5 Important Steps Not To Forget After Locking In Your Rental Tenant (With Extra Credit)
I finally did it! I found a tenant! Now good times are here! I can just sit back and spend the rent money. Oh yeah!
(Landlord reaction after placing a tenant into her rental home)
It is a good feeling getting your rental home filled! The house preparation, the marketing, the showings, the rental screening, the deposit collection… it’s exhausting, but usually means that you are in the clear from doing it again for at least a year. That’s something to celebrate!
Great tenant placement is about 75% of the heavy lifting good property managers do. Getting past this hurdle is a great accomplishment! If high standards were kept throughout the screening process, a fruitful, peaceful tenancy is extremely likely.
But after the bubbly has been consumed, the noise makers silenced, and the euphoric feelings have subsided, a question sometimes starts to gnaw at your innards:
What have I forgotten to do?
This is a perfectly normal reaction. And, fortunately, it has a very easy answer. Here are 5 important steps not to forget after you’ve locked in your rental tenant (with ways to earn extra credit):
- Make sure the new tenants know where, to whom, and when to send the rent checks. Priority #1!!
Extra Credit: Send a reminder 7-10 days prior to the due date every month (I like e-mail).
- Call your insurance company and let them know you need to change your policy from a home owner to a landlord. I haven’t seen any price changes personally from doing this. Extra Credit: Make sure your tenant has a renter’s insurance policy.
- Make sure all utilities are scheduled for shut off when the tenant moves in.
Extra Credit: Allow 3-5 days after the tenant’s move-in date to schedule the shut-off. It’s tough to live without utilities and moving time is busy. It’s perfectly decent to be thoughtful!
- Cut off the lawn service after the tenant moves in.
Extra Credit: Have the lawn mowed the day before tenant move-in. It’s a nice gesture and sets a precedent on how the lawn should be kept.
- Exhale and put your feet up! You’ve done it! Never miss an opportunity to celebrate!
Extra Credit: Head to your nearest Caribbean island ASAP.
Brett Furniss is the head property manager of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management. BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn MoreWhat is the Key to Marriage & Great Property Management?
I was in a marriage communication class this past Sunday at my church. And the leader began the class by loudly exhorting:
Who wants to have a GREAT marriage???
Everyone enthusiastically cheered and nodded assent. I quietly commented to my wife that a great marriage did, in fact, seem better than the alternative.
As I felt a sharp elbow in my rib cage, the class leader seized the building momentum with a slide showing a breakdown of a person’s average communication:
7% Verbal
55% Non-verbal (ex. aforementioned elbow to ribcage)
38% (the dreaded and infamous) Tone
So, how does this marriage advice fit into performing great property management? The keys is effective communication via verbal, non-verbal, and tone to your tenants.
To break it down:
- Verbal: Present the important points of the lease to the tenant in person. For me, the Big 3 items to communicate are:
- Pay rent on time and in full every month
- Maintain the property (cleaning, changing air filters, etc.)
- Get along with your neighbors
- Non-verbal: Make sure all important points are fully written out. The writing should be clear and concise; it should include a good lease and other things you care about (lawn care, handling repairs, etc.). If there is confusion with a tenant about anything in writing, re-write it so it doesn’t confuse the next tenants. Each cumulative year in the property management business should see a corresponding decrease of tenant/property manager misunderstandings (lack of properly communicated expectations is the root cause of most disputes).
- Tone (wasn’t this the subject of a Seinfeld episode?): Be nice. At the end of the day, it is a people business. As the Bible says, “If you live by the sword, you’ll die by the sword.” Though there are many advantages to taking the emotion out of the business and using a Draconian decision tree approach to management (ex: if they don’t pay by the 16th, we file for eviction every time), I personally feel that’s a poor methodology (both operationally and from a ROI standpoint). Emotion matters. Parents being able to provide a home for their families matter. Most people don’t take being removed from their homes through court order lightly; they just need some occasional compassion to get through rough patches. Be nice, to a point.
By using a confluence of verbal, non-verbal, and tone communication, you can manage your property well and have a great marriage to boot!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management. BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn MoreShould I Sell My Rental Home?
From the mail bag… (aka a question I may have made up to write about)
Q: I have a few occupied rental homes and wonder if I should sell one of them now that the market seems to be improving. What are your thoughts?
- Oh, this is a surprising question from left field! And a great one! Kudos to you, mighty thinker!
It is a tough decision on whether to unload a rental property. If you decide it may be time to do so, the first thing is to establish whether you can by asking 4 questions:
- What is the realistic value of my property? Have your trusted real estate advisor run sales comparables and put your home’s value at the low end of the range for estimating purposes.
- How much will it cost to get my property in sales shape? In my opinion, there is a difference between getting a home in rental shape and sales shape. With a rental, you may get away with steam cleaning the carpet and touching-up the paint; with sales, there is a lower threshold for cosmetic issues which may mean replacing the carpet and repainting the house.
- Do I have the money to cover the mortgage and utilities while the rental home potentially sits vacant for months? Generally-speaking, showing a home effectively with tenants in it is tough.
- Do you have the money to pay the selling costs (Realtor fees, closing costs, less than full market offer, etc.)?
So, the math looks like:
Answer #1 – Answers #2, 3, and 4 = $$ (hopefully a BIG, positive number)
Then the question is: Is $$ above worth selling the property for?
If so, do it. If not, continue to hold the rental until the market and your mortgage balance improves further.
However, there is a scenario that skews the math and lets you skip cost items #2 (home cosmetic fix-up) and #3 (home vacancy costs), and eliminate or reduce #4 (selling costs in terms of Realtor fees)…
- OK, I’ll bite. What is the scenario?
- When the tenants in your rental home want to buy it for themselves.
This is the #1 question to ask if you think you may want to sell your rental homes. ALWAYS ask the tenants first. If they do want to buy it, get them in touch with a mortgage broker and see if they qualify.
If they qualify, this is a win-win exit strategy. The tenants get to start building equity in a home that they already love. And you, the owner, get to avoid much of the costs and uncertainty of selling your rental home.
And what if the tenants proactively ask you if you are willing to sell your rental home to them when you’re not quite sure you are ready? You want to think REALLY long and hard about it. These opportunities don’t come up that often and you need to make sure that it is something you really don’t want to do.
Cash is king and the purpose of investments is to make money. Two well-worn adages come to mind:
A bird in the hand is worth two in the bush.
AND
Buy low, sell high!
Happy investing!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management. BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn MoreCharlotte Property Management Weekly: Recruiting Great Tenants- Your Team Is Only As Good As Your Players
It’s been said the most important part of major college coaching is recruiting. A team’s ultimate potential is limited by their talent level. Sure, good coaching can make good players better, but great players are the reason teams win championships and are consistently good.
I started thinking about this the other day when a friend of mine called. He told me that a friend of his bought a property management company inCharlotteand it is proving to be a nightmare. The company he bought has sloppy books, awful employees, and a large cache of substandard properties that are in disrepair. But most importantly, they have a lot of tenants that have not been paying rent and have stayed in the houses rent-free for months. His friend is watching his investment go up in flames as he tries to salvage what’s left.
This made me think. What would be the characteristic that would be most important to measure the strength of a property management company? Is it good employees, growing cash flow, long-term contracts in place, sound business procedures, or something else? They are all obviously very important. But what’s the ultimate key to success?
As I thought more about it, my head began to hurt and my mind drifted to sports:
Why did Coach Nick Nolte agree to buy Ricky a new truck in the movie, Blue Chips? Why are there so many recruiting scandals in college athletics? Why do I read about “tampering” charges in the professional leagues when teams illegally contact players when they are not allowed? Why are college coaches only allowed to send potential recruits a limited number of text messages and are restricted on how often they can call them? Why do coaches work harder in the offseason traveling to visit recruits than they do during the season? Why do the Charlotte Bobcats think they can rebuild the team with late round draft picks?
Then the answer occurred to me. The players are the most important thing. They directly dictate the success of a coach. If a team has great players, they will be a good team (no matter the coaching quality). That is why recruiting is so important and organizations are willing to push the envelope on wooing potential stars.
As a rule, every top-tier athletic team puts a premium on signing great players. And this is the same mentality that top-tier landlords and property managers, like you, must have to build a strong property management company and investment portfolio. It’s about getting great tenants for your properties. They will directly dictate your success.
When a great tenant applies for a property, it is imperative to let them know that you want them. You need them. You will treat them like gold if they would just sign with you (on the lease). Text and call them every hour (there are no contact restrictions in business, only the weirdness factor of over-communication). Add incentives. Buy them the pony they always wanted, as long as it is munching the grass in your rental home’s yard! Let them know your love will never end if they can out down a deposit today.
Great tenants provide so many great benefits! They pay on-time and in full providing consistent cash flow. They take care of the properties so they don’t fall into neglect. They let you know if your employees are lacking or slacking. They even take care of minor repairs on their own!
Your team, investment, and/or company is only as strong as the players it has signed. Maniacally pursue the best, get them under contract, and rest will take care of itself!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Tenant Stories Often Raise Red Flags
“If you have to ask how much it costs, you can’t afford it.” Maxim of the Wealthy
“If you have to ask for a payment plan for the home’s security deposit, you can’t afford it.” Maxim of the Intelligent
We are approached by potential renters a few times a month with something like the following:
“We love this house! We want to take it! We would call our lives “complete” if we could inhabit this home with our children! We get goose bumps just imagining the daily ingestion of pure beauty that permeates from each nook of this stunning domicile. We have the first month’s rent ready to put down now! Where do we bring it? We will treat this house like our very own with weekly carpet baths and loving dustings!
But… The only problem is that we are a little short on the security deposit. Will the owner accept breaking this payment into 3 months? Let the owners know we are good for it and I will be praying that they be blessed this Sunday at each of the church services we regularly attend.”
Thinking like a property manager, how many red flags come up in this beautiful soliloquy? A few come to my mind:
1. Lack of funds: I dare to call this the number one tenant screening technique; this is the collection of the application fee, pet fee, security deposit, and the first full month’s rent upfront and in full. This really is the number one way to find out if they have cash on hand. If they can pay it, they probably have money. If they can’t, they probably don’t and won’t apply.
2. Offer of the security deposit in a payment plan: This ties into red flag #1, but there is another issue. If they don’t pay it upfront, you are left with absolutely no leverage to get it after they move in. You can’t evict them because they are paying rent. Please don’t take payment plans! I’ve done it a few times (because it seems so easy and the tenants seem so sincere…), but they rarely keep up with them. Moving is always more expensive than they realize and cash was already short. They won’t give you the money simply because they don’t have to. They duped you on the front end and will now avoid your calls and hollow threats.
3. Effusive praise over a rental home: I like it that you like it, but let’s not go overboard. When you tell me that you’re going to take meticulous care of it, that’s great; but I’ve never had a tenant tell me that they were planning to systematically destroy their rental before moving in.
4. I like it that you’re into church: But I wonder why you’re telling me this when you’re applying for a rental home?
Red flags don’t mean you need to wave a white one. Be diligent in your screening process and the right tenant will come along!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: The Options Available to Owners of Vacant Homes
As a Charlotte property manager specializing in lease options (rent-to-own and rent-to-sell), we get many calls from home sellers “exploring their options” about their vacant properties (unlike Obama, my puns are typically not intended). So, as a public service, I’ll run through the available options:
- Strategic default (I think this is what it is being called): Stop paying the mortgage and taking the credit score beating like a man
- Put the property on the market for sale: If the home is special and priced well, it will sell in some period of time. If not, eat the mortgage every month until the banks start lending again.
- Rent the property out: Get most of the mortgage paid every month by the tenant. Keep a tenant in the property until the market comes back and then place the home up for sale.
- Rent-to-sell the property: Put a rent-to-own tenant into the property who will pay the mortgage and potentially buy the home during their lease period.
- Rent out the property and then put it on the market: In my experience, this leads to disappointed sellers and upset tenants.
- Arson: Not recommended. And, no, this is not a service we offer!
All of these approaches obviously have pros and cons (like jail time). Depending on each respective person’s needs and tolerance for risk, each approach could be the appropriate one.
And to conclude the public service announcement, please contact your local property manager for further details.
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
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Charlotte Property Management Weekly: Your Rental Home Wants You to Wait Until It’s Ready
Every client we’ve ever had has wanted as little vacancy time for their rental as possible. Zero days are optimal; every day after zero winds up costing them money in utilities, mortgage payments, and maintenance. Not wanting to lose any money leads to a mentality of getting the home on the market as soon as possible, regardless of condition and resident situation.
So some clients want us to put their homes on the market prior to them being ready for occupancy. What I mean by this is that the home has not been completely repaired and there are still personal items in the house. They (or their current tenants) also are within the process of moving.
The rationale, by itself, is sound. The greater the length of time the house is on the market, the greater amount of potential tenants that can see it. If more potential renters see it, the law of large numbers would dictate that someone at some point would love it and want it.
However, does this really work? I would argue it doesn’t. Huh? Why’s that? Isn’t it common sense?
Simply, the American consumer’s mind works differently now. There is an inundation of information being flung at them on a constant basis. Most of it is ignored; however, there are some marketing messages that get through (like a rental listing). If the consumer takes the time and makes an inquiry to visit the property, there is typically one shot to get them. Their attention span is limited.
This one shot means that the house has to look perfect. This visit needs to conclude with the prospective tenant loving the house. If they see or feel something they don’t like, it will probably turn them off and they will want to find another home. And there are many other rental houses on the market that look very similar. The competition is fierce!
So why does this matter? Maybe the diamonds in the rough that aren’t turned off by the home’s uncleanliness will be unearthed and they’ll take it. It’s certainly possible. But are renters who don’t care about the condition of the home desirable? If so, there may be disappointment when move-out time arrives and the home doesn’t look so great. Clean people typically want clean homes.
The other main reason is that once the marketing of the property begins, momentum is started. The rental is on the top of all the searches from rental websites, people who are waiting for a rental are told about it by their property managers, and it is fresh. This is when things typically happen for an average rental home- the first two weeks. Interested calls, inquiring e-mails, and subsequent showings come quickly. They need to be harnessed and converted into applications and security deposits.
But when the rental house isn’t up to the task, momentum is stunted. Interested, potential renters see the property in less than ideal shape and compare it to better kept homes on the market. The home loses out. Or the current tenant in the home is packing boxes to move and glares at the renter who is interrupting their evening after work. The house looks horrible and the vibe is bad. Potential renters flee to the next home. Can you blame them?
With rental homes, it’s more about quality time on the market and less about total time. Make sure the rental home is ready and most inviting when the most people want to look at it!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn More
Charlotte Property Management Weekly: 700+ Credit Score Tenants Not the Best Option for your Rental Home?
He wanted to make sure that we placed a rental tenant into his home that had 700+ credit scores. That was it.
I told him I didn’t think that was a good idea; it would reject a lot of better suited applicants. He told me I was crazy (in so many words).
Learn MoreCharlotte Property Management Weekly: The Top 3 Reasons Why Good Property Managers Matter More Now (Reason #2)
Traditionally, this could be considered a “lowering” of standards; however, in today’s market, I would argue that it is understanding, collecting, and interpreting tenant data better. Tenant selection has become more of an art and less of a science.
And this makes it much harder!
Learn MoreCharlotte Property Management Weekly: Coke vs. Pepsi vs. Your Real Estate Firm- What’s the Difference?
“I can’t believe that millionaire CEO who just moved to town is looking for houses with Jimmy “The Home Seeking” Missile. Doesn’t he realize Jimmy knows more about weaponry than he does real estate?” (Baffled Charlotte Real Estate Agent)
Coke and Pepsi have been warring over market share in the soda business for a long time. Coke had a gigantic lead until Pepsi started making inroads in the 1970’s and 1980’s.
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