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Five Lessons From My First Tenant Eviction

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Lessons I learned From Evicting A Tenant - tenant evictionEventually, it happens. You run into your first bad tenant which leads to a tenant eviction. Unfortunately, this usually happens more often in your beginning years as a landlord. Right when you have the least extra cash flow and the most faith in humanity.

Now not to say it happens to everyone, and not to say all hopes for humanity are dashed, but the first time you run into a tenant that has no qualms about not paying you, leaving a mess behind and simply carrying on with their life is the time you start doubting why you are in even in this business.

Fortunately though, I have some tips to help you either avoid that first let down, cut down on the drama associated with it and save you some headaches. Would you like to find out about them?

Tenant Eviction Lesson One

A breach of your lease is serious business. Whether it’s non-payment, damage to the property or something even more serious. Because it’s serious, you need to take serious action and make sure a) the tenants know this isn’t how it works, and b) you need to start taking the appropriate action to evict the tenants.

One of the biggest issues I see with new landlords is they end up being compassionate, often too compassionate, and the one month’s outstanding rent ends up becoming two or three month’s outstanding rent and then the landlord discovers it can take an additional one to three months to get a tenant out.

What might have been a $1,000 decision now could be $6,000 with little hope of ever collecting.

You’re far better off being serious, starting the eviction and then cancelling it if you do manage to get paid, rather than hoping the tenant comes through. The other important point from this is it sets the precedent.

If the tenant sees you won’t let them get away with non-payment or any other breach they will see you treating this like a business and hopefully not let it become a pattern. Now, when it comes to non-payments in my locale, if the tenants pay before the date they are to be out, the eviction becomes null and void.

I tell them this and I also explain I am doing it to cover my ASSets. If they make the payment, no harm, no foul. If they don’t I am already well into the process of having them removed.

Now I mentioned these are lessons I learned from my first eviction, this is an example of something i learned afterwards. I expected other people were like me. Honest, respectful and that they would honor their commitments. I was wrong and ended up evicting these people a couple days before Christmas back in 2004.

I then spent the majority of my Christmas break, which I intended to spend with family, repainting a property, fixing holes in walls, repairing damages caused my neglect and cleaning floor, counters and bathrooms. All on a property I had just finished doing all of this on less than six months prior.

Don’t learn the hard way like I did!

Eviction Lesson Two

Tenants lie. Now don’t take this as a blanket statement, but when it comes to someone facing an eviction and the possibility of  living on the street, making up a small fib about paying the landlord doesn’t seem so bad.

You want to believe them, but you’re running a business and you need to remember that. Accept what they are saying at face value and move forward with the hopes that they come through, and many often do, but at the same time, don’t delay moving forward with an eviction or with the appropriate steps to take control of your property back as quickly as possible if it goes sideways.

This lesson I was first introduced to when I was continually promised a payment and wanted to believe them, but I was ultimately let down. Over the years this has been reinforced many times by people I have tried to help, only to discover no one was helping me, they were just looking after themselves.

Eviction Lesson Three

controlling your propertyRegaining control of your property should be your priority. When you get caught up evicting a tenant it often becomes about the outstanding money. This is understandable especially if it’s several months rent that never made it to your bank account.

Don’t get caught up in the money because the reality is you will likely never see it. If things are so tight for them they cannot pay rent, where will any extra money to pay you back come from? That’s why it’s so important to take immediate action as the longer you wait, the more you can be out.

Your priority should instead be to get back control of your property so you can once again turn it back into a positive cash flowing situation. Focus on getting the tenant out as quickly as possible using the rules and laws in place in your area.

Some places this can be tougher, some areas are definitely pro-tenant and the process can be long, slow and unfavourable to you as a landlord, but bottom line your goal should be to get the tenant out and the property back in your control.

In my case, I was able to get my property back just before Christmas and that gave me the gap between Christmas and New Years to get it repaired, repainted and re-rented and in our case I had it back and rented out within the first week of January. I went from losing money every month the tenants didn’t pay to having it rented out again with cash once again flowing the right direction.

It’s important to remember, once you have control, you have so many more options. You can get any renovations or repairs done if they are needed, which usually doesn’t make sense to do when the bad tenants are still in place. You can decide if this landlord business is right for you or not and either get ready to find better more suitable tenants for the next go around, or you can start preparing to sell.

But many of these decisions are delayed for you unless you have control of the property and get those tenants out.

Eviction Lesson Four

Knowledge is power. Understanding the steps involved in evicting a tenant is actually very powerful and many landlords I’ve walked through the process locally tell me it’s actually empowering.

It’s human nature to be fearful of something new and the first time we have to go through the process of evicting a tenant it’s not only a new experience, but also very stressful.

Your mind is filled with concerns your property will get destroyed, you’ll never be able to get the tenant out and that it could potentially cost you a fortune. All with the pressure of not knowing when or how long this could go on!

Granted, in some areas the process is much easier than others, but learning the process early is much simpler than having to do it under the pressure of a time sensitive eviction.

So where do you get this knowledge?

You can start with some of your local government service offices. They often have a consumer landlord tenancy agency or hotline that can provide you some information. It is usually the extended bureaucratic version, but it provides a starting point.

From there you might want to research local apartment or rental associations for landlords. They can be a great resource for first time landlords. They also should have tons of information regarding evictions, leases and everything in between that you can use to improve other areas of your landlord business.

The majority of these associations require memberships for complete access, but they often have lots of free information to help you move forward.

Finally, other landlords in your area. Networking with other landlords can be very advantageous for everyone involved. Locally it can provide you with changes in local laws or upcoming new rules, on the bigger scale it can be a resource for you to learn and make the job of being a landlord easier. (Never mind the opportunity to share this website to your new associates!).

This is part of how I learned to do my first eviction. I was a member of a local Real Estate group and sought out several of the members to get some guidance. By networking independently of the group my wife and I formed some life long relationships with some great people who we are glad to have as friends and fellow landlords.

Knowing how to evict a tenant isn’t knowledge you really want to have, but if the situation comes up, you’ll be happy that you do have it.

Eviction Lesson Five

Watch your property during an evictionKeep an eye on your property, especially the days leading up to the eviction date!

Depending on how the eviction went, you could end up with some vindictive tenants, after all it’s never their fault they couldn’t live up to the agreement they signed with you, it’s only your fault for evicting them.

One of the ways they can be vindictive is to leave all the doors and windows open when they move out in the dead of winter. Much like my first evicted tenants did. Patio door wide open too along with every light on.

Now back then I didn’t know to check out the property earlier (and sometimes the damage is already done by the time you get there) and we were lucky enough the downstairs tenant arrived home to tell us about it. Before he called he went through and closed all the windows, turned out the lights and closed the door(s).

I now warn landlords to even just do a quick drive by of their property leading up to the day the tenants are supposed to be out, or in the case of a suited property, I keep the other tenants in the loop as to what is going on so they can be my eyes and ears on site.

If you’ve also established good relationships with the nearby neighbors you can let them know what is happening as well. Some landlords become concerned that the other neighbors will think less of them for having a bad tenant, but more often than not they respect that you are taking action and keeping them informed.

Your property is a huge investment and spending a little time driving by, chatting with the neighbors and keeping other tenants in the loop just helps you protect your investment.

Anything Else?

Well, there’s probably another half dozen warnings I could throw your way, but consider the lessons above as your priorities. Of course, much of this can be avoided by making sure you screen your tenants diligently before you ever hand out keys.

From there you also want to make sure you have a written lease that’s valid for your area. It’s another pitfall that new landlords fall into. Without a written lease, you leave far to many loopholes that a bad tenant can take advantage of, so make sure you have a lease and again, one of the networking groups is a great place to look for these.

They may not be perfect, but they are a starting point.

So, my question for you. Have you had to evict a tenant already? If so, have you run into any of the problems I described? Or are there more you could add? If so, I would love to hear them, leave me a comment and share them with the others and we can form our own little landlord community.

 

Getting Back Into Hot Water With Your Tenants

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AKA – What To Do When Tenants Have No Hot Water!

tenants hot water tank brokeEveryday’s an adventure when you’re a landlord! Especially when a somewhat important part of your property breaks down and a tenants are mad.

The quick intro is I had a hot water tank go down, it didn’t burst a leak, it just wouldn’t stay lit. If it doesn’t stay lit, the water doesn’t get hot, if the water doesn’t get hot, the tenants get upset, I had an upset tenant.

Now for the extended story!

Why It’s Good To Have Contractors On Speed Dial

You never know when or what will break and that’s why it’s important to have people to call when things eventually do stop working. Whether it’s a fridge, a furnace or a hot water tank, over the years I’ve gathered a group of dependable people I can call in case of an emergency.

Last week was no exception, except for timing.

This is the part that’s problematic as a landlord. Timing.

It was last Wednesday just before 10 at night I got the text from the downstairs tenant at one of my properties that the hot water tank was out. It was pretty unlikely it quit at 10, it probably quit sometime during the day, or even first thing in the morning and I understand it’s not something they may know immediately about, but from a cost effectiveness stand point, I wasn’t going to call a 24 hour plumber to show up at midnight and pay huge charges for what I suspected would be a small problem.

That’s where the timing appeared to go down hill.

The next morning at 8:30 I called our favorite plumber and explained what the problem was. Much like triage in emergency, he had to decide where my “emergency” fit in his day and since he had two people with no water, I came up as number three on the list of importance.

This I understand, but the next problem was, he also had two other appointments he couldn’t change the next day, so things looked tight. But he was going to get back to me later in the day, once he found out how long or how short the other jobs would be.

So I settled down and by late in the afternoon, I still hadn’t heard from him. Now I wouldn’t say panic set in, as I know not having hot water can be a pain, but it isn’t life threatening, but then the upstairs tenant texted me.

I Was Given The Ultimatum

He wasn’t happy. He also informed me that going 48 hours without hot water was unacceptable. Now this is where things could have gone horribly wrong, and it’s also where the lesson comes.

First, to my knowledge at this point it wasn’t 24 hours, it was less than 18 hours earlier I first found out. So maybe someone there forgot to tell me the day before?

So rather than taking a defensive aggressive stance, (and this is what I also recommend you do), I defused the situation by agreeing with him, explaining what I was doing and going as far as to explain to him that if I hadn’t heard back from my plumber by noon tomorrow, I would either bring someone else in or personally come fix it myself.

That’s when he gave me the ultimatum of either it was fixed tomorrow or he was bringing someone in at my expense.

If you know anything about hot water tanks, they aren’t extremely technical products. Usually there is only a couple of things that go wrong and they typically can be fairly inexpensive to fix. However, they are awful expensive to replace and it’s often easier for someone to recommend a replacement than to simply do some quick trouble shooting or even replace a cheap part with fingers crossed.

The last thing I needed was for the tenant to bring someone in and to get a $1,200 bill for the installation of a new hot water tank, so again I reassured him it would be dealt with. I called my plumber again and ended up in voicemail, so I left a quick message explaining where things were at.

Why We Love To Work With The Same People Over And Over

Finally around 6:30 that night my plumber called me, he had just finally fixed the second emergency and wanted to come to the property to check the tank. Whew.

As I mentioned earlier there are typically only a few parts that quit on hot water tanks. The most common is the thermo couple which simply triggers the gas flow as it cools down. When it doesn’t work, it doesn’t trigger and hence, no hot water.

Thermocouples are not expensive. they are usually $20-30, which is way less than the cost of replacing a large tank! They are also not hard to replace.

They can usually be swapped out in 15-30 minutes, so my fingers were crossed.

By 7:30, my plumber called me back to confirm yes indeed it was the thermocouple and everything was back up and running, life was once again good and the tenants were happy.

Now as I mentioned, it only takes about 15-20 minutes to change the thermocouple, so why did it take him an hour? Well again, this is why it’s important to have trusted go to people you deal with.

After he changed the thermocouple out, he didn’t want to leave. He wanted to make sure it stayed lit and the tank heated up properly. So while he’s waiting, he hears water running in the toilet. When he questions the tenants they say it’s been like that for a while!?!?!?!?!?!? Sigh.

So he proceeds to replace the flapper and saves me money in the long term. By the time he’s done he’s able to check the tank, it’s still lit, the water is getting warm and his job is done above and beyond the normal call of duty.

The TakeAways

So what did we learn from this? Well first, you really need some trusted contractors. This can be hard as so many of them come and go, so many just aren’t up to snuff and so many simply rip you off.

But when you do find a good one, you need to make sure you hang on to them for dear life! I refer all of our contractors/repair folks to people all the time. I need them to stay busy to stay in business and to get tons of referrals from me so they in turn look out for me whenever they can as well.

Second, you shouldn’t power trip on your tenants when they get their backs up against the wall. Did my tenant have a legitimate beef about the hot water. Well, I can understand his side, he may not have know I only heard about the problem late at night, he may not have known I was actively working on it and he may not have known I really was trying to get it fixed.

I could have put him in his place, I could have matched his aggression and called his bluff (currently we have less than 1% vacancy rates in our city, so I would have very little problems replacing him and most likely at a higher rent), but I took the high road and worked with him and explained I was doing everything under my power.

This is part of the landlord business that landlords need to understand. You want to work with your tenants as good tenants can make your life easier. Getting angry back may have made me feel better momentarily. I could have shown him who was boss and that I was the property owner and that he had no right to question me, but it wouldn’t have served anyone.

In the end, he was ecstatic with the plumber coming after regular hours, he was happy with me for getting it dealt with and he will most likely be a very content minimal problem tenant for as long as he stays with me, because he knows I am being pro-active and dealing with any issues.

So, have you ever found yourself in similar circumstances? If so, how did you deal with it? Could you have dealt with it better? Let me know your thoughts on how I handled it and if you found this helpful for future reference!

Another Satisfied Tenant – NOT – Dealing With Bad Tenants

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You Can’t Win Them All

tenant defaces rental property - bad tenantIt happens, you get a losing hand in poker, you pick the slow line at the checkout, you pick a bad tenant.

It’s a matter of the numbers, in my case, more tenants equal more numbers and more chances for something to go off the rails, but the important part is you have to deal with the repercussions and move forward.

The image here is an example of a repercussion that I found yesterday upon arriving at one of my weekly furnished rental properties and is an an example of what can happen when you’re dealing with a bad tenant.

Etched on the top of my wooden coffee table were the words “Bill is a slumlord“. Just out of the picture is some additional graphic art including a swear word and random drawings. It was left by a tenant who had pushed my buttons too far and I evicted.

Yesterday was not a good day to talk to me…..

But today’s another day….

So I searched for the lesson from this, and initially there was none. Just frustration, disappointment and anger. Did I mention it wasn’t a good day to talk to me?

Today’s Another Day

The headline above may just be part of that lesson. It really is another day.

Part of the reason I evicted the tenant was he was continually late with rent, another was he was apparently incredibly messy and with this house being a shared accommodation, everyone has to clean up after themselves or it all falls apart.

When one person doesn’t clean up it deteriorates quickly. I’d left notes explaining things had to change, but they hadn’t.

I asked everyone who they believed the culprit was, but apparently their is honor among tenants and no one would point a finger, until a few days before I told this guy when his last day would be. One of the new guys said he was tired of the mess and confirmed my suspicions.

So anyway, I was to meet the departing tenant yesterday at noon, but instead found this, found the front handle on my door was broken off, my front light outside light cover taken off and smashed on the front sidewalk, a general mess of spills on the laminate floor in his room and of course, the lovely etching. What a lovely fellow.

Bad Tenant, But Big Picture

In the big picture it’s not a huge dollar expense, but it’s the time and energy to fix it that gets disappointing. But what hurt the most at the time was the frustration that he felt I was a slumlord.

Here’s a picture of the room normally, does it look like a slum to you?

Furnished Rental living room

Clean Up Day

With furnished rentals, it’s important to keep them filled, so my wife and I returned today to get everything cleaned up, to take the coffee table away to see if we could repair it and to get things back to clean.

After a couple hours of cleaning, it’s like a new place! Not back to where it was before this fellow moved in, but far closer.

And it was also where the lessons started showing up.

When we arrived, the table was still etched and the fellows room was still a mess, but the kitchen counters and kitchen table were all clean, neat and tidy. One or more of the other tenants had stepped up and cleaned up partially at least.

Since I had a very good idea of who it was that had done most of it, I texted the other tenant before I left just to inquire who had been cleaning and he admitted that he was tired of the mess. When I informed him we had spent the last several hours cleaning, floors, walls, taking garbage out and doing dishes, he was extremely appreciative and that was the important lesson!

Where we had one tenant who was so bitter and angry he defaced my property, I had another that was thankful for what I offered and for stepping up and those are the tenants we as landlords need to find and work towards keeping happy.

Good tenants are the lifeblood of our business

and bad tenants suck the life out of our business.

Having had over 1,000 tenants over the last ten plus years it’s amazing how many of the bad tenants seem to stand out, yet they made up such a small portion of the big picture. Yet of all the tenants I have had through, 90% have been  good and 5% I dare say were simply awesome.

We Need To Focus More On The Awesome

We can’t let the bad experiences rule our lives. If you’ve had a bad tenant you know it can be a slap in the face and it causes many landlords to give up, to walk away from the business, their dreams and their original plans. We, YOU, can’t let that happen and when you have bad experiences chalk it up as a learning lesson.

Take something from your experience and see how you can apply it to future tenants or future interactions.

For me, I’m not sure what or how I could have dealt differently with the tenant at this point, but I could have made the other tenants happier sooner by acting earlier. I have to chalk part of this up to some bad apple, but I know I’ve had so many great apples the positive has to outweigh the negative.

Have you had a bad tenant experience? Want to share it below along with any lesson you learned? If so, I’d love to hear it!

How A Car In The Garage Won Us A Rental Property In A Bidding War

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Negotiating A Rental Purchase

Buying a Suited Rental PropertyWe’ve bought a lot of rental properties over the years and while we ended up with many that we wanted (some perhaps we shouldn’t have wanted so bad), we’ve also missed out on many along the way.

Sometimes at a rental property we saw things that would affect the value or would require too much time and energy to repair and we avoided purchasing them and sometimes we saw certain features that made the property attain “must have” status in our minds. Of course the important part is the property had to work.

And by work, I mean it had to fit the particular mold for what we were purchasing the rental property for. During our heyday, we bought properties we renovated and flipped, we bought properties we turned into regular rental properties and we had properties we turned into high cash flow rooming houses.

Depending on the features, the area and of course the price, we knew we could usually fit a property into one of these systems.

If it was outdated and in need of renovations, we knew it might make a great flip property, if it was in the right neighborhood and had the right floor plan, perhaps it could be our next rooming house or if it was already suited, maybe this was our next rental property!

To help streamline this process, having a good Realtor can be a huge help. On the other hand, having a Realtor who doesn’t understand you can also be a huge pain in the a$$. In this tale of how a car helped us win a bidding war, the Realtor was a pain and it wasn’t long after this we parted ways.

It Pays To Pay Attention

At the time we were looking for a new rental property to add to our portfolio. We’d recently flipped a property and we wanted to move those profits into a property that would generate a nice return, so our Realtor at the time found us a nice property in a great rental neighborhood that had just come on the market.

It had just come on the market so we knew we needed to see it ASAP, as we felt it wouldn’t last long, so we had the Realtor setup an appointment right away and went to view it that evening.

It needed some work, but it was perfect for our needs. Three bedrooms up, partially finished basement with the laundry near the bottom of the stairs and a detached garage. We knew we could quickly suite the basement area and turn it into a nice little one bedroom unit, the garage had a furnace in it, so it could be rented as a heated garage and the upstairs was dated, but had great bones.

But perhaps the most important part was, the owner stayed at the property while we toured it and helped us out by telling us all the important details about the property. This is a rare occurrence as typically the Realtor who lists the house advises the owner to make themselves scarce during the showings.

You simply never know what might sneak out of the owner’s mouth that may hinder a sale or perhaps give potential buyer’s an advantage when it comes to negotiating. It’s access to unfiltered information about the house!

True to form, this homeowner followed us through on the tour and gave us plenty of extra tidbits, mostly about how much he was going to miss the home as he was moving to be closer to family, but also a couple little tidbits that were going to be beneficial to both parties. And this is why it pays to pay attention.

Ramblin’ On

It was when we looked at the detached garage we hit the jackpot.

Although it was full of tools, treasure and junk, there was also something buried under a tarp in one of the parking spaces. Since it never hurts to ask, we asked what it was.

Buried underneath it was a 1963 Rambler that the owner had one day hoped to restore. During the next 20 minutes he told us all the details about how he loved the car, had hoped to fix it up and then one day give it to his daughter, but instead it had just ended up sitting there being neglected.

Buying a rental property

You could hear his disappointment as he told us how he was now going to likely have to just give it away to some parts place or to try and sell it somewhere and would never realize his dream. As we finished the tour, we knew it was a property that worked for us and my wife already had a strategy in her mind to help ensure we got it as we knew there was at least one other interested party who was potentially putting in an offer that night already.

Unfortunately in this world, there are many folks who would use the extra information we had to take advantage of someone and outright deceive them. Deceiving people has never been our goal, we always wanted to make deals that worked for both sides, deals that were win win and where everyone was a winner and comes out happy.

So my wife came up with the perfect offer to achieve that.

We put in a full price offer, but it had one big condition in it.

The sale had to include the car. This condition just about put our Realtor over the roof, he thought we were nuts (and this was another reasons we were soon done with him).

We knew the car was a big concern for this fellow and we felt that just knowing that someone was interested in taking the car would help put his mind at ease.

Again, this wasn’t some slimy negotiating tactic, we saw how much he loved that car and wanted to get it back on the road, so that became part of our goal for it as well. We weren’t just going to acquire the home and the car and then scrap the car, we wanted to make sure it got taken care of too.

As it turns out, there was another offer that went in that night too. An offer that was actually higher than ours. But it didn’t include the car or any mention of it.

And The Winner Is?

Now I can’t remember whether it was later that night or first thing the next morning when we got the news, but even though the other bid was higher than ours, the homeowner went with ours. So who was the real winner?

Both parties! The homeowner got the price he was asking and someone to take his car. Was the car the only reason he went with us?

Part of it may be that he spent time with us on the tour and liked us, part of it might  be that we explained what we would do with the property and how we would take care of it, but mostly we do believe it was about the car. He knew someone was going to take care of it and help take one more problem off his hands.

And The Lesson Is?

None of this would be really helpful to you if there isn’t a lesson to learn from it as you go along and hopefully you already see it. It’s two parts actually.

First, it’s basically that paying attention to some of the details (and getting lucky by having the homeowner hang around) can help you with your negotiating.

Second, armed with extra information you can turn your negotiation into a win win scenario where everyone gets what they want.

As for the car?

getting a car with the houseUnfortunately, we had to sell it. My wife had visions of us restoring it and possibly giving it to one of our oldest daughter  at some point (really I think she just wanted to cruise around in a cool looking car). We didn’t just sell it to a scrap yard though, we found someone else who intended to restore it.

So how it ended up, we’re not quite sure as we never followed up with the fellow we sold the vehicle too, but we can only hope it was returned to it’s former glory.

Now, since this isn’t one of my typical landlord tips or advice articles, my question for you, would you like more posts along this vein? Posts or articles that talk about deals or strategies we used to buy properties? Let me know and tell me your thoughts on this story, I love to hear your thoughts!

Raising Your Rents, Without Raising the Roof

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Increasing Your Rent Without The Ruckus

Rent increases - positioning them with tenantsLast article I talked about how stupid we tend to be as landlords. We have a great property, we treat our tenants well and yet you still feel bad about raising your rents to help cover our own increased costs.

Tenants understand costs increase, they know taxes go up, the can relate to increased insurance costs, but what they won’t tolerate is greed or abusive rent increases. It’s a pain in the butt to move, but if they feel wronged, it’s worth it to them.

On the other hand, if they feel like they are in a good spot, the increase won’t put them in the poorhouse and perhaps most importantly, it’s a fair rent increase, they typically have no problem staying. As always, it also requires common sense.

If vacancies are skyrocketing and rents are dropping everywhere else, you can be assured your increase will definitely have a higher chance of causing them to bolt. So know your market and understand the local laws and regulations regarding increasing the rent you charge your tenants and increase it when applicable.

Because when or if the market does slow later and you have a vacancy, you will definitely have to lower them to keep attracting tenants.

It’s All About Positioning

I was recently coaching a landlord through this and it all starts with positioning. She hadn’t raised rents for several years and was missing out on as much as $300 per month of additional rental income. Her current tenants were good, so throwing a $300 increase all at once at them was going to be a little unfair.

After all she didn’t want them to leave, she just deserved fair value for her property.

The lesson from that is, if you are paying attention to your local rental market, you’ll have a pretty good idea of the local vacancy rates and whether rents are increasing or not. If you pay attention to this, you can deal with more gradual increases which benefits both the landlord and the tenants.

When it comes to a strong rental market with vacancies dropping and demand for units increasing, it’s very important for you to be paying attention to how the market is changing. You need to have an idea of how much rates are increasing so you don’t get left behind and this is also where your positioning starts.

When I refer to positioning, I’m talking about putting yourself in the best light. The position that helps you, while at the same time puts you in a position to still provide good value for your tenant.

In this example, if you’re finding rents have gone up $100 per month for properties equivalent to yours, you start off with that in your written letter to the tenant. Now I’ve always advocated trying to get top dollar for your property initially. I believe having one of the nicest rental units in the area helps set you apart, helps get you better tenants and helps you garner higher rent.

You may already have been $100 higher to start with if you followed this process and if you are, you’re in a great position. Because you don’t have to raise your rents $100 this time, if you show your tenants how much others have raised their rents and end up only raising yours $50 or even $75, you’re still the good guy.

If you haven’t been following this process, you can still use this technique, but you won’t be quite as far ahead, but an increase is an increase!

Sample Letter of Rent Increase

So let me give you an example of some wording you can use, and feel free to copy and use this where you need to!

As you’re most likely aware local rents have increased over the last year as the costs of everything from taxes to insurance have increased. After doing some research we’ve noticed rents in this area have increased by $100 per month and in some places even more.

Now while we value you as tenants, we need to cover some of our increased costs and remain competitive in the market. So rather than giving you a big $100 jump per month, we’d like to reward you for being good tenants and only increase the rent by $75.

At this price, you are still getting the property for less than similar properties in the area. We hope you find this fair and again, we really appreciate having you as tenants.

How does that sound? Does that make sense to you?

You’re starting by talking about increased costs. You segue to rents increasing by $100, and possibly more and then you increase the rent by less than the average coming out as as the good person.

You’ve positioned yourself as not only looking after your interests and trying to cover your costs, but also letting them know that you value them and that you’re trying to help by not increasing the rent as much as you possibly could.

Now depending on the market, you’ll need to change the number where they’re bolded to the appropriate values, but that’s part of your homework. Now just to make sure you get the impact of this $75 per month increase, you have to understand it becomes an extra $900 over the course of the year and that $900 can cover a lot of your costs. If you have a suited property and increase both suites by $75, that’s $1,800 to your bottom line by the end of the year.

If you haven’t raised your rents in several years, rents may have increased by $200, $300 or even more per month since the time you originally rented your space out. If rents have increased even $100 per year for each of the last three years, you’ve missed out on $7,200 worth of income. If your property was suited, that’s $14,400 in lost revenue because you didn’t increase your rents. 

Now this is assuming you raise them them maximum amount, but that’s to make a point. The point being, you’re leaving money on the table!

Guarantees and Rules

will tenants leave if rents increaseNow there is no guarantee this will work every time. You may have some tenants that simply cannot afford the increase.

Whether they are just getting by, whether your property wasn’t quite working for them, there will be times when people will move out on you leaving you with a vacancy. This isn’t a bad thing.

If that’s the case and you’ve done your homework, you now have a very solid idea of what the local rents are and if you have a great property, you will be getting an even larger increase than the potentially discounted rent you offered your tenants.

It can be sad to think about losing tenants and the extra work involved in having to prep the property for new tenants, going through the screening process, starting over with new people and the concerns about whether you picked the “right” tenants, but as I’ve also mentioned time and time again, landlording is a business. And you have to run it like a business.

Which brings us back to the rules your business has to work under. Make sure you understand all the applicable local rules for rent increases. There can be caps on increases, timelines for increases and many other variables you’re required to know when it comes to increases.

Some areas have rent controls in place limiting how much rent can be increased per year. Usually these are tied to inflation and they are typically far less than the market will bear. If your region is restricting your increases with rent control laws, you need to consider increasing rents the maximum allowable each year so you don’t get left behind.

Often you cannot retroactively increase, so if you don’t do it now, you lose it forever, so don’t miss out. Other areas have specific legislation about timelines for notifications to tenants about increases and how often rent can be increased.

My location requires 90 days notice of a rent increase (which must include three full months) and I’m only allowed to increase once every 365 days, or once per year. Your local landlord tenant laws may be similar or may be more restrictive, so make sure you look into that as well before you attempt to increase your rents.

An illegal increase may not necessarily result in fines ( in most cases they are simply void), but if you’re not sure find out. Usually it just results in resetting the clock and delaying when the rent actually increases.

Finally, some areas also have caps on how much rent can be increased in a year. This too can cause issues if you miss out as you cannot stack multiple years if you missed out. So again, become familiar with the local legislation.

If you’re going to be a successful, educated landlord, you really do have to run it like a business and this means rents changing to reflect the market. These days those changes are typically going to be upwards, so you need to stay on top of your market!

Hope you enjoyed this article, if you have any hints or tips you can share with the other landlords that visit us, be sure to leave a comment below and thanks for reading this far!

Why Are Landlords So Stupid?

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Why Landlords Don’t Think Properly

don't be stupid landlordsDon’t worry I don’t get a free pass on this either! I’m just as guilty at times as other landlords and because I know all this, it actually makes it worse!

Example, tenant tells us on the first they will be a couple days late, so what do we do? They have some good history with us, we have a good relationship, so we say that’s fine, thanks for notifying me, let’s just get this resolved by the 4th.

The problem is we have set a dangerous precedent. They are going to be late, there are no repercussions to them and they now know if something comes up in the future, all it takes is a call to get a few extra days.

What we should have done is read the riot act, within reason, explained how the bank won’t accept a note from my tenant in lieu of actual cash money and that this cannot happen again. Then follow it up with a letter going over all of this again as a reminder and for their tenant file, in case anything comes up again.

It’s not that we’re jerks that we need to do stuff like this, it’s because of human nature. We have to remember to protect ourselves and our assets, but we don’t think properly. We think stupidly.

We tend to worry that we will upset the tenants, so we play nice. Which while being kind hearted, is actually stupid, because tenants understand costs rise. Which brings me to the next area of landlord stupidity.

Why Won’t We Raise Rents?

Again, no free pass for me as I don’t always do this either, and it comes back and bites me as well.

Even if we don’t raise our rents on a yearly basis, our costs still go up, don’t they?

Maybe right now we are getting a break on mortgage costs as rates are still so low, but as I look back over the last ten years I am definitely paying more for taxes, my insurance has not gone done on any property and utilities, labor costs and general costs of business have also definitely risen.

Yet we (I’m generalizing all landlords here) are afraid of passing these costs onto our tenants. Sure we’ll increase rents if tenants leave and we sure as heck drop them if the market slows down, but why do we give longer term tenants a free pass?

Landlords Action Steps

One of my goals with this site is to make you a better landlord. The articles I write, the stories I tell, the intent is to teach you, to educate you and to help you avoid mistakes I made or that I see so often from other landlords. It’s also to help make you more profitable.

So here’s an action step for you. Let’s call it a challenge even. If you’ve owned your rental property for  at least two years, and haven’t raised your rents, take a look back through your taxes, through your insurance and through any other costs that you may be incurring for your property. Have they gone up?

If they have, have you passed the costs onto the tenants? If you haven’t, your action step is to learn your local rules for rent increases and determine if you can raise your rent to cover your costs at the very least.

You may be handcuffed by local landlord laws covering rent increases, locally here I can only raise the rent once every 365 days. So if I just signed the tenant up six months ago, I cannot pass on an increase for six more months.

You may be handcuffed by timelines, locally I have to provide 90 days notice which includes three full months for a rent increase. Since today is the fourth of March, I cannot pass a rent increase on to a tenant now  until July 1st.

You’ll need to learn if there are any restrictions like these or worse rent controls restricting or guiding you as to how, when and how much you can increase your rents. Start looking into these today and next article I’ll explain how to write your rent increase letter to make you look like an awesome landlord while at the same time you’re increasing the rent!

Final Thought

I understand that some regions of the country have higher vacancy rates and raising your rent just causes tenants to jump ship, but a reasonable increase to cover your costs rarely causes a good tenant to leave.

Think about this, you’re providing a safe secure home for someone and you’re taking all the risk of covering the payments, being able to qualify to even purchase a property and long term hopefully using it as a retirement vehicle. You should be able to pass the rising costs onto your tenants who have the ability to leave in a year, who don’t have to qualify for a mortgage and who fall back to you if a fridge or stove breaks.

$25, $50 or even $100 a month helps you cover increases, provides you more cushion if something does go wrong and helps make your business just a little more profitable. So take that action step to determine if you need to raise the rent and the process/timeline for you to follow.

Why Discounting Your Rents Is For Amateurs

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And Why Professional Landlords Get Premiums!

make your rental stand outFirst month free. Free TV with purchase. Don’t Pay until…..

You see these types of discounts in ads everywhere these days. You also see these types of businesses that promote like this come and go and there’s a reason. They trade in commodities.

Commodities are items that have little value and are typically traded or bought for the lowest cost. Trading in commodities is not good business for the simple reason that you are tied into the lowest price. The lowest price doesn’t give you margin for error or more importantly for profits.

As a landlord, if you start offering discounts on rents to attract tenants, you’re turning your property into a commodity rather than a valuable asset. Yes, you have to be competitive, you can’t price yourself out of the market, but as a long term strategy, you want to be a leader rather than following the pack off the cliff.

Discounts are the easy way out and once you start offering them, they become expected. If you’re a retail store, maybe that’s to be expected, but to really succeed you don’t want to be the next Walmart or Target, set your sights higher and become a premium brand.

If you’re following some of my systems and tips, you know it’s important to be a professional and to treat your landlording like a business. If you become an educated landlord, one of the areas you need to look at is the condition of your properties and how they appear to prospective tenants.

We learned a long long time ago that if you spend a little extra initially to get the property better than your competitors it pays you back in increased rent, longer staying tenants and tenants that take better care of your properties. And here’s why..

The Argument For Increased Rent

If you do any tours of competing properties, even if this just involves reviewing other ads and photos of properties in your area, they all tend to be the same. Picture of the kitchen, picture of a bedroom, picture of a living room and some bad writing offering a price and maybe a few details.

Occasionally though, a few stand out. Usually they’re priced higher, the pictures look more professional, and the advertising copy looks polished. You want to be the landlord who is renting out that property for several reasons.

By looking more professional and by charging higher rent, you’re automatically going to push many of the less desirable tenants away. If they have a poor track record of paying rent, they understand a professional landlord will be screening them more thoroughly and they won’t even qualify. If the rent is higher, they understand they won’t be able to afford it and they will be cash strapped. And if the advertising copy comes off as professional it will also help to discourage them from even inquiring.

You move from quantity to quality and what you are looking for is quality tenants.

If you ever rented (I rented for years until my wife and I could afford our first house), you probably looked at a lot of properties before you found the right one. We personally couldn’t believe the condition of some of the properties that landlords thought were rentable. I still hear this from tenants when I question them how their search for a rental is going.

Once you did find the right one though, you had to have it. And it didn’t matter if it was an extra $100 a month, it stood out in your mind over the previous properties and it became even more valuable in your view point. This is the type of property you want and the mindset you want to instill in tenants that view your property.

Now, to get to this level, you may have to spend a few extra thousand dollars initially for extra renovations or updates, but this not only helps increase the overall value of your property, but that extra $75 per month, or perhaps $200 per month of extra income in a great property, sure helps increase your cash flow.

The Bonus’s of Better Properties

The extra cash flow isn’t the only bonus. If you have a better property, tenants tend to stay longer because it is such a great place to live. They actually become much more hesitant to leave as they don’t want to give up a  great property.

This translates into less tenant turnover and longer periods between vacancies. Which simply means more money going into your bank account for longer periods of time and that helps ensure you continue to be a successful landlord.

These tenants that are also willing to pay extra to live in this great property, also tend to take better care of it. If they truly take pride in where they live, they want to make sure it looks great and they keep it that way. You’ll end up with fewer repairs after tenants vacate, less work for when the turnover eventually takes place and if there are any issues with the property like leaky taps, these types of tenants will let you know immediately, rather than finding out after repairs become more expensive.

Unfortunately I can’t guarantee every tenant will be a success using this strategy, but in combination with other strategies, it sets you up for success.

How To Avoid Discounting Your Rents

So let’s recap some of the strategies that can help make this work for you.

Buy rental properties in rental heavy neighborhoods. This gives you a much larger tenant base to choose from. You start with quantity and narrow it down to quality.

Renovate your properties to help them stand out from competitors. This makes your properties memorable and helps you receive premium rents.

Write better ads with better pictures. Stand out from the crowd and get people appreciating your property and it’s value rather than looking for a commodity.

Don’t discount your rents to attract tenants. Tenants that are attracted to discounted rental units will also leave quickly if they can get a better deal. Don’t be a commodity, create an environment where tenants want to come home to.

So, did you find this helpful? If you did, could you do me a favor and share this with at least two other landlords you know? The more landlords we have out there that are better educated and running true landlord businesses the better the environment for tenants, which makes a landlords job easier. It turns into a win win situation, so spread the word!