Although today most of my focus in real estate investing is with notes, and I now employ a property manager for nearly my entire rental portfolio, it wasn’t too long ago I was managing over 100 units. Although there are some hard and fast rules for property management, especially many that can vary across different types of properties, as well as different types of clientele, I’ve noticed a lot of tips that still aren’t widely talked about. So, with nearly 25 years of experience under my belt, here are few tips I’ve come across that I’d like to share with everyone on Bigger Pockets.
Although print ads have given way to the Internet, some of the traditional ways of finding tenants can work just as well, both individually and in tandem with new technology, like word-of-mouth. Whether it’s word-of-mouth with other agents, landlords, tenants, with or without finder’s fees, or just plain old social media, most of my best tenants are through personal recommendations.
When placing ads, sometimes it’s what the ad says and how you say it, so be descriptive! Also the more photos in the ad, the better, especially if using things like Postlet’s or Craigslist for example. In my ads, I’ve always only required one month’s security deposit, but upon application and credit review, I may require additional security. If I had a good applicant who was short on cash, I may even start the lease on the 15th instead of the first so as to only require two and a half months upfront instead of three months.
Another thing I used to do, mostly to save time and create a sort of “fear of loss” with potential tenants, was to schedule all of my tenant showing appointments at the same time. This way they would feel the property was in demand, or at least more in demand than if they were the only ones that showed up to view it. To save even more time, I would try to schedule all of my rental showings for the week on the same day since they were all in the same general area.
To me, screening is much more important than the lease. Sure, I would look at all the normal things like work history, residence history and where the tenant currently lived, but I even checked out things like the car they drove, and previous landlords and employers (not just the current ones). But the number one “must do” for me was a credit, eviction, and background report. These can be done for as little as $25.
As for credit, I looked over this carefully as well but this could vary depending on location of my rental and could sometimes be overcome through an additional amount in their security deposit. When screening a Section 8 candidate, I still did the same checks but I also looked at things like length of time in the program, because the longer someone is in the program the better the odds are that they’ll stay in your property and abide by section 8 rules and guidelines. Also, when dealing with section 8 tenants, consider their children’s ages because if they have children about to come off the program their voucher (dollar value) could be downgraded to a smaller size unit with fewer bedrooms.
This is a great area for debate, but to be quite honest, I was in court several times a month and I can count on one hand how many times I’ve been asked to even produce a lease. The one thing I do know is that the court is looking for fairness and reasonability, usually on behalf of the tenant. This means no exorbitant late fees, a 45-page lease, etc. Most of the time I just used a standard PAR (Pennsylvania Assoc. of Realtors) lease with some added clauses and/or rules and regulations.
The one warning shot I’d like to fire out is for a “lease option”. I’d found it best to just use a lease and an option agreement until the tenant is ready to exercise the option to purchase because it’s much easier to go through the eviction process than the foreclosure process. As for deposits and money at lease signing, I only accepted cash, certified check or money orders due to the fact I’ve been stung before. As for terms of the lease they can vary depending on the client. For example, on a low-end rental my term may be one year and revert back to a month-to-month lease when the year is up, but a section 8 tenant may have a one-year lease that is a renewable only for an additional one year. This increases the likelihood the section 8 tenant would stay longer, since they could only consider moving for a 60 day window once a year.
If I was having trouble renting a place I may give a free month’s rent (never free security) or lower the rent on a 6-month lease so I could raise the rent back up sooner. I also liked my leases to end in winter so as a lower likelihood of wanting to move at that time. Anyway, it’s still a great idea to review the lease, inspections, maintenance, and repairs with all tenants at the time of move in just to set the right expectations.
When it comes to eviction, my number one tip is DON’T WAIT.
Did I say, “don’t wait?”
The sooner you move on this the better. My statistics on what tenants get caught up after being 60 days late in 25 years is “one”. Not a good stat. Your biggest fear is the tenant who files bankruptcy. I’ve had the horror story of the tenant who bought themselves an extra free year that way, but the new bankruptcy laws have changed all that. Just get a real estate attorney and file a “Motion for Relief” and continue to evict. It costs a little money but it’s cheaper than waiting. On the flip side of this there have been cases where common sense must be utilized. For example, I’ve even let tenants stay in the wintertime before without paying some or all of the rent while purposely waiting to evict. You may think I’m crazy but I had my crew tied up on other projects and the unit would have just sat there vacant with me paying the heat instead of occupied and the tenant paying the heat.
To be quite honest, I’ve never lost a landlord-tenant case in court. One tip is to dress nice; oddly enough most judges will hear your case sooner (probably because they think you’re a lawyer or a property manager). Be organized, and know your numbers in advance. Be willing to do a continuance if you’re getting some money at court from the tenant. But just so you know, the majority of my tenants did not appear in court so it wasn’t too hard to win when they didn’t show up!
One Last Tip
Sometimes townships or cities require any municipal liens to be paid by the owner of the property (e.g. water or gas). The one tip I’ve learned over the years is, at least with some public utility companies, there is a rule that if the tenant creates a payment plan with the utility company the landlord is no longer responsible to pay the lien. So the next time you’re notified that your tenant is behind, besides letting them know they’re in a violation of their lease, suggest that they get on a repayment plan. This can be a significant savings for landlords, especially over the long run of their property management career.
At the end of the day, the best advice I can give you is to run your rentals like a business, not a job. And if you want to keep good tenants, be proactive, inspect regularly, respond quickly, and be creative. Think about improving things while they’re still there. Try rewarding early payments; offer extra services like direct deposit, tenant insurance, paint or carpet, or even a security system if they pay the monthly fees.
So, what are some of your favorite landlording tips? Share them in the comments below!
Photo: Cassandra Gallegos-Moore