Being a Duke Hoops Recruit & Landlording: YDKWYDK
As much as I hate to admit it (being a UNC guy), Duke University is a worthy rival on the basketball court. A big part of that is their ability to recruit great high school players. They go after the best of them and have been very successful in landing them in Durham. Many of them were so good that they only played one year at Duke and then left early to play in the NBA for millions of dollars.
But, for others, it didn’t work out that way.
Point guard Derryck Thornton was one of those Duke recruits. He was an esteemed 5-star recruit who was finishing his junior year of high school in 2015. Duke was thin at point guard for the upcoming season and they convinced Thornton to “reclassify”; this allowed him to graduate early from high school and join the Blue Devils for the 2015 season.
It was a great honor. The defending national champions needed him to come early and play. He was only 17 years old! So he said “yes”, enrolled at Duke early, and was starting at point guard. It seemed like he had the world at his fingertips!
But, YDKWYDK (You Don’t Know What You Don’t Know). A year later (when he originally should have been starting school at Duke), Thornton was transferring out to play basketball for the USC Trojans. It was allegedly a combination of factors he could not have seen coming: his freshman year didn’t go as well as they had hoped, certain Duke players inexplicably didn’t go pro (that would have made more playing time available to him), and other more heralded recruits joined the 2016 team. He went from being really needed to being really expendable. So he was gone.
YDKWYDK. By definition, it’s hard to protect yourself against the unknown. This is especially true in property management when there are so many variables; renters (people) are complicated and they are all so different! It’s best to have someone who might know what you don’t know because they’ve been there before. Experience counts!
I know I’m biased towards using a property manager, but I understand the self-management side of it as well; I’m all for saving money! It’s cheaper if I fix the sink, as opposed to my plumber, but what about if I miss something and it causes a leak behind my wall? Then I’ve got a bigger, much costlier problem. YDKWYDK
And if property management is merely a hobby, it’s really tough to know what decisions can be costly down the road:
“My friend/co-worker wants to rent the property. He seems like a good guy. Should I rent it to him?”
“Should I allow any pets in my rental home? If so, which ones are okay?”
“Is it important to do credit checks? If their score is low/high, is that an instant denial/approval?”
“Do I need to do home inspections? If so, what am I checking for?”
If Thornton had been told in 2015 that he would be transferring to another college after his freshman year at Duke, he probably would have had a good laugh. But it happened. The same can be said of many decisions being made today by landlords who dabble in property management; the unforeseen long-term costs of seemingly innocuous choices might make the expense of having a property manager seem very reasonable!
YDKWYDK. Happy Landlording!
Brett Furniss is a property manager at 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, Uptown condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn MoreToo Much Sympathy Can Kill Your Rental Business
“Moderation in all things, especially moderation.”
Ralph Waldo Emerson
Over the years as a Charlotte property manager, I’ve gotten a lot of calls from landlords who tell some version of this story:
We had placed a family of tenants into our rental home and everything was going great! They paid on time for the first 8 months and were really a joy to interact with. I mean, Brett, when minor repairs were needed around the house, they took care of it at their own expense- they would just call and ask if it was okay with us if they made the repairs! They really were a beautiful family; you should just see their youngest daughter, Cybil- she reminded me of my granddaughter! But, I digress…
The problems started when they were late in July. Apparently there was some mix-up with accounting at their work and the paychecks weren’t cut correctly that month. I was okay with it (things happen); they wound up paying on the 15th that month and I didn’t charge them the late fee that I could have. They assured me this was a one-time thing and they wouldn’t be late again.
August 1st came and went and there was no rent. When I called to ask about it, I started getting voicemail. Two weeks went by and I was wondering if I needed to start thinking about evicting them, but then they returned my call. They said their car had broken down which left them without transportation to work, so they had to choose to pay for the car repair instead of rent (you can’t earn money to pay rent if you can’t get to work). They said that was also why they didn’t call me back immediately; they didn’t have the funds to pay their cell phone bills either. After apologizing profusely, they asked if they could wait until the 1st of September to pay. “Of course,” I said.
September 1st came and we got a check for about a quarter of the rent (for August). They said the rest would come from the paycheck on the 15th. When the 15th came, they called to explain that it was either paying back rent or paying the light bill, and the children couldn’t live without heat. And they also had to pay for Cybil’s dance recital which she had been looking forward to all year. “Our kids need to come first.” Then they told me what a great landlord I was and said they were so appreciative of my understanding.
Brett, this story goes on, but I’ll bottom line it for you. The tenants are 5 months behind and I am beside myself and out of patience. I wish they would just get caught up! Where do I go from here?
First of all, there is nothing wrong with being a nice, understanding person. We have enough jerks in the world. And what’s done is done; it’s a sunk cost and it’s time to deal with the facts on the ground.
If the tenants are 5 months behind, it’s time to evict. There is no way that they can get caught up at this point. Find an eviction attorney (ask a property manager for a recommendation if you need one) and get the ball rolling ASAP. In NC, you could be looking at 6-8 weeks if the tenants prolong the process (and possibly longer if they know how to play the game). You need to get your house back and stop the bleeding.
A caveat- I don’t ever want to evict anyone. It’s expensive, it’s time-consuming, and it is a lose-lose-lose proposition (owner/property manager/tenant). At lease signings, I communicate to tenants that if they are having payment issues (life happens), to contact me immediately so we can work something out. Whether that means a payment plan, negotiated vacancy, or something else, we need to talk it out and negotiate a workable plan. We’ve worked things with tenants in the past that has made the best out of a difficult situation. Everybody needs a place to live.
But we’ll never get to 5 months of non-payment. It just can’t happen. Sympathy, at that point, turns into taking advantage of home owners, which isn’t fair.
Though every tenancy situation is different, there are a few non-negotiable parameters:
- Non-payment can never get past 30 days. That’s 2 pay periods and past the point of return for most tenants.
- If a payment or negotiated vacancy plan is agreed upon, it is set in stone. If the plan is breached (for any reason), eviction must be filed.
- Don’t take it personally. Rental properties are a business and sometimes business stinks.
I am all for sympathy. But with rental homes, sympathy can kill your business if not used with moderation.
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, Uptown condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn More#1 Way Landlords Can Increase Their Rental Home ROI: 4 Tips
Landlords always want to know how to make a better return (ROI) on their rental homes:
Can we raise the rents?
Can the pet fee be an annual expense?
Can we charge for air usage within the confines of the home? (OK, I haven’t really heard the last question… yet)
As a Charlotte property manager who has been in the business for a while, there is one clear cut winner on how to maximize rental home ROI. And this earth-shattering, nugget of wisdom is…
Keep your tenants.
That’s it. If they stay and sign long term leases, landlords avoid a litany of costs: vacancy, fix-up, utilities, lawn care, potential vandalism, property management tenant procurement and marketing fees, potential non-paying tenant moving in… and that’s just off the top of my head.
Wise landlords want to do everything they can to keep their tenants.
Here are 4 tips to keep them:
- Think about not raising the rent. I’ve heard of some landlords who do not raise the rent EVER for as long as their tenants stay! That seems extreme to me, but I can see the rationale.
- If #1 (no rental increases EVER) doesn’t work for you, cap the annual rental rate increases at 5%. Or offer to raise the rent 5% on a 1-year lease while simultaneously offering to extend the lease at a lesser rental rate for a multi-year lease. (Incentives really work!- part 1)
- Pay your property manager for extending your tenant’s lease. This will align their interest with yours. We have a client who proactively offers us $400.00 to extend his tenants’ leases. I think he has a great understanding of where his ROI comes from. (Incentives really work!- part 2)
- (Most important) Execute the normal blocking & tackling of property management. In other words, do what you’re supposed to do. Make needed repairs in a timely fashion, don’t be a jerk, and set proper expectations and meet them. Remember: Moving is a pain; don’t make your tenants feel they need to because their rental situation is unbearable.
There are many other tips on how to keep rental tenants (give them rental anniversary gifts, free months of rent for renewing, etc.). However, it is not disputed that tenant retention is the #1 component of achieving a good ROI. As the old song goes, “It’s cheaper to keep her!”
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 (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn More3 Tips for Effective Rental Home Inspections
What’s going on in my rental home and how does it look?
Typical Landlord Query
You do want to know, but you don’t want to know. It’s one of those paradoxes in life.
If you do want to know, it’s important to have some type of methodology. Here are 3 tips to making the most of your rental home inspections:
- Spot checks won’t lead to lease extensions. And, in the South, they may get you shot. Being that I usually don’t prefer it when people show up unexpectedly at my door (even people I really like!), most tenants are not going to like it if a property manager shows up unannounced (they might not even like the property manager- I’ve heard this happens sometimes…). Prior to tenant move-in, let the tenants know what type of inspection schedule you are likely to keep (annually, bi-annually, quarterly, monthly (gasp!)) so expectations are set in advance. Don’t feel the need to schedule the inspection when they have company in town; it can be a good idea to give the tenants at least a week notice of your visit. And the tenants don’t need to be there, but make sure they muzzle their pets. Don’t undervalue injury-free inspections!
- If you ask for nothing, don’t be upset when you get it (and you usually will!). Smart property managers want the tenants to know exactly what they plan to look at. But isn’t that like giving students the answers to the test beforehand? Yes!! Having the home in good condition is the desired test effect (even if they have to cram for the test). We send them the exact checklist we are going to fill out a week before we visit. This checklist lets them know we’re looking out for unapproved animals, dirty air filters, smoke smells in the house, cleanliness, lawn care, that our keys work, functional smoke & CO detectors on each home level, and any other things that really stick out (we provide ourselves a little latitude to comment on items not on our checklist). Then we snap 4+ pictures (no bedrooms) and e-mail the filled-out checklist and pictures to the owner.
- If no one is keeping score, no one cares. Sharing the inspection results with the tenants is paramount. They need to know that the property manager is paying attention and cares how they treat and maintain the home. We send them the exact, filled-out checklist we had used on their home. We let them know what corrective actions need to be taken and ask them to get back to us when they do correct any issues. However, the first thing we do is compliment them on the items that are correct. We want the tenants to know we appreciate the things they are doing right, prior to asking them to correct the items they could be doing better.
In short, schedule courteously, announce beforehand what will be inspected, share the results, and praise/correct accordingly. Rental home inspections, when thought out well, can be a positive experience for both the property manager and tenant (and the home itself!).
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 (including Rent-To-Sell) for single-family homes, condos, and town homes in the Charlotte-Metro Area. Contact Us Today!
Learn MoreSection 8 Offers “Free Rent”? 5 Reasons Many Landlords Still Choose Not To Participate
I saw an ad for a Section 8 speaker touting their government-sponsored rental assistance program as “Free Rent” for landlords. I had to laugh. As we’ve been told our whole lives, nothing worthwhile is free. And the Section 8 program is not an exception to the rule.
For the uninitiated, the Section 8 housing program allows people who earn under a certain income to receive a housing voucher to partially subsidize or pay for their rent in full. This seems like a boon for landlords.
The process looks like this: For the tenants, they need to scour rental home ads and find landlords who are willing to accept Section 8 vouchers. For the landlords, they need to willingly accept them. The problem is that many landlords choose not to accept them, which seems strange. The landlords do not want government-guaranteed “free rent”?? Well, maybe free isn’t always so free…
A big misconception is that the tenants are the reason landlords hesitate to accept Section 8 vouchers. To me, this is patently false. Some of our nicest and best tenants use Section 8. Really, on our rental applications for Section 8 tenants, we run them the way we typically do, but deemphasize income and credit score requirements as Section 8 has them partially backstopped.
So, if the tenants are good, why not accept Section 8? The 5 main reasons many landlords choose not to accept Section 8 vouchers:
1. Too much paperwork. It’s not easy for landlords, especially non-real estate professionals, to navigate the process.
2. The governmental standards for housing are really high and your house will fail the inspection. Slum lords (ex: the type of people who ask if tenants really need clean, running water) are not the only people that fail; almost everyone fails the inspections. I can speak from personal experience, anecdotal evidence, and conversations with the inspectors. I asked one inspector what percentage of homes passed their first time and he laughed. “Seriously? Zero percent. I’m not kidding.” He went on to say that his own house wouldn’t pass a Section 8 inspection. Our latest fail report had paint splatter on a strike plate and a loose electrical outlet as reasons it failed. When there are hundreds of items that the inspectors are looking for, you are behind the eight ball.
3. Customer service is typically unresponsive. I don’t really blame the employees. The workload that is saddled on them is immense. I asked an inspector the other day a question about a failed item on the inspection report and she exhaustedly told me she couldn’t remember- she conducts 15 different home inspections every day! So, bottom line, getting anything accomplished with them takes a lot of time, energy, and follow-up.
4. Waiting is the hardest part. We had a house that took 5 weeks to get an initial inspection. So, for 5 weeks, we ate the rent and utilities as the house stood vacant. There was no “free rent” or sympathy. After the home inevitably failed, there was another 2 week wait for a reinspection. The combined 7 weeks of non-recoupable utility and mortgage payments hurt. So did the vandalism that occurred as the house sat empty.
5. Re-inspection failures and rent abatement really hurt. So, let’s say you pass the initial inspection and the tenant moves in. At the ten-month mark of the tenancy, there is a reinspection where the Section 8 inspectors look for housing violations. We used to occasionally pass these, but that hasn’t happened in the past few years due to stricter regulations. The inspectors will find new things that happened during the tenancy; sometimes they find things they missed on the first inspection. Our latest fail was partially for a loose banister.
The problem with failing reinspections is that you are given one chance to fix the items. They provide a punch list so it should be as simple as giving it to a handyman to fix, right? Well, the descriptions detailing what is wrong are nebulous and getting the inspectors on the phone to ask them to remember your home and a specific issue is not likely. The handyman does the best he can, but when it fails, you enter into the unfriendly world of rent abatement.
Rent abatement is how property managers get fired and cash flow becomes difficult. It starts with the failed second inspection. This letter comes a week after the inspection letting you know what items you failed. You are instructed to fix the outstanding items and then schedule a final reinspection. During this time, not only is rent deducted for the abated period while waiting for the final inspection (your bank account is debited the following month on the 1st when payments are made), there is no rent paid for the coming month. For example:
Your rent due is $900/month and your abated 2-week period costs you ($450).
On the first of the month after abatement, not only do you not receive the $900 due (and the tenant is still living in your rental home and the bank wants your mortgage payment), you are clawed back $450 (payable immediately). This essentially puts you in the hole $1,350 (not counting the funds for the repairs on the home). Cash flow becomes a big issue. This is when “free rent” becomes “free rent” for the government. You’re a great citizen to do this, but you don’t feel so great when this happens.
If you pass on your final reinspection, you will get the $900 back the following month (the $450 is gone forever). If you fail, your contract with Section 8 is terminated and the tenant is free to leave. This presents a much bigger problem as the tenant usually doesn’t have money to pay rent, Section 8 is not paying you, and the tenant needs to enter the arduous, time-consuming process of finding a new Section 8-eligible home (while living rent-free in yours).
In closing, Section 8 can be a good program if you know it well and have repair people very familiar with their changing requirements. However, “free rent” for landlords is a gigantic misnomer and is about as far away from the truth as you can get. It can be intelligently argued that Section 8 vouchers are much more risky than working with non-subsidized tenants. “Nothing is free” is the true mantra!
Brett Furniss is President & Owner of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords, managing single-family homes, condos, and town homes in the Charlotte-Metro Area. BDF Realty’s services include property management, home fix-ups, and home sales, including Rent-To-Sell (“When You Need a New Solution to Sell Your Home”). His newest book is 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!) which is available on-line now.
Learn MoreCharlotte Property Management Monthly: 5 Crucial Expectations to Set Verbally With Your Tenants at Lease Signing
I’m a big believer in setting expectations in relationships; it seems to make things go more smoothly. If you know clearly what you’re supposed to do and I know what I’m supposed to do, there is less opportunity for hurt feelings and animosity. A beautiful, life-long relationship can blossom! (Cue the romantic music…)
This is why many married couples say the first year of marriage is the hardest. There is no book of set expectations for each partner; it’s created on the fly. The idyllic vision of married life begins to fade quickly when real life is thrust upon them. Who pays the bills? How many days are you staying out late with your buddies? You want me to iron the clothes? These fun questions need to be addressed and expectations of conduct need to be negotiated so both spouses are (mostly) satisfied. There is no marriage contract that explicitly spells this out.
Fortunately, a landlord-tenant relationship is governed by a set of rules known as “the lease”; this should theoretically make things easy! A lease is a perfect way to express your expectations to your tenant. That sounds good, but how come there often seems to be hurt feelings and bickering in leasing relationships? From the landlord’s perspective, the tenant should read the contract and follow it to the letter, right? If the tenants did everything the lease said, there would be no issues. So, of course, the issue lies with bad, rebellious tenants.
Wrong. The problem is a society who doesn’t have the time to read anymore. You are in the minority that you have made it past the Twitter-restricted 180 characters and are on to the fourth paragraph of this blog. Congrats! Pat yourself on the back!
And the standard lease is not exactly a page turner! It is legal jargon with no cool pictures or diagrams that goes on for page after long page…
If you want your tenant to know what you want them to do, you must verbally tell them. They will remember what you say and will usually act accordingly. Your leasing relationship will be the better for it! Guaranteed.
Tell the tenants what you expect (the Cliff Notes version please!) and what you are going to do for them (and won’t do for them!). The five most important things I make sure I cover with tenants in our lease signings:
1. The date the rent is due (the 1st of the month), the day it is late (it must be RECEIVED by the 5th of the month), and the day eviction is filed (the 16th) if we don’t hear from them and work something out. I also mention the late, bad check, and eviction fees that would be due in each scenario.
2. Where their security deposit is, what it is for, when it will be returned (within 30 days after move-out), and under what conditions some of it may be withheld.
3. Explaining that aesthetically the home is “as is”. When things stop working (HVAC, plumbing, etc.), what the repair process is and how it is handled.
4. I explain the 3 keys to a good tenancy: paying your rent on time, getting along with your neighbors, and keeping the home in good shape (including standard maintenance).
5. How early lease terminations are handled. Life happens and this is how you can get out of your lease and keep your credit intact. (Note: We ask that a 30-day notice be given along with 2 months of rent as a lease termination fee, in addition to the rent due up to the vacancy date)
6. Bonus item message to give for property managers: “We are not the owner of this home. We are the messenger. We don’t always like being the messenger, because messengers get shot sometimes. You don’t need to shoot us. We’d actually really appreciate it if you didn’t.”
This isn’t a comprehensive list, but it is important to remember that attention spans are not endless. These five points should be helpful in having a great relationship with your tenant!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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
Selling Rental Properties: 3 Free Steps To Determine Whether You Should
There’s been a lot of good news of rising home prices coming from the Charlotte housing market, as well as the rest of the country. For real estate investors, this news is a mixed bag. There are less great buying opportunities for them, but their net worth is increasing. It also presents a good opportunity to turn their home assets into cash.
Making money on selling rental homes is a nice aspect of the investment real estate game. Buy low, sell high. When a real estate investor is able to do this, life is good! It makes all the repairs, waiting for late rental payments, and extra tax work worth it!
Let’s face it, there are two main joys of selling investment homes:
1. A good amount of cash is transferred into your pocket
2. The worry about your extra home is gone and given to someone else!
So if you have an investment property that you may want to sell, here are 3 free steps to make a quick determination on whether you should:
1. Determine the value of your home: Ask your property manager or friendly Realtor a realistic range of values for your home. Why a range and not a fixed number, you ask? Real estate pricing is subjective. If your home is in great shape and in a desirable section of the neighborhood, your home should sell in the top of the range. If it’s been beaten by years of tenants and little fix-up has been done, it will be in the lower range of the values. Estimate low for this exercise.
2. Estimate selling costs: Nothing creates a bigger vacuum of air on the phone when I explain that owners should factor in 10-15% in selling costs. After the initial scolding pause, they ask the requisite question, “What? How do you figure that, brother?”
This general estimate of 10-15% is computed by:
6% Realtor fees
1% Miscellaneous seller closing costs
3-8% Less than list price offer and seller concessions (typically paying for the buyer’s closing costs)
For example, MecklenburgCounty (Charlotte) currently has an average offer acceptance of 92% of the list price (and this is on the rise from 90% from last quarter).
3. Find out your loan balance: For a general idea, just look at the loan balance remaining on the monthly mortgage statement. If you don’t get a mortgage statement, you’ll really like this exercise!
Once these 3 figures are retrieved, the math looks like this:
Value of home (be a pessimist!) – Estimate the cost to sell (say 12%) – Your loan balance = Profit (or loss)
For example, take a $100K house with a loan balance of $60K:
$100K (home value) – $12K (12% of $100K) – $60K (loan balance) = $28K (Profit!)
This is a general estimate of whether it is worth putting your home on the market to sell. Now you can decide whether this approximate dollar figure works for you.
Selling homes can be a very good thing for your wallet! Just use this simple exercise to see if it is worth doing at any given point in time.
Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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 Monthly: Don’t Return Your Tenant’s Security Deposit Just Yet
As a Charlotte property manager, I am a big proponent of returning as much of the tenant’s security deposit to them as possible. If the tenant took time to care for the property, did what they were supposed to do during their lease period, and paid all of their rent, they certainly deserve it back! There is a reason property managers are required to put the security deposit into an escrow account; it is a reminder that the security deposit is not the landlord’s money, it belongs to the tenants.
However, that being said, I’m also a proponent of the “slow return.” By NC law, the security deposit does not need to be returned to the tenant for 30 days. And also according to the law, if the landlord is still figuring out repair costs and won’t make the 30-day deadline, they just need to notify the tenant that the payment will be delayed in writing and let them know the approximate cost of the repairs at that point in time.
Why would landlords delay the tenant’s security deposit return? The most popular question asked (by far) when a tenant moves out is, “when can I expect the security deposit back?” If you want to be a “cool” landlord, shouldn’t you just give it back after the walk-through? You already know how much the repairs are going to cost (if there are any) and the tenant could use the money back. You certainly want to be good to the tenants who were good to you, right?
Well, yes, but not exactly. I recommend keeping the security deposit as long as possible. Once it is given back, you really need to consider the tenant gone and their account closed. You need to assume that you will never get any money from them again.
So? They moved out already, right?
Yes, but… Walk-throughs are an inexact science and sometimes things are missed. Think about home inspectors; they are professionals that take hours doing a walk-through to write a comprehensive damage report and they still miss issues with the home. I guarantee that landlords are not close to conducting several hour walk-throughs at the level of detail that they are (nor should they be). Things get missed and that’s life.
However, you can provide yourself some extra time so missed things can get caught before it’s too late and you have to pay for it! It may be one of the handymen working on your home that alerts you to new repair issues. It may be a Realtor or marketing person who wonders why something looks off. Or (usually) it’s the next tenant who moves in afterwards that lets you know what’s not up to par (and by the way, they want the issues fixed on your dime!).
Let tenants pay for damages they are responsible for. And, unfortunately, the delay in returning the security deposit to them is a good way to ensure this happens.
Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners 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 MoreTop 4 Opportunities for Owners in a Hot Rental Market
As a Charlotte residential property manager, we are seeing the rental market really heat up! There are fewer buyers and more renters; this causes rental prices to go up and vacancy rates to go down. In the home sales market, sales prices and activity continue to stagnate making it a less ideal time to sell. The laws of supply and demand are in full effect!
We are also seeing an uptick in inquiries about purchasing the rental homes we have in inventory when they are vacant and on the market. Unfortunately, the dollar figures for the offers to purchase are not overly appealing. Buyers are still bargain hunting.
So what does this mean strategy-wise to an owner of a rental property? It means there is a lot of flexibility available on the rental side to improve financial positioning. The top 4 opportunities in this hot rental market for rental home owners are:
1. Raise rents: Rental comparables are rising. Make sure you are receiving market rate rent on lease extensions.
2. Lock-in security: If security is the #1 goal, offer to extend existing leases at the same rate for longer periods of time. Explain the good deal you are offering the tenants.
3. Fix up vacant properties and raise the rent: If you have a vacant rental property that is in marginal to bad shape, it is time to make the investment to fix it up. The market will reward you for this work with higher rents that will pay for the repairs.
4. Ride the hot rental market out and then sell: Enjoy the higher rents and subsequent increase in cash flow while the getting is good. Wait until your home’s value appreciates to the price you want before putting it on the market for sale. If your house is on an amortizing mortgage, even better!
As a wise man once said, “Don’t fight the trends, ride the trends.” Use this hot rental market as an opportunity to make more now and later!
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 Monthly: Stick It Out or Play the Field? Long Term Vs. Short Term Leases
In property management, one of the things we discuss with new clients is their goals. Are they planning on keeping the property long term or are they looking to sell it at the first opportunity? Do they want to move back into it at some point? How much flexibility do they need? What is their risk tolerance?
We want to make sure that we are enacting strategies that fit what clients are trying to achieve. They aren’t all in the same life situations.
It’s the same thing in the dating world. Some are looking to get hitched. They want to be seriously dating in an exclusive relationship on the way to marriage. They want someone on a long term basis who they will be with through the thick and the thin. This type of dating allows for greater security and a lasting partnership. However, it is a difficult one to leave without very hurt feelings and does not always allow you to see the best that the partner has to offer.
Other people are looking for “fun”. They want to meet as many people as possible and continually upgrade who they are going out with. This is a strategy that entails a lot of dates, work, and stress. The swinging singles would also argue that it also includes a lot of excitement, the ability to always see the best of the other person, with little actual commitment from their end; when something better comes along (or any other reason, including none at all), it is understood that they are gone.
Leases are the same. Some owners want to have the security of a payment coming in every month. They are willing to sign a multi-year lease for the current market rent, with no rent escalators built in. They want their tenants to be there for a while and be happy. To this end, they often will make home improvements for the tenants. They know they will be holding on to the property long term and are willing to make some sacrifices to keep tenants for the same time period.
Some owners like flexibility and the ability to always get the market rent (or more) for their home. They entertain weekly or monthly leases where they know they can demand a premium for the short lease period. Sometimes there are big events (like the upcoming Democratic National Convention inCharlotte) that they know they could get the equivalent of several months rental payments for renting out for only one week! They also have family and friends that come into town often and they like to have an open place for them to stay.
There are certainly downsides to short term leasing! There are no recurring rental payments guaranteed to come in every month, which is a financial risk. There are many opportunities for the bevy of new tenants that go in and out to damage the place. There are also increased payments to the property manager for fixing up, marketing, and procuring tenants so often. These need to be covered by the excess rent that is hopefully commanded.
Long term versus short term leases is much like the old argument of risk versus reward. Short term leases provide higher highs and lower lows, while long term leases are a moderate investment path that should provide consistent, average returns. The question is what the owners’ goals and needs are and this can certainly change many times during the relationship with the property manager.
For most property owners, the long term leases are the most economical option for their investment homes. However, one size does not always fit all and short term leases can provide a nice bump in income!
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