All Forum Posts by: Nathan Gesner

@Christian Bors, I agree you've probably taken this too personally.

You have no record of the original condition and planned to give her a refund. Why haggle over a lock change? Is it legal to charge her for a lock change? Yes. But isn't that rather petty when you are already facing $15,000 in renovations?

As I see it, you have two major mistakes here:

• You shouldn't buy a property with a problem tenant UNLESS the problem is fixed prior to closing. In other words, you should have closed the deal after the tenant moved out, not before. If the seller were forced to deal with her, he may have been able to keep the deposit (or more) and help offset the renovation costs. And he would have someone pounding on his hood while you are safe at home!
• Do not do a final walk-through inspection with the tenant present! They will try to distract you, argue with you, etc. I wait until the tenant is out and returns the keys to me, then I conduct the walk-through inspection alone at my convenience. If I find anything that the tenant will be charged for, I document it with video/pictures. After cleaning/repairs are done, I send any remaining funds to the tenant with an itemized list of charges. If they want to contest the charges, I usually provide them with a copy of the video/pictures (by email or YouTube link) and a letter detailing how they can submit a written request for review. If I receive a request (hasn't happened yet since I show them my evidence with video/pictures) I would sit down with my staff to see if a mistake was made. If it was, I own up to it. If not, I give them a generic form letter that states we reviewed their case and still stand by our original assessment. After that, they have to take me to court.

One of the main reasons individuals fail with investment property is the lack of policies and procedures. Now that you've dealt with a problem, figure out a way to ensure it doesn't happen again by taking the advice of others and installing a procedure. Good luck!

I would recommend cleaning up the mess before you step into it. If you purchase the property knowing they occupy the units without a written agreement, that could be seen as approval of the arrangement. I would not step into a situation like that.

Good post. As Zion pointed out, the most important aspect of property management is finding a GOOD tenant. This places tenant screening at the top of the list for a good manager and when interviewing someone for the job, they should be able to show you a complete, fair, and clear process. They have to go through the steps every time.

I lived in Hawaii for a few years and considered renting a property but their management fees were outlandish. They literally wanted a higher percentage for a vacant unit because finding a tenant took more work than managing a rented unit. SERIOUSLY?!? 25% when it was vacant, 15% when it was occupied. I asked where the incentive was to find a tenant and they said they were an honest, professional company. Uh-huh.

I manage 130 properties for 40 different owners. I charge 10% of rent and that includes everything from advertising to screening to inspecting to evictions. In some cases, I make good money. In others, I work my tail off for $10 an hour. But I treat every property as if it were my own. I treat the owner of a single cottage the same as the owner with 40 properties. And I treat the tenant paying $350 a month with the same respect as the tenant paying $2,300 a month.

By the way, my vacancy rate averages less than 1% year-round and it's been like that regardless of the housing market. If anyone's looking to invest in solid rental properties, check out Cody, Wyoming! ;)

1. I agree that you should NOT lie about who you are. If you need a lie to succeed as a Landlord, you're obviously in the wrong business.

2. Do not deduct anything from rent. Rent is rent. If you pay him for mowing the lawn, that's a separate transaction. If you reimburse him for fixing a leaky toilet, that's a separate transaction. Don't mix the two.

3. I would recommend you generate new contracts with the tenant. Explain that you've seen his payment history and try to find out why he pays so late in the month. He might have a legit reason, but odds are he probably paid late simply because he could. If you need payment by the 1st, let him know that, figure out how to make it work, and put it in writing. If you can wait until the 15th, make the due date the 15th and put it in writing. In other words, there's no point in playing hard-ball with a tenant that's got a good history of timely payments; you're only setting yourself up for a bad tenant/owner relationship or you'll lose a good tenant. Look for the win/win!

Jon, it's true we shouldn't consider a personal home as a vehicle towards wealth, but it is certainly a wise investment.

First, if you are paying $700 a month to buy a home, that's an investment. If you're paying that amount in rent you are basically throwing your money away with a guaranteed 0% return on investment. You also have to add in the tax write-offs, stability, security, and many other intangibles included in owning a home that one can't get with renting.

Second, let's say you decide not to buy because it sounds like a poor investment. That doesn't automatically free up your $700 to place in stocks or other investments! You still need a place to live and will end up spending that money to rent a place. You're guaranteed worse off.

Third, unlike your example, most homeowners maintain their home and many even improve on them over the years. Home ownership is one investment that we can actually affect. I can make improvements to my home that increase its value, like adding a bathroom or an extra bedroom. I have no power over the value of stocks and mutual funds; I just put my money in and see what happens.

Fourth, let's not forget that a house payment remains steady while rent will increase regularly. When you take into consideration the rent increases, no tax write-offs, etc., the buyer wins hands down.

Finally, there are too many intangibles. What about the homeowner that makes improvements? What is the value of personal freedom? What's the true cost of renting during that same time period?

If your son or daughter were asking you for advice, would you really tell them they should rent and invest the difference in the stock market? 30 years later, they'll curse your name.

Another thing to remember is that a good Landlord understands peple run into difficulties. I tell my tenants to call me IN ADVANCE if they are experiencing problems getting rent money together and I will try to find a way to help them through that rough time. But there are limits to my kindness.

For example, one tenant had a family emergency and used rent money to fly home. She had a good history of paying and gave me advance notice, so I believed her. HOWEVER, I protected myself by drawing up a simple contract stating she was allowed to pay late but that rent must be paid in full by XX date with the standard late fees, grace period, etc. and that this agreement applied only to this particular month. It was in writing and signed in case she tried to change the story, but she stuck to it and everything got back on track the next month. Another tenant had a similar story with a good history of paying but he failed to make good the first month. Then the second month. Then the third month we had to evict him.

You have to run a business, not a welfare line. And it's OK to have a heart, but you have to have a brain on top of it.

Know your state/local laws! Some examples:

1. Mandatory grace periods can range from zero days to an entire month. In Wyoming I can evict after three days but in New Jersey and D.C. the tenant has a full 30 days to pay before eviction can be filed. (is anyone surprised?)
2. Many states limit what you can charge for late fees. For example, Wyoming has no limit but Iowa limits fees to $40 in a month.

I don't know what state smitnlit is in, but $280 sounds unreasonable unless they're living in some high-cost properties. If a unit rents for $1400 a month, $280 would be a 20% late fee. How can a tenant pay rent, plus an additional 20% on the 25th of the month and then pay the next month's rent on/before the 1st? Even an additional 10% on the 15th is unlikely. Allowing tenants to go that long before paying is just asking for trouble the next month and you might as well get rid of them.

For me, all rent is due on/before the 1st. I give them a four-day grace period. Late notice is posted on the 5th and I add a one-time charge of $25 and an additional $5 for each extra day they are late. On the 10th, I file a "Pay or Quit" notice and they have three additional days to pay before I file for eviction. Once I file for eviction, they will not be allowed to stay no matter how much they pay me.

If a tenant pays late one month, they are allowed to stay but warned that their leash has shortened. The second month they are given the first grace period and then I post a "Pay or Quit" and give them three days to pay or move out. If they pay they stay, but I warn them that is their last chance. If they pay after the 1st at any other time during their tenancy, I post an "Unconditional Quit" notice and give them three days to move out or I file for eviction. The Unconditional Quit does not allow them to pay and stay; they have to leave or I file for eviction.

I charge Owners 10% of rental income, nothing more. If the unit is empty, I don't make any money. I don't charge any extra for tenant placement, vacancies, etc.

If the Owner isn't making money, neither am I.

Wyoming is very Landlord friendly. We'd like to keep it that way, so please don't move inland from the coastal states and try to change us!

Update: I went on vacation for a week. While I was gone, the previous owner/tenant showed up and removed the mail box and an electric fence. Current owner refuses to charge him or seek compensation.

I'm meeting them for lunch today and will iron this out. Ridiculous!