He was compelled to forfeit his license. He was also ordered to pay restitution to his victims by a specified date. Criminal charges may yet be brought and paying restitution may be his only hope of avoiding them.

But wait, there’s more…

I wasn’t done. Knowing full well that there is a high likelihood of additional victims, I contacted the editor of the local newspaper. We discussed everything that had happened and he confirmed things with the state, sheriff, and local court. He ran an article in the paper last week (see article).

It is up to all of us as real estate investors to take action against those individuals who take advantage of others. That action will not only keep others from being hurt, it will help keep the industry as clean as possible. If you are a victim or witness to illegal actions or scams report it to the proper authorities. I used every avenue available to me to check into the background of the property manager before I hired him and he came up clean. There had been victims before me but they never reported him, if they had I wouldn’t have been scammed. Taking action against these scammers can save others; wouldn’t you want others to save you? Then do the right thing.

 Rather fail with honor than succeed by fraud. – Sophocles 

Photo Credit: Shane Adams

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Fall of a Property Manager: The Rest of the Story

Whether you are a seasoned landlord that has seen it all or a landlord that has one house and a great tenant, there will probably come a time when you want to sell a tenant occupied house.  You may be thinking it’s not going to be a problem.  Selling any home in this market can be a challenge, but selling one with a tenant can completely exasperate you.

Look at it from the tenant’s point of view. They live there right now and chances are, they don’t want to move. From their point of view, you are asking them to inconvenience themselves by allowing strangers to traipse through “their home” at all hours of the day and possibly the evening. When you sell the house, they will have to move if a retail buyer bought it. They may still have to move if an investor buys the house and wants to make changes. Why should they make it easy for you?

The one thing you don’t want is an angry tenant

Think about the damage they can do. Then think about what they could tell a potential buyer if given half a chance! They have actually lived there for a period of time and they should be familiar with the home, how it is maintained, any problems the home might have and the quality of the neighborhood in general. If they are angry, they may remember things differently than you do.

If you want to have a chance of selling that house, you need a plan. You need to try and get the tenant on YOUR side so that you can sell the house quickly.

10 Tips for Selling a Tenant Occupied House.

1. Sit down and explain to them what the situation is; that the house is for sale and you would like their help.
2. Assure the tenants that they are not going to be booted to the street with no warning and that they will have “X” amount of days after the contract is signed to move.
3. Promise them that they that they will be notified prior to any showing of the home.
4. Let the tenants know that they will also be notified prior to any home inspections, appraiser visits, etc.
5. Offer to compensate the tenant for every time they allow someone to view the home. You will have to decide on an amount, but consider paying them $10 every time the home is shown payable once the house closes.
6. Offer to give them a gift certificate of some kind to a store of their choice when the home closes.
7. Ask what you could do to make this process easier for them.
    
   If the tenant is really stubborn, you may have to resort to one of the “big 3″ below.

8. Offer some type of bonus for leaving the home in top notch condition when they move out. For instance, you could offer them an additional $100.00 bonus in addition to the return of their security deposit.
9. If moving expenses are the problem, offer to reimburse them for the cost of the moving truck. Help them move on.
10. If the tenant is really stubborn, you may have to resort to the “cash for keys” plan. If the sale of your property hinges on getting  these folks out of the house this will certainly prove to be a lot easier and less costly than an eviction.

Get the tenants on your side!

While the last couple of suggestions may sound crazy, stop and consider this. Angry tenants can do a lot of damage to your property!

Time is money and the faster you get the house under contract and sold, the sooner you can move on. Your job is to get the tenant to help you sell the home.

Photo: Crosa

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Ten Tips for Selling a Tenant Occupied House

Not too long ago I was looking at a property in a neighborhood that I wasn’t very familiar with. The numbers on the house seemed decent, but the neighborhood itself looked marginal at first glance.

So, as soon as I finished meeting with the seller and checking out the house, I went around to all of the neighbors to ask their opinion of the neighborhood; I simply knocked on the door, introduced myself, told them I was thinking about buying the house across the street, and I wanted to know if it was a safe neighborhood.

Why You Should Talk to Potential Neighbors

Well, one thing I’ve learned about neighbors is that they love to gossip. In this instance, one neighbor complained about a bunch of teenage punks who went around shooting BB guns. Another neighbor complained that the person next to them was always noisy and playing loud music at night.

I discovered that many neighbors didn’t like each other, but that there were no serious crime problems in the area. In fact, every time I look to purchase a new house I always knock on all of the neighbors’ doors and ask them about the area and even what they know about the house I’m buying.

Then, if I end up buying the house I go to those same neighbors again and say, “Hi, I’m Jason, we met about a month ago and I ended up purchasing the house across the street from you. I’ve put some tenants in the house and I’m a very strict landlord so if my tenants are ever causing you trouble, please give me a call immediately and I’ll take care of the problem.”

This interaction establishes a good relationship with the neighbors

And, I can think of two instances where it’s really helped me out. One time, I got a call from a neighbor that one of my properties was on fire and he called the fire department. My tenant had left the house with a candle burning and it had tipped over on the mantle. Luckily, there was very little damage thanks to this neighbor.

Another time I got a call from a neighbor that my tenant was smoking marijuana all of the time in my property. This place happened to be a Section 8 property, so I called up the housing advisor and she paid my tenant a visit and I never had the problem again.

As you can clearly see, getting to know your neighbors is well worth it. They’ll be your “spies” to make sure your tenants aren’t trashing the house, burning it down, or hopefully doing any illegal activities. And, they’ll love you as a landlord because if they do have to report a problem, they know you’ll quickly take care of it.

Photo: Chromjuwelen

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Using Your Rental Property Neighbors to Protect Your Interests

I recently got an email from a newer investor I was helping out. He’d already done several deals and was very successful despite being in the real estate business for such a short period of time. However, he now had a tenant in one of his rental properties who was not paying rent, and since he’d never been in this situation he didn’t know the best way to handle it.

Well, the best way to handle a delinquent tenant is to always try and contact the tenant and try to get your rent. If you’re able to get a hold of the tenant and they can’t pay rent then you need to talk them into leaving the house ASAP. Over the years I’ve had a few tenants in this position and my proposal has always been “If you leave the house within two weeks in broom clean condition then I won’t come after you for the past rent you owe.”

Thankfully, this has always worked for me and I’ve never had to do an eviction in my life. However, oftentimes when I tenant stops paying rent they “put their head in the sand” and they’re not going to take your phone calls or answer your emails. If this happens you need to begin the eviction process and in most states the first step is to mail the tenants a Pay Rent or Quit Notice.

The Pay Rent or Quit Notice

This notice says that the tenant owes X amount of dollars in rent and they have a certain amount of time to pay this money or they’re going to get evicted. In Virginia where I live, it’s a 5-day Pay Rent or Quit Notice, but each state is different and some states are as low as three days.

What I like to do with this is mail one to the tenant but I also have someone go over to the house and tape one on the front door for me. In the few instances where I have had to use this I always get the tenant calling me within a day. There’s something about this piece of paper that scares them straight!

And like I mentioned earlier, I’ve never had to do an eviction in my life. Plus, if your tenant does call after they get the notice and that’s the first time you’ve talked to them, here’s your chance to try and get them out of the house voluntarily without having to do through the eviction process.

But what happens if the tenant doesn’t contact you after you’ve mailed and taped the notice to their front door?

Then you need to immediately continue with the eviction process. Head down to your local courthouse and find out what forms you need to fill out to get the process moving along.

The worst thing you can do (that far too many investors are guilty of) is not take immediate action to get them out of your house. Do not hold out hope that they’re eventually going to call you and magically come up with the rent. If they’ve ignored your phone calls, emails and your Pay Rent or Quit Notice, then you’re never going to hear from them and you need to put the legal system to work.

Image: Jeroen van Oostrom / FreeDigitalPhotos.net

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How to Use The Pay Rent or Quit Notice when the Rent is Late

I have a very easy and simple solution to dealing with properties that have termites: Don’t buy them. You think I’m kidding but I’m not. I come across far too many (new) investors who wanted their first deal so badly they didn’t’ get an inspection or they were too cheap to actually get a good inspector and instead hired a family friend to do the job. (You get what you pay for.)

That leads me to one of the most important rules of purchasing a rental property. Always get a home inspection.And always hire a good home inspector. If you don’t know one then go to your local REIA meeting and find out who others use. And when he charges $300 for the inspection don’t balk at the cost. It may very well be the best $300 you ever spent.

For instance, a few years ago I was considering doing a deal on a row house in Baltimore City. I’d already done a deal in the neighborhood and was talking to neighbors to see if anyone else was interested in selling. (By the way, I just gave you a clue of what to do when you buy a place in an area, talk to neighbors and try to buy more.)

Anyway…

One fellow I talked with said he was having financial troubles and needed to sell the house ASAP. I ran the numbers and they were tight, but doable. However, when I saw the inside of the house and had the home inspection I knew there was no way I could make the deal work.

Besides the dozens of repairs needed, the house had over $10,000 worth of termite damage, if not more. The “tubes” from the termites were running all through the wood support beams and the termite dust was all over the basement.

When I told the guy I couldn’t buy the house he looked devastated…

But seemed to know he had a termite problem, but didn’t have the money to take care of it. In fact, just the other day I was again in Baltimore City looking at another property that had termite problems, because as I was inspecting it I could see the termite dust which had fallen all over the washer.

Now of course, there are many remedies to getting rid of termites, but a lot of times they just keep coming back and back. I know one landlord who’s always got a termite inspector coming out to his place because he can’t seem to get rid of them.

So, I’ll go back to my original advice. To avoid the hassles of termites, always get a home inspection and avoid properties with termite damage. (And yes, I realize there will be times when the numbers work on a house and it’s a “home run” deal so it’s worth it, but those are few and far between.)

Photo: Chris Baranski

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

How to Survive Termite Problems in a Rental Property

If I’ve said it once, I’ave said it a million times… the key to being a successful (read profitable) landlord is to select quality tenants and train them to be even better tenants.  If you mess up in either department your life is going to be miserable and your profits are going to suffer.  Guaranteed!

I have been working with a client for the past several weeks who has been in a reactionary role relative to a very dominating tenant.  It has not been a fun experience and my heart goes to this client and the challenges she is dealing with.  You know you are going to have issues when the tenant succeeds in kicking you out of your property but will let the handyman you employed stay to complete the work… and threatens to make your life miserable as a landlord because they can.  OUCH!!  OUCH!!! and triple OUCH!!

While I don’t profess to being in possession of a magic wand, I am almost certain the this situation which has escalated could have been avoided first through proper screening and secondly by training the tenant that as the landlord you are the BOSS not… not them! 

I have written volumes about selecting and managing tenants. Just search through the BiggerPockets Blog to find the many articles dealing with screening and then training tenants.  This isn’t rocket science, and I am not going to repeat everything previously written, but I am going to share with you a few additional insights dealing with tenants who want to control the landlord/tenant relationship placing the landlord in a continuously reactionary role.

How to Avoid Being Dominated by Your Tenants

1.  If you don’t want problem tenants tighten your screening process.  I know it is hard to believe, but spending a couple more weeks selecting the best tenant will actually be more profitable then selecting the first one who walks through the door.

2.  Once a person is lucky enough to be one of your tenants, you have to start TRAINING them immediately.  And, what do I mean by training?  I mean making sure they know the rules (you do have a set of house rules… right?) and that they are abidding by them.  And, if they start to deviate from them or your lease in any way, you must make them aware of what the rules are and what their obligations are under the lease.  Don’t let them slide!

3.  Never let a tenant dictate your actions. To do so transfers all of your power as a landlord to the tenant; your life will be living hell (as my client is experiencing) from that moment forward.

4.  Get out in front of any potential problems.  For instance once my client understood the intent of her tenant and the tenant started complaining about the poor quality of a completely new property (this one was renovated with the intent to sell, but was instead used as a rental), my client requested an out-of-cycle Section 8 inspection.  Yes – there were two issues — a door off its hinges (door jam destroyed) and water from an overflowed tub leaking into the downstairs.  Both issues were caused by the tenant, and repaired immediately by my client.

5.  If you start to loose control of the situation don’t hesitate to conduct routine and formal “safe and clean” inspections (remembers lots of pictures) to ensure you can never be accused of not knowing what the material condition of the property is.  In this case, this client ended up in escrow court for non-issues because the tenant got out in front of her regarding exaggerated maintenance issues (this occured several months after the out-of-cycle inspection).

6.  I shouldn’t even have to mention this, but it appears to me that most landlords execute a lease with their tenants, bring it back to the office and stuff it in a draw somewhere.  This is a huge mistake!  You need to not only use a lease tailored to protect you (there just happens to be a sample lease in the BiggerPockets FilePlace that is landlord focused) but you need to know what your rights and responsibilities are in that lease.  Every action you take must be allowed by the lease, and if you have a well written lease, you will have many, many tools at your disposal.

Here is the bottom line…

Most tenants just want a safe and clean place to live.  Yet a few could care less about safe and clean, but only look at you, as their landlord, as the bad guy, and they are out to make your life miserable.

Don’t let that happen.  Get out in front of bad tenants and protect both your property and your profits.

Best of luck!

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6 Suggestions on How to Avoid Being Dominated by Your Tenants

I got a call from my tenant Sandy earlier this week. She lives in one of my townhouses and she told me that the air conditioner was leaking, and that water was coming through the ceiling into the kitchen.

Obviously, this is a problem, and needed to be fixed immediately. So what did I do after her call? Well… I certainly didn’t run over there to fix the AC unit myself. My handyman skills are good enough for changing light bulbs and that’s about it.

Instead, I immediately called my virtual assistant Lisa and told her to call American Home Shield and have them send someone out to fix the leak. You see, American Home Shield is the home warranty company I use and I think every investor who owns rental properties should get one of these warranties.

There are many companies out there in addition to American Home Shield, however, I’ve been using them for years and I’ve been pleased with the way they work.

So how exactly do they work?

Well, my assistant Lisa called them up and told them that the air conditioner was leaking and gave them the address of the property.

Then American Home Shield contacted one of the HVAC companies in their database to go out and repair my AC unit. (On a quick side note, my assistant Lisa gave American Home Shield my tenant’s cell phone number so that the HVAC company could set up a time to come fix the AC. In other words, I didn’t have to go wait for a repairman or even step foot in the house.)

When the repairman had finished fixing my AC, my assistant Lisa called and paid via credit card so that my tenant didn’t have to write a check and have me repay them. (The payment she made was the $60 co-pay, but the cost of the home warranty plan I use is around $400 a year.)

Some people balk at paying $400 a year but not me.

First off, I only pay for the home warranty on properties that are in my “buy and hold” portfolio, which I plan to hold onto for the next 30 years. If I’m doing a lease option deal, then my tenant/buyers are required to purchase the home warranty and pay for it themselves.

Another reason I don’t balk at paying $400 a year is because I’ve tried finding a good and reliable handyman . . . If you’ve been in this business long enough you know that finding an honest handyman who shows up for the job is like finding Big Foot. It isn’t easy.

So having the warranty makes my life all around easier, so I don’t have to spend time dealing with handymen who don’t show up or who take too long to fix something or who show up drunk. (Yes, that happens quite often.)

Since one of your main goals should be to run your real estate business as efficiently as possible, I would highly encourage you to use the same system I have to deal with repairs on your rental properties.

Photo: Jeremy Hetzel

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

My Leaky AC Unit and How It Got Fixed

“LANDLORD ACCUSED OF ATTEMPTED RAPE”

This was a recent headline in a local paper here in Maine.  It got my attention for several reasons and got me to thinking about how vulnerable landlords (property managers included) are when entering your rentals properties.

To be sure… this landlord has huge problems, as he was in the tenants bedroom, uninvited, in the middle of the night.  A circumstance for most landlords that would be hard to envision in any normal situation.

But what about situations where you enter your rental and the tenant may be stressed as a result…
Which for many tenants is anytime you show up!  Such as physical rent collections (an action I am strongly against), routine inspections, correcting tenant caused maintenance issues and others.

A recent situation with one of my clients drives this point home.  The tenant had petitioned in court to have their rent placed in escrow (an action taken two days prior to a court approved eviction), due to the tenant claiming there was sewage in the basement.  The court agreed to escrow the rent, stopped the eviction and started an inspection process to verify the tenant claim.  As a landlord in this situation your first action would be to get the plumbers out to the property because the last thing you need is raw sewage cohabitating with your tenants.  Right!

So… the landlord lets the tenant know the plumber is coming out to investigate and fix the issue, and when the plumber arrives the tenants 10 year old daughter, supposedly home alone, answers the door.  The plumber had the presence of mind to not enter the house.

What would you do in this situation?

I hope for every landlord they would be as prudent as that plumber. 

But think about situations like those mentioned above.  Your primary goal is to provide a safe and clean living environment and ensure the tenant is paying their rent.  So, when you are confronted with situations where you or your representatives must enter your rental properties are you considering that once you step over that threshold you are in a he-said, she-said scenario?  And if so what actions are you taking to protect yourself… just in case?

Here are few recommendations that have proven effective for myself and my clients… and they should help you to protect yourself as well.

How to Protect Yourself when Entering Your Leased Rental Property

1. Always communicate with the tenants that you plan to enter the property.  In many locations there are specific laws regarding notifications and hours of entry.  Know what these laws are and follow them.  Because if you don’t, you can be sure your tenants know what your rights to entry are.  Also, make sure your lease gives you generous entry rights (within the laws of your community).
2. Always, always, always… have the lease package for that tenant/property with you.  If you have to proof your right to entry having this documentation in your possession is critical.
3. If you think the tenant is going to create problems with your entering the property contact your local police and schedule to have them accompany you when you enter.  I have done on many occasions and I am always amazed at how quickly a problem tenant will become cooperative when you show up with the police.  Make sure you have that lease package with you.
4. If you find yourself inside a property and the situation starts to escalate for whatever reason… leave!  Go sit in your car, call the police, and wait for their arrival.  Ditto that lease package in item 2 above.
5. Digital cameras and video recorders are now standard tools for any landlord.  Pictures will tell the best story.  If you have to be in the property by yourself and are concerned about the tone and tenor of your visit tell the tenant right from the start that you will have your video recorder on for the entire visit and then proceed to record.  In some states you must get permission to record someone… so make sure to get their permission… and record it.  If the tenant will not give you permission and you expect a difficult visit… leave!
6. Always travel in pairs.  This was a standard practice for our team… especially with problem tenants.  Even if the person participating with you is a friend having two people present will help to verify whatever circumstances that might occur and also might keep a tenant in line.

As always… I am sure there are other great ideas that could be added to this… so please feel free to your comments.  And…

Best of Luck!

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This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Landlords: Are You Protected When You Enter Your Rental Properties?

If you’re like me, you may prefer to find tenants without the use of a property manager or real estate agent.  Over the years I have found that it’s really not that difficult to locate good tenants if you put a little bit of effort into it.

Most landlords know the two basic methods for advertising a rental home; either you have an agent place a listing in the local MLS, or you take out a classified ad in the local newspaper. While there is nothing wrong with these methods, I’d rather save the commission or the advertising cost and be a bit more creative.  Also, I think with slightly more aggressive techniques, you can actually lease the property sooner and with less expense.

Here are three  great alternative marketing techniques for quickly getting a renter in place:

• Bandit Signs – These are the small corrugated signs you typically see placed at intersections and on telephone poles.  We’ve had tremendous success getting tenant leads from bandit signs over the years.  For our business it’s worked well buying blank signs and hand writing the information as opposed to special order signs purchased from a printer. You can shop around online and typically find blank signs for about a dollar each. I suggest putting up 10-20 signs within a mile of the property; especially near shopping centers and highly trafficked street intersections.  (You should check out local ordinances that may prevent you from placing signs in certain locations or on certain days.)

• Online Classifieds – Most people in our industry know that there are hundreds of real estate related sites where listings can be posted.  The selection process, however, can be overwhelming and leave one unsure of where to begin. If I had to pick one free method for advertising my listings online, I’d recommend Craigslist in tandem with a great tool called Postlets.  On Postlets.com you can create a free online flyer that can be copied and pasted as a Craigslist ad.  In addition, your ad can  be syndicated automatically to other websites such as Backpage, Hotpads, Trulia, Zillow, etc.  I would recommend posting a new ad to Craigslist every day so as to insure as much exposure as possible.

• Neighborhood Referrals – Many investors don’t realize what a  great resource existing neighbors in the area can be when trying to locate a tenant. If you already know some of your neighbors, I’d recommend knocking on their doors alerting them to the fact that you are advertising for a new tenant. You can also print some flyers off your office computer and distribute around the community.  In the past I have offered referral fees to neighbors, but have found that it’s not necessary in most cases. Usually, people are inclined to mention the available house to friends or family simply because they like the idea of having somebody they know (and trust) in their neighborhood.

Finding tenants isn’t as daunting (or expensive) as most new investors may think. With a little creativity and a small investment of time, you can expect the phone to be ringing with tenant leads fairly quickly. However, once you begin taking calls, be sure you have a plan of action for showing the property as well as screening tenants. Getting the phone to ring should be the easy part … picking the right tenant is an entirely different topic!  For more on this, you can search the BiggerPockets archives for articles that relate to screening tenants.  Happy investing!

This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

Three Alternative Marketing Techniques for Leasing Your Property

I was having breakfast this morning with a client and the subject of selecting and approving tenants came up.  Our discussion first focused on the need for written standards to be used when approving tenants to ensure that you either approve or decline tenants in a uniform and consistent manner and then of course what those standards should be.

For those of you new to the landlord game you may ask: Why is it important for me to have written standards which must be met by any and all applicants?

Simple answer…  To keep you out of JAIL!

A less dramatic response might be, so that you could never be accused of randomly selecting or declining tenants based on anything but well thought out and consistently applied standards.  Remember fair housing laws are there for a reason… and there are many ”do-gooders” out there to ensure these laws are followed.  And, they would love nothing more then to take down the “big, bad, rich landlord” for not following these laws.  Which by the way require that every applicant must be evaluated and approved or declined in the same manner.

I must admit that it took me a while to get our qualification standards established.  Not so much because we were avoiding the issue, but mostly because we were developing our standards and procedures based on each new experience.   In time however, we did establish these standards… but they were not as robust as they should have been.

Getting back to breakfast…

In conjunction with our overall discussion regarding standards and avoiding potential trouble during the tenant selection process, my client prepared an initial set of standards that we reviewed.  Those revised standards (thanks George for the idea for this article), plus others that I have used are provided as examples of standards which you could implement in your tenant selection process.    

Recommended Standards for Approving or Rejecting Tenants

1. The application must be completed in its entirety.  If it is not properly completed it will be discarded and the application process for that potential tenant stopped.
2. Each applicant over the age of 18 must complete an application and go through the application process.
3. Prospective tenant(s) must never have been evicted from a property.
4. Prospective tenant(s) must demonstrate monthly income at least 3.5 times the monthly rent amount.  (this amount can be whatever you desire, with the national standard usually at monthly income equaling 3 times monthly rent).
5. Tenant(s) must have a credit score of at least… (XXX).  Or, tenant must not have any utility judgements levied against them.
6. Tenant(s) must demonstrate that they are currently employed.
7. Tenant(s) must have a clean criminal record.  (Remember, an individual with a criminal background is one of the only NON-protected classes as regards fair housing laws).
8. Previous landlord information provided by the prospective tenant(s) must be verifiable and a favorable recommendation must be obtained from previous landlords.  In many cases today prospective tenants may have been living with  friends or family… so make sure you know who is providing the recommendation for the prospective tenant(s).
9. Current employment information provided by the prospective tenant(s) must be verifiable.

Keep in mind that you may not have to include every standard listed above, but whatever standards you decide to implement from the above list or others that you desire based on your business model, they must be applied consistently.  This means that if you require a credit score of 640 for one applicant you must require that score for every applicant.

I would also recommend that you consider providing your list to prospective tenants so that they know how their application will be evaluated.

The bottom line: you need standards and they must be implemented consistently.  To do otherwise is only opening yourself up to more hassles then you would ever care to encounter.

Best of luck!

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This Article is Copyright © 2004-2011 BiggerPockets, Inc. All Rights Reserved.

9 Standards to Help Landlords Approve or Reject Tenants