The Educated Landlord

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The Curse of Knowledge

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Are You Smarter Than Your Tenants?

Curse of knowledgeI am blatantly guilty of the curse of knowledge and even though I’m fully aware of it, I often still fall into as it’s a trap that’s tough to escape. Being aware is the first step and this article hopefully helps make you aware.

So what the heck is this curse of knowledge? It’s what happens when you go talk to your mortgage broker, your financial advisor and even your mechanic.

They speak in some sort of gibberish where they use words like amortization, fiduciary standards or ABS control module malfunction. Fully expecting everyone else knows what these words also mean.

Now often we may know some, but as the conversations drag on new and even more industry based jargon comes out. But it doesn’t end there.

In many situations when dealing with people who work in a specific field, they have specific knowledge that a layperson may not have. An example right off of this site would be something as simple as the master key system I teach new landlords about, or the process I teach for screening tenants. A new landlord wouldn’t necessarily know either of these, often even established landlords don’t!

Task, procedures or simple industry knowledge that seems natural to the person in the industry, but requires further explanation when talking to someone who is the proverbial duck out of water is where the curse of knowledge comes into play. And this curse can affect how your tenants and you get along, how profitable your property is and even how safe it can be!

You Really Just Have Different Knowledge

voodoo dollThe biggest problem with “the curse”, is you assume the other person has the same knowledge as you, which which is a gateway to misinterpretations. You believe the tenant should understand the bank requires your mortgage payment on the 1st, hence they have to pay on the first. They may think the bank will understand if the tenant suddenly had to pay support payments or an unexpected expense. Or worse yet assume you will constantly carry them!

You understand leaving windows open in the winter to cool the house down is an ineffective use of utilities (and if you as the landlord are paying them, is an added expense!). Yet to the tenant, they may just think utilities are free and it never occurs to them that it costs you extra money that takes away from potential improvements or maintenance of the property.

It’s not as if the tenants are dumb, they just don’t have your knowledge, or the curse that comes with it. With any luck your business model as a landlord isn’t based on finding tenants that aren’t as smart as you. Hopefully you are finding intelligent, thoughtful people that make your life easier, your property safer and don’t burn your property down.

You just have to remember, it’s not the matter of tenants being dumb when it comes to property versus you, it’s just that they have different knowledge. Often many of them have only been on the rental side, they don’t understand the ramifications of not paying on time, of leaving outside taps open when it’s freezing outside, or the downside of taking smoke detectors down when they go off and not informing you.

Part of your job as a successful landlord is to make sure you educate your tenants on many of these little knowledge gaps that you may have between the two of you. This is what’s called an information imbalance as Dan and Chip Heath refer to in their book Made to Stick: Why Some Ideas Survive and Others Die (which I’d recommend you check out if you are into marketing and/or business, and yes that is an affiliate link so I get a few nickels if you purchase it through there, so thanks).

So How Do We Educate Our Tenants?

Training your tenantsThis is where the big problem shows up, because it requires more work on our part! We need to take time to educate our tenants and to create systems so we continue to do it every time.

One place to start is creating a property binder for each of your units. In the case of an up down suite, each tenant would have their own binder covering the property. Some of the information overlaps, such as where the water shut offs are for the property, location of the breaker boxes and proper use of the heating and cooling systems where applicable.

This binder stays in the property and is the ideal for putting the tenants copy of the lease, any walk throughs, local information such as shopping, restaurants, schools, post offices and banks as well. It is their go to reference and can even include manuals for stoves, fridges, and laundry machines.

Another area we can work on is explaining our leases in detail to the tenants. No glossing over the fine print. Thorough explanations of why you always need to get paid on X day is required, from there explanations of any penalties or repercussions that also accompany late payment. DO NOT LEAVE THIS VAGUE!

Next step, thorough walk throughs of the property. In one of my email tips I refer to explaining about water shut offs on toilets, taps and washing machines. Make sure you point these all out to the tenants and explain them. With external air conditioning units, maybe take a minute to explain covers need to be off when using them or that they shouldn’t block the sides.

As a landlord, you’re probably already a homeowner, so while much of this isn’t rocket science, it might as well be to someone who this is brand new too. If this is the tenants first rental unit ever ) or they have limited experience with these items), you may have to walk them through how to use the laundry, the oven or even the programmable thermostat!

By putting in the time when you sign the tenants in, you can prevent hours of frustration and possibly expensive repairs or headaches later. But by putting in this extra effort you’ll also stand out in more ways than you realize.

It’s just one of those ways you can be a standout landlord that you’re tenant will also remember and refer people to in the future!

The P.S.

The landlord tenant relationship is a two way street. As landlords and especially as long term landlords, we often forget the hardships involved with being a tenant. There is also a curse of knowledge associated that goes along with being a tenant and it may be a matter of the market changing, new rules being put into place or just our forgetfulness about what it was like being a tenant ourselves once.

While I always caution against being buddy buddy or Facebook friends with your tenant, it is important to let them know they can contact you if there are problems. you don’t want to be the landlord they fear, but rather the landlord they respect because you look after them. Previous bad experiences with bad landlords can color the perception of  tenants and this can taint the knowledge tenants have.

Bottom line, do right to your tenants and the majority of the time they will do right back to you. Now get out there and get your systems in place to break down the knowledge barrier between you and your tenants!

Bed Bugs – Pests In My Rental Property Part Two

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Bed Bugs – A Landlords Nightmare

Landlords and bed bugs - pests in my rental propertySo, here we are a week later and if you read my previous post where we first discovered we pests in my rental property (if you haven’t read it yet, please start here and then come back Bed Bugs Part 1), you’re probably curious to see how I dealt with them.

Well, I’m still actually dealing with these pests in my rental property, so it’s not over, but the good news is, our treatment is working after initially messing it up. Just to get you back up to speed, I initially had two options to get rid of them.

Bed Bug Treatment Options

Option one was spraying. This was going to require minimum three treatments and typically four or five. Each treatment costs around $600 and the overall effectiveness is around 90%. Part of the problem being where you catch the bugs during their life cycles.

If they are sprayed, haven’t died yet and then lay more eggs, you have to repeat with another spray and so on and so on, until you catch them at the right time. The downside being a) it’s not 100% effective, b) they become resistant to the pesticides over time requiring stronger and stronger chemicals and c) no one can be in the property during the spraying because of these chemicals for six hours. Then even after six hours, do you really want to be around the chemicals?

Option two is heat treatment. This works out to also require three treatments as the property has two upper levels and a finished basement. So one day in the basement, one day on the main floor and the third day on the upper level. The positive is this is 100% effective as they superheat the house to 120 degrees fahrenheit for several hours which kills the bugs themselves and I can only guess poaches the little eggs before they hatch rendering them inert.

This can be even more expensive though as it’s $1150 per day around here plus travel costs. Also, the tenants could stay for the first two treatments, although the house will be very warm, but on the third day I would have to put them up in hotels or find other alternatives, so it would easily be $4,000 for this approach.

Now fortunately, my pest fellow also introduced me to another option involving traps and dry ice. These involve small plastic containers with a center area where dry ice is placed and an outer ring that is covered in a fine talcum powder.

Bed Bug Traps

Using Dry Ice to Trap Bed Bugs - pests in my rental propertyUsing the dry ice traps was going to be considerably cheaper as the traps themselves cost about $120 for 24, plus the dry ice, which at the time I had no idea what the costs would be. It turns out for around 6 Kilos or 13 pounds, it’s just under $40 and I need that much each time I set up the traps.

The idea is you load up the traps, the dry ice which is CO2 evaporates and the bugs are attracted to the trap as the CO2 is what attracts them to people as they sleep. Once they climb over the outside wall of the container, they get trapped in the talcum area with the powder and can no longer climb out.

You simply go back the next day, empty the trap of all the bugs in the toilet and reload and repeat until there are no more bugs. Simple right? Well we really only learn from our mistakes…

Mistake number one, I picked up the traps on the Friday, went and bought my dry ice from one of the few local places that sell it, and proceeded to the property to set up the traps. I managed to roll this all into some other appointments that day and had all the traps set up by shortly after one in the afternoon and proceeded home to strip out of my clothes and set up a couple traps around my clothes in case I had brought visitors home with me.

Now it was waiting time! And learning time….

Apparently dry ice has a fairly short shelf life. So when I looked at my traps at home around nine that night, it was almost all evaporated, and by ten, completely gone. Since bed bugs are nocturnal, I wasn’t so sure how well this was going to work. My traps at home had nothing in them, which was good, I hoped, but the true test would be checking the property the next day.

The Next Day

So fast forward to checking the traps for bed bugs at the property and nothing. Absolutely nothing!! Just to complicate things even more, the dry ice place wasn’t open Saturday, Sunday or the Monday which was a holiday, so at this point I didn’t know if they simply didn’t work, if I set them too early, or if I really did have bed bugs!

Fast forward even more now to Tuesday. I’ve done some research and I’ve talked to my pest guy. He tells me that I should have caught something, even during the day if there was a huge infestation, maybe just maybe I only had a couple male bugs, and no females and I got lucky, but I’m best off trying again.

My research on dry ice helped me avoid a major catastrophe as I planned on buying more of it, taking it home and storing it in my freezer until that night when I would go out and re-set the traps. Apparently the extremely low temperatures of dry ice will cause freezers to shut down, instead you need to use coolers to slow down the evaporation and the coolers cannot be air tight as the gas needs to seep out. I was glad I did some research!

So picked up the ice, brought it home, put it in the cooler and off that night to set the traps around 7:30 and once again, I wait.

The Day After The Weekend After

So it’s Wednesday by now, time to see what if anything I’ve caught and lo and behold “Thar be bugs”! It looks like I’ve caught about 8 of them in the various traps spread around the rooms. All of them are very very tiny which indicates to my pest fellow that these are young bugs and I may have caught them fairly early in the cycle. That’s a good thing!

So Thursday night I repeat the process, I catch even more and here we are on Friday where I’m heading out this afternoon to buy a large order of dry ice which I’ll store over the weekend so I can make three more trips. I’ve been buying it in 6 Kilo batches, but for the weekend due to the decay of it, I’m going to pick up probably 30 Kilos so I still have some left over for Sunday.

The trick now is to stay on top of this every day until my traps remain empty. The positive is, it seems to be making a difference, none of the tenants are reporting any new bites and  the traps I set up at home haven’t caught anything which is making my wife very happy.

I’ve also found multiple other variants on dry ice traps explained out on the internet and I’m not sure if they will work better, worse, are easier to work with or would be harder, but this is working for me, so I will just carry on.

It does require cooperative tenants and they see that I am trying to help them which really helps, and hopefully by mid next week and for around $600 in total I should have this solved! Fingers crossed!

As always, love to hear your thoughts and any feedback you may have.

Every Time I Think I Have Seen It All, Bed bugs…

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Bam, Something Else Pops Up To Bug Me

Just when everything is going right

I’ve been doing the landlord business for a decade now and every time I think I’ve seen it all, something new happens. Maybe I should just quit thinking?

You see enough as a regular landlord, but when you add furnished rooms into the fold, it exponentially increases your exposure to new events, experiences and yes horror stories.

In the last 10 years, I’ve found bullets left behind in rooms (that gets you thinking), knives, home made weapons, crack pipes, needles, pills and drugs. I’ve evicted tenants for non-payment of rent, damage to properties, threatening other tenants, fighting with other tenants and threatening me.

I’ve broken up parties at 1:00 in the morning, talked tenants into putting down knives at 5 in the morning, called the police in to remove tenants and made court appearances to help put tenants in jail.

I’ve had the police contact me as I was the first contact on a recently evicted tenants cell phone when he was found dead, I’ve had a tenant die in a property and I’ve been the one to “discover” the body. I’ve even had what appeared to be a minor home invasion. What else is there for me to learn, see, or happen to me?

Ooops, I Shouldn’t Have Asked

I’ve had skunks, mice, wasps and all manners of pests in the past disrupt my tenants, my properties and my business, but now, I’ve got a new one to add to the list. Bed bugs…..

Bed bugs have become a huge problem throughout North America and Europe and with the number of properties I have and the types of tenants I deal with it’s been amazing I haven’t run into this before, but finally I’ve been hit.

So, as with all my experiences, I need to share it not to freak you out, but to let you know the options you have if you run into a similar situation.

First, if you’re not familiar with bed bugs here’s a little background.

Most importantly, in my opinion, bed bugs are not a sign of unsanitary conditions. Bed bugs are showing up everywhere. From jails and court houses to hospitals and five star hotels, you can find them everywhere and it’s created a thriving business for pest control companies.

These tiny little bugs are about the size of a grain of rice and can flatten themselves into just about any space imaginable.They feed off of human blood and are attracted by CO2 which we give off when we breathe.

To make it easier for them to find CO2 and of course their meals, nature has deemed it necessary to fit them with a type of infra red vision allowing them to see at night and to see the CO2 as we exhale it from our body. This infra red vision also makes them rather adverse to light.

All these traits are what attracts them to their lunch, us, while we sleep. Being so small and being able to flatten themselves allows them to live in the seams of mattresses, couches and even under the baseboards away from prying eyes during the daytime. But once we go to sleep, the buffet is open.

Common signs are little red welts and as the infestation grows, the increase of the welts. Strangely, some people are barely bothered, while others are magnets to them. In my scenario, the female tenant is getting eaten alive, while the boyfriend is getting ignored.

Dealing With Bed Bugs

The problem obviously is how to get them out of my property and learning anything I can to help prevent it in the future. So first the bad news, I can’t prevent it from happening again.

The nature of these bugs is to attach themselves to humans, clothes, furniture and anything nearby. In apartment buildings, or buildings in general, they can get into the walls, under baseboards and travel great distances in both a self preservation tactic and for food.

In talking to the pest person Don (who has been incredibly helpful), he’s informed me that the bugs go through several stages before they start laying eggs, but this is a rather small window of time. And once they hit that stage, the females lay five eggs per day, every day. Talk about your exponential problem exploding quickly.

Oh, and they try to travel as far as they can to lay the next batch further spreading themselves throughout a property. This means once you find out you have them, you’re probably already in trouble.

To try and get rid of them, you can vacuum the mattresses, all your furniture and then bag and treat them with chemicals or discard them. But you’re not done. They are likely still in your clothes, linens and carpets, maybe even in the walls.

To kill them in your clothes and linens, you need to wash everything at the highest heat setting on your washing machine and then the hottest heat in your dryer to dry them thoroughly. And that still leaves the things you cannot wash.

This leaves you with two options. More chemicals or heat. The problem with chemicals is the more we treat pests with pesticide, the more they become resistant, plus the after effects on our children, our pets, our homes and ourselves is possibly years away from us discovering. Chemicals = bad!

The heat option though also has a challenge. It’s freaking expensive! Now costs will obviously range and they may be lower or higher depending on where you’re located, but for perspective the cost to treat my entire property with chemicals is around $600 here.

It would take minimum two treatments, possibly three and usually four or five. With a chance of success of maybe 90%. the problem being the timing and the effectiveness of the chemicals. It doesn’t kill them immediately, there may be eggs not quite hatched between sprays and you may be just off by a couple days of their life cycle leading to even more sprayings being required.

The property I am dealing with is two stories plus a finished basement. Due to the size of the place it will require three treatments of heat, one in the basement on day one, one on the main floor on day two and then upstairs on day three. Each of these treatments is just under $1,200 plus travel costs. So $3,600 plus, woohoo.

The upside? The heat treatment is pretty well 100% effective. What happens with the heat treatment is they pump in air heated by a generator and keep the temperature above 120 degrees fahrenheit (that’s 49 degrees Celsius!) for several hours to kill the bugs, the eggs and almost anything else alive in the house. Each day of doing this is the equivalent of eight months of heating for a normal home cost wise. Hence the big charge.

It’s enough to make you debate whether owning a rental property is worthwhile!

Now Watch Me Pull A Rabbit Out Of My Hat

A CO2 Bed Bug Trap, I hopeBut, there may be one other solution which is what I’m working on starting today. Bed bug traps.

My pest guy informed me of a new tactic that seems to be working very effectively, although it can take several days to a week or two to work. It uses a simple trap that uses dry ice to attract the bugs and then traps them.

As dry ice warms up, it emits CO2 also known as the bed bug dinner bell. This CO2 attracts the bugs, they climb up the side of these small plastic trays to get to lunch and then the inside of the tray is treated with talcum powder which sticks to them, impedes their ability to crawl up the steep sides and they perish in the tray.

These trays have to be emptied every day and you need to put anywhere from four to ten trays in a room to make it effective and depending on the room size. There are also some issues about too much CO2 in a room where people may be sleeping, so good ventilation may be required.

Using this technique, after about four or five days the number of bugs should dwindle down to hopefully nothing, or you just carry on for several more days until nothing new appears.

In my situation, I’m currently booking for the heat truck which they tell me is about 7-10 days down the road and in the meantime I’m filling my place with these trays. If the trays work effectively it is going to cost me a few hundred dollars by the time I am done and I will be bug free. Then I can cancel the heat truck.

If they do not work, I still have the heat truck coming and it’s back to the expensive plan. So please cross your fingers with me and let’s hope that this trap solution will work. If it does, it saves me over $3,000, it should fix things up fairly quickly and I can test some of my other properties just in case.

One More Warning

Remember how I mentioned these bugs attach themselves to clothing? Well, Don also cautioned me and said there is a chance a few may have attached themselves to my clothing while I was there searching for them.

I may have introduced them to my home!

Needless to say, I’m bringing a couple of the traps home to see if I catch anything.  Both my wife and I are already having trouble sleeping as just the thought of this has made us psychologically unbalanced and now we are imaging bugs when none have actually been seen. And hopefully none will be seen! Watch for updates and be sure to share any stories you may have to help others.

Hey, if you’re following along, you can find part two of me Dealing With Bed Bugs Here!

You Need Your OWN Real Estate Plan

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Your Real Estate Plan Has To Work For You

Do You Have A Real Estate Investing Plan

I received some great feedback on the recent video about having a plan, (if you didn’t watch it, you may want to jump over here first, You Need A Plan). But there’s more to it.

It seems in the last week, people have just been appearing out of no where asking me questions about getting into Real Estate investing. And they’re not just asking me, they are asking other people they know as well. Which is great, but they are getting different answers everywhere they go, which is a problem.

As an example, a friend I just talked to the other day talked to another landlord friend who has about eight properties, so this other landlord is obviously is pretty serious about it. He’s sold all of his up down suites in high demand rental areas and bought single family properties in better neighborhoods.

He had quite a few of them previously and due to headaches of having extra tenants and managing properties further a field, he’s changed what he’s doing. He has a new plan. And that’s great, but it’s his plan!

This other landlord owns another business which has employees and his time is occupied with his main money earner, his company. I can see why he would want less tenants and to move things closer and simpler.

Now I don’t actually know him, but I would suggest his goal is to create a nice side retirement nest egg for himself with the rental properties and they also make a safe simple investment. The bulk of his time has to be devoted to his thriving business which is the real money earner and the real retirement vehicle.

This is significantly different than someone who may be considering turning Real Estate investing into their career.

Again I Say, You Need Your Own Plan

Follow your own Real Estate investing plan

If your intent is to buy a property or two as an investment, keep it fairly hands off and simple and your goal is to simply pay the mortgage down over time and have a retirement nest egg in 25 or 30 years, maybe a single family property closer to you is the way to go.

When you’re buying an investment property, you just have to understand the trade offs and what suits you.

With a single family home for example, you lose in the following areas.

  • Overall Cash Flow is Lower
  • Smaller Base Of Renters For This Type of Property
  • Longer Periods of Vacancy

Cashflow is usually just a few hundred dollars more than expenses on single family homes (unless you’ve owned it for many many years). The types of tenants that can afford to rent a whole house, also typically have enough income to purchase, so this subset of renters make up a smaller percent of the total base of renters actively looking for places to live. And you end up with longer periods of vacancy due to having a smaller base of renters.

The positive trade off is often they are better tenants and this equates to less headaches and/or time. If that’s what your goal is then this may fit your plan.

For someone with high income, and little time who is looking at this as a long term investment (15 years plus), this may be an ideal plan for investing in Real Estate.

But what if your goal is to get out of the job you have and not have to worry about income from your job? What if, like me, you intended to make Real Estate investing your full time career? Or at least a huge portion of your retirement nest egg? Then you need a different plan.

Then you need to focus on cashflow, because cash flow is what makes the rental market flourish for a landlord. When you have an up down suite or a side by side duplex with two incomes and you’re generating $500 per month of cashflow, or $800 or even $1,000 on one single property it takes a considerable amount of pressure off the amount of income you earn independent of your Real Estate..

It also gives you space to manoeuvre if the rental market slows down. And it will slow down. It might not be this year, or the next year, but in most areas the Real Estate market is cyclical. That single family home you were making a couple hundred dollars off of works fantastic when vacancy rates are 2 or 3%, but when they push up to 6 or 7%, rents start slipping down due to competition. If you’re in Detroit, well all bets are off.

Preparing For Downturns

Real Estate Does Go Down in ValueWith a $1,000 monthly cashflow dropping rents on two units  by $200 each makes you more competitive and still gives you some nice cashflow. Even on $500 cash flow, losing $400 will be painful, but you’re still positive and if you lose one person, you’re not having to cover the full payment yourself.

With a solid plan, you have a plan B, a contingency to deal with these scenarios. Raising and lowering rents and still surviving is an option.

With a single family home the amount you can cut is much lower and with higher vacancies due to a smaller rental pool having your property vacant for two, three or even four months can be a killer. When you only have $100 or maybe $300 cash flow in good times, you better have lots of extra income to support it, but maybe that’s part of your plan?

So obviously I’m biased, but I’ve seen what works. I’ve been through sub 1% vacancy rates and vacancy rates around 8%. I’ve had tenants offering to take places unseen during low vacancy periods and I’ve had properties languish for months vacant during the last downturn. Through it all I’ve recognized that cash flow is indeed king and it’s a recurring theme I push on this site to new landlords.

Ultimately though, it comes down to your plan. Some of it’s your comfort levels. Some is your available time and where you eventually want to be with it. If you don’t have the time to manage extra rental units, maybe you need to be prepared to hire property managers. If you’re investment window is 30 years, it’s about the end result not what’s happening right now, so you have to plan accordingly.

The important part being the planning. In some upcoming articles I’ll talk about renting out condos and other types of rental properties. If you have some thoughts on this though, I’d love to hear them!

 

 

What’s Your Plan? Or Do You Have one?

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Your Landlord Plan

Blueprints for your landlord business- have a planIt’s amazing how often a landlords plan it to invest in a rental property and rent it out. There done, that’s my plan. But is it a plan or is it a part of a plan.

In the following video I talk a little bit more about landlord plans and hope to provide you with some clearer thoughts about what your landlord plan should be.

I experimented with some close ups (sorry if I scare anyone), and my new microphone had the volume levels too low so hopefully you can still hear it. As always, love to hear any feedback you may have so leave me a comment, send me an email and be sure to share with any other landlords you may know.

Hey, if you have a plan and want to share it for inspiration for other new landlords out there, we’d love to hear it so leave a comment below. Hope this video helps with your landlord education. As always, if you have other areas you’d like to see videos or articles on, let me know.

Landlord Plans Update

I just finished a chat with an aspiring landlord this morning. He’s nearing the end of month three and getting ready to start month four of his two month renovation before it’s ready for tenants.

He had a plan, but couldn’t stick to it for various reasons. And that’s fine, sometimes your landlord plan has to change to fit the landlords situation!

Just remember that plan is what will get you to the end, so if you have to adjust your plan, make the adjustment to continue to move you forward.

With the fellow I talked to this morning, his challenge was lack of time as he was doing all the work. To help him get back on track I recommended his plan change to include some paid workers to get the property back on track.

His two month over run cost him not just his mortgage payments, but utilities, taxes, insurance and his lost time. Worse yet, he had tenants lined up and the delay could end up costing him another month of vacancy once he’s done.

Spending $1,00 even $2,000 to get it done, now, will change the plan, but it will get ti back on track as well.

So the lesson here is be ready to adjust and correct plans that don’t work!

Renting Out Rooms – Running A Rooming House

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Running A Rooming House As A Rental Option

Running a rooming house and renting out roomsThe longer I’ve been in Real Estate, the more ways I’ve seen to make money with Real Estate.

Whether it’s flipping properties, rent to own strategies, buy and hold or any of the myriad categories in between, there are simply dozens and dozens of ways to make money in Real Estate and running a rooming house is one area I specialized in.

Now, word of warning, rooming houses aren’t for everyone! Just like some individuals can’t handle the stress of flipping and others can’t handle the stress of dealing with tenants, rooming houses require a specific mentality to balance everything out.

Rooming houses as a category typically come with a poor reputation. With stories of problem tenants, drugs, sketchy areas and more it scares many potential landlords off before they even start. And truthfully, it can be this way, but it doesn’t have to be.

So what does running a rooming house involve? It’s usually a home or a building that rents out rooms on a daily, weekly or monthly basis. Most are furnished, and they typically provide shared washrooms, possibly kitchens and possibly laundry areas.

They also tend to cater to people at the lower end of the rental system who may not qualify for typical rentals or who don’t wish to be tied down to extended leases.

Folks who cannot afford deposits or first and last months rent, people who tend to deal in cash and people who get paid weekly.

These are your normal rooming house tenants, sounds appealing so far doesn’t it?

Our First Rooming House

It was in 2004 that we bought our first “rooming house” style property and we bought it for a couple reasons. First it was the other half of a duplex we had already purchased earlier form the owner and second, cash flow. Huge stinking cash flow!

Rooming House kitchenYep, we were suckered in by money and we quickly learned some lessons about running a rooming house. This particular property was set up with three rooms downstairs that were rented out on a weekly basis as furnished room rentals and the owner lived in a suite upstairs. They had a makeshift kitchen in the basement crammed in with the laundry. With all three rooms full we would make in two weeks what a normal basement suite generated in a month.

Our thoughts were to upgrade the basement units a bit and to rent out the upstairs to an onsite manager who would deal with collecting rents, signing people in and out etc.. The former owner had mattresses on the floor, supplied black and white 13″ TV’s and was typical of rooming house landlords. We have learned consistently not to be typical!

First thing we did was replace the mattresses with new futons that allowed the guys to have beds or couches in the limited space, we got rid of the crappy TV’s and upgraded them to 20″ color TV’s and brought in night side tables and a few other “upgrades”. Two of the rooms were already occupied, so we painted the hallways, the other room and generally updated what we could, but it was still a cheap rooming house, sigh.

My First Negative Experience

Needless to say the rules involving running a rooming house and for renting out to weekly tenants are often considerably different than renting out to longer term tenants in regular rentals. Due to the high turnover, the cash based business, the timing required and the type of tenants, credit checks are simply not done. That’s the first challenge with running a rooming house.

People show up cash in hand and need a place now typically. There’s no two or three day waiting period to check references or get reports back, it is cash and carry. This leads to all sorts of “fun characters” and takes us to my first negative experience which took place within the first month of taking over.

The key to making this work is to stay on top of the tenants. Rent is due weekly and it must be paid on time. See any problems yet….

Within the first month I put in a new fellow, sketchy would be putting it mildly, but he had cash in hand, By the end of the first week I had complaints from one of the other longer term tenants. He was leaving dishes in the sink, he would forget to lock the door, typical problems and things that have to be dealt with quickly.

I was due to collect rent so my wife and I headed over to get rent, do some more work to improve the place and make sure it looked ok. At this point I need to bring up the fact I was brand new to this and had only been a landlord of any capacity for just over a year, so I didn’t necessarily know the rules, or follow them…

Don’t Try This At Home Folks

I knocked on buddy’s door and I could hear him moving in there, but he didn’t answer. So I knocked louder. Still nothing, I told him I could hear him, still nothing. So being a frustrated landlord I broke the rules and the law and unlocked his door to confront him.

To add some perspective I stand around 6’2″, weighed around 220 pounds and I’m reasonably athletic (at least at the time). Buddy was 5’8″ maybe 150 pounds, so I wasn’t worried about a confrontation, although I was getting my money, I hoped.

When I open the door, I find buddy sitting on the floor, needle in hand and likely just finished shooting up. Being a calm, rational person I did what anyone else would do. I blew up! I told him he had 15 minutes to vacate (also against the rules, but by his glazed yet fearful expression he understood it was time to leave).

I went and explained to my wife what had happened and the door to the basement opened and the tenant I thought I had confronted walked in. I had just evicted someone who wasn’t even supposed to be there. In my defence, there were no lights on in the room, they both had long shaggy dirty blonde hair, they had the same build and I had only met him once.

I explained to him what I found, told him as well, 15 minutes be gone. I gave him 15 minutes, went back to the door and he had his stuff packed and was ready to go, then I noticed the TV was missing. When I politely inquired about it he told me that someone had come to take it away to fix it. I went from seeing red to seeing crimson and told him he had about 1 minute to get the hell out, to forget about his security deposit and to avoid me for the rest of his likely short life. Welcome to running a rooming house and the experience of renting out rooms.

Rooming house info and resources Click to get more info about rooming or boarding houses

That Was Then

We were ready to shut down that experiment, but for some reason struggled through and learned some valuable lessons. About six months later someone else approached us with a rooming house they hoped to sell. This time though, it was a full duplex at a price we couldn’t refuse. It had ten rooms in total and when full generated almost $6,000 in gross income every month.

With new systems and process in place from our earlier mistakes, we continued to expand and at our peak had eight rooming properties and over 50 individual rooms that I dealt with on a weekly basis. That equates to collecting rent 2,600 times in a year if I was 100% occupied. Talk about an advanced lesson in landlording and running a rooming house business.

Now, many years later, would I do it again?

Definitely, although I know I would make numerous changes along the way.

Would I recommend it to everyone?

Not really.

Although there are many that could make some huge income off of this. The income from that one duplex alone was over $30,000 per year, even after vacancies and expenses. Plus, it’s almost doubled in value from our original purchase price.

Is it a lot of work, yes, but is it 40 hours a week? No, usually only four or five per week which makes it an exceptional return on the investment.

The point of today’s article isn’t to get you to thinking about rooming houses as an investment, but rather to get you thinking about other opportunities available out there. I preach that up down rentals with detached garages, in my opinion, are the best way to go as far as good rental properties, but I also own condos, single family homes and yes rooming houses.

In some of my interviews with other landlords and in conversations, many are doing great with everything from vacation rentals to furnished executive rentals to single family homes. So there is no one right way. you just need to find the right way for you and then learn as much as you can to specialize in that area.

Rooming House Examples

Screening TenantsWhen we started to expand with our properties we had simple rules we stuck with. The properties we felt were ideal for running a rooming house had to have at least five rooms  to rent or capability to build up to five rooms. It had to have an upstairs and downstairs bathroom and shower setup, or again space for us to build it.

They had to have great transit access. We understood many of our tenants were new to the city and often took transit, so access was incredibly important. And we had to be close to the work, so our properties were positioned close to industrial areas where many labourers and trades would be working.

Knowing your tenants and their requirements was part of the battle and is something you as a landlord should be aware of as it makes finding and keeping them easier. Understanding what our style of tenant needed made our job of advertising and renting out so much easier.

The other lesson we learned was learning where to find our tenants. We hit up training centres for the trades, unions and even immigration companies about our properties. We took those that were interested on tour and we even found one company who rented an entire house from us for two full years at $4,000 per month to house incoming workers for a major project.

Finally, I’ve incorporated a series of questions I ask people who call my ads. Much like screening my regular tenants, I have filter questions to narrow down my waisted time. All designed to get better people in and to save my time.

So, my challenge for you, even if you have a regular rental, is to make sure you know the benefits of the property you currently have, or if you are planning on buying a new rental property, the nearby benefits. Then find that avatar or perfect tenant and find out where they work, what they do and then go advertise or visit those places in preparation of your next vacancy.

Investing in Real Estate isn’t fire and forget, it’s a business and requires some strategy behind it. Hopefully you enjoyed my long drawn out story and can learn some lessons from it you can apply to your landlord business!

If you liked this article let me know, if you want more stories about my experiences (both good and bad) tell me. Or if you just want more tips and generic landlord advice let me know too!

Just to add to this you may want to read another post I have about rooming houses. you can find it here, Profiting From Rooming Houses 

Boarding House and Rooming House information - Running a Rooming House
Rooming House Resource Page

Rooming House Tips

Guide to Getting Started With Rooming HousesIf you’re serious about running a rooming house or have just started one, I’d highly recommend you check out my Basics of Rooming & Boarding Houses Guide.

It’s $17, includes information on how to determine the best areas for rooming properties, the options for daily, weekly and monthly rentals and it gives you the information I wish I had when I started!

Click here to get your copy now (it’s a PDF, so you can have it in minutes) The Basics of Starting Your Own Rooming House

The Basics Of Running A Rooming House

So, are you intrigued? Does the idea of owning and running a rooming house sound like a journey you might be interested in taking?

Over the years I’ve owned a lot of properties and a lot of rooming houses and it hasn’t all been perfect, but that’s part of the learning curve. Sometimes there are expensive lessons we learn and other times there are inexpensive lessons.

That’s why it’s important to go into this with your eyes wide open.

Running a rooming house is more than just buying a property and putting bodies in.

There are rules and regulations that vary from place to place, city to city and even district to district. There is higher demand in some areas and lesser demand in others which can lead to underperforming properties.

Then there’s the concept of targeting certain segments of the population to develop a steady stream of clients. We learned early that we constantly needed to be advertising as an empty room meant we were losing money. Later we learned who and how to market so that we found our ideal tenants.

Learning all of this took years and not knowing it from the beginning likely cost us tens of thousands of dollars of lost income and bad purchases and nearly causes us to quit before we even got off the ground!!

In hindsight if I could have found training or information to help guide me and avoid those early mistakes it would have been priceless.

But that was my bad luck, or in this case your good luck as I have that information and I have a way to share it with you so you can avoid the costly lessons I learned.

I’ve put the information you need to know before you buy your first Rooming House property into an online training program call The Basics of Rooming Houses.

Now this may not be for you. If you like making mistakes, losing money, getting frustrated and quitting in frustration then you should probably don’t want to consider taking my training as it will make the majority of those painful experiences go away!

However, if you’d like to learn how to determine the local demand for rooms (along with understanding what you can charge for a room) I can help with that.

If you’d like to discover how the rules work in your area for room rentals or rooming house properties I explain how to figure it out and who you can talk to in order to get the details.

Perhaps most importantly, once you get through the initial training I teach you how to start finding more and more tenants so you eventually get to the point where you can live off of referrals and repeat customers! Once you understand how much easier this business is when people are calling you all the time you’ll really start to appreciate it.

I guess it really comes down to how serious you are, or how much money you want to lose on your own..

So if you’re someone willing to learn, to get educated and to get off on the right foot, you’ll want to go sign up for this course and get started today.

Click here to invest in your rooming house education – The Basics of Rooming House Course

Interview With A Landlord – Donna F.

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Interview With A Landlord Series

After the great response regarding my first interview with a landlord, I managed to wrangle another landlord into an interview to help provide some more insights into her landlord business and the overall experience of being a landlord.

I’ve actually known Donna for about six years now and  she has a great story for you in this video interview.

She started with a plan, has a goal and is making her way through it and provides some great advice for other landlords out there. If you’re wondering if it’s possible to create your own landlord business while working a full time job, here story should serve as an example that it is possible and hopefully inspires you as well.

I’m always looking for other landlords to talk to and my hopes are to have one interview a month that I can share with you, so if you have stories you believe will help other landlords with their landlord business or even cautionary tales that will help protect landlords, I’d love to hear from you.

Also, if you’re enjoying these series, let us know! Leave us a comment, share it with friends and tell Donna how she did!