It would be a severe understatement for me to say everyone has an opinion on this mega foreclosure problem happening today. However, it wouldn’t be an understatement to say Sheriff Thomas Dart of Illinois actually expressed his opinion.

If you haven’t heard of him, use your friendly search engine and you’ll see many interesting articles. He decided he wasn’t going to process foreclosure evictions because he didn’t believe some renters in apartment buildings were receiving enough notice of the foreclosure.

He is quoted as saying, “Innocent tenants [will no longer] be victimized by an uncaring, reckless system.” He went further and imposed the requirement that banks must prove they informed tenants of a 120-day grace period as required by state law. This grace period allows tenants to find new housing before moving out.

Simple Solution To Complicated Problem

This seems like a simple solution to a complicated problem. After all, the forecloser is required to provide mandated notice requirements in any type of court action but some don’t always provide that notice to tenants. If I am correct, Illinois does not provide any type of exceptions to the notice requirement. Apparently the sheriff wasn’t provided with his copy of the notices.

I actually applaud the sheriff for taking a stand he thought would help what he termed victims. However, one has to ask if the foreclosure process was followed to the letter of the statutes, can the sheriff make the determination, based on social consciousness, that he will not follow the law as written?

If he can, then other sheriffs would be able to say something like the problem is simply too big to let continue and, they too, have to stop conducting foreclosure sales because too many people will be on the streets.

You can probably construct the logic stream that would follow so I won’t continue along that line. Rather, I’ll pose a question or two.

First, if Dart’s action actually happened in every jurisdiction in the U.S., would we have put a crink in the political/financial free-for-all called bailout?

Second, would that be fair to those of us who pay our mortgages on time?

Third, do we want social conscience to be our determinant in what laws are, or are not, followed?

Since the question stream can continue for pages, I’ll simply stop with three. I wrote the above scenario because those of us in the trenches should be aware that any type of policy can come at us from any quarter involved in the process. When it does, we are the ones affected and that affection is usually monetary in nature.

Also, this problem has left the old school thought theology rocking and reeling. What was once a known system with known procedures has been altered to an identifiable situation with maybe procedures. I am finding I have to test as I go. What was a sure fire submit package is now sometimes merely a baby step into the process.

I’d appreciate hearing what others are finding as they find properties, make offers and attempt to close their deals. Maybe I am off base and need an attitude adjustment.

Photo Credit: prestoncovillaud

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Tags: evictions, Foreclosures, housing, sheriff foreclosure, tenant

Have you ever seen those polls which list different groups and industries by how much respect they get from the public?  Real estate agents and used car salesmen usually rank near the bottom.  And while I’ve never seen the rental property industry evaluated in any of these polls, suppose we were included?  Suppose the American public was asked how much they respect landlords and rental property agents.  What would they say?

Answer: they would rank us way, way down the list – possibly even lower than those guys who try to sell you 20-year-old Buicks.

Reputations are driven by the media. Why does everyone respect the Coast Guard? Most stories about the Coast Guard involve boating rescues, drug busts and other heroics. Unfortunately, most stories about landlords and real estate investors are sordid, embarrassing or even criminal. That gives us a horrible reputation. Good landlords – who provide a useful service to the community while trying to earn an honest living – are tarred with the same brush as the rotten jerks who shaft their tenants, allow their buildings to be grungy and dangerous, and let down their communities.

(caption: You don’t rent slums, so why get thrown in with the slumlords?)

We pay a real price for our reputation. Remember that government decisions are driven by two things – effective lobbying and public perception. Landlords and real estate investors don’t have effective lobbying because we are fragmented. And our public perception is awful. For those reasons, governments on the federal, state and local levels are happy to stick it to us. We get hit harder with new mandates, higher taxes and increased liabilities.

How are we going to reverse our public image? One of the best ways is to police ourselves. We should denounce those landlords and investors who deserve their bad reputations. It’s challenging to make that mental switch, because our natural tendency is to defend people that we think are like us. Consider the recent story about the landlord who was charged with homicide after his tenants died from carbon monoxide poisoning (hat tip to Richard Warren).

When you first see this story, your natural inclination is to defend the landlord – he’s one of us! – or to hunker down and think “I hope that never happens to me.” I think it’s actually a great opportunity to defend our industry, in part by throwing this landlord over the transom. He’s not like us. Read the story and you’ll see what I mean. Of course, he hasn’t been convicted of anything yet, but if the charges are true, he committed multiple crimes even before the horrible act of negligence that left his tenants dead.

When you see a newspaper story like this, write a letter to the media outlet and condemn the behavior in the strongest possible terms. Point out that responsible landlords don’t behave anything like this. Note that we do a vital service for the community by providing housing for people who can’t afford to buy their own homes.

Of course, this is playing defense. You can also play offense. One way is to make sure the public knows when you or your fellow landlords do something good. Get the word out when you do something to beautify the neighborhood or improve your properties (if the improvement is significant). Become an effective advocate for affordable housing in the community. Go to meetings. Get in touch with housing organizers and politicians. Make it your business to educate people who don’t know how landlording works, but should.

While you’re doing that, don’t ever whine about your hard lot. Believe me, nobody wants to hear how hard it is to be a landlord. The non-landlording world thinks of us as wealthy people who don’t really work. Challenging that perception is going to be really difficult. It would be far better to avoid the subject and instead focus on what we do and how we help.

Almost every community wants to increase its affordable housing and become a bigger, better and stronger city or town. Because we do this for a living, we know the solutions to creating affordable housing, which are:

1. Have a free market in rents
2. Reduce regulations that limit or prohibit building
3. Eliminate unnecessary regulations that increase our costs or liabilities
4. Eliminate transfer taxes.

By taking these steps, we can do more to improve our reputation, remove some of the burden of government, improve our communities, and yes, grow our businesses.

Tags: housing, landlord, landlording, Media, renters, tenant

Some readers did ask for my rules.  Your rules have to depend on your properties.   For example, there’s no point posting rules for using the pool if your property doesn’t have a pool.  Also, it’s up to you to determine what are appropriate fines.  Just remember to charge more for more serious items.  And, it’s not wise to threaten eviction for the first violation.  I can’t speak for the whole country, but New Hampshire is experiencing relatively high vacancy rates and so we have to love our tenants a bit more at this time.

I’m planning to put updated rules documents on my web site fairly soon, but in the meantime, here are some useful guidelines for rules.

Fire Safety

The following should not be allowed – tampering with smoke detectors, non-electric space heaters, fireworks, or any open flame other than a gas stove installed by the landlord or candles in holders, damaged electrical equipment.  You can order any tenant’s appliance or equipment removed if you deem it unsafe.

Trash and Sanitation

If you have dumpsters, the dumpster company will let you know what is allowed.  If you have trash pickup, the city will let you know.  Tenants must keep trash in closed bags inside barrels with secure lids.  If there is curbside trash pickup, tenants must put out barrels after a certain time and bring them back by a certain time.  The city may mandate a certain type of trash bag.  Impose a separate fine for each separate item of trash (e.g. bag, box or whatever) which you have to take care of because the tenant blew it - plus whatever you are charged.

One problem with this is it can be hard to tell whose trash is left out on the sidewalk.  Make your best guess and wait for denials.  i would be very interested to hear how other landlords “assign” trash.

Parking Lots

Designate specific spaces for each tenant.  The only things allowed in parking lots are registered motor vehicles (cars, trucks or motorcycles) or registered trailers.  Limit maintenance to these specific items – interior cleaning, replacement of small parts such as lightbulbs, adding of fluids such as oil or antifreeze, changing of tires.  Do not allow oil changes.  Do not allow any use of unregistered motor vehicles such as minibikes, scooters or ATVs.

Keys

Do not allow tenants to make copies of keys.  You can order key blanks which are marked with “do not duplicate” and a serial number.  Record the serial number when you give the keys to the tenant (typically one set of keys for each person who signed the lease).  It may be appropriate to offer the tenant additional keys at the start of tenancy for a small fee.

Common areas

If you have common lawns, tenants can use them for outdoor activities, but cannot leave anything on the lawns overnight.  The following are not allowed: fireworks, cooking, weapons, alcoholic beverages.  You may want to allow alcoholic beverages outside in case of a scheduled social event where the tenant asks your permission ahead of time.  All trash must be removed by the end of the event.  Do not permit any use which would prevent other residents from using the space at the same time – that is, anything that would block off an area.

Common area activity is not permitted outside of certain hours (which you may extend on weekends).  Designate which areas are not unit interiors, but are also not common areas (decks and porches, for example).  Activity in those areas may still be prohibited after a certain hour.

Pet policies deserve a book of their own, but obviously pet waste must be cleaned up by the tenant immediately, pets can’t be left outside unsupervised and pets can’t be outside even with the tenant unless they are on a leash.  The simple answer is obviously to ban pets, but this will also really limit your prospective tenants.

Guests

Tenants are responsible for the conduct of their guests.  If the guest of a tenant violates a rule, the fine or penalty will be owed by the tenant.  Any guest who threatens or endangers other tenants will be permanently banned from the property.

Overnight guests

Overnight guests are only permitted for a few nights per month (this is up to you, but I would suggest a maximum of four nights) and one or two consecutive nights.  If the tenant has an overnight guest he wishes to have stay longer, he can negotiate the matter with you.

Maintenance

Tenants must let you know immediately when they have a maintenance issue.  Impose a fine for late notices.  Typically you will not allow any tenant to perform his own maintenance (including painting and small repairs using tools).  You should not ever allow a tenant to perform maintenance on another tenant’s unit, unless a) the first tenant is a licensed contractor working in his field and b) you have a separate arrangement with the tenant to perform the work.

At the same time, tenants are required to keep their units neat and tidy.  Any trash must be bagged and in a barrel with a lid and removed from the unit at the next possible opportunity.  Entrances may not be blocked.

Social behavior

Any threatening or criminal activity is obviously banned.  Tenants are not allowed to put any signs or notices on the exterior of their units.  Solicitation is not allowed.  Tenants may not enter another tenant’s unit (including porches, steps or decks) without the other tenant’s permission.  Even within units, noises above a conversational level are not allowed after a certain time.

It is the tenants’ responsibility to let you know about rules violations, but not to address those violations themselves (by confronting another tenant, for example).  You want your tenants to be informants, not police.

In preparing your list of rules, you should also consider appropriate penalties.  A very few types of violations will be cause for eviction.  These include safety matters such as open flames inside units, as well as criminal or threatening behavior.  Otherwise, you should impose a system of fines, with second offenses commanding higher fines.  Charge more for safety and sanitation issues than for convenience violations.  The penalties as well as the rules must be either in your lease, or referenced in your lease.  Include that more than a certain number of violations in a month will be cause for eviction.

Tags: eviction, landlord, renter, tenant, tenant rules

What Make A Good Renter?

Is a good renter someone with great credit, or large deposit or maybe  high income?  The approach landlords take in qualifying their renter could be changing because of the housing crisis and the large number of foreclosures.

The main objective of renting your home should be to have a qualified renter that will pay rent on time and take care of the home to some degree.  Large deposits can maximize renters responsibilities to the care of your home, but what can be done to help minimize renters late pay or simple non payment and evictions.

The qualifying approach I encourage landlords to take is one similar to underwriting a loan.  The question that everyone should ask themselves before renting their home. Can my renter make the payment on a consistant basis and how?  This question is always answered by employment.  There are a number of way to increase the odds of finding a good renter just by looking at their employment.

Time on the job - The length time at the current employer is the first thing you should look at.  If a potential renter has been employed for a number years this helps build a case that consistant income can help provide for timely rental payments. 

Proof of income - Not only knowing where your renter works, but knowing exactly how much he makes is very important.  It is not out of the question to ask for the last two paystubs and last years W2’s.  While this may seen extreme, you have answered two critical questions.  Does your renter really work and how much do they make.

Debt to Income Ratio - While pulling credit can give you an idea of credit score and repayment history, how are you going to judge individuals that have gone through foreclosures and bankruptcies.  Sometimes a bad borrower is a bad borrower and you need to decline them for your rental,  but in today’s market place you will find more good renters with bad credit than ever before.  My suggestion is to look at credit, income and employment and determined a debt to income ratio .  This will illustrate whether they have sufficient income to cover their rent and debts.

This process is very similar to qualifying for a home mortgage.  It is up to the landlord to develop their own guidelines as to what is acceptable to their market place.  This is a very simple process to help increase the odds of a good renter - check employment, have proof of income, and determined debt ratio.

Tags: Credit, debt, employment, income, landlord, lease, rental, rental-property, renter, tenant

Okay, I’m not going to post all of my tenant rules here (although I will if commenters want to know).  This is more about why tenants need rules, why I have many more rules than most landlords, and how I enforce rules with a minimum of pain.

The TV That Woke Me Up

When I started landlording, I did what most of us do - grabbed a sample lease off the Internet, plugged in a few additions that made sense to me, and hoped for the best.  I realized the magnitude of my mistake one night as I was standing outside the building.  It was brought home to me in color.  Well, ex-color.  An ex-color TV that one of my tenants had left on the street in a forlorn hope that the city’s recycling center would take it away.

Now as homeowners, we know that just won’t happen.  Cities don’t take a lot of items in their recycling pickups, usually because those items may contain hazardous waste.  But the tenant didn’t know that - just like tenants often don’t know that leaving food waste in open bags attracts animals - or that when you play Led Zeppelin loud at midnight, not everybody in the building appreciates it - or that junk cars in the parking lot are less than attractive.

So why are tenants often so clueless?  One likely answer is inexperience - they may not have lived in apartments before.  Others are just not very swift.  In any case, the solution is rules - lots and lots of rules - combined with unbending enforcement.  Here are some rules for rules.

1. Give each tenant a separate copy of the rules and include the rules in the lease by reference. This means including a lease clause to the effect that the tenant must comply with all rules; that the tenant will be charged fines for some violations, and that other violations will be grounds for eviction; and that the failure to pay fines is also grounds for eviction.
2. Be specific in your rules. It’s not enough to say “Don’t throw out hazardous waste materials in the trash.” You need to spell out which items are unacceptable.
3. Don’t nitpick with ridiculous rules. I once knew a landlady who insisted that window shades needed to be at the same level for each unit in the tenant’s apartment. Her tenants almost never renewed their leases.
4. Go through the rules, one by one, when you take the application. Make sure the prospective tenants know that almost any landlord will also enforce these rules.
5. Watch out for rules that make sense to you, but are not legally enforceable. Some landlords do include unenforceable rules, hoping they can intimidate tenants into following them anyway. These landlords are breaking the law and may be fined or sued.
6. Although state and local laws vary, they typically do govern such things as occupancy limits (so many residents per bedroom), eviction proceedings, security deposits, and limits on visitors.
7. Be reasonable with your fines. A $100 fine for key replacement is likely to be thrown out in court. A $100 fine for disabling a smoke detector probably will not. What’s the difference? Key replacement is mostly an inconvenience for you – it costs you time and money to make the keys and get them to the tenant. On the other hand, a disabled smoke detector is a hazard that threatens the lives of everyone in the building.
8. Be reasonable with your eviction penalties. In this economic environment, we are all struggling to find qualified tenants. Do you really want to throw somebody out over a minor infraction?
9. Remember that you can only change rules in the middle of a lease with the tenant’s agreement.  That’s one reason to make your list comprehensive from the start.
10. Make frequent drive-bys in the first few weeks to make sure your new tenants are following the rules.  If you cut the tenant somee slack for the first infraction, make sure the tenant knows you spotted the problem and he’s getting a one-time break. The second time you must charge for the infraction.

Tags: landlord, landlording, rental-property, tenant, tenant rules

Hey folks. This is a guest post from Brendan O’Brien, who will be joining us from time to time and sharing his insight and wisdom about topics primarily focused on landlording.

Hi to all BiggerPockets readers and members.  I’m Brendan O’Brien, also known as PropertyMaster, a landlord and software developer based in New Hampshire.  I own three properties with 13 units here in  the Granite State and make Property Master software.

The REI subjects that most interest me are landlording (with an extra focus on tenant relations and finding tenants, since these take up most of the landlord’s time), and finding hot growth markets.

Why hot markets?  Well, New Hampshire has long had the best business climate of any state in New England.  That meant that if you were a buy-and-hold landlord, you were better off here than in, say, Massachusetts.  Businesses were (and still mostly are) starting and expanding here at a faster rate.  Thus jobs, and then real estate development.  However, New Hampshire has a few problems as well.  Our “climate” climate is not so great.  Increased business regulation and a bigger state government our eroding our advantages.

So the first thing I’m curious about is, what success have you had with investing out of state? If I’m going to expand outside of New Hampshire, I really don’t mind if my investments are hundreds or thousands of miles out of the way. 

Oh, last bit.  Obviously we’re all here because we want to make money, and that can lead to excessive boosterism (which sounds a lot like “BS-ism”.  Please refrain from excessive BS-ism.  I will too.  Another thing to avoid is gutter language and “you’re an evil moron” kind of talk.

Tags: landlord, landlording, tenant

So I see one of my friends that I haven’t seen in a while when I was in Florida, and she tells me I look disgustingly skinny (basically, she calls me a hideous freak). Well, I tell her that I’m training for a marathon, so I’m sure that has something to do with it. And here’s the other reason: I HATE cooking. I have the worst eating habits. If it’s not in the frozen food section, can’t be cooked in a microwave, or made by my personal chef (Mr. Boyardee), then I don’t eat it. Anyways. About two months ago I’m at Giant staring at the TV dinners and Healthy Choice TV dinners are 50% off (yes, you know where this is going). I pretty much bought out the store and now have a lifetime supply of Healthy Choice meals. The problem is, that these meals have about .003 calories. So over the next few months I will probably wither away and die (how come they couldn’t have Hungry Man dinners on sale….gosh!)

Before I start to look like Nicole Richie back in the day, let me go over the paperwork needed when you have found a tenant/buyer. Here are the 9 necessary docs.

1. Property Condition Move-In Form - Walk through the property with the tenants and note any problems, blemishes, etc….
2. Renter’s Insurance Form - The tenants have 7 days to fax back the form with proof of renters insurance (I also staple the card to the form of the agent I work with).
3. New Tenant Information Form - A welcome letter for your new tenants. This letter should list the names and phone numbers of all utility companies, the day the trash is collected and anything else they need to know about the property.
4. Property Maintenance Agreement - This form states that the tenants are responsible for the first $300.00 in repairs and they must also get a home warranty. (I have my tenants use American Home Shield).
5. Option Agreement - States that the tenants have a one year option to buy the house at x amount of dollars. And that if they violate the terms of the rental agreement or any other agreements, the option becomes null and void. (This does NOT get recorded at the courthouse. You only record the option agreement between you and the seller).
6. Payment Policy - This form only has a few sentences in huge font that state: Your company has a zero tolerance policy for non-payment of rent, that evictions start on the 5th and there are no exceptions. (and that you can murder them for non-payment of rent…..I wish).
7. Property Disclaimer Form - This is the same form you signed with the seller. Each state has their own disclaimer/disclosures about the property.
8. Lease Option Disclosure - This form says that the tenants understand they have an option to purchase this property. And that you might not be the owner of the property and may only have an interest in the property (this is important….in a sandwich lease option you only control the property and you need to disclose this).
9. Rental Agreement - This should be iron clad and cover everything. My current lease is 7 pages. Make sure you have your lawyer review it. (Maybe in another post I’ll go over the key paragraphs of my lease).

Well, this week I’m headed to Florida again. I’m driving down, because I’m going to leave a car there….so I’m looking forward to a good ole’ 12 hour road trip. And in my car will be all of my real estate and marketing CD’s so it can be a productive 12 hours. By the way, right now in my microwave is my Healthy Choice mash potatoes (I think that’s how you spell potatoes, but I’d better ask Dan Quayle) and broccoli meal…..de-lic-ious! Til next week.

Tags: buyer, lease option, real estate investor, real-estate-deals, tenant