The Educated Landlord

Making Landlording Easier

You are here: Home / Archives for Rooming Houses

What A Rooming House Landlord Need To Know Before They Start

By

Being A Rooming House Landlord Can Be A Tough Job

Being a Rooming House landlordMost of the time a rooming house landlord makes it tough on themselves because they are missing some important information when they start, or they simply don’t change with the times and either of these can make their job tougher and definitely less worthwhile.

I just finished reading another article chronicling how many rooming house landlords are getting out of the business. They’re seeing less money being made, tougher regulations being put in place and less support from local governments.

The prevailing problem (or at least the problem I picked up on) was that almost all of these landlords catered to the bottom tier tenants.

Tenants that survived off of social assistance, government subsidies and basically had no other options but to live in low cost rooming house properties.

If that’s your target market, I can almost guarantee you  a) won’t last b) will become burnt out very quickly and c) will quickly get disillusioned with the business model of own rooming houses.

What A Rooming House Landlord Needs To Know To Thrive

When I started I bought into the low end rooming house market strategy with my first rooming property. I hated it…

I kicked my first drug user within a few weeks and lost a TV he pawned as well.

Shortly after that I realized low end properties were not what I wanted to do and low end tenants with tons of problems were not who I wanted to rent to. Sounds discriminatory doesn’t it. And if I screened only on that aspect it would be, so I don’t.

Instead I just raised the bar of entry.

Here’s the take away.

If you target low end tenants who can pay low end rent for your low end property you will end being a former rooming house landlord relatively quickly.

Yes I understand there is a need for spaces like that, but the challenges, the headaches and the disillusion that can accompany it aren’t worth it for a small time landlord.

Perhaps that needs some clarification.

If you plan on operating one or two properties, maybe 5-20 rooms, it’s not worth it.

If you have a larger portfolio, maybe buildings with 20 plus rooms you rent out, then perhaps you can make it work. It’s economy of scale.

On a smaller scale if you have low rents your cash flow at the end of the month won’t be high enough to offset potential losses. If you work on a bigger scale with more rooms, one or two losses won’t affect you to the same degree as you have more incoming to offset the shortages.

Changing The Rooming House Model

Rooming houses don’t have to cater to low end tenants, thats’ old school thinking. Instead, your rooming house should cater to the gaps in the market.

When I started, the gap in my area was safe, affordable, clean properties where tenants weren’t locked into long term commitments. I changed the model and was rewarded quite well for it.

rooming house landlord - higher end rentalsDid I still have headaches? Yes, but the number went down substantially.

Did I still lose money on occasion? Yes, but by charging higher rates and catering to higher end tenants I also made more money and reduced turnover, even without locking anyone into leases.

What you need to know, before you jump into the rooming house business, is that the more you break the traditional low end rooming house model and convert it into a profitable business the longer you’ll survive, the more people you’ll be able to help out and the less problems you’ll face doing it.

Want To Start Your Own Rooming House?

Rooming houses can be a profitable business, if you do it right. That’s why I put together the Basics of Rooming Houses.

It’s a beginners course to rooming houses perfect for someone interested in the business model and who wants to avoid soem costly mistakes learning on their own.

I walk you through the basics of finding out the local demand for rooming houses so you understand whether it’s a market you should pursue (imagine buying a property before you even know if it will, this helps you avoid that).

I show you how to learn the local rules so you don’t find yourself in trouble or worse shut down.

And I show you how you can start creating streams of steady clients who become a referral source for you making it easier than ever to keep vacancies low and profits high.

If you want to get off on the right foot, this investment in your rooming house education will get you started the right way.

Just click the following link to get started with this online course today,

Basics of Rooming Houses Online Course

 

What Are Boarding Houses?

By

And Is a Boarding House For You?

What are Boarding Houses and Rooming HousesI have a lot of people stop by looking for information about boarding houses, room rentals and rooming houses. It seems people are interested in short term rental properties as a way to earn extra income or to turn an under performing property into an asset that cash flows.

The extra income was the original ticket for me.

I bought my first rooming house with three rooms in 2004, hated it and wanted to shut it down within the first few months. That wasn’t an option, so I modified the original premise to what I can only say was an even better model.

Then within three years I ended up owning nine more rooming properties with 53 rooms that each rented in a range of $150-190 per week.

If you can quickly do the math on that you might understand why I grew it so quick!

Anyway, I’m wondering off the main point of this article, so let’s get back on track  by explaining more about boarding house properties and how they fit in the market.

Boarding Houses

Room and Board Properties - Boarding houses date back hundreds of years and come in a variety of different types and options. Predominately the idea of a boarding house is a property that it includes a room and board . With board being meals and often including services like laundry and cleaning.

My first experience with this was actually with my grandmother. She was a widow and rented out two rooms in her three bedroom home to local workers and provided them evening meals and laundry service.

These two sources of income helped her make ends meet and helped keep her busy as she loved taking care of people. It was a perfect fit for her!

Over the years you’ve probably seen other examples in movies and books without even being aware of what you were looking at.

Boarding Houses – The Original AirBnB

From Sherlock Holmes 221B address being a boarding house to George Bailey’s mothers boarding house seen in it’s a Wonderful Life to more recently in the film Brooklyn where Eilis lives in a boarding house.

Of course all these examples tend to be from previous eras where this was much more common. People tended to be more transient years ago and often followed work and needed cost effective places to stay. Even though things have changed and boarding houses aren’t quite as common, they do still exist and may be a perfect fit for some people.

If you don’t mind sharing your home, enjoy cooking meals and possibly providing cleaning or laundry services (which can be an additional charge). Operating a boarding house style property may be the perfect method to help you make ends meet and put some bonus cash in your pocket.

It just requires a spare bedroom (or two), enjoying having people around and most importantly ensuring you have a solid set of rules in place.

Variations of boarding houses include Bed and Breakfast setups, hosting foreign students and even AirBNB properties and even combinations of these options.

Just in my little circle of friends and relatives I see examples of this every day. My sister-in-law runs a successful Bed & Breakfast, a friend of mine rents out two rooms in her home, one to a foreign student and the other on six months terms. My cousin rents out a room in his home and we have friends who bring in foreign students for eight months at a time.

I even have an acquaintance who helps people convert their vacant rentals into AirBNB spaces.

The important part of any of these though is understanding any local regulations, laws and possibly even zoning that could come into play.

With a single room rented out to help make ends meet, it might be just fine, it might fly under the radar of any by-laws or zoning and be ideal for you.

Once you expand to a full fledged B&B though, or rent out multiple rooms as a full fledged business it can expand into a litany of paperwork and processes to legally operate.

Renting Out Rooms

Room Rentals for ProfitThe majority of my experience with these types of properties involves renting out furnished rooms in a home where the tenants are responsible for cooking their own meals, their own laundry and even their own cleaning (or at least most of the time).

From higher end properties targeting business people, tourists and more upscale clients to mid to lower end properties targeting trades people, individuals caught between places and even simply folks down on their luck, rooms were great for me.

They became a bit of a cash cow for me and helped create significant monthly income for us, but I’ve already written about that previously. If you’d like to find out more, check out this article,

Profiting from Renting Out Rooms and Boarding Houses

Or, if you would like handy tips on how to run your own rooming house, be sure to check this out,

Get My 5 Best Rooming House Tips via email

Or, if you’d like to learn about the Ultimate Mortgage helper,

Renting Out Rooms In Your Home

Here’s are my thoughts on what every rooming house owner should know,

What A Rooming House Owner Needs To Know

And finally, if you’d like to learn more about how, where and the basics of locations for setting up your own rooming house,

The Basics of Starting Your Own Rooming House

What are your thoughts on rooming houses, or did you even know they existed? Leave a comment below!

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!

I’m Just Your Typical Landlord Hypocrite

By

This is probably where I need to say, do what the landlord says, not what he does!

I have to confess, I’m breaking my own rules. Now I guess in the big picture that’s not a huge issue, but when it comes to a tenant owing me a ton of money and me suddenly finding myself sucked into the Eviction Spiral, it gets a bit serious.

After all, I’m supposed to be the expert, yet I’m making the same mistake I tell you not too and I guess I better tell the entire tale. So let me take you down the garden path….

Landlord story, down the garden path with a tenant

 

This actually dates all the way back to December with one of my weekly rental tenants. He’s a very clean neat individual, but a) he doesn’t speak very much english and b) he owes me money.

As we zip back a few months to the beginning of December as typically happens to many of my rooming house tenants they vacate around mid month and head back to where their families are located. It’s typical as many of the construction projects close down early before Christmas and many of the workers get to enjoy a two or three week break and trades folks are who I cater too.

So this is something I tend to see every year, then in January they start coming back, rooms fill up and it’s business as usual. Now my nice clean non-english speaking fellow named Michel had no one to go home to. No family around, nothing, so he intended to stay at my property over the break. the only issue being, he had no income coming in to pay for the room. (This is where the hypocrite part comes into play!)

As I weigh my options I have a few things to consider a) he’s a good guy, b) he’s been good about paying in his past history and c) I have a bunch of vacancies anyway and if I kick him out or he leaves I still won’t be collecting rent for that room and I don’t know what the next guy will be like and how many weeks before there could be a next guy.

So I did the easy thing, I let him stay.

Fast Forward to January

calendarI just happen to live in an oil based economy region so as January rolls around many of the projects have moved to a hold status due to the uncertainty of oil prices and the viability of some of these projects going forward if oil stays low.

Instead of starting work at the beginning of January, it turns into mid January, then late January and finally the beginning of February before he finally lands a job. the good news is, he gets paid a lot per hour, so it own’t take too long to get caught up. (Now I don’t want you to read anything into this, but I’m talking about getting caught up in February and here it is March when I’m writing this…)

Anyway, according to my rules, I should have cut bait and recast already. instead I go with my gut and give him more time. This is the part where YOU need to do what I say and not what I’m currently doing with this guy.

Now Fast Forward to Late February

Now we’re in the last week of February and I get a text update from him (he uses French to English conversion to send me texts, sometimes it is very very confusing). This set of texts though is quite clear. He will have $2,000 for me on Saturday the 28th (yes, I let a weekly tenant rack up an outstanding balance of over $2,000, please find me a wall to bang my head on).

As you can imagine I’m pretty upbeat when I go to meet him Saturday, at least at first.

You see, he lost his bank card and couldn’t withdraw the money.

Is it time to panic yet?

Of course he can’t tell me this due to the lack of conversational English between us, but he has notes that someone obviously wrote out for him in English. So now I’m stuck in a tight spot. It’s the Eviction Spiral I referred to originally.

If I kick him out, I take a huge loss, so I have to take a stand.

His notes tell me he will go to the bank after work Monday get the cash and get a new card and will have the money for me Tuesday night. Experience tells me this is the perfect getaway for him.

If he has $2,000 that is enough for him to get into a new rental place, with the 1st being the next day, it’s an optimum time for him to skip out.

But I follow the hypocritical emotional road and lay down the line, Either I get paid Tuesday or he GETS OUT!!

Even in our lack of a mutual language I am quite sure I got my point across, now I play the waiting game.

My question for you, what would you have done?  Let me know your thoughts in the comments below and I’ll add an update Wednesday about what happened!

Update Friday

Just to make this worse, I’ve extended to tomorrow. The tenant paid $200 to buy a few more days, but tomorrow is the cutoff. I meant to update Wednesday, but it’s been one of those weeks that will likely be extending out for the entire month!

Poof, It’s Magic!

Yes, I’ve had another tenant disappear…

I was at the property Monday to get some work and cleaning done there (I rented a steam cleaner for the day, so I was bouncing from property to property to get the most bang for my rental dollar) and my tenant’s room was wide open, all his items were gone, the room was quite clean, his keys were on the dresser and he was gone.

Bottom line, I’m out a bunch of money, my faith in humanity is eaten away a bit more and in the end I can still sleep at night. I tried to help, deep down I knew it probably wasn’t going to work out for me, but as part of my nature I really do want to help people (hence this site!), just along the way I may have to take a little damage.

The hypocritical lesson to pass along is if things are really tight, you can’t take this chance. You need to clamp down immediately. I could probably rationalize some of the loss as I would have had a vacant room for multiple weeks anyway, but it’s still a loss. If you have more losses than wins, you eventually lose and in Real Estate, you lose big when you lose.

 

Renting Out Rooms In Your Home

By

The Ultimate Mortgage Helper
Renting Out Rooms

running a rooming house - renting out roomsWould an extra $400 or $500 a month go a long ways towards helping you make ends meet? Have you thought about renting out rooms in your home?

Looking for a method to get your house paid off faster without having to change your spending habits? Do you simply have too much space in your home that could be used to generate cash? These could be signs that renting out rooms might work for you.

Or maybe not, as this isn’t for everyone! But there are thousands of people using this tactic to help them get by, to increase their cash flow and to get their homes paid off quicker.

If you’re outgoing and enjoy meeting new people, this could be awesome. If you like your own space and like having your friends over and staying up late, maybe not. It’s not for everyone, but if you can make it work for you for a couple years it can be an incredible option.

The Caveats

First off, you’re letting a stranger into your home. While this can be offset by thoroughly screening the tenant (if you intend to go this route, be sure to take my Educated Landlord Tenant Screening Course), there’s no guarantee you will get along with them.

You could also offset this by renting the room to a friend or family member, but this can open a whole new set of issues. It’s one thing evicting a stranger for non-payment of rent, but it can make family Christmas dinners a tad awkward when you have to kick out cousin Jimmy for the same reason.

Second, you will need to be very familiar with the local rules for renting out space in your home. Do you fit under the local landlord laws, or a subset of the laws? In my region if the landlord lives int he property and shares common space with the tenant like living rooms, kitchens and bathrooms they fit under different legislation which is much more in favor of the landlord.

Knowing the difference can change how and what you can do with problem tenants and this can definitely take stress off of you knowing the law is on your side!

Third, your boundaries may feel restricted. Now it’s not just your space, but common space. If you’re used to just leaving your clothes or dishes lying around, you will be setting the standards for the house.

You can’t expect your tenants to follow the rules you set if you can’t live within the same boundaries.

If you found this article about renting rooms interesting, you’ll also enjoy these

Profiting From Renting Out Rooms

Renting Out Rooms In Properties

I’ll also have some upcoming courses on how to set up a rooming house, run a rooming house and even analyzing a property to see if it works






Want to start your own rooming property, or already have and just want tips delivered to your inbox? 

Then sign up below and get updates about rooming articles, get free tips and find out some of the tricks of the trade!

We respect your email privacy

Profiting From Renting Out Rooms and Boarding Houses

By

Renting Out Rooms — A Rental Cash Cow

I can’t think of  a better way to explain renting out rooms than as a cash cow. Far and away room rentals have been one of the most profitable ways we’ve found to make money on rental properties.

Properties that may not have been suited to generate enough income to be attractive as rentals otherwise. That might be a bit confusing so let me explain.

With a normal half duplex that isn’t suited and where I operate out of, I may be able to get $1,000, on the low end, maybe $1,400 on the top end in monthly rent if I rented it to a family. With a mortgage payment of around $1,000, taxes of $150 per month insurance around $30, that really doesn’t make much sense as a rental property and I will probably end up losing money.

However as a rooming house with five separate rooms I rent out, everything changes.

Room rental property
They even put up Christmas decorations

I’ve got several long term tenants in this property who I’ve kept the same rent for a couple years for as they take good care of the place and treat it like a home, not a rooming house. I’ll use these numbers to give you an idea.

I have five rooms in the property. Two rent for $170 per week, one for $175 and two for $200 (the newer tenants and the current going rate).  Each week that becomes $910, in four weeks that becomes $3,640 which is significantly more than the $1,400 max I would make from a single occupant.

Now I do supply internet and cable and I do pay for all the utilities, and my maintenance costs are higher, but I still clear over $1,500 a month when it’s full. Note I did say when it’s full!

Normally in properties like this you have much higher turnover, so it’s important to stay on them and fill vacancies ASAP. This particular property though my last vacancy was almost five months ago, for a week, and before that it was probably four months prior again! Did I mention cash cow?

It’s Not All Rainbows And Unicorns Though

It’s not always like this though. I do have problems. I do have to evict tenants, there are more things that break due to more wear and tear, but when they work, they do work extremely well!

Plus, as I pointed out earlier, it takes a property that wouldn’t really work as a profitable rental and turns it into something that works like gangbusters.

So, if you’re stuck with a property that doesn’t quite cover the expenses and that you can’t sell maybe you need to entertain the prospect of running your own rooming house!

If you liked this article, you may also want to check out this one Renting Out Rooms – Rooming Houses As a Rental Option

Or check out my Rooming House Resource page by clicking on the following image,

Boarding House and Rooming House information
Rooming House Resource Page

Rooming House Tips

Another Satisfied Tenant – NOT – Dealing With Bad Tenants

By

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!