The Educated Landlord

Making Landlording Easier

You are here: Home / Archives for Property Management

Should (and can you) Fire A Tenant?

By

Should you fire a tenantThere’s an old Polish proverb that says “not my circus, not my monkeys”. If you understand this proverb, you know you have to fire a tenant in certain situations.

If you don’t, let me break it down.

What the original creator of this proverb was trying to say (at least in my opinion) was that if it’s someone else’s problem why are you dealing with it?

Their problem, their issues, until they become your issues.

Then it may be firing time.

If a tenant is repeatedly late with rent because they get paid late their circus has dragged you in as part of a sideshow. Try paying the bank late repeatedly, it doesn’t fly and your circus could get shut down.

If your tenant refuses to maintain the property, the grass is two feet high and full of weeds or the snow on the sidewalk to a foot deep it’s not them that gets the ticket from by-law, it’s the property owner. You’ve been dragged into another sideshow.

If you find a tenant is repeatedly causing you grief, stress or is extremely demanding, you need to fire them and find someone new, otherwise you become one of the monkeys in the circus.

So, Can You Fire A Tenant?

I know I can where I live, but it’s because I understand my local landlord tenant laws. My secret is fixed term leases.

Under my local Residential Tenancy Laws I don’t have to renew a lease if I don’t want to.

My secret involves starting tenants with six month leases or possibly year long leases and renewing at the end of the term, well renewing if I enjoy the circus. If not, Hasta la vista baby.

I can’t stress enough that is applicable to where I live. It’s important for you to understand your local laws.

What flies in Alberta (where I am) doesn’t fly in New York City. That doesn’t mean you may not have options, but you really need to know them before the emcee starts introducing the monkeys because after the shows starts many of the rules may not apply.

Keeping It Short

There, a short post, enjoy and share, provide me some feedback and let me know if you ever fired a tenant or let me know if I’m simply out to lunch.

The Secrets of Self Managing Your Property?

By

Self Managing Your Property,
Or Hand It Off?

self managing your propertyShould you be self managing your property or should you be paying a management company to deal with your property? It’s a question that comes up quite often around here and there really is no one answer that fits everyone.

Personally I manage all my properties, I save a ton of money by doing it myself and it works well for me. Of course I’ve been doing this for a while, and because of that I have some secrets I’ll share a bit later on in this article. Also, I don’t like sharing the money with a property manager when I know I can do as good, if not a better job at it than 99% of the PM’s out there.

Others I know have one or two properties, they pay property managers to deal with collecting rent, placing tenants and they simply sit back collecting the left overs. It takes the stress of management out of their hands and it works for them.

Some landlords I know have dozens and dozens of properties and are continuing to expand their holdings, so rather than burden themselves with property management, they understand they need to focus entirely on buying and only use property management. They don’t really make money managing properties, they make money buying and owning so they have different priorities.

Yet thousands (probably closer to millions actually) of landlords self manage their properties. So the question comes up, should they really manage their properties? Or should they hand it over to professionals?

The Challenges of Management

The more properties you have the more tenants you have. The more properties you have the more appliances that can break, the more tenants turnover and the more items you have to track. And the issues don’t grow in a straight line, they seem to grow exponentially.

For many people a single property can be overwhelming. imagine multiplying it by a second suite, a second property or more!! It could lead to complete failure and eventually push them out of the landlord business. For those folks the challenge is too much and it simply makes sense to hand the reins over to a property manager.

But property managers don’t work for free.

The main challenge of having someone else manage the property often ends up being the cost. Property managers are typically going to cost 8-12% of the monthly rent. For a property that generates $2,000 of gross income per month that works out to be $200 per month or $2,400 per year. That’s a good chunk of change!

cost of managing your propertyThrow in extra costs for signing in new tenants, possible showing fees, extra charges for coordinating repairmen and it doesn’t take too long for a low cash flowing property to suddenly start losing money.

Now I’m not saying it can’t work, or that all property managers will overwhelm you with additional costs. I am saying that you need to be aware of all the costs involved, you need to make sure they balance out appropriately and it should fit your goals or plans with your portfolio.

As I’ve talked about in previous articles your goals affect your strategies. If you don’t need cash flow now, a property manager may be perfect for you. If you drastically need cash flow, a property manager could be draining that cash.

The Secret of Successful Self Management

Since I’m a pretty big proponent of self management, maybe you’d be interested in learning some of the secrets of successful self managing your rental property?

Still here, good!!

Surprisingly to really find out how to be successful at managing your property or properties you really should start by looking at what property managers do. Or at least what successful ones do!

Not so surprisingly the biggest “secret” is another topic that I try to bring up repeatably and it involves systems.

No matter what property management company you look at, if they’re successful they have specific systems and processes in place that they have refined over time and they then replicate and use over and over on all their properties.

Sure you need some time management and some customer service skills, but if you have true systems in place that walk you through steps like advertising properties, screening tenants, even clean up and maintenance, it can make the job of managing your property so much easier and perhaps just as important, much more consistent.

You can expand on these systems to include processes for your accounting (if you haven’t read my article about a simple paperwork accounting system for rentals you might want to read this article, Accounting For Your Rental Property), processes for buying a new property and just about every recurring process involved with your investment.

Another Secret About Self Managing Your Rental Property

So what else can make your job self managing your property easier? Well how about an accounting system or a software system set up specifically for your rental business?

Many new investors often start out trying to track everything on spreadsheets or in notebooks and while it’s a great way to potentially store or analyze some information, you really do need to set yourself up properly to manage your properties and your tenants.

With the large number of transactions we go through on a monthly basis we ended up going with Quick Books Pro as the accounting package to track all of our income, expenses and even tenants.

While it’s not specifically designed to work with rental properties, we made the wise decision to bring in a bookkeeper to set it up properly for us right near the beginning.

To be fair we didn’t bring her in early enough, we thought we were smart enough to set it up how we needed it and it ended up costing several hours worth of re-entering data and adjustments once it was properly set up, but it was worth it. Lesson learned. Fortunately it was still fairly early in our business endeavor as it would take dozens of hours to convert now!

We also had the bookkeeper come in once a week and usually spend three or four hours a week doing data entry. This left us with reports and information at our fingertips and readily accessed if needed while taking some of the burden off us.

Since we first started there have been dozens of programs and applications that have been developed for both small and large portfolio property owners.

They track everything from rents to maintenance and all the particulars in between. Again I’m already neck deep in the systems we already have so it’s too late for an old dog like myself to pivot and start over, but if you’re looking for options why reinvent the wheel when there are new shiny ones available?

Property Management Software

software for self managing your propertyThe priorities you need to stay on top of are obviously going to be incomes and expenses, so at the very least any property management system requires the ability to track those.

Some of the software you can currently find out there goes far beyond that though. From the ability to store leases under tenant files via mobile camera apps to creating maintenance lists and even some marketing information.

Some are entirely mobile allowing you to run your business while you’re on the move while others are designed for desk top use. Some of them even allow you to accept online payments!

I’ve already stated I’m set up with a different system, so I can’t tell you many specifics about any of the various programs out there, but I do have something that may help.

Over the last several months I’ve tried to be much more active online with articles and it’s starting to pay off as more people are approaching me asking me to collaborate or share some information. Since I’m a tad protective of who I’ll work with and what I’ll forward on, many of them get refused outright, others I look a bit closer at and do share or collaborate with.

One of the groups that recently reached out to me was actually Reviews.com who review an extensive list of various products, items and services. In this case it’s rather timely as they had recently reviewed Property Management software.

I’ve read through their review and found it fairly informative, but since I’ve not actually used any of the software they reviewed or recommended it’s been a bit tough to confirm everything. Then, out of the blue I found out one of the landlords I’m coaching has started to use one of the software packages they recommend and he loves it!

Tada, now I have some verification!

The software he is using is TenantCloud which is a free cloud service application which allows him to use it on his mobile while he’s out and about. This makes it ideal for him as he’s managing a couple of rooming houses with a total of 20 rooms and this gives him tenant information right at his fingertips.

Plus it’s the top rated free software recommended by Reviews.com, so even more validation. To save you some time searching through their site, here’s the direct link for all the reviews of the property management software they looked at:

Property Management Software Reviews

Caveat About Self Management

I’ve shared some important information here, but I’d be remiss if I didn’t talk about one other important piece of the puzzle when it comes to self managing your property.

It’s actually the biggest benefit of having a property manager and the biggest negative about self management.

It’s having back up for when you need a break!

caveat about property managementIf you like to spend a couple weeks in the Caribbean during the winter months or perhaps you spend the summer at the cottage you still have tenants in place and a property to worry about if you self manage.

With property managers in place it’s one less item to worry about, but on your own you need some backup.

I understand I’m starting to sound like a broken record, but having systems in place and someone who can look after your property when you’re away (like another like minded landlord!) can relieve a ton of stress and guilt about zipping away for a well deserved getaway.

If you can find someone you can trust to help you out and in turn you can reciprocate, if you can set yourself up with systems to keep your business consistent and if you have something in place you can use to track your portfolio you are well on the way towards being able to self manage your property!

Now, if you’re already using some management software, you have some secrets about managing your own property, or you have some feedback about this article leave me a comment and tell me about it!

I always love to hear from you and while it’s great that people email me, by leaving a comment here it can help more landlords out there as they won’t see my email replies. And as always, if you find this helpful and you know other landlords who could benefit from it (or maybe you just want to warm them up to taking care of your property during your next getaway) be sure to share this via email or by using the handy social share buttons just below the article.

You can quickly share it too Facebook, Twitter or LinkedIn and show others you truly are an Educated Landlord!

So, Your Tenants Late with Rent…

By

Dealing With Late Paying Tenants

late rent payments - tenants late with rent

I received an email recently asking me what steps a landlord should take when a tenants late with rent and I was kind of taken aback.

You see, this is one of those issues that is so easy once you’ve gone through it a couple hundred times. The problem for me is it was so long ago, I’d forgotten what I do is a learned response.

And I learned it so long ago that when a tenants late with rent, I simply take action.

So, rather than making you learn it on your own, I’ll just go ahead and break down the steps you need to follow if this occurs to you, but before I get there,  I want to talk about the challenges of evicting a tenant.

It’s these challenges that create the need for your actions to follow a specific process on your end as a landlord, so let’s dive in.

The Challenge of Evicting a Tenant

Just about every jurisdiction has a specific process for evicting tenants. Sometimes it involves a three day notice to quit, other times a 14 day notice to vacate. Some places require a court application to make it official and others have tribunals.

The one consistent challenge this represents for landlords is you need to prove your tenant has breached your lease and/or that you have a valid reason to evict them.

In my experience those valid reasons for an eviction tend to revolve around three main issues,

  • Non-payment of rent
  • Damage to the property
  • Conflicts with other tenants

You would think any of these would be easy enough to prove, but when you end up in a hearing, landlords often find themselves ill prepared compared to the excuses or lies that a nefarious tenant may be able to come up with when faced with eviction.

I’ve had tenants late with rent lie about paying cash and not receiving receipts, I’ve had tenants try to explain the gaping hole in the drywall was there when they moved in and I’ve had tenants explain they had no idea there were conflicts.

So what’s a landlord to do? Especially when a tenant is outright lying?

Preparing For Evictions Before They Are Necessary

Now, the point of this article is about what to do when a tenant’s late with rent. It could just as easily apply to damage to your property being damaged, conflicts between tenants or any other reasons that could lead to requiring an eviction of a tenant.

The important sub message for you is that every issue like this you need to understand could be the first step to building up a case for eviction. Assume the worst, and hope for the best!

That’s why the first step you need to take is to create paper trails you can refer back to if the situation doesn’t correct itself and goes further out of control.

When I’m consulting with landlords about evicting tenants I continually harp on documenting everything. It’s not just a matter of talking with them, you need to document it as well.

That’s part one of preparing, but just because you’ve documented it doesn’t end there.

Part two is making sure the tenant receives copies of your notices/documentation so you have a complete paper trail and takes the ability away from them to say they weren’t aware.

Creating a Complete Paper Trail

Tenants late with rent so create a papertrailSo what is a complete paper trail? It’s evidence that shows everything along the way, whether it’s the written notice you provide informing tenants rent is late, to complete documentation showing the condition of the property when they moved in all the way to dates and instances of previous conflict issues with the tenants.

Hopefully this is making sense, but to clarify even more let’s walk through an example.

It’s the 1st of the month and Joe your tenants late with rent. Now maybe he usually sends electronic transfers later on the 1st, so you sit back and eagerly check your email on the 2nd, again no money!

Tenants Late With Rent

Step 1

I’d suggest calling and/or texting the tenant immediately advising them they haven’t paid rent for the current month yet.
It could have been an honest mistake, or it could be a sign of pending trouble. You can often tell by how easy it is to initially contact them. Although sometimes you may simply get strung along as well if you do reach them first time, so be diligent and stay on top of this.

If you get paid great, you still want to move onto step 2, but at least the pressure is off.

Step 2

If you were paid, great, but you’re not done yet.

Follow up with a written letter for the tenant informing them that you understand late payments can happen, but this can only be a one off type situation as the rent payment is required to cover your bills for the property like a mortgage (you may need to ad-lib here a bit depending on your situation).

If you weren’t paid, you want to create a more stern letter for the tenant explaining all of this.

In both cases you need to refer to the conversation and/or text correspondence that you previously had about this issue. This is a matter of building up your evidence and paper trail.

I’d suggest bringing up potential repercussions if it’s not dealt with immediately and what may happen if the situation isn’t corrected (eviction, extra costs to the tenant and more, but all without being threatening, just informative).

Step 3

***UPDATE – Thanks to some great feedback from one of our readers, who also happens to be a Constable located in Massachusetts, he’s recommended the following tips regarding service of paperwork;

1) Certified mail does not need to be accepted and won’t be returned immediately. First class mail cannot be proven to have been delivered. Worse still is there is no proof what was delivered.  Tenants can claim that they received an empty envelope or one containing a blank piece of paper.

2) Proof of service.  I am an officer of the court. As such my return of service is accepted by the court as prima facie evidence that service was effectuated as indicated. Also I am a disinterested person and have no involvement in the action.

I would strongly suggest that whenever possible a Constable, deputy sheriff or Marshall should be engaged to serve this process, ensuring  that the case  can move forward with little delay. – Constable MP Weisberg

Now rules and variations do occur depending on where you are located, so make sure you understand them locally. Service by a process server, Constable or Sheriff may be mandatory, or simply advisable depending on your unique circumstance. Thanks for adding your voice to this MP and thanks for helping other landlords!

It’s important that you hand deliver this if possible. If it’s not, you want to create some potential trail of delivery and receipt.

If you’re hand delivering make note of the date and time and follow up with a text and/or email referring to the letter you dropped off. A frequent tenant response in hearing is they never received any notice about the problem, this solves that.

If you are not able to hand deliver you can send it via registered mail or courier which provides a tracking process.

If neither of these are possible as the tenant is trying to avoid you, then your option may be posting the notice on the property.

The challenge with this is it’s still hard to prove they received it, so here’s some additional steps.

Make sure you post it on every entrance to their unit. If it’s an apartment, it’s easy, just post it across the door and the door frame so they can’t miss it as they go in or out.

If it’s a house with a front and back door, post a copy on the front and back door, again across the frame and door. If it’s a house with a garage, post it on the two doors and the garage door.

Perhaps most importantly whatever the circumstance, once it’s posted then make sure you take a photo with some sort of date and time stamp to verify when you took the picture(s), just in case you need to prove it later.

Just as a warning, be aware some pro-tenant jurisdictions may claim this is tenant harassment or potentially slanderous if it’s posted for everyone to see. Always be aware of local rules and laws and make sure you can back up any claims that may be indicated to protect yourself.

Step 4

Follow up!

Once you’ve talked to the tenant, left them notice or documentation about the issue, follow up with an additional text, email or follow up phone call which you also document.

I’ve run into numerous situations where tenants have confirmed via text they received the notice, then in a hearing deny it and their entire claims fall apart due to the text evidence showing they are lying.

The final proof ends up often being your follow up, so don’t take a short cut and miss that final step as often it can be the deciding factor.

Final Thoughts

One way to stand out if you do ever end up in an eviction situation is to be a professional. If your tenants late with rent it requires more than a phone call or text to be a professional. You need to do the extra work!

As is often the case it comes down to treating this like a business and doing your job professionally. If you’re in a hearing and you come across as a professional who has all the evidence, is following all the rules and are going through all the proper processes evictions become much easier.

Now it’s your turn for a final thought.

If you’ve ever evicted a tenant, tell me what the experience was like below in the comment section. If you think this article would have helped you I’d like to hear from you even more!

Rainbows and Unicorns, Exit Stage Left – A Landlord Nightmare

By

Dealing With Rental Disasters & Disappointment

Dealing with a fire at your rental property - another one of my landlords nightmaresSometimes your world falls apart and you get caught in a landlords nightmare. Or so it seems. Right now I am on week two of significant problem after significant problem of both the disaster type ( fire at a rental property) and disappointment type (tenant who I attempted to help out who burnt me hard, this time with garbage rather than fire).

I started out writing this as an email to all the subscribers, then after I had been writing the email for roughly 20 minutes and I wasn’t a quarter of the way through the story, I realized I needed to turn this into an article so I could cover more of it.

This post has actually taken me a month and a half to work through, to write and to finally get near the end of. It’s also the first post in almost nine months on this site. I’ve become a bit burnt out and tarnished, but I am making a comeback!

The intent of this isn’t to make you feel sorry for me and my problems, it’s to make you aware of potential problems that can occur and hopefully some additional lessons about dealing with what seems like overwhelm and how dehabilitating it can be.

We all face problems and as landlords these problems affect not just yourself, but your tenants who you are also somewhat responsible for and that can make these issues even more important.

I’ll start the story with disappointment and then we’ll move onto disaster. This will be a long one, so grab some coffee or some tea and get settled in.

Explaining The Parameters

Rental Markets FluctuateI think I need to preface these stories with a little background of our local economy. Often time what’s happening locally with unemployment, job creation and the economy all contribute to the experience you have as a landlord and in this case it’s very apparent.

The first parameter of note, the local economy where I live and own properties is driven by the energy industry which has been taking a beating lately with low oil prices. This is translating to unemployment rising, wages dropping, uncertainty in the local housing and job markets, higher vacancy rates, lower rents, and a significant amount of doom and gloom in the air among people.

Now if you’re in Real Estate for the long term, swings in the economy happen. If you’ve bought based on cash flow and long term value, these types of scenarios are reasonably easy to ride through. It may involve reducing rents, taking a hit on cash flow and making time your friend as you wait out the inevitable ebb and flow of economic cycles.

The second parameter is I like to help people. Often times more than I should. And often to my detriment as people in general appreciate help, but it’s becoming more and more common for it to be expected rather than truly appreciated.

This most often occurs when I try to help tenants out when they get laid off due to the slower economy or situations that are often out of their control.  In return for me giving them more time to pay and to get on track, I do expect a few things and maybe my expectations are too high.

They’re tiny little things like, if you’re “looking for work”, don’t spend the little money you have left getting drunk in the middle of the day. Little things like if you can spend $10 a day on booze and $10-30 a day on take out pizza, don’t complain you don’t have any rent money.

I know lofty expectations. Apparently far too lofty and for these expectations perhaps I should be punished.

Disappointment

So, near the middle of October, just before 7:00pm, I get a text from one of my working tenants complaining that the last three or four nights straight three guys who aren’t currently working (and coincidentally owe me money) have been partying it up until late in the night in one of my rooming properties.

He’s getting up (or trying to) at 6 in the morning after trying to sleep through these bozos who are displaying zero respect for the other tenants and zero respect for my house rules which involve quiet times from 11pm until 6am. Queue the disappointment.

​I immediately head out and park half a block away so I don’t alert them and walk up the alley so I can come in the back way unseen.

This particular property is two sides of a duplex, so I go to the south side first where two of the culprits live and walk in surprising them.

I find one guy in the kitchen, the other guy sitting on the couch smoking in my non-smoking property and a plethora of empty beer and liquor bottles lying around. Ramp up the disappointment to sheer anger.

One thing that sets me off is tenants smoking in my properties. From burns to odours to picking up cigarette butts after they’re gone, the entire issue of smoking in my properties just pisses me off. I find it shows a complete lack of respect for me, for my properties and for my rules. And to top it off,this is the second time I caught him!!!

I immediately tell him, he’s done and to be out in the morning (true, this isn’t even close to legal as far as evicting someone goes, but he wasn’t arguing with me at that point most likely due to the colour of my face (red with anger) and my tone of voice. I also inform the other guy, he has until Saturday to vacate.

After that brief explosion, I head over to the north side of the property to deal with buddy number three.

On this side I find more empties, evidence of smoking, but no actual smoking going on and buddy who I read the riot act to. At this point I made another mistake (perhaps two). This guy, let’s call him Richard (cause it’s his name), owed me a lot of money.

Richard owed me multiple weeks of rent, but had been diligently been paying me back. He was a brick mason, so he got paid quite well when working, but much of his work had been drying up with the slower economy. He’d fallen behind in the past and I’d helped him out and he had caught up previously.

My first mistake was letting Richard get this far behind, the second mistake was not kicking him out that night as well. I erroneously though the other two guys were the instigators and he was dragged along due to peer pressure. That may partially be true, but this guy was bad news as well.

In the end I told him he could stay, if he caught up quickly and he informed me he was working full time again and would have no problems catching up. Lies…

I’m going to omit a bunch more depressing details to fast forward to the weekend which is when I collect rent. Both of the first two guys are gone by this time and buddy Richard is supposed to have a bunch of money for me and things are supposed to be turning around. Except he’s not there…

And one of the other guys tells me he hasn’t been working full time, but rather has been working at a temp agency sporadically and is supposedly where he left for that morning. Or so he told the other guy.

To top it off, I also find a ton of empty beer bottles, more smoking evidence and a huge mess in the kitchen and common area which I know are all Richard’s doing. I know it’s him as the only other upstairs tenant is away for the long weekend and had left two days ago (this becomes important as we go forward). No wonder he didn’t want to see me that morning.

As my anger rises, I write up a note telling him to vacate by the next morning and I would be by Monday and wedge it into his door frame so he can’t miss it when he gets home.

A Landlords Nightmare – Disappointment Turns To Disgust

So far it’s been a heck of a week. And I still haven’t talked about the image at the beginning of this article which happened the week before. To recap my seven days I evicted three tenants, had a fire at a property and with everything going on, it felt like my world was collapsing.

So obviously it got worse..

On the holiday Monday I received a call from the tenant who had been away for the long weekend. He’d just got back and someone had broken into his room, stole his flat screen TV, his new Xbox, his tablet, jewellery, money and other miscellaneous items. Gee, I wonder who that could have been?

So I drop what I’m doing and head on over to the dark side.

Suspecting it may have been Richard and one of the other tenants I evicted before I leave I stop to photocopy their pertinent information that I gather when I fill out my rental application. This includes full name,  birth date and usually some form of government ID complete with number.

While I’m doing this I text the fellow at the house to call the police to report this, to start inventorying what is missing and to find his insurance companies number. In situations like this the tenant needs to be covered by his own insurance as my insurance does not cover tenants belongings.

Roughly 40 minutes later I finally pull up to the property to find perhaps a dozen empties scattered across the front lawn and on the front deck, one of the chairs from the deck laying out on the lawn and a sense of even more trouble inside.

Little did I know what awaited me inside.

I’ve Seen It All, Or So I Thought

With almost 1,500 tenants under my belt and after having been in the landlord and specifically the rooming house business for over a decade you see a lot of things! And every time I think I’ve seen it all, I get surprised.

To get right to it, I’ll shorten the intro to this as it could be a novella otherwise (and probably already is to some of you). It appears Richard kicked the other tenants door in, stole everything to pay his crack dealer, and then bailed. It was when I opened Richards room to see if he was around I got to add a new something to my ‘seen it all’.

dealing with a horrible tenant - landlords nightmares
Sorry for the blurriness, I was shaking with frustration when I took this

Garbage was piled up all along the bed (and under I found out) almost even with the dresser and top of the bed. I could see pizza boxes, empties, plates, bowls clothing, chip bags and more at first glance.

Disappointment was the first thing I felt.

I created these properties as a safe, affordable place for people and this is what I get for it. Of course disappointment evolved into anger, but the reality of it is, it had to be dealt with.

So over the next two days I started cleaning up.

Cleaning up after a tenant

16 black garbage bags, two large city garbage bins and two large city recycle bins later the main garbage was done.

During our clean up we found hundreds of cigarette butts thrown in the garbage,pizza boxes with maggots, beetles and all types of bugs in them.

We had pizza boxes stuck into the carpet and we discovered that our tenant had a peculiar habit of urinating into two litre pop bottles, beer cans and pop cans.

We threw out over 15 sealed large pop containers and I had to empty around 20 cans of urine out into the toilet. Definitely one of the most disgusting clean ups I had ever done.

When we had the garbage out and we had a chance to look at the furniture it was decided none of the furniture was worth saving. The mattress had cigarette burns, stains and who knows what else on it, the frame and furniture had spills and stickiness of an unknown nature and would have taken days to look clean, so we threw it all away including the carpet we had to remove.

Horrible tenant trashes carpet
Guess what the bottle was full of……

By the end of the week, once it was all done and all cleaned up, I realized I was getting burnt out.

Within a couple days from there, we talked to our Realtor and had it up and listed and actually just closed the sale on it December 1st. The new owner is going to carry on as a rooming house and he’s excited about the cash flow, the possibilities and as part of the sale I’m providing him with my systems, contacts and more to ensure he does achieve success, even after hearing of my setback.

Retrospective – What Went Wrong?

As I look back, the fault for how this tenant ended up does partially belong to me. Granted he has to take responsibility for his life and how he lives it, but I tried to help him (as I do many of my tenants) and I let him slide far too far. If I would have followed my normal procedures and hammered the guys for getting out of control, none of this would have happened, or at least on a much smaller scale.

I was burnt out and I was tired of the business. I’d been helping people for so long and getting so little back (or more realistically letting the bad over-shadow the good) that I let things slide, I didn’t show up at the properties as often as I should have and I realized I over stayed my commitment.

Typically I try to see inside a tenants room once a month just so I know the condition, in this case it had been several months and I had previously warned him to clean it up, but didn’t follow up. All bad mistakes in retrospect!

I’m excited about the opportunity to help this new owner make this a success, but I’ve already cautioned him to have a five year plan to move forward and so that he doesn’t get caught up in it for too long and also become burnt out.

This has also turned into a positive as its made me realize all the systems and processes I put in place to help make this a success and I can see me creating some programs to help other rooming house owners succeed and avoid many of the problems that can occur.

This particular property was a huge benefit to me over the years and not only generated a nice profit when we sold it, but grossed in excess of $500,000 worth of  cash flow while we owned it. Even with the headaches and the disappointment on the way out, it was still a winner!

Now Onto Disaster

So we’ve talked about my disappointment, now it’s time for disaster.

This fall was extremely taxing for me and really wore me down. Disasters and disappointment have that affect as they can be emotionally draining and I can vouch for that from first hand experience.

October 3rd, just after 5am the first call came in. It was a Saturday morning and it’s not unusual to get a call early in the morning from one of the guys, it’s just unusual to get it this early. Normally it’s just to let me know they are off to work and left money hidden for me to grab when I collect.

I leave my phone plugged in by my desk at night, I’ve learned that if someone is calling in the middle of the night either the police or the fire are better suited to deal with it, I can deal with it when I get up. So I ignored it.

The second call came in about ten minutes later and I ignored it as well, but started to get a sense of problems. It rang again one more time a few minutes later and I continued to lie in bed until around six which is when I normally get up on weekends (yep, I’m one of those early risers and sleep in until 6 on weekends).

First message was from a tenant just saying call me as soon as you get this, second message was from the neighbour telling me my house was on fire…. Now was a good time to semi-panic, I just didn’t have time for that.

I got dressed and headed out the door and tried calling the tenant along the way but couldn’t get an answer.

When I show up 20 minutes later there are police and fire vehicles all over the place, with the road blocked off so I park a block away and walk to the house.

By this time the fire is out and it doesn’t look like anyone is around except for a tv crew. Not being excited about talking to them without knowing anything I walked back looking for any firemen or police and noticed a city bus parked an idling down the street.

I head over there and find all of my tenants safe and warm and finally find a police officer and start getting the story from everyone.

Apparently an arsonist had been running around early in the morning and had lit three or four separate fires so the police and firemen were scattered all over making sure everything was under control.

At my property the fire was started in the detached garage and it destroyed three quarters of the garage and ran across to the back wooden steps blowing out the back house windows into the kitchen, burning the deck entirely, spewing smoke into the house and damaging the roof and back section of the house.

The good news again was all the tenants were out and the house wasn’t destroyed, it just wasn’t habitable. Fortunately I had some vacancies in other rooming properties and was able to shuffle everyone around so they had a place to sleep and stay until I knew what was going to happen here. Dealing with a rental property disaster

The Repercussions of Disasters

Dealing with a situation like this can be draining. Much like my previous story of disappointment there is a lot of emotional weight involved with disaster. In my case I took on the burden of the upheaval of my tenants, several of whom had been there for a considerable time.

I had to deal with the mother of one of the tenants to confirm he was ok, I had to deal with police and fire reports and dealing with insurance and fallout of everything after.

The biggest blow being the insurance company deciding they didn’t want to insure any of my properties after this claim. Trying to obtain insurance on rooming properties is bad enough, but trying to acquire it when the original insurer cancels it becomes expensive and time consuming as dozens of new forms and tenant info sheets needed to be filled out.

In the end I saw my insurance increase by over 3.5 times. I went from just under $4,000 per year to around $14,000 per year in just a few weeks. Talk about a hit to the cash flow!

As for the repair work, here we are just shy of two months later and we are almost done. the garage was finally demoed and removed the other day and I’ve decided to take a payout for it rather than rebuild (more on that shortly). The only thing left is the repainting of the outside stucco which they left until it was too cold to paint outside…. and now has to wait until spring, unless I get paid out on that too!

But it doesn’t end there.

I decided to forgo replacing the garage and instead get paid out by the insurance company. The best demo and repair estimate they came up with was just over $27,000 for a single car garage, but I found out when they pay you out, you don’t get any profit or taxes which that number included.

Additionally as it was a rental, first payee is the lender as per the mortgage agreement, although they do make exceptions. The positive about this is it does go on the principle, although I could have used the extra cash to cover payments while it’s vacant (I did have loss of rent coverage, but it was inadequate and only covered about 60% which is nice, but never enough as complete!).

This property was also due for renewal on December 1st, so when I called them to inform them about the payout from the fire it caused more problems (I really noticed a trend during this, when you do the right thing it causes more problems). Since the garage was not being replaced they informed me the property would need to be re-appraised, at my expense, to see if they would even renew it or if I had to potentially put more money in to decrease the loan to value (LTV).

Having dealt with buying foreclosures in the past, having dealt with previous lenders who wouldn’t renew, and with my previous history as a mortgage broker, I explained how anything but renewing was going to cost them extra money as I would force a foreclosure and sell the property before it got anywhere leaving them on the hook for a large internal costs. Lo and behold they came back a couple days later with an open mortgage that fit me perfectly with no appraisal required.

Another lesson from this, if you have knowledge about the process and how it works, you can avoid being pressured or leveraged into situations that others might fall into. I am positive if I didn’t know and completely understand my options, they would have stuck me with the appraisal fee, they would have required me to top up the mortgage and they wouldn’t have provided me a mortgage that fit my needs.

Knowledge is power!

Light at the End of the Tunnel

So, here we are into the first week of December and the dusts from my previous several months of my landlords nightmares has settled. My horrible tenant property is sold and I have cash and time on my hands again (hence finally finishing this).

My disaster property is all repaired and officially listed and although it’s a horrible time of year to sell as most people are focusing on Christmas right now, I know the buyers who are coming in are pretty serious.

I’m excited as going through the process of selling this rooming property is opening my eyes to how much I know about rentals of this nature and the new owner is finding the information I’m providing to be, and I quote, “Awesome” and helping him get off to a huge headstart without all the headaches.

Life may not be quite great, but it is under control and pretty darn good and I like that. Your lesson from all of this is simply that there are lessons from bad things. That if you focus on dealing with the situation whether it’s good or bad, you can get through it and maybe end up in a better spot like we feel we have.

It may not have been where you wanted to be, or it may have taken a circuitous route, but you can get there, just don’t put your head in the sand as I’ve seen other investors do and hope, it simply doesn’t work out!

Confused About How To Properly Determine Rents?

By

Determining Market Rents

Determing Rental Prices For Your PRopertyA challenge many landlords face is what they should be charging for rent. When you need to determine rents, it can be a fine line between charging too much, or charging too little.

If you charge too much you end up with more vacancies, higher turnover and ultimately less profits.

If you charge too little you may end up with tenants staying longer leading to fewer vacancies, but ultimately also getting less profits.

Part of operating a successful landlord business is finding that sweet spot where you’re not too high and you’re not too low.

Many landlords wish there was some sort of tool that could help them with this and fortunately there is!

It’s a website called Rentometer.com and I’ve been using it for years to determine rents for my properties, to see how I compare and even to see trends over time.

Of course you shouldn’t limit yourself to just one source, there are multiple other ways you can get this info as well, or to help provide you with multiple comparisons just in case one is off a tad.

Fortunately for you, the president of Rentometer Mike Lapsley, provided me an article he wrote walking you through some steps to help you confidently set your rents. Here’s the article with some additional info about Mike and Rentometer for you! Be sure to leave him (and/or me) a comment.

5 Ways to Help You Confidently Set Rents

BY MIKE LAPSLEY ON FEBRUARY 23, 2015

The rental housing business is very local and it takes time and effort to understand a local market and all the nuances that go with it. Many variables can impact the rent you can charge for your rental unit including: location, building structure, amenities, age of unit, market conditions, etc. The subjective and local nature of many of these variables make it difficult for anyone to tell you exactly the right rent for your rental unit.

However, having said all that, there are some things you can do to help you more confidently set your rents. Below are a few ideas to help you set rents for your rental property:

1. Stay up to date on local economic and business activity in your market because economic activity is one of the key drivers of housing demand including rental housing.

2. Work with local real estate professionals – property managers, brokers, agents, appraisers, and lenders. Local experts are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, zoning, etc.

3. Check local apartment listings using the local newspaper, apartment guides, Craigs List, and of course Rentometer (shameless plug!).

4. Check your local apartment or rental housing association for research and other information they may provide about local rent levels – past, present, and future.

5. Use “rent per square foot” whenever possible as a benchmark. This allows you to encapsulate into a single number all the subjective variables of rent and provides you a basis for comparison across different units, locations, amenities, etc.

The task of setting rents can be done more confidently with good current and historical data, as well as a thorough understanding of the local market and current market conditions.

Mike Lapsley is the President of Rentometer.com. You can reach Mike at: mike@rentometer.com Learn more about Mike here.

About Rentometer

Used by tens of thousands every month, the Rentometer provides rent comparison data and analysis through a simple, intuitive user interface. Everyone from landlords, property managers, owners, and renters can research and compare rental rates on Rentometer.com. Rentometer offers a basic free version as well as Rentometer Pro for users that need more detailed info, a professionally printed report, as well as additional tools to analyze the data. For more information, please visit www.rentometer.com, find them on Facebook at www.facebook.com/rentometer or on Twitter @Rentometer.

You Can’t Eat a Brick…

By

Unless Your Richard Kiel…

You Can't Eat A Brick - reference to money stuck in a propertyIf you didn’t catch that last reference, perhaps you’re not a James Bond fan? Richard Kiel played the James Bond villain Jaws in a couple of the James bond moves (The Spy Who Loved Me
and Moonraker and yes those are affiliate links for which I make pennies if you buy the movies 8′]) and he could chew a brick and steel and more.

And even if you did catch the reference, you’re probably wondering how the heck this applies to Real Estate?

The answer is part of the problem. When it comes to a Real Estate asset like a rental property you’ll find that your money, or equity, is trapped in your property. You don’t realize that equity until you sell and while it may add to your net worth, it’s not money you can quickly or easily access. Which is the problem.

A sudden downturn in the economy (caused by oil dropping to $50 a barrel around here), unexpected repairs (that roof that suddenly started leaking) or an increase in vacancies (large local employers laying off staff or shutting down) can all have a huge effect on your cash flow as a landlord.

That’s where having access to that equity, or by having cash reserves in place can help.

Borrowing From The Experts

A Reserve Fund Study provides a long term plan for upcoming expensesOne way to prepare for instances like this is to hoard money during the good times, but that may not be the best solution for everyone. Another option is to borrow from what expert property managers do.

In this example condo boards. They are forced to be experts in planning future expenses.

Now personally I’ve had some horrible experiences with condo boards, but there are always some benefits somewhere and the concept of reserve funds is one of those.

If you’re not familiar with a reserve fund it’s a process that condo boards use to build up funds for planned (and sometimes unplanned) expenses. In my are it’s law for a condo building to have a Reserve Fund Study completed that outlines projected expenses for the next 25 years on the building.

This study needs to be completed by a company that professionally reviews everything and includes breakdowns on upcoming expenses such as new windows, roofs, ongoing maintenance along with taking into account other future expenses such as tax increases and more.

Now I’m not suggesting you need a professionally completed reserve fund study done for your rental property, but it wouldn’t hurt to take a longer term look at your property and plan for the future so you’re not caught by surprise.

By taking an approach in advance to deal with this, you hopefully won’t be caught in the position of having all your equity stuck in the property, having no money handy and you stuck figuring out whether bricks go best with ketchup or mustard for dinner.

So What Can You Do To Prepare?

One option you can use is starting with a reserve fund. We often would budget right from the start an additional $5,000 as part of the float for a property.

This was required up front money and made sure we were prepared moving forward for unexpected expenses.

Another option I know several investors use is to not withdraw any funds from the incoming cash flow for the first six months to a year depending on the profitability of the property. As an example, if you have $500 cash flow per month from your fully rented property, leaving that $500 to build up for ten months could give you a $5,000 reserve.

Another way to proceed might be utilizing a bit of both. Maybe you’ve just bought a new property, you only have $2,000 to start the fund, you still have $500 cash flow, but rather than taking all $500, you take $300 for ten months to build up your reserve. Or $200 for 15 months.

Or maybe you have a brand new roof already and your biggest upcoming expense might only be an appliance, so maybe you only look at a $2,000 reserve. It just doesn’t hurt to prepare.

But Don’t Over Prepare

Should you limit cash reserves?

Now this works fine when you have one or two properties, but if you start expanding your portfolio there gets to be a time where you have a lot of money sitting there not working for you.

If you have five properties each with $5,000 set aside you’re looking at $25,000 that you could likely use some of to either expand your portfolio further or find some other use for.

If you had ten properties that becomes $50,000 and after that it gets even crazier. So while it’s good to have that reserve, when you start getting bigger, you may want to consider other options. Or even start that way.

Even if you only have a single property, there are still other options to consider.

Setting up a line of credit on your personal residence can give you quick access to cash in the need of a major repair without incurring any major costs when it’s not needed. This will give you ready access to funds rather than locking up your own cash.

Depending on how long you’ve owned your rental property there may be an option to put a secured line of credit on your rental as well (a secured line of credit is attached or “secured” to the equity in your investment property helping to protect the lender). Secured lines of credit tend to have lower interest rates, but it may be more problematic getting one on a rental property and it may require additional equity.

Credit cards can work to cover unexpected expenses, but this usually means a very high cost of borrowing and is probably one of the least desired options. But it’s an option!

The important thing is to plan ahead for those times of need so you don’t become the needy one!

Do you have reserves set up? Options like Lines of Credit? Share your safety net with the others and we can all benefit! I always love to hear your feedback.

Hey Baby, It’s Cold Outside

By

Can you evict tenants in the winter?Winter Evictions

If’ you’ve never heard the song “Hey Baby, It’s Cold Outside”, you’re missing out, it’s a classic. If you don’t know what the rules are about evicting a tenant in the winter where you live, you could be missing out on some cold hard cash, like several months worth of rent.

The rules are different everywhere and with the temperature hovering around -30 degrees Celcius (-22 Fahrenheit) with the wind chill as I start writing, I thought winter evictions might be a timely topic.

Can You Evict Tenants In The Winter?

I think the most common answer is yes, but it can depend. I know, not very definitive as far as an answer goes. Ask tenants and they will almost all answer no, but if you’re getting landlord advise from your tenants you may have a much bigger problem…

The problem is the rules vary from state to state and province to province and it would be unrealistic to know the specific answer for every city, town, state, province, district or country throughout the world. But that’s where the internet comes into play.

I did some quick research and actually couldn’t find any places that allowed tenants to stay, just because it was winter. I started by specifically looking at provinces and states that were known to be more tenant friendly and cold.  I looked at rules in New York state, Minnesota, Ontario, Quebec and Alaska to name a few and all seemed to be pretty specific.

Evictions can take place at any time of the year if tenants are in breach of the lease. Now to be fair, I didn’t check every state, province, city and town, so you’ll want to do some local research of your own just to be well educated about it!

Winter eviction of tenants

However, just because it isn’t illegal to evict them, there is not guarantee it can be done quickly. There is a ton of leniency built into the laws when it comes to issues like compassion, hard times and basically bad luck. Here it isn’t written anywhere how much time someone has to be out of the property when evicted.

This gives judges and hearing officers the ability to make decisions based on the evidence and this could mean a quick and effective eviction in more grievous situations. While in other cases they can be given 90 days or longer, but with specific conditions in place or it can accelerate the eviction timeline. These would typically be payment conditions, but depending on the scenario they can vary.

Have you evicted a tenant in the winter? If you have leave us a comment and let us know where you’re at! Maybe we can form a mini database of info right here!

To get it started, I’ve not just evicted tenants in the winter, I’ve also done it right before Christmas and no I’m not the grinch, I just play one on TV! Looking forward to your comments.