All Forum Posts by: Thomas S.

I fully understand your position, it just does not apply to tenants when the reality is that the vast majority have a hidden resentment of landlords. The level of respect they have for landlords is about 10 degrees lower that that of lawyers.

My work/career back ground was in the field of dealing with and conflict resolution. I have 20 years of training and hands on experience in the very skills you are referring to. 

When it comes to the landlord/tenant relationships, having a legal lease, precludes the necessity to negotiate. One does not negotiate a existing legal agreement. It is intended to be followed to the letter assuming it is enforced.  

I personally never get mad or threaten. That would be a display of emotions which has no place in business. When a tenant is of the opinion that their landlord is a A-hole, more than the usual amount, it is because they are being told they must do something they do not wish to do. The form of the message does not change the facts.

I am respectful and professional in conveying th emessage….no pay no stay. Comprendre

Absolutely not. Allowing anyone to compromise the integrity of your roof places you at risk of water damage. In addition there are considerably increased costs when it comes to re-roofing the property when panels need to be removed and reinstalled.

I see no financial upside for you as a landlord and can invision several down sides.  

@Aimee Knier

Like you we can not simply non renew either. We are forced to use creative measures to persuade tenants to decide it is in their best interest to move on. When it comes to late rent payment we can file to collect the day after it is due and it costs the tenant $190 every time they pay late by 1 day. That and other creative pressure tactics usually achieve my goals.

@Joe Splitrock

"I want to help you".      Interesting landlord/social worker approach. Laughable all the same.

When tenants hear that sort of line I know exactly what they are thinking..........." Thanks but no thanks A-hole I don't need your F-ing help. I am quite happy scr*wing you over on my own".

I might be wrong but I seriously doubt it understanding human nature as I do. 

I personally do not place much value on inherited tenants. I do treat them all equally but will know within a couple of months if I will be keeping them or not. Having all tenants on M2M leases is ideal.

Being inherited has no relation to whether they are a asset or a liability, it depends on the individual. However they are 100% a liability if they are NOT at market rent. Unlike many landlords I am not afraid to operate my business I do not di*k around with slowly easing tenants to full market. I would never voluntarily supplement any tenants rent given the legal ability to charge full market rent immediatly. Tenants come and go, but having a tenant leave is very unlikely due to a rent increase. They know they have had a free ride and the good times are over. If they can not afford market rent I do not want them as a tenant and hope they do leave. When I buy a property I expect to have all tenants at full market asap or replace them. That is how business operates and how to maximise returns. You budget your anticipated costs going in. If a landlord has not budgeted to clean house and experiences a vacancy they were not prepared to face they were not prepared for the realities of doing business. 

Good customer service is provided equally to all tenants that are paying full market rent.

Keep in mind I consider myself to be a professional landlord, not a mom and pop, so my priorities always center on maximising returns in the big picture. If mom and pop prefer to focus on ease of operating their hobby business then rental rates/ROI are of considerably less importance. They would rather have a bad tenant than having to face finding a new tenant.

Landlords should never CHOOSE to take responsibility for utilities. You always want utilities in tenants name when ever possible. I would be getting estimates for electrical for 3 additional meters as opposed to ever considering having utilities in my name. I would not personally ever invest in a property that did not have all separate utilities in light of the potential misuse/abuse  and non payment issues that will definatly arise. Do not ever expect your tennats to pay for utilities the last month they are there and expect them to abuuse the utilities in th event your relationship is not ideal. 

You should have the 4 tennats with meters have them in their names and until yu divide and meter the other three just estimate th ecosts plus 10-15% and add it to their rent. I would not be billing them for utilities.

You absolutely can not divide the bill equally 7 ways unless you can prove they each used exactly the same amount of electricity.    

When a property has dead equity that money is generating a return separate from the property itself. In effect you have tied up your cash to BUY cash flow. The maximum return that cash can generate is equilivant to your prevailing interest rate. If a mortgage rate was at 5% then you, at the very best earn a 5% ROI but usually far less. The deceptive part is the principal portion you are also receiving. Because you have your cash sitting in the property you must earn back all that cash before you can count your cash flow as a positive. Investors with equity choose to only see what they want. They choose to not see the real numbers. As such cash buyers generate the lowest ROI of all possible investment options.

The biggest issue most people face with investing in real estate is understanding the value of their cash and actually doing the math on what income is generated by their cash and what in fact is actual income from their investment property. It is complicated and the primary reason why most do not understand that leverage generates a greater return than cash. Amateur investors trick themselves into believing cash generates a higher return only because they place no actual value on their cash.

Imagine buying a 1M property with all cash and charging 3K per month in rent. Assuming all expenses are 2K per month does that property produce 1K per month in positive cash flow. No the property is generating nothing it is the cash that is generate all the income at a ROI of 1.2%.

There are numerous threads going into the details of how leveraging multiple properties outperform a single property purchased with all cash. The math does not lie it is investors that CHOOSE to not understand the math that is the problem. The funny thing about mom and pop investors is that, although they believe their paid off properties are generating a high return,  in reality they are not. The same money in a income fund for 30 years in most cases would do far better without the hassles of actually owning real estate (this excludes areas of above average appreciation).  Ignorance is bliss.

Keep in mind the length of a lease has no bearing on how long a tenant stays. They leave when they choose regardless of a lease.

I prefer M2M. Draw up your own new lease, M2M, to include everything you want and have her sign it. It will automatically renew every month without resigning . To do your annual rent increase you simply send out a notice of the new rent and when it begins. You do not need to sign a new lease every time you raise the rent. The notification is all that is needed.

Your tenant can sign a longer lease if she chooses however there is no advantage for you as the landlord to use a longer term lease. If she has been there for 5 years on M2M where do you see a 1 year term as being a improvement.

The problem with hoarding cash in real estate is that you are losing money every month based on the opportunity value of that cash. If you assume a descent return of 10% on your cash you must deduct $833 for every 100K of equity straight off the top of your rental income every month. Easy to see how hoarding cash will kill the cash flow of almost any property.

To maximise returns you maximise leverage. If you do not wish to invest in additional income properties put your cash in a income/mutual fund. You will still double your return. My choice would be to mortgage and pull out every penny possible or sell and start over if they do not cash flow with full leverage.

Best approach is to not invest in properties that do not have separately metered utilities. Everything in the landlords name has the potential to not be paid by a tenant.

If you are ufortunate to own a property that does not have seearte metters you do not want to add to the problem by adding interweb as well.

@Kim Stuart

You are viewing this from the wrong perspective. This is a business. Your priority is to maximise your income otherwise you will not be in a financial position to keep your property properly maintained.

First rental rates are not based on the value of the property, although you are seeking rent to be minimum 1% of property value, the rental rate is driven by the market. When a inherited tenant is below market ideally you want to raise their rent to full market as soon as you legally can. Gradual increases only prolongs the inevitable costing you more lost income. There is no logic in it when you understand every tenant eventually moves. Put them to full market in one step if you legally can and if they leave so be it. Long term you will be farther ahead.

When dealing with inherited tenants don't waste time being concerned about how they feel, most inherited tenants are not worth keeping, being fair has nothing to do with market rents.

When gauging the quality of inherited tennats If your tenant is not paying full market rent you do not have a good tenant.