All Forum Posts by: Nathan Gesner

How to return deposits

I suspect he is a bully trying to scare you into giving him some money even though he knows he is wrong.

Do not be too specific. For example, my letter may look something like this:

1. 1. Remove furniture and trash: $200
   
2. 2. Cleaning, 10 hours: $250
3. 3. Replace 12 light bulbs: $60
4. 4. Replace missing shower head: $75
5. 5. Two days additional rent: $80

 Total charges: $665

Tenant paid a $600 security deposit. After applying the deposit, tenant account is in arrears for $65.

You may only pay $2 a light bulb, but it also takes you time to purchase them and install them, which is why there is a $5 charge per bulb. It's even more if they are specialty bulbs like the globe bulbs in bathrooms, LED bulbs, flood lights, etc.

I suggest you keep it simple and factual. SAMPLE LETTER

I've gone to recording move-in and move-out inspections with pictures AND video. The video is saved to my YouTube channel and kept private. If the tenant attempts to fight the charges, I send them a link to the hidden video. It shuts them up every time because they see with their own eyes that I have proof. The reason I still take pictures is because it shows the problem areas better and it's easier to send copies to a collection agency or an attorney when going after the tenant.

One last thing: I do not allow tenants to be present for a final inspection because they will try to distract you from things. I give tenants an opportunity to conduct a "pre-inspection" any time prior to their actual move-out. I go over cleaning tips, point out problem areas, and answer questions. I also remind them that my pre-inspection can't catch everything and I will conduct a final inspection after their departure and by myself. I try to do the final inspection 2-3 days after move-out because it gives the cleaning supplies time to clear out so the true odors present come back. I've been in homes that smelled pretty good on the day of move-out but two days later reeked of animals or smoke!

Here's a good starting point: CLICK HERE

Rather than ask what is included in their lease, I would ask to review it. Also check out their management agreement and look for hidden fees or other issues.

One thing I always stress: you get what you pay for. Far too many Landlords hire a manager without properly vetting them. When everything falls apart, they blame ALL property managers rather than taking responsibility for their own failing. It's kind of like the Landlord that thinks all tenants suck.

Anyone can collect rent. You really need an investment manager. Someone who is concerned about protecting your investment while maximizing your return. The most expensive guy may be the one that makes you the most money. Then again, he may just be a swindler that charges a lot. Research is critical and can be the difference between enjoying your investment or hating it.

I use Whirlpool or Amana, cheapest ones available. They work well and are easy to replace if they ever break down. My appliance repairman says he repairs them less than any other brand. 

I had an owner that insisted on Bosch despite my recommendation. She paid about 75% more and it just broke today, with just nine months of use from a husband/wife. It's not worth paying extra when they are no more reliable than the cheap ones.

@Stacy Davisyou have to be careful using leases from other Landlords or Property Managers because the language they use may not be allowed in your state. There are very few attorneys on BP and the ones that are here probably won't give you a lot of free advice. I wrote my own agreements by reviewing dozens of agreements from around the country and considering what I wanted in mine. HOWEVER, I give them to an attorney for proofing, refinement, approval, etc. This is important! Just because something sounds good doesn't mean it is legal, even if you get it from a professional property manager in your local area.

As for your specific question, there's no need to be detailed. Drug use is already illegal, as is murder, rape, burglary, domestic violence, threats of violence, discharge of firearms, use of fireworks, etc. Rather than list every single crime that is already a crime, simply write a clause that states the Tenant may be evicted for illegal behavior on the premises. Here's mine as an example:

Tenant, his guests or invitees, shall not engage in criminal activity, including but not limited to violence, threats of violence, unlawful discharge of firearms, or drug-related criminal activity. A single violation may be deemed a material breach and good cause for termination of this Agreement. Unless otherwise provided by law, the filing of charges for any such violation shall be sufficient for such termination and no criminal conviction is required.

Notice it is not limited to just those crimes. Any criminal activity is grounds for removal. The final sentence says they do not have to be convicted. If I read in the police blotter that a tenant was picked up for drug possession at a local bar, I can safely assume they possess drugs on my property and I will file for eviction. I've used this clause a few times and they didn't contest it. It has not been proven in a court of law, but I'm in a Landlord-friendly state and my attorney thinks it is solid.

@James Wise I read that same page earlier today and am surprised Ohio allows an unlicensed person to do more than is allowed in Wyoming. In our state, my office manager is not allowed to say anything about a rental because that could be construed as "negotiation" of a real estate transaction. She can't say whether it is still available or even read information off a sheet that I have provided. It's very frustrating for us and to those seeking information.

@Coleman Nelson you can make good money at PM. The average REALTOR makes about $40,000 a year. With at least one designation (CRS, GRI, etc.) the average salary jumps to about $67,000 but those with designations also typically have much more experience. The average salary for a property manager is probably a little higher than your typical sales agent.

I network with some of the most successful managers around the country. They all agree profits are maximized when you are below 100 units (if set up correctly). Between 100 - 200 units you start adding expenses like office space, assistants, etc. Once you get over the 250 mark, profit starts to increase through economy of force.

I won't share hard numbers but can tell you that I make a lot more than your typical sales agent. 2015 was my first year with no business loan payments and my take-home pay was about 20% higher than it was the first four years and will be about another 15-20% higher in 2016. Out of 140 agents in the county, I am in the Top 3 for take-home pay. And while sales agents may enjoy flexibility with their schedule, they do not enjoy nights and weekends off or steady paychecks like I do!

@Max James I did employ constructive criticism. Get a license, get an education, and then refine your knowledge by sharing with the experts on BP. I'm a big fan of BP, but it's not a good place to build your knowledge from the ground up unless you intend to take years doing so.

How did I scale? First, let me point out I didn't graduate highschool and jump right into PM. Nor was I working a basic-level job. I spent 21 years in the military where I gained a ton of experience managing people, money, and resources. For my last 9 years, I was responsible for up to 120 people, an operating budget of $2.5 million, and a couple hundred million dollars worth of facilities and equipment. And people shot at me on occasion. Managing houses and angry tenants seemed like a piece of cake! That's an exaggeration, of course.

I owned some investment property and had hired a PM. It wasn't the worst experience, but it wasn't the best. I had enough life experience to know that in most jobs, there are those that do the minimum to earn a paycheck and then their are those that work hard to make things better. I had no doubt I could do a better job at PM than most and I enjoy managing assets, so it seemed a good fit.

I read several books about investing and Landlording over the years. Then I got my real estate license and worked under an experienced property manager. I didn't necessarily agree with how she did things but it still educated me quickly on the basics. I quickly took off but I still continued to educate myself and refine my business. Even to this day I am regularly exchanging ideas with other successful property managers around the country, mostly through National Association of Residential Property Managers (NARPM). 

Again, BP is a great resource for information but I do not think it is a good starting point for a professional PM. When you ask a question on a forum, you may end up with more answers from novices than from people with experience and it's often difficult to tell them apart. I guarantee you there are people on this forum with decades of investment experience that haven't a clue what it takes to manage properties for others as a professional manager. If you don't have a strong foundation, how will you know?

Jered, you clearly took my statement the wrong way. I said his state requires a license and he should get an education. I provided an example of how we would all be skeptical if someone planned to use a forum to become a plumber. I fail to see how this is bad advice, let alone being a "jerk" about it.

@Coleman Nelson Ohio will require you to be licensed. If your partner becomes a broker and sets up his own company, you and everyone else involved in property management will have to be licensed. An unlicensed individual usually cannot advertise, answer questions by phone, or even confirm if a unit is still available for rent! I believe the fine in Ohio is $1,000 per violation and I can assure you they audit the PM offices regularly.

If you want to handle money for others, you need to know about trust accounting and how to avoid commingling funds. Most states will not allow you to mix your own money with your clients, which means you have to maintain separate accounts for any rental properties you personally own. If you have the right property management software and systems in place, you can typically work with two accounts: operating and deposits. Operating is for receiving rent, paying invoices, paying your management fee, and paying the owner. Your state may have very specific requirements for naming the accounts. Are you allowed to earn interest on the accounts? If so, do you have to disclose it or pay the interest out to the Tenants or Landlords? What are the requirements for naming your accounts? What forms of payment will you accept or not accept? You want to accept credit/debit cards but they charge a 2.5% finance fee. Can you pass that on to the tenant? If so, are there special requirements that might make you change your mind?

You will have to create an application screening process to ensure everyone is screened fairly, honestly, and objectively. What will you do if eight young co-workers from McDonalds want to pool their resources and rent your luxury home in an upscale community? Can you discriminate against the guy that reeks of smoke and booze or has 15 facial tattoos? What about the 18-year-old kid with no rental experience and no established credit? What if the person is applying while out of state? What if a foreign national on a work visa wants to rent from you and he's unable to pass a credit check or criminal background?

You need to know how much you are allowed to charge for deposits. You need to know how much you should charge for deposits. You need to know when to deviate and charge more or less than your standard. You need to know what to do with a deposit when you and the Landlord part ways. How much time do you have to return the deposit? What do you do when the tenant fails to cash the check? What deductions are allowed? What should you deduct for and what should be an owner expense? What if the tenant owes more than is held in deposit?

What are the requirements for recording income and expenses, ledgers for Landlords and Tenants? How long do you have to hold records after the Tenant or Owner leaves? Do you have to keep paper files or can you transfer everything to digital? How do you protect the privacy of Landlords and Tenants? What can you disclose when someone calls and asks for a Landlord reference?

You need to know and understand Fair Housing, ADA, Lead-Based Paint, and mold issues. What are the occupancy requirements in your area, if any? Do you know what the code requires for smoke detectors, CO2, egress windows, deadbolts, etc? If a tenant calls and says she wants to leave because her boyfriend hit her or the neighbor is stalking her, how will you handle it? A tenant leaves in the middle of the night with no notice and you find the house full of stuff and his car is in the parking lot. What do you do?

The neighbors complain about a barking dog in one of your no-pet homes so you decide to inspect. Do you have to give the tenant notice? What does the law say and what is in your lease? When you inspect the property, can you document with photographs and/or video? Can you evict the tenant for having an unauthorized pet? What if you allowed a dog but now the tenant has a second dog or three cats? What is allowed if their pets are damaging the property? What if their kids are damaging it?

When will you pay owners? What bills will you pay on their behalf? Do you really want to be involved in paying their mortgage or insurance? If their roof is damaged, will you file the claim on their behalf or just assist as needed? Will you charge for those services since it is outside the scope of ordinary management? What if the owner wants to add a deck?

Will your tenants pay on the 1st or will you allow deviations? If a tenant starts a lease on the 20th, do you prorate their first month or do you charge a full month's rent and prorate the second month? What will you require for move-in? Will you charge extra deposit or rent for pets? Does the law allow you to charge extra for pets? What if the applicant claims to have a service animal and wants to rent a house with a no-pet policy? Can you verify their disability and if so, how? 

I can clearly go on all night and still not hit everything. What I've listed above are common issues I deal with regularly. It's naive to think you can post questions on BP or any other forum and learn what you need to know, which is why I suggested you get your license and take some classes or read some books before delving into something you aren't familiar with. And I say that in a friendly, helpful way.

I believe you have to be a licensed real estate agent working under a broker before you can manage for others. You should consider starting by taking a couple classes in basic property management. You don't even know the basics which means you don't even know what you don't know. You could ask a hundred questions, get all kinds of answers, and still not know enough to run a PM company.

By way of example, it's like saying you want to be an appliance repair technician. Then, instead of going to school to learn the trade, you just hop on a forum and start asking what parts and tools you will need to fix appliances. Jumping into PM without an education or the established policies and procedures is why our profession has a bad rap.

Try Liberty Management or Larsen Properties. I'm not sure exactly what areas they cover but both are highly recommended and a good starting point.