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Out With The Old, In With The New

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Tenant Turnaround Time

One and a half hours. That was the shortest turnaround time I had between one tenant moving out and another moving into the same property. What was your shortest time?

The Secret is Preparation

It hasn’t always worked out this well for me and typically the turnaround is a day, but there is no reason it shouldn’t be a few hours or less every time. After all, the longer you are vacant, the more money is out of your pocket.

The secret to making this all work though is preparation. So, what do you need to prepare? Well obviously, you need all of your paperwork, leases, exit and entrance walk through forms and deposits paid in advance, but the catch that most landlords worry about, is the condition of the property when tenant #1 leaves.

This is where preparing well in advance pays off and is just part of another strategic system that landlords should have in their arsenal. The question for you at this point is, are you ok with sacrificing an hour now, to prepare some paperwork you can use over and over and over in the future and that allows you to turn tenants over quicker than you thought possible?

One Special Tactic

It all comes down to one extra tactic once your tenant provides notice. This tactic is simply a matter of mailing, or dropping off in person, a copy of the original lease, the walk through and one new form with the tenant, shortly after you have their notice.

The original lease points out their obligations, the walk through reiterates the condition of the property when they moved in and the new form is your ticket to happiness.

This extra form is the one you should prepare immediately and includes a list of expectations for the tenants departure. It reminds the tenant of their responsibilities by pointing to any pertinent clauses you have in your lease. Clauses such as the tenants being responsible to steam clean the carpets if you have them.

It goes over your charges for any cleanup or garbage removal you may require to complete after they move out and details costs they will incur if you have to replace any light bulbs, screens or any other minor items. It also explains that they can get their full security deposit back quite quickly if no extra work is required for cleanup on your part.

If there is significant work to get the property back to original condition this can affect the timeline of them receiving their security deposit and they need to be aware. So break this down in your form as well.

By the rules, you have to return any remaining security deposit back within ten days of them moving out, but if you require work to be done, you can also withhold approximate costs if you have a quote to get this completed and it’s always good to get high quotes, just in case!

The majority of the time though, this lights a fire under the tenants. So, as long as you check the property out a couple weeks prior to the move out, you should have a great idea how quickly the new tenants can move in!

Understanding Costs

You can charge your time out at the equivalent rate for other cleaning companies. So if you do the cleanup yourself, call a few cleaning companies in your area to determine a per hour cost for cleaning and use this in your form.

Also, when talking about costs to replace bulbs, it’s not just the cost of the bulb, but your time. So replacing a bulb isn’t $1, because that’s what it sells for at the store. It’s $5 because you had to buy it, and use your time to replace it. Explaining this and showing the tenant how it’s in their best interest could help you get your turnaround time even lower than mine!

Accounting For Your Rental Property

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You Need Accurate Accounting

It’s tedious, it can be downright ugly at times and it is rarely fun, but you need to make sure you stay on top of your accounting when it comes to your rental property.

Accurate and up to date accounting can be the difference between getting a mortgage renewed at a great rate or an average rate and it can also make a huge difference in how much tax you pay.

Filing Receipts & Paperwork

My wife is the expert when it comes to filing and she has created a great system for us. Part of the system we learned through our membership with a Real Estate group and part of it we evolved to make sure it worked best for us.

The base part of the system is to create a three folder system for each property you have. It’s easiest if you make each a separate colour as well.

Designate one as tenant and put all of your tenant paperwork in here such as leases, applications, and any correspondence with tenants etc. This keeps all the tenant information together.

Designate a second file as legal. In this one keep purchase documents for the property, mortgage information and any legal documents regarding the property.

Designate a third folder as the all encompassing miscellaneous. This is where everything that doesn’t fit into the other categories falls. We keep extra manuals for appliances for the property here, quotes for repairs and general maintenance information here.

The next extended part is to create 12 folders for each of the months of the year. This is where all your bills and receipts go. If you only have one rental property and never plan on going past there, you can simply put all of this into the miscellaneous folder, but if you have two or more properties, monthly folders makes your life easier.

The rational for this is that if you buy a case of lightbulbs for your properties, they don’t go to one property, two bulbs go here, one there etc, so it can be hard if it gets bundled into one property. By separating all the bills into months it allows you to track back much easier for smaller items.

How Do I Allocate Expenses?

You can probably already tell I am not an accountant, nor do I play one on TV, so you may want to confirm with your own accountant that this works for you. Consider this my disclaimer.

We use Quickbooks Pro to track all of this. We actually are using Quickbooks 2010 still, but our bookkeeper has informed us 2012 will be worth the upgrade for us.

It allows us to go back via each property to track what has been allocated where and since we have multiple properties, when we do buy in bulk (which can be a huge cost saver!) we don’t have to worry about over expensing one property.

There are other options and while the priority is to be sure you are using something computer based to track all of this, we are pretty happy with Quickbooks versus the other products out there. So if you haven’t started computerizing your accounting yet, you may want to jump into it sooner than later.

 

Is Your Property Safe?

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Safe Properties Rent Faster

With the long winter months where I live it gets dark pretty early around here. Dark enough that people can get nervous if they cannot see all the corners as they walk up to their homes.

As the landlord you probably aren’t even thinking about the large shrub being a perfect hiding place for criminal, or the dark parking spots as a security issue, but many tenants sure do!

Landscaping for Safety

We may not think about this in the summer months, but this can be the perfect time to make sure the overgrown bush is trimmed back and the tall hedges are shortened to provide a better lit environment for tenants.

Studies have shown that security and safety are very high up on tenants short list when it comes to not only finding a rental property, but also for staying there long term. By cutting back shrubbery from pathways and making properties more inviting you not only help keep tenants happy, but they stay longer, sounds win win to me!

Lighting The Way

One of our rental properties had off street parking, which was great. The problem was the lower suite was rented to a great young lady who started to get nervous coming home from work in the fall as it started getting dark earlier and earlier.

She was quite concerned about this. Concerned enough to address it with us and mention she was considering moving.

The solution? We installed motion sensor lighting high up on the back of the property and accomplished a couple items.

First, the property became much safer and second, the tenant was extremely grateful. This resulted in her staying with us even longer than she had anticipated. In hindsight, we should have done this when we bought the property, but as they say hindsight is 20/20.

Fortunately for you, it’s now more apparent! Hope this was helpful for you.

Want To Fill Your Properties Faster?

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Then What’s Your Price Point?

fill your properties faster - advertising for tenants the smart wayWant to fill your properties faster when they’re vacant? Then take a page from Walmart.

Have you ever shopped at Walmart? I think I know the answer, but humour me.

Everywhere you look, items are priced at $19.97, $39.99, $89.97 or even $99.99. They are never priced at $20, $40, $90 or $100 and there is a reason for it.

It’s the same reason you should never advertise your unit for $1,000, $800 or $1,500. Psychologically people think of $995, $797 and $1,499 as lower numbers. Rational thought jumps out of the window and people feel it is less, even if the difference is just a few pennies or even five dollars.

This can be extremely powerful when you are trying to rent out a property, so humour me again and never rent your property out for an even dollar amount!

Bonus Tip

Here’s a quick bonus tip to help ensure your properties get found more often. If you advertise on any of the online rental sites (and I highly recommend you start if you aren’t already doing this) make sure you understand their search functions on the site.

Often the systems allow renters to search by price and you always want to be just under any cut off points. If they break the increments down by $50 it might be tougher to stand out, but if they break them into larger increments, you can make sure your rental fits in the right spot!

If the cut off points are $750, $1,000, $1,250 and increase by $250 from there, you want to fit just under those cut off points. Think $749, $999 and even $1,249. Don’t be afraid to experiment and even try $747, 997 and $1,247. Experiments have shown the number 7 included in a price actually sells better than 9!

Is Your Tenant Who They Say They Are?

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Are You Sure?

Another short tip for you. When you have a tenant applying, it never hurts to have them provide picture ID so you can confirm that you have the right person.

In today’s age of identity theft, criminals renting properties and turning them into grow-ops and meth labs and who knows what else as far as illegal scams go, confirming identities can help thwart some potential headaches.

It only takes a minute and you can then verify you have the correct last name, spelling and often even confirm their date of birth if that is a requirement on your applications (and it should be!).

Advanced Step

I operate a group of furnished shared accommodation properties. These properties are weekly rentals and require very minimal screening. With the minimal screening comes some additional headaches.

In my situation I have some techniques I use to pre-screen tenants, but they are not infallible. By only advertising these properties online I tend to get people educated enough to use computers. By charging higher rates than the low end properties out there, I avoid the majority of the alcoholics and addicts with minimal funds.

There are also several other techniques I use to help make this work efficiently for me. One of them includes checking into the local most wanted listings.

My particular city has a listing that gets updated every week to include the current “at large” criminals and every week I try to take a look to see if I recognize any current or former tenants. I also use this to potentially screen any incoming tenants I might meet.

 

Utilities Extra!

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Quick Utility/Advertising Tip

Here’s a short tip that may work for those of you who include utilities in the rent.

If your rent is $1,100 with utilities and you are having troubles filling vacancies, change your ad to this.

Rent $995 per month plus fixed monthly utilities of only $105 per month.

People won’t see $1,100 anymore, they will see only $995. The extra bonus is many people search for rents of $999 and less on online sites, this puts you into more online search results.

It won’t work every time, but in my previous experiments, the number of calls basically tripled by making this one change.

I still collected the same amount each month, but how it was presented changed the perception.

This will work for any rent amount, with utilities built in. So if rent is only $475 with utilities included, you could advertise as $425 plus $50 fixed utilities. They key point being, if you need to appear more competitive and want to attract more calls, you have to get seen.

By having a more competitive looking price point, you will be much more visible.

Bonus Utility Tips

Granted your utility costs will likely be higher than $105 per month these days, but the tactic works all the way from renting a basement suite up to a complete single family home, just the numbers change.

In my region we’re able to actually create a separate contract outside of the lease allowing us some additional flexibility. This includes the ability to charge utility increases when applicable and to include over use clauses to protect us from tenants running the heat with the windows open.

Rules differ in every area so you may have to do a little research to see what you can do with this. We’re fortunate enough that our local rules give us the benefits of not only keeping it outside of the lease, but also having it tied to the lease as a breach if they fail to pay the utilities.

Where it gains the most benefit for landlords is we get to build in an extra $20-40 per month cash flow with this strategy. This does take a bit more math homework and diligence, but an hour’s work to make an extra $300 seems like good math to me ($25 extra per month for 12 months equals $300).

So if you average out your monthly utility costs to be $250, charge a flat $275, if it’s $190, charge $225, if it is $307, charge $345! Just build in extra cash flow to cover you off and to improve your bottom line!

If you’re interested in finding out how to apply this to your property leave me a comment below and I can walk you through it a bit more in depth. There are also additional methods you can use to not just leverage this, but to also get rebates back magnifying your cash flow even more! Let me know if your really interested in leveraging that cashflow more!

Utilities? Or No Utilities?

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Should You Include Utilities In The Rent?

Do you include your monthly utilities in the rent or do you have your tenants pay them on theirr own?

Some landlords like to keep the utilities in their name and other landlords find it better to have the utilities in the tenants name.

To help you determine what may be best I created a quick pros and cons list of why you may want to go either way.

The Pro’s and The Con’s

I’ll start this with the list of reasons why you might want to keep the utilities in your name.

The Pro’s

  • It’s easier
  • You know they will get paid
  • Tenants can’t leave you with a big bill when they transfer utilities back to you early and vacate

The Con’s

  • Tenants don’t pay for utilities, so they leave lights on, the heat set higher and windows open, all driving up your utility bill
  • Higher utility costs cut into your overall cash flow
  • Tenants end up being less responsible for their actions and ultimately less respectful of your property (note this is a generalization)
  • You potentially have to rent your unit out for a higher amount as utilities are included

Now, here are the pros and cons of why you might want to have the utilities in the tenants name and removed from your name.

The Pro’s

  • Tenants take more responsibility for utility costs
  • You end up with better cash flow
  • Tenants are more apt to update you about utility issues, ie dripping taps, furnace inefficiencies, window drafts
  • If tenants skip out, the utility company goes after them (note some cities and towns have enacted legislation where the utility companies can get outstanding utilities from landlords, after all isn’t it the landlords fault? Wouldn’t want to penalize the profitable utility companies would we…)
  • Your rent may appear lower as utilities are not rolled in

The Con’s

  • Can cause issues with suited properties and bickering between tenants
  • It’s harder to manage

If you cannot tell, there are pros for both sides and before I discovered some new strategies I always had tenants put utilities in their names.

I actually wrote about this in a. different post and if you’r interested in learning how you can even use it to increase cash flow, go take a read, Utilities Extra? In the end though, you have to make your own decision.