Charlotte Property Management Weekly: How To Handle Evictions And The Reasons To Avoid Them
Handyman: I was over working on your property and your tenant seemed to be really happy.
Owner: You would be too if you were living rent-free.
When tenants don’t pay, it is not good for anyone. Inevitably, things get put in motion. The owner gets upset and wants to know why they haven’t gotten their money. The property manager is spurred to issue threats to lower the hammer on non-payers. The tenants typically try to go “dark” (incommunicado), as Jack Bauer (and those in the spy game) would say.
I think of the Tupac song that I was mistakenly listening to a few years back. It talked about the deep pride he felt about having the ability to pay the rent. I believe that people do want to pay, but they can’t give what they don’t have. Life happens and things cost money. If the rent is not getting paid, it is never the only expense that is being neglected.
Unfortunately, there really isn’t much to do as a landlord but file for eviction if the rent money doesn’t come in. However, due to the costs, stress, and actual time, it is something o be avoided if at all possible! There are two common avoidance techniques that have minimal success:
1. Payment plans to catch up on rent: I’ve been burned on these! If the tenant is on a fixed income and is living paycheck-to-paycheck, there is really no way for them to get out of the hole. The plans seldom work. I really have to have history with the tenant and think highly of their character to entertain these.
2. Negotiated exits: this allows the tenant to leave without an eviction and saves the owner money for the court stuff. The only problem with this is, “How does the tenant have money to pay another landlord when he’s not paying you?”
So, how does one file for eviction as a private landlord? Well, in NC, this is how a normal eviction goes:
1. Make sure the tenant always receives a rental statement with what’s owed on the first of the month (this is your “demand for rent” letter). We e-mail them.
2. The first day evictions can be filed is the 11th of the month. You’ll need to go down to the courthouse with a copy of the lease, a few stamped envelopes, and cash. Ask someone where evictions are filed, go there, wait in line, fill out the paperwork and envelopes, and give these items to the clerk.
3. Once you receive the nod from the clerk, exit stage right (or left); just get out of there. Hanging out at the courthouse isn’t that fun. Or cool (unless you’re a high-priced lawyer working for Lockhart-Gardner).
4. Wait for the eviction court date to arrive in the mail in one of the envelopes you provided. The show up to court on that day 20 minutes early to fill out the paperwork that you’ll need for the trial. Do what the judge says. You should “win”.
You are now thinking, “Yeah! It’s over! I won! I knew I should have forgone mortuary school (stupid “Six Feet Under”!) and been a lawyer instead!” Uh, no. Not quite. The next steps which cost more money and take a month to complete are as follows:
1. Wait 10 days to file a “Writ of Possession”. This can be accomplished at the same desk at the courthouse. Please bring a new stash of stamped envelopes, cash, and the eviction notice you received in the mail from the court. You’ll repeat basically the same process for the eviction in step #2 with the new “Writ of Possession” paperwork.
2. Get out of there. Don’t mingle. Your head needs to be down and a beeline made for your escape vehicle. Pretend to be talking on your cell phone while speed walking. Wipe profusive sweat off of your brow. Wear a hood to cover your head, if weather appropriate.
3. Wait for the sheriff to call you to let you know when they will be at the house to change the locks. This takes a week or two. After they call, you’ll need to call a locksmith and schedule them to meet you at the house when you meet the sheriff.
4. Show up and be really uncomfortable. Watch the sheriff remove tenants from the home and the locksmith change the locks. Give the locksmith cash after he hands you the new keys.
5. The tenant now has 10 days to remove their things. They will call you to schedule a time for you to let them in the house. If their things are not removed within 10 days, you are required to store anything of value at your expense if they want it later (because you’re so nice (!) and it’s the law).
6. Begin the process of fixing up the house to get it in market shape.
I hope this is enough evidence showing that evictions are not desirable! To avoid these costly evictions, utilize thorough tenant screening procedures upfront!
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: Talking To Your Tenant Will Cost You Money
“Talk is Cheap.” (Keith Richards)
“Talk can be expensive!” (Property Manager)
There are “hands-off” owner clients. And then there are the “hands-on” varieties.
The “hands off” clients just want to know the rent money is in their account on the day they expect. If there are repairs that are going to cost them money, they want to know that too. They just want the bare bone facts with no fluff. That’s fine.
Then there are the “hands-on” owners. They want to be continually updated if there is any news at all about their properties. “What repairs are needed now?” “Is the tenant caring for the lawn?” That’s fine. “How did Felicia do on her math test last Friday?”
What??? Who’s Felicia?
As I pull the property folder and scan through the lease, “Felicia” is listed as an 8-year old occupant. Unfortunately, no math test scores were listed. Darn!
As a property manager, we work for the owners. However, we want to have good relationships with our tenants as well. When executed properly, we serve as a cordial buffer between them. That is a valuable service!
However, we can’t get too friendly with tenants, as much as we’d like to with many of them. We don’t work for them. If we get involved talking about their families and what’s going on with Felicia, we can’t do our jobs effectively. For example, what happens when they don’t pay rent and we need to evict them? The relationship gets really personal; personal to the effect of your “friend” calling you screaming that you’re heartless, they can’t understand why you would evict them when you know she lost her job, and how we felt about Felicia being homeless? Yeah, that’s not a good conversation.
Any decent property manager (with any length of experience) quickly learns to keep a professional distance so this type of scenario doesn’t happen. Dealing with these types of situations where bad things happen in our residents’ lives is part of the job (not a good part!). But we know how to deal with them.
This is where the “hands-on” owner sometimes gets in trouble. They decide to contact the tenant in their home and forge a bond. Instead of relying on the property manager for home updates, they go straight to the source. And this is where talk leaves the “free zone” and becomes expensive. Here are a few examples:
1. The owner calls the tenant regularly and asks how things are going. The tenant brings up any minor issue with the home. The owner feels compelled to ask us to send a repairman there.
2. The property manager asks for a rental price increase. The tenant calls the owner directly and makes their case on why they can’t afford it. The rent stays the same.
3. The tenant is late paying rent and the eviction is scheduled to begin. The tenant calls the owner and swears to pay soon. The owner asks us to call of the eviction. This usually doesn’t work out and the owner loses more money.
My favorite all-time story on this topic is the owner who called us about rescinding a rental increase planned for his tenant. When we asked why he didn’t want the extra money, he said:
“It’s not worth it to me to hear him griping night-after-night about it. To even it up, he’d just make me pick up more rounds at the bar anyway.”
When owners talk to tenants, it takes their relationship from a business to a personal one. And it’s tough for most to say “no” to a friend, even when it means taking a financial loss.
So save some money and resist the urge to talk to your tenant. Rest assured, Felicia’s very capable math teacher is doing her job!
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: When Tenants Want Out, Let Them Go: 3 Tips to Negotiating Early Lease Terminations
“Let my people go.” (Moses to Pharaoh)
Happiness. Everybody wants it. That goes for tenants, property managers, puppies, you name it. To accomplish it, sometimes a change of scenery is necessary. I mean, you want to go where everybody knows your name. And they’re always glad you came. Right?
Occasionally, we have tenants who are not happy with their home. They want to break their lease and move out immediately! Things are not fixed up the way they want, the neighbors are unpleasant, and work is too far away. Utility bills are too high, the building complex is too noisy, and their “party friends” found out where they were living.
Some tenants want to take this frustration out on their property managers (I’ll pause briefly for your feelings of sympathy/empathy). Unhappiness can be like gangrene, infecting everyone in its path. It’s not desirable, or necessary! I just want to write them a letter:
Dear Beloved Tenant,
Why so glum, friend? It seems like we’ve had a tough time connecting recently. All relationships have rough patches. We can get through this!
I’m sorry you are unhappy with the house. This happens! It’s tough to know exactly what is best when looking at a house for only a short time. I mean, over 50% of couples who are around each other everyday for years wind up unhappy and divorcing (remember the story you told me about that with your Aunt Cathy and the one-armed sailor?); sometimes our judgment when making long-term commitments isn’t what it should be! But take heart! I understand. We can talk through this!
I know threatening to not pay rent may seem like a good idea now, but it’s not a path that is good for anyone. If you really want to leave, we can work something out. Life is too short and you seemed like such a happy person when we first met (with your rhinestone-collared Shitzu in tow)! Oh, how we laughed as she frolicked! Let’s get you back to that place!
Sincerely,
Your PM
P.S. We need to hug soon. Please pet Mitsy for me.
Keeping unhappy tenants locked into their leases isn’t a “best practice”. It can actually be counterproductive and less profitable than letting them go!
It’s all about how the negotiation is handled. First, let’s establish the needs and concerns of each party:
1. The tenants want to move out. They’re concerned about facing legal and credit score consequences for breaking their lease.
2. The owner wants someone sending them money every month to pay for their home investment. They are concerned about vacancy, costs to get their property into market condition, and marketing costs for a new tenant.
So where is the win-win? Here are three tips in getting there:
1. The rental home goes on the market immediately. The tenant agrees to keep the home in immaculate showing shape and be extremely accommodating for prospective renters wanting to view it.
2. The tenant gives a 30-day notice to vacate and pays a 2-month lease termination fee. If the house is filled prior to 60 days, this falls to a 1-month lease termination fee that will be refunded to the tenant (incentives are important!).
3. The tenant is required to leave the home in move-in condition (including steam cleaning the carpets and a thorough cleaning). The security deposit is insurance of this. (Note: make sure this side agreement for early termination is in writing)
The owner should be kept whole financially with a new paying renter, and the tenant gets their freedom in 30 days with no consequences. A win-win situation is achieved.
Then we can all go back to being happy again. Cheers!
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: Rental Home Walk-Throughs: 4 Ways to Protect Yourself
“You know you have a good compromise when both sides are slightly unhappy.” (Many Authors Credited)
As a Charlotte property manager, my least favorite part of the job are the end-of-lease walk-throughs; that is, when the tenant moves out, and we visit the property to check out its condition. If there are damages, we need to decide whether they are “normal wear and tear” (no charge to the tenant) or damages that need to be repaired from the tenant funds. It’s very subjective.
There are three scenarios when it comes to these property manager walk-throughs. The house is left in:
1. Great condition: The tenant gets their security deposit back and the owner doesn’t have to pay much to get the home in market shape. Everyone is happy.
2. Mediocre Condition: Some of the damage is normal wear and tear, and some of it was caused by too much rough play by the tenant. This is where the greatest conflicts occur between owner and tenant.
3. Poor Condition: The security deposit is basically conceded by the tenant. They know they don’t deserve anything back and hope that there is no future contact concerning the property. The owner is able to use the security deposit to mitigate repair costs.
I’m going to focus on the most challenging situation, the home left in “mediocre condition”. This can elicit two different responses from the same walk-through report:
Owner: “You’re killing me! That tenant treated my home like a kid’s tree house and they are only being charged $500 for damages? Add a zero please! They should be put in jail! Did they ever think to cover the food in microwave so it didn’t erupt all inside of it? Did they decide to save money on towels and wipe their hands on the walls? The carpet was new when they moved in! You’re being easy on them! You represent me, remember? Why do you like them so much?”
Tenant: “You’re killing me! I treated that home like my own! I cleaned it daily. We took our shoes off when we were inside (which we shouldn’t have even bothered with, being that the carpet was shoddy-looking when we moved in- I told you this!! Remember??) There might have been a couple things wrong, but I could have fixed them for like $50! $500? Are you crazy?? I thought you liked me! This is highway robbery! You’ll be hearing from my attorney!”
Property managers are really trying to do the right thing, but are stuck in the middle of competing interests. It’s sort of like being friends with both the wife and the husband when they are in the midst of a divorce. You want to be friends with both (like usual), without either of them feeling slighted. Practically-speaking, that can be tough to do!
To make this experience as clean and easy as possible, I’d offer the following four suggestions to landlords:
1. Trust your instincts- there is no “right” answer and it is usually impossible to make both parties entirely happy
2. Be specific on damages and document repair costs
3. Have a consistent methodology on how costs are assessed
4. Take pictures or use video during the walk-through so tenants can see the damages they are being charged for
Though rental home walk-throughs can’t always be pain-free, there are ways to limit potential fall-out from this necessary part of the property management business.
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: When Should Rental Rates be Negotiated?
As a Charlotte-area property manager, we get contacted (usually via e-mail) by prospective tenants asking us if the owner is willing to accept less than the listed rental rate. This question gets asked before the tenant even looks at the rental home.
I guess with the “new normal”, Group-On world we are living in, some might assume that consumers are not willing to look at something that isn’t drastically reduced; I don’t necessarily agree with this. But it does bring up the question: How does a property manager answer such a query on an immediate price reduction? There are obviously two ways to do this.
Question from Prospective Tenant: Will you lower the price even though I haven’t even seen the home and have done nothing besides click the rental ad to e-mail you?
Answer from Property Manager: Yes! How much would you prefer to pay? The list price is merely a starting point for negotiations, my astute friend! Property management’s new business model is akin to the “suggested donation” for entrance into a benefit concert. By the way, all the new chairs in our office are of the “EZ-Fold” style; we sit on them while eating our Burger King “Have It Your Way” Whopper, Jrs.
OR
Answer from Property Manager: No! The listing price is the listing price! I’m offended by your audaciousness, you crooked wretch! In a battle of wills, we will win. Think about it: our downside is that the rental home is on the market for a few more days; your downside is homelessness. The rent has now doubled for you! Scram!
Neither of these is a winning response (caution: do not use these responses at home or the office), but they do cover each end of the spectrum of responses to this “negotiation.” The best answer is somewhere in the middle of this spectrum. But where?
First of all, let’s clarify what a “negotiation” is. A true negotiation is where both sides give something of value and, in turn, receive something in return. In this example, the property manager is giving a discount in rent (real dollars), and the tenant has not even committed to visiting the property (let alone filling out an application and putting down a deposit)!
This example is not a negotiation; it is an example of a fishing expedition. Or a game show called, “How Desperate is the Owner to Rent Out their Property?” So giving away rent money for nothing is an obvious no-go. The best answer to an immediate query about reducing the rent would be something along the lines of, “I’m not sure how the owners would feel about that. If you visit the property and are interested, it is certainly something I could ask them.”
Okay, this does risk alienating some people. However, if the rental price is close to market value, then other renters will materialize. However, if the house has been on the market for a while, this may be a game you want to play. Proceed cautiously so you don’t wind up throwing free lawn care and daily Bojangles biscuits in as well to close the deal.
What about if the tenants do look at the property, are interested, and then try to negotiate the rental price? If the owner is willing to reduce the rent, I think an argument could be made to do this; however, this would be only if the tenants are strong candidates (great credit scores, landlord history, and income). Tenants who pay on time, keep the property in good shape, and do not create problems for others (neighbors, police, and property managers…) are worth their weight in gold. If they do not fit this bill, I would decline any reduction in rent.
Rental rate negotiation may be subjective, but common negotiation rules still apply. Make sure you get when you give! No “quid” without “quo”!
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: Property Management Owner’s Dilemma: Get Bigger, Stay the Same, or Sell Out?
Business is a funny thing; one is never allowed to be satisfied. If you start a company, grow it, and begin to cash flow it, then that’s good, right? Isn’t that the idea? I thought it was, at least.
However, it really isn’t if you read the news, watch television, or attend any business group meetings. The things that people want to talk about are:
1. What are your growth figures in terms of revenue? Projected out to 2015?
2. Is your social media and digital strategy sound? Have you made the time and financial investments?
3. Have you thought about geographical expansion? Franchise? Office openings?
And on and on and on. There apparently isn’t any downtime allowed! If you sit pat, you’re destined to fail. You must reach for the stars of worldwide domination! The purpose of making money is to reinvest it! Get on it! Get bigger! Now!
So rapid growth is left as the only option, unless you want to be considered a “burned-out” property manager. If you choose to pursue slower, organic growth, you can be called “uninspired”, a “non-visionary”, and lazy. No one writes articles on business people who stay the course! Those stories got chopped out early in the editing room. But despite many loud naysayers to the contrary, staying the same is certainly a very viable option. It’s just the “keeping on, keeping on” strategy. Nothing is wrong with that!
But what about if you really are “uninspired” now? You are burned out! You are a property management company owner (or real estate agent) who doesn’t want to deal with the business anymore. You are looking to get out and sell out. How would you do this?
You could hire a business broker to find someone who wants to add property management to their real estate brokerage company, or just wants to own a stand-alone property management company. These instances are pretty rare and the business broker would truly be earning their money if they found someone who will buy your smaller firm (under $1M in revenues)!
What is more likely is that you would sell your management accounts to another property management firm. For example, I received a letter the other day from one of the largest property managers in town; this letter was undoubtedly sent to every property management company in the area. The letter asked to buy up the property management accounts we had.
In mergers & acquisitions speak, they were utilizing a typical roll-up strategy of buying up every smaller company in the area to accelerate their growth. They had no interest in our systems or procedures; they just wanted to throw our management clients into their management machine. This would be a fast way for them to grow rapidly. It also would be a quick way for “uninspired” property managers to get out of the business and make some quick money off of their company. A true win-win? Possibly!
To grow, stay, or go- it’s a personal decision that shouldn’t be the result of other’s expectations. There are options available no matter what you and your company’s strategy is!
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: Why Can’t Property Managers Guarantee How Long it will Take to Fill a Vacant Property?
Question from client: “How long will it take for you to fill my home with a tenant?”
Answer from property manager: “It should be in the next month or two, but I obviously can’t guarantee that.”
Comment from client: “Okay, I completely understand. I wouldn’t want you to speculate about the result of an action that you do for a living and your company has executed repeatedly well for the past 19 years (according to your ad).”
Question from hungry patron: “When will my eggs be ready?”
Answer from waiter: “It should be in the next 10–20 minutes, but I obviously can’t guarantee that because I’m not the cook.”
Comment from client: “You lazy imbecile! I’m starving- shake a leg! It should take 2 minutes- tops! Tell your guy back there to skip a smoke break and crack a couple eggs!”
What’s the difference? Clearly, it’s customer expectations. In some industries the expectations are really high, and in others it’s low. It’s just the way of the world.
So why don’t property managers guarantee the time it will take them to fill a rental property? Is it because they can’t (obviously)?
If you’re an experienced cook, you know approximately how long it takes to cook something. You’ve got to track down the ingredients, mix them up, and cook them for some length of time. It can be estimated (within a few minutes) of how long this will take. The “Guaranteed 10-Minute Breakfast or It’s Free” promotion should be easy to execute without giving away the farm.
The same should go for a property manager, right? If they know:
1. What time of the year it is
2. How fluid the current market is
3. The condition of the home
4. The rental price
It should be enough information for a tighter estimate of when to expect. There are just not that many variables to consider and factor in! So why are there no guarantees then? And why is it “so obvious” that a property manager could never give one?
Q. When will this basketball game be over?
A. Sometime today, but I obviously couldn’t guarantee that
Dominos Pizza did the “20 Minutes Guaranteed, or it’s Free” delivery promotion for years and they were able to pull it off with many more variables to consider (traffic, events going on in the city, number of orders, employees not showing up to work, weather, etc.).
So why not property managers? Are filling a home time guarantees a matter of can’t, or won’t?
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: Are Monthly Rental Home Inspections Desirable?
I was asked recently if our property management company provided monthly rental home inspections for houses under management. I assume what was meant was the kind of inspection where we go into the property, check everything out, eat dinner with the tenants, and then help any young children with their homework. Then we’d set a time to visit again the next month before hugging goodbye. Smiles would be all around.
This type of inspection would work if we were renting out the “Little House on the Prairie” and the harvest was plentiful that fall. But I’m not even sure how welcome we’d be if the rain wasn’t coming and Pa had to sell one of their prized cows to make ends meet. And I’m not sure how happy they would be to have another mouth to feed when we stopped by for our monthly inspection; we’d, of course, be slightly embarrassed that dinner conversation would focus on the eviction our clients, the Olsen’s, are ordering us to execute on them (“If rent isn’t paid, file for eviction on the Ingalls’s promptly on the 11th! No more famine excuses!”).
Unfortunately (and fortunately), modern life isn’t like this anymore. Tenants don’t want the property manager coming around; they’re busy and don’t want their property managers tied into their social life (usually).
However, rental home inspections are sometimes necessary. But how often should they be conducted? Let’s examine the pros and cons of a monthly visit:
Pros of monthly inspections:
1. Knowing what the tenants are up to
2. Lease violations would be quickly recognized and dealt with
Cons of monthly inspections:
1. Become a preferred rental vendor of the old KGB and Gestapo
2. Limited benefit for costs associated with frequent visits
3. Tenants will be hateful and not rent from you
4. Pushback from tenant privacy issues
5. Forced to deal with issues that arise- do you evict? Tough decisions and ultimatums have to be handed down, and then they need to be carried out.
More on #5. The “sometimes ignorance is bliss” is a tough one to explain. “I always want to know what is going on in my rental house!” Do you?
If violations are found, are you ready to evict? If the tenant is paying on time and in full every month, do you want your property manager looking for reasons to get rid of the tenants? Eviction is expensive! And when the tenants are being evicted, no one is paying the rent anymore. That’s a double whammy on costs.
Well, warnings could be issued. “If this happens one more time, then you’re out!” If there is evidence that it did happen the following month, you really do have to evict them now. If not, what is the purpose of these monthly inspections anyway? Inspections are not meant to paint the owners into a corner. At the end of the day, you want paying tenants to stay, right?
Inspections can be useful; some violations need to be dealt with immediately. However, even the Ingalls’s wouldn’t think it was rude if you stopped by on a much less regular basis!
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: Rental Homes Don’t Need to “Dress” Well?
Everyone knows that for a home to sell (especially in a challenging economy) it needs to look its best. Now does that logic apply to rental homes in terms of leasing them out?
Not from what property managers sometimes hear from rental home owners:
“It looks fine. It’s just a rental.”
“I’d live here with the place looking ‘as-is.’ I don’t think I’d want a prissy renter who couldn’t deal with a few minor issues and a little dirt.”
“The other property manager down the street said it was fine the way it was. You want me to spend how much to fix it up?”
I’ve heard the analogy that a house should “dress” like it’s dating when it’s on the market for sale, and “dress” like it’s married when on the rental market. I’m not sure if I’m more bothered by:
1. The connotation that spouses don’t try to look their best for each other once they are married
OR
2. That property managers have to resort to relationship analogies to get people to actually listen to them
That being said, I think there is a semblance of truth to the fact that homes for sale need to “dress” better than homes for rent.
But… there is a direct cost to this! And this is when “monthly rent versus value” arguments start. Let me explain.
When we are assessing what a rental house can rent for, we provide a range of rental prices (example: “Your house should rent in the “$1,100 – $1,300 a month range.”). We ask the owner to pick the price they want to rent it for. Well, duh! Everyone (except the morons) would pick the $1,300!
Well, after further thought, maybe not. There are drawbacks to marketing at the highest rental price when the rental house doesn’t match up to competing homes; drawbacks like the house staying vacant for a long, long time!
In order to command top rental dollar, the rental home needs to:
1. Have minimal flaws and look really good
2. Offer equal or more tangible value than similarly priced rental homes
So, if owners don’t want to spend the funds to have the house look immaculate and the house is not the same or a better value than similar rental homes, they may want to list it at a lower price (like $1,150). This will ultimately offer a better ROI as they won’t have to eat their mortgage payment and expenses for the many months it might take to rent it out (this happens when price is not correlated well with market value).
Unfortunately, the market doesn’t lie. With the internet, prospective tenants can find hundreds of rental homes that are all competing to get their attention and money. The market is efficient; rental homes that offer good value will get quickly snapped up, and the ones that don’t will sit.
The way a home looks is the most important criteria in how much a renter will pay each month in rent. If the home has “some minor issues and a little dirt”, there is value lost when compared to a fully functional, clean rental. The rental rate needs to be adjusted downward or the home will sit empty for months and months.
The bottom line is that good-looking homes offer more value, which will command a higher rental rate, and be vacant for less time. This generates more money for the owner. The converse is equally true. So “dressing” does make a difference!
Wait- it’s also true that a well-dressed person who looks their best at all times will generate more, and better-heeled, suitors…
Maybe there is something to this “dressing” relationship analogy after all?
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: Money Back Guarantee on Rental Homes?
A fact of life is that sometimes people are not happy with what they buy. Sometimes they buy fruit and it is not as sweet as they like. They buy bread and it is not fresh enough. They buy Charlotte Bobcats basketball tickets (prior to them trading away their best player for basically nothing) and the team is not good enough.
And so it occasionally goes for rental homes. People sign a lease, move in, and then decide that they do not want to stay there for a myriad of reasons. As a result, property managers sometimes receive e-mails like this:
Dear Sir/Madam,
We were excited about moving into this home but it is a complete disaster! We visited the property during the day prior to signing the lease and everything looked great. Little did we know that the next door neighbor slept during the day, and only did his animal sacrificing in the dead of the night! The screeching animals prevent us from getting any sleep and my 9-year old daughter is so traumatized she won’t even look at animal crackers anymore! We’ve had to take down our bird feeder to keep the neighbor from hopping the fence and our beloved outdoor cat has been relegated to an upstairs, windowless room. Help!
We need to get out of our lease immediately and are demanding reimbursement for all moving expenses, therapy sessions, and a pet security detail during the move.
Signed-
Moving Now (Unhappily)
P.S. We hate you.
No one likes getting letters like this. Believe it or not, property managers want tenants to be happy, almost as much as the tenants do; so do the owners of the rental homes (without exception in my experience)! It makes the job of securing payment from the tenant (and consequently paying the owner) a lot easier! No non-masochist property manager is trying to pull a bait and switch on anyone; I mean, guess who would be fielding unhappy calls daily for the life of the lease? It would not be worth it!
That being said, I believe that the right rental home exists for the right person. There is not a one-size fits-all rental home in existence. This truth is why tenants need to visit the property, talk to neighbors, and develop a comfort level with the home prior to signing a long term lease!
So back to the facts of the example situation: The property manager works for the owner of the property. The tenant wants out of the home. The owner needs to make a decision on what they want (or can afford) to do.
Let’s look at the money back guarantee possibility from the one who has to pay for everything (the owner). If the tenant is allowed to move out and is reimbursed expenses, the costs that will accrue to the owner are as follows (note: some costs are one-time and others are on-going):
1. Reimbursement of tenant moving expenses and miscellaneous
2. Turning and keeping on utilities
3. Monthly mortgage payment and HOA fees while rental is not under contract
4. Cleaning & repair
5. Preparing marketing materials (pictures, ad copy, and home information)
6. Advertising costs
7. Property management fees (Yes, sorry. The non-profit property management companies (aka www.PropertyManagerInYourState.org)) don’t seem to last.
8. Real estate agent commissions for bringing in the tenant
9. Monthly mortgage payment and HOA fees while under contract (the time the house is taken off of the market and the tenant is ready to move in- someone has to pay for this time…)
This turns out to be a lot of money! This is why money back guarantees on rentals are not financially viable!
At the end of the day, it’s not a good situation for anyone. The owner and tenant both feel they are getting bilked. So what to do?
The best solution is avoidance! Property managers and owners should represent the property as accurately and completely as possible. Tenants should go in expecting that they will be living in the rental for the life of their lease and should perform extensive due diligence accordingly.
Then, even without a money back guarantee, property managers can start getting letters with the postscript of “I love you” a little bit more!
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!)
