Sorting Out Large Estates & the Appliance Repairman Dilemma
A friend’s father passed away late last year. When he died, it turned out that this modest man surprisingly had quite a lot of money; his son could really not believe the financial acumen he apparently had! He left a rudimentary will that bequeathed everything to his three children (including my friend). With this tough news, there was an economic silver lining.
But the father’s estate was a mess. There were bank accounts everywhere. He owned real estate in several states. Documentation was half on paper and half on-line. Some of the self-managed rental houses had leases, others were handshake deals. There was no estate plan; everything was going to probate court.
And complicating the matter, the heirs were not of the same mind. Some of the siblings needed the money immediately, while others could afford to wait on trying to get the best prices. It caused a lot of family unrest, on top of the grief they all shared at his passing. A blessing had become a curse.
I thought of how his father could have made this process so much easier by employing professionals. A good financial advisor could have had all of the financial accounts organized and available at the push of a button. An estate attorney could have had the assets placed in a trust so they could have avoided probate court. A property manager could have just kept the houses maintained and rents coming into the estate until any selling decisions were made. The cost would have been a fraction of his total wealth and would have largely eliminated the turmoil and sheer man hours required to piece things together.
On a smaller scale, this reminded me of a dilemma in Charlotte property management with broken appliances.
Almost every house has the four major appliances: refrigerator, stove, microwave, and dishwasher. When bought, they work and look great. There is fully-functional, appliance kitchen bliss which is expected by tenants and required by the lease.
But as the years go on, appliances start to break and stop working as designed. The question becomes whether to try to repair a broken appliance or just replace it.
Employing an appliance repairman will cost around $100 to get him in the door. Then one of three things happen:
- It’s a simple fix and the cost stays around his appearance fee (best case scenario)
- It’s a more complex fix and will cost around $200-$500 all-in (most common case)
- It’s a more costly fix and replacing the appliance is the most appropriate option (worst case)
After one of these options is selected, the tenant has a working appliance and everything is back to kitchen bliss.
A legitimate question arises: At any point, is it prudent to go directly to appliance replacement and save the $100 appliance repairman fee? What if the appliance is 30 years old? What if there is another, pre-existing issue already (like a broken handle)? No one wants to waste money.
As a property manager, we almost always go with sending the appliance repairman for several reasons:
- Older appliances tend to last longer than the newer manufactured ones
- Replacement costs of $500 -$2,000 are much larger than the possibility of a quick fix at $100
- If an appliance is broken due to tenant misuse, the tenant can be responsible for the cost. There is no way to ascertain this without a repairman.
- The tenant has less down time without a working appliance typically
- Pre-existing issues are usually not functionally-related and not the reason for the call
Much like administering large estates, professionals are trained to understand and handle problems. They can make trained decisions that usually wind up paying for themselves at a fraction of their upfront cost. Smart landlords are wise to employ them!
Happy Landlording!
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Flag Football Scouting & Rental Home Inspections: Worth it?
I was at one of my son’s flag football games and noticed that his coach was calling out the opposing team’s plays in advance based on how they lined up at the line of scrimmage. The players on his team would then shift their defensive formation and consistently stop the other team from gaining yards. I was impressed! This coach is much better than I am!
I asked my son about it after the game and he shrugged and said, “It was exactly what Coach Roberts said would happen after he scouted that team last week.” What? Coach Roberts was scouting 10-year old flag football games? I had never heard of such a thing.
Apparently, Coach Roberts would go and scout the next team on their schedule weekly. Most of the time that was easy; the games were either right before or after the game on the same or a neighboring field. He would go and figure out what offenses and defenses the other team utilized and who their best players were. Wielding his clipboard, pen, and binoculars, he would studiously examine this youth game where he knew no one involved.
When I was doing my no-scouting coaching, it typically took the best player on the other team to have a few long runs before I changed the defense to double-team him. Coach had them in that defense from the start! I couldn’t deny the advantage it created for him when he knew before the next practice that their opponent had only one superstar player or that they always threw it to the tight end on their goal line play.
Knowledge is power. Applied knowledge is even better!
In Charlotte property management, there is a version of “scouting” called on-site home inspections.
Now there are naysayers (and I used to be one of them…) who might think it is a waste of time to check in on tenants and visit the homes during the lease. The argument would be that the home is going to look the same regardless when the tenant moves out. A 10-minute walk-through is not going to change a tenant’s lifestyle dramatically. But my thinking has evolved on this issue.
Knowing things early has its advantages:
- If air filters are not being changed, any HVAC unit service visits could potentially be charged back to the tenant. Plus, it’s a good time to emphasize their importance and ask for pictures of the filter change.
- If something crazy is going on, it’s good to know.
- Are there unauthorized pets? It’s good to nip that in the bud early.
- Do the smoke and CO detectors still work? It could save lives.
- Is there any evidence of smoking? The longer it goes on, the more ingrained the smell will be in the house.
- Do the keys still work? It’s good to be able to get in when needed.
- Are any recent repairs up to snuff? Pictures and tenant feedback aren’t always overly revealing and, if not, vendors can be sent back out to complete the work properly.
When tenants know the landlord is paying attention to what is going on in the house, we’ve found that homes tend to be treated and maintained better.
Kudos to scouting and Coach Roberts! Smart coaches and landlords can gain a competitive advantage applying knowledge that most people wouldn’t take the effort to get.
Happy Landlording!
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Late Rental Payments: Are New Yorkers Scary? Or Just Like Us?
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
(John Paul Getty)
“I love payin’ rent when the rent is due…”
(from “Dear Mama” by 2Pac)
I remember years ago when I was coming out of college and my first job was in New York City (NYC). A friend of mine had an extra bedroom in the Lower East Side of Manhattan that I was able to rent. I was about to become a “real” New Yorker and ride the subway into work every day. It was an exciting time!
But, truthfully, it was also a scary time. I grew up in NJ watching television shows (NYPD Blue and Law & Order) and the news channels depicting rough city life. I rarely went into NYC as a youth and wasn’t really comfortable with life out of the suburbs. When I did go into NYC, there were homeless people begging for money, people urinating openly in the alleys, and throw up on the pavement. The subways were dirty and crowded and everything was so expensive. I was lost when I ventured out of the streets and avenues in the lower area of Manhattan and would ride the subways going the wrong way (Uptown? Downtown?). The whole environment was disconcerting.
However, when I started living in NYC and settling in, it took me a few weeks to realize that the people there were actually not scary. Now some were definitely strange, but most non-tourists were just like me. Every day, they were just trying to get to and from work and enjoy the time they had off when we weren’t working. Very few were trying to cause trouble or be threatening; they were just trying to make it.
From a rental home perspective, there seems to be a parallel from “scary New Yorkers” to “scary tenants”. The news is rife with tales of woe deriving from revolutionarily, disruptive tenants. Tenants that destroy a rental house, break all the windows, and don’t pay for six months. Or those that professionally squat in a rental home, live there rent-free for 2 years, and brazenly berate the owners when they stop by the house they own. Crazy stuff.
In my experience, most tenants are agreeable people who pay their rent regularly. And the late paying tenants who were on the brink of eviction? Most were not scary or even trying to be scary. They actually wanted to pay. Some lost jobs. Some tenants made poor choices and were irresponsible. But very few were maliciously trying to swindle the owner. At the end, almost all were trying to do their best to make things work- and sometimes they couldn’t pull it off. Life is a tough teacher sometimes.
Eviction is tough. Really, it is a game of losers, played by losers. The tenant loses out on their home, feeling of security, and usually most of their personal belongings. The owner loses a lot of money: marketing, repair, and legal costs, as well as the incoming rent. The property manager looks bad and may lose his job. No one is winning.
Leases are a partnership. The owner fixes major things and pays the macro property bills. The tenant lives there, pays rent, and takes care of the micro bills and fixes. And they should live happily ever after (or until the lease is up and one side decides to end it).
It can be scary when the partnership starts to break down. The best solution is to do everything possible to make it work. The tenant-landlord relationship is contractually intertwined. If the tenant has a problem, the landlord also has a problem. If the tenant loses, the landlord typically loses.
Smart landlords view tenants as such and and try to (cautiously) do what they can to keep them in the house (payment plans, extensions, etc.). Or, if that’s not possible, they work with the tenants to create a solution to offboard them as respectfully as possible.
(Most) tenants are not scary! They are like us or any regular New Yorker; they’re just trying to make it.
Happy Landlording!
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Late Rent & Library Books: What’s the Right Approach?
I remember approximately five years ago when the Charlotte Mecklenburg area libraries stopped charging late fees for overdue books.
My first thought was, “How will they ever get their books back on time?”
To be fair, they put some checks in place. If a book was two weeks overdue, no other books could be checked out on the account. If it was a month overdue, the cost of the book was charged to the account. But if the book was brought back within a year, the cost of the book was refunded to the account so there was no charge (it just created more work for the librarian!).
So if I checked out Calvin & Hobbes and got really into it, I’d have 364 days to get it back to the library without incurring any type of monetary penalty. That is really borrower friendly!
Local governments thought this “no late fee” policy for libraries wouldn’t materially affect their book returns as there was adoption throughout the country. And I don’t know of any libraries that stopped operating because of this policy change.
Would this policy work with rental payments? It would definitely be more tenant friendly!
As Charlotte property managers, we are not strangers to late rent payments. It is part of the rental home game. Rent is due on the 1st of each month and it is considered late if not received by the 5th of that month.
The biggest problem with late rent payments is that it slows the payment wagon. Rent money typically goes to the property manager who pays any vendor bills (if applicable) and then deducts their own fees (we need to eat too!). Then the money is sent to the owner.
The owner has mouths to feed as well. There are usually mortgages and other loans tied to the property that need to be paid. Then there is money that needs to go to property tax bills, home insurance, and sometimes an HOA. All these funds then feed other people and entities. The economy goes on. But it all starts with a single tenant making their rent payment!
So getting the rent on time is paramount for everyone downstream. If too many tenants decide to wait a year to pay their rent, the system crumbles. And for most landlords, if one tenant does not pay for months, it has a noticeable effect on their ability to pay others.
If this is the case, what should landlords do to facilitate on-time rental payments?
- Screen applicants well upfront: talk to past landlords (paying rent on-time is a habit!) and make sure the underlying tenant finances show they have that ability to afford their rental payments
- Send late letters and always charge late fees: there needs to be some sting. On-time rent is important!
- File for eviction after the 2nd payday: if there is no money then, it is really hard to catch up. Cutting losses on the earlier side will curtail longer term lateness.
I remember during COVID we allowed penalty-free late rental payments for months. The late rents shot up during that time, even with all the government money flowing in. With no penalty there was a relaxed effort, even for a few historically good payers.
Libraries have the luxury of being non-profit entities that have local government as a financial backstop to continue to operate. Smart landlords know they have a lot of mouths to feed (with no taxpayer back-up!) and need to be proactive to make sure tenants are doing their part.
Happy Landlording!
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Surprise Parties Should Be Fun & Managing Rental Home Expectations
“Frustration is a function of our expectations…”
(Stephen Covey)
You ever really look forward to seeing a movie?
Well, I have. And several years ago, I was looking forward to seeing a movie that opened right before my birthday.
I had a really long week, but just kept thinking of what it would be like for it to be Saturday and how I’d be feeling when I was watching this movie. I’d be sitting in the air-conditioned theater, legs kicked up, eating popcorn, and enjoying a few hours of restful entertainment. It was a dream in my mind to be sitting in that early showing. And being that it was going to be my birthday, there didn’t seem to be any obstacles to this unfolding like I had envisioned.
I had my birthday breakfast, my wife and kids left to run errands, and I was just killing time before the movie. Then I heard a knock on the door. It was my neighbor and he asked if I could help jump his wife’s car across the street at the recreation center.
I quickly glanced down at the time on my phone. I still had twenty minutes until I had to leave, so we hopped into my car and ran over to the recreation center. I parked next to his wife’s car and he said that we needed to talk to her inside first. I wasn’t sure why that was necessary, but I dutifully followed him. He went down a hallway and then opened up a door to a room that I hadn’t been in before.
“SURPRISE! Happy Birthday!”
I looked up and saw smiling friends and family all around this mysterious room filled with birthday streamers. My wife was beaming, looking at me expectantly. This should have been a really happy time, but my disappointed face said it all.
My perfect birthday plans had been foiled. I was crestfallen. This long-awaited movie wasn’t going to happen.
Expectations aren’t always rational, but they are very real. My wife worked so hard at putting it together and people took time out of their day to celebrate my birthday; I should have been extremely thankful and had a massively happy day. But my happiness was temporarily jolted. I did not get what I expected and was feeling sour.
As Charlotte property managers, listing vacant homes for rent is somewhat straightforward. We typically fix up and clean the homes before putting then on the market so everyone knows what to expect. Prospective tenants are walking into a home that largely looks like it will when they move-in. Rental home owners have already paid the fix-up costs. Tenants could move-in immediately after rental application acceptance. Everyone has relatively clear expectations on what is transpiring.
However, it’s not so clear when there are showings on an occupied rental home. Prospective tenants see a home that is being lived in and this creates many potential questions: Is this home being painted after the current tenants move out? Is the stained carpet being cleaned or replaced? Are there any upgrades being done prior to move-in? What items were brought by the tenant and will be removed, and what stays? When will it be ready for me to move into?
The rental home owner also has questions: Can we avoid a full paint job when the existing tenants vacate? Can the stained carpet stay? How much of the security deposit can we use? What are all these things going to cost?
The tenants and owners are asking the property manager for answers, but the property manager has questions too: What condition is the home going to be left in when the existing tenant leaves? Is the tenant going to paint before move-out? Are they any good at painting? Will the stains come out of the carpet? What will my final walk-through reveal about the house when everything is out?
Everyone has expectations. Generally-speaking, the incoming tenants expect a nice-looking house with everything working when they move into it. The exiting tenants expect to get most of their security deposit back. The owner expects not having to pay a lot to fix-up the property for incoming tenants. These don’t always gibe.
And when expectations are not met, people get upset. Even on their birthday!
Many property managers and landlords don’t market occupied homes until they are vacated, partly to avoid issues like this. It can seem like a great idea to get a jump on finding a tenant, but managing expectations while dealing with uncertainty can be challenging.
Smart landlords who do choose to go this route have conversations with all parties and try to set realistic expectations with all of them to avoid disappointing surprises. As I’ve been told, surprise parties are supposed to be fun!
Happy Landlording!
Learn MoreBeing 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.
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