My Favorite Landlord Tips

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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.

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Finding Tenants

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.

Tenant Screening

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.

Leases

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.

Eviction

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

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

6 Comments

  1. Dave,

    Nice article. I had an ‘Ah ha’ moment recently at a property management class I took. The instructor said he never calls the current landlord, only the previous ones, because the current landlord might want them out because they are awful tenants, and lie to you.

    Seems pretty logical, but for some reason I never thought about it.

    Ryan

    • The method I use to ferret out fibbers is to collect as much info from the tenant during the initial interview, write or record every word. Ask how much past rent they paid in each rental, hint if these folks move every year they will be short term with you also.

      With this info in hand I call the two past landlords, the most recent landlord is usually the only one you can connect with in my experience. This is where a nice list of the tenant answers comes into play. I ask the tenant how many rooms the place had, did the place face a main street, what color was the outside of the house, all these questions are extracted during the personal conversation in the interview. How much rent did they pay when did they start their original lease, how long were they in residences etc.

      If the old landlord is their best friend on the phone, I am going to trip them up.

      Last think I rent 99% low income, if you want to be sure these folks are not going to tear you place up or grow weed in the basement, sign the new lease in their old living room.

      I picked up one of the best tenants in the last 10 years, her rental history was sketchy as she moved from out west to the east. Her reason for vacating her present house was two fold, lots of drug activity in the landlords other nearby properties, and zero customer service.
      Sitting in her living room I saw a meticulous person, but a deteriorating property, and yes lots of drug activity the neighbor sharing the porch asked if I was a cop.

      Nice well kept low income properties whose landlords care, are also a hot commodity.

  2. I’m new to REI so I am absorbing as much info as I can before I consider what system I plan to use when I begin my first REI venture. I admire your showroom strategy that you do with potential tenants, saving yourself time and money, and also to give off an impression that your property is a hot commodity to rent (nice). Also I was kind of confused about you meant when you said that you “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.” I understand that your intention is to give the tenant an opportunity to purchase the property at an agreed amount after certain amount of years that they have leased the property, but what do you mean, or what are you implying about “it’s much easier to go through the eviction process than the foreclosure process”? Thanks

  3. Frank,

    The quote you’re referring to has to do with selling the property on a lease – option. What I meant was that if doing so, you want the person to appear as a tenant in the eyes of the court until they’re ready to buy the property, as opposed to an equitable owner.

    If you only have a lease and an option agreement, you’re still in landlord/tenant court. Although it varies from state to state, in Pennsylvania (where I’m located) an eviction takes 45 to 60 days. This could cost a few hundred dollars.

    In Pennsylvania (a judicial state), if you had a lease and an agreement of sale, you would have to file a foreclose action. It’s 10 to 12 months minimum to foreclose and then an ejectment period which could be another 30 to 60 days. Plus all the legal fees, $2-3K uncontested minimum. So, I would much rather evict than foreclose.

    Hope this helps.

    Best,
    Dave

    • Thanks for clarifying for me. That is a good tip to know. I plan to begin wholesaling as my entry into REI, but eventually I will buy and hold certain properties and utilize lease options as one of my strategies. I haven’t fully grasped the concept of lease options just yet but I am willing to learn it if and whenever you have a chance to show me. I would greatly appreciate it.

  4. I really liked your article. I can relate to your statement where you mentioned you’ve “let tenants stay in the wintertime before without paying some or all of the rent while purposely waiting to evict”. My husband did that exact same thing a few winters back with his rental. We commonly get below freezing temperatures in the winter here so at least he knew his tenant was keeping the pipes warm!

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