landlord advice 2 - The Educated Landlord

Raising Your Rents, Without Raising the Roof

March 17, 2014 By Landlord Education

Increasing Your Rent Without The Ruckus

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

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

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

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

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

It’s All About Positioning

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

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

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

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

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

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

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

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

Sample Letter of Rent Increase

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

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

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

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

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

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

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

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

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

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

Guarantees and Rules

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

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

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

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

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

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

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

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

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

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

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

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

Why Are Landlords So Stupid?

March 4, 2014 By Landlord Education

Why Landlords Don’t Think Properly

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

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

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

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

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

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

Why Won’t We Raise Rents?

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

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

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

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

Landlords Action Steps

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

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

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

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

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

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

Final Thought

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

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

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

Analyzing Rental Properties – Neighborhoods

January 9, 2014 By Landlord Education

Location, Location, Location

Continuing on with my series on analyzing rental properties I started by talking about doing some homework before you jump in.

We started it by looking at the local economics of where you’re potentially looking to purchase an investment property. Economic factors can help ensure the chances of your rental property being a success are multiplied, so if you’re just starting with this post, you may want to go back to part 1 Analyzing Rental Properties – The Economics

In this post I’m going to talk about neighborhoods which help ensure a steady stream of tenants and even better odds of hitting a home run with your investment rental property.

As the old adage in Real Estate goes, the three most important parts of buying Real Estate are location, location and location, although when buying rental property, it’s not the same location as buying your personal residence.

So many would be landlords see a house down the street from where they live come up for sale and they get the idea that it would be ideal as a rental property for them. Nine times out of ten, it’s not. In fact it could be the worst decision you make as a landlord and has the ability to permanently scar you.

The Pain

I’ve been there. I purchased the house beside mine years ago to help out the little old lady who wanted to move away. We tried to help her sell the property, but the market was very flat at the time and she was on a deadline, so we did what we felt was right and bought it os she could move on.

We were already experienced landlords with a couple years under our belt, so we knew it would work. Except with a high mortgage and low rents we new we would have some cash flow challenges, but if we could make it last a year, then we could sell it, yeah that’s it!

So we went ahead with it. We repainted, we fixed up some minor issues and we had a great property, just no one to rent it. Now since fortune favors the brave (or the uneducated initially), we managed to find some people who drastically needed to sell their home due to foreclosure issues and needed help getting back on their feet.

We were able to set up a win win solution where we took over their current home’s equity and renovated it, put it on the market as it was in a much higher demand area and sell it quite quickly. At the same time we moved them into the property beside us, used a portion of the equity as a down payment for a rent to own scenario for them and it all looked great.

They were actually paying less per month, we were making a few dollars as rent to own properties have higher rents and we had a bundle of cash from the flip of the other property. Everyone was winning.

They seemed like nice people, we got along quite well and several times they even joined us out back on our deck for a beer or glass of wine during the summer. Then the wheels fell of.

One of the burdens they had to deal with in their lives was a severely mentally handicapped daughter . She was fifteen years old, but mentally only reached the capacity of a two year old. Needless to say, but helping her and managing her was a full time job for the mom. Plus they had another son, so their days were full.

It started when they asked if they could get a dog. Pets are great therapy for children and apparently even more so for people with disabilities, so how could we say no? So away they went and picked up a mid sized dog, for a very tiny back yard…

A little more background, our former neighbour kept an impeccable yard. The rumours in the neighborhood was that she snuck out late at night to pull dandelions as we never saw any in her yard and the back yard was beautiful with banks of flowers across the back and a lovely covered seating area to relax in.

Well, in no time it was a complete mess. The lawn was dead and torn up, they never cleaned up the dog crap and it went from bad to worse.

Very unfortunately the daughter’s health deteriorated even more and she passed away. We felt awful. They had done so much to make things work for their child, they had given up so many things to make a good life for her and she was taken away by failing health.

The positive we saw on this was with the extra financial burden gone, they would be able to turn their life around and while this left a huge hole in their lives, it would ultimately allow them to move forward. We were wrong.

People Just Think Differently

We were actively growing our Real Estate portfolio plus I was working a demanding full time job at the time, but we wanted to succeed so we made adjustments to our lives. We only had one well used vehicle to save money, we rarely ate out and we scrimped and saved. We thought that was how everyone should think when they are trying to live up to their ambitions and dreams.

You simply adapt to make things work and start to think differently.

Not the renters next door though, although they did think differently than us. What little money they had left they sunk into their daughter’s funeral, which is understandable, but it left them with nothing and when their daughter first became sick (this last bought was over a few months), we did what we thought was the right thing and didn’t pressure them for rent.

We knew they were incurring significant extra costs during that time, the husband wasn’t able to work as much as he was needed at home and we could cover it. So by the time they had the funeral they already owed us almost $6,000. I know rookie mistake, but a compassionate mistake, after all they were not just my tenants… but they were my neighbors too.

Then the husband’s vehicle broke down, so they leased a new expensive vehicle, still not sure where that money came from if they couldn’t pay me. Next we noticed the wife had new shiny manicured nails, a brand new cell phone and they even asked if they could get a second dog!! All expenses we refused to splurge on for ourselves as we were very money conscious. We said no obviously and suddenly we became the bad people for refusing them.

The best part? We had front row seats as it all took place next door.

Finally, we find out from them that the government funds they were receiving to help with their daughter’s disabilities were “suddenly” cut off now that she had passed. Their free supply of money that was obviously just being spent on them now suddenly dried up. Were they thinking it just ran on forever?

This just made the likelihood of us ever getting the outstanding rent back extremely unlikely, so we were ready to pull the plug and evict them. Before that hppened, they came to us and told us there was no way they could afford to stay in the property and had located a basement suite to move into, but couldn’t get in for six more weeks.

They were going from a 1,600 square foot single family home in a nice neighborhood, complete with a two car garage and a basement, to something under 1,000 square feet. Talk about a change of lifestyle.

I can’t even remember if they were able to get us any additional money during that remaining time they were there, but I know I spent every day hating the idea that money that should have been coming to me, instead was going to the shiny new vehicle in the driveway beside my older vehicle. It was a very painful daily reminder of how I was being taken advantage of.

When they finally did leave, the property itself wasn’t too beat up, but the back yard was a disaster and we had to completely repaint and re-floor the property. We knew there was no way we could rent to someone next door again and that we needed to sell, so a significant renovation was in order.

In the end, the tenant walked away owing us over $10,000, plus we dropped another $20,000 in fixes and upgrades to sell it. The positive part of this was during the time the tenants were in there, the market had taken a huge upswing and even after all the losses and extra expenses we still managed to make a healthy profit, but we were just lucky.

The TakeAways

The painful and expensive lesson we learned is that having your tenants next door or even near to you, opens up the door for more problems. Your relationship could evolve from just landlord tenant to a more complicated Landlord/neighbor scenario.

Part two of this is when things do go wrong , and there is no guarantee they will go wrong, it’s much more painful when it’s next door for you to see or you pass by it on your way home from work every day. Yes you get to keep a closer eye on things, but that too has it’s good and bad.

Part three, if things do go bad and it gets to the point where your relationship sours, do you really want your tenants knowing where you live, or having to see them almost every day? Especially if they are spending your money on themselves rather than paying the rent they owe?

Why take a chance?

In all likelihood the neighborhood you are living in isn’t the best location for a rental property anyway. Although the quality of tenants overall may be better in nicer neighborhoods, the quantity is way down.

This can lead to longer times filling vacancies while you are making payments each month on more expensive properties.

When buying in areas more prone to rental properties you have a much bigger pool of tenants to choose from and while you may have to put more work into screening, during tougher economic times you want a bigger base of potential tenants to choose from as vacant months add up quickly.

Also, buying rental properties in rental areas is usually much cheaper than purchasing in prime homeowner areas which can save you money to start with. Buying a property for less money and still being able to get the same amount of income is simply being smart.

Buying an expensive property in an expensive area and hoping to make money may work, but it’s much harder and has more drawbacks.

Most of these neighborhoods frown on renters. It’s the NIMBY mentality or Not In My Back Yard attitude. They complain about illegal suites (which they have a right too), they complain about too many vehicles, they complain about snow not being shovelled in a timely fashion or grass not being cut to acceptable lengths etc. And while these people exist in all neighborhoods, they are much more prevalent in owner occupied areas.

Even if you do everything right, if your neighbors find out your property in the nice neighborhood is a rental, it gets a bit of a social stigma. Yet if you buy in a rental area where you have a huge pool of tenants, it’s just another property in the neighborhood.

Yes you may have a longer drive to randomly check up on your property, but the other benefits outweigh this by so much!

The BottomLine

You have to do what works for you. I’ve given you my example of what can go wrong and I’ve explained why not renting next to you works better. If you’re already living in a rental neighborhood, you may not have an option, or if you’re in a small town it’s hard not be be near your rental, but if you have a choice, don’t make it too close!

The benefits of purchasing a rental property in a rental neighborhood are they are typically a bit cheaper, they typically generate better overall cash flow, renovations cost less, you have more tenants to chose from and they can often be suited providing you with multiple streams of income from one property.

The benefits of buying in your possibly upscale neighborhood is that it’s close, you can keep an eye on your tenants, the initial price is higher so % increases in value reward you more and the class of tenant is typically better.

The negatives of buying in a rental area is you have to do more thorough screening as it’s quantity versus quality, the initial price point is lower so if values increase x% it would be smaller than if on a more expensive house and it may not be near by where you live.

The negatives of buying in your neighborhood that is not a rental area are far fewer tenants to choose from, so longer periods of vacancy, lower amounts of cashflow, renovations are typically more expensive, if the relationship sours, you have to deal with it often on a daily basis and your property can suffer local stigma for being a rental.

There are people who buy near them and run their property successfully, with only one property this may work perfectly for you. However, all the investors I know who buy multiple properties tend to buy them further afield and usually in specific areas designed to generate the best chance of success and the most cash flow and I can’t recall any of them buying the rental next door or down the street from themselves.

And if they don’t do it, why would you?

So, this has been one of my longest articles ever, so I hope you got some value from it, I’d love to hear your comments and stories about your rental properties. Are they in your neighborhood? In rental areas, or next door?

The next article will be the third in this series and will talk about local rental markets, I hope to have it ready for you soon!

FYI, this is how it looked when we were done,

Analyzing Rental Properties – Economics

January 6, 2014 By Landlord Education

Is It a Good Or Bad Rental Investment?

When you’re purchasing a rental property as an investment, you’re really looking for a good long term investment. The problem is, how can you be sure it works, and how can you tell a good rental property from a bad rental property?

Fortunately, there are a few things you can look at to help put the odds of finding a good rental property in your favor. This article will address a few of them.

Before anyone purchases a rental property, they should really do some homework regarding the local economy, the neighborhood they are considering purchasing in and the local rental markets. So yes, there is homework involved.

Economic Factors

I’m starting with economic factors as I feel they are one of the best indicators of long term success for a Real Estate investor or beginning landlord. You really want to choose an area that gives you an advantage.

While it’s true there is rental property in just about every city, county and jurisdiction, these areas are not all created equal and understanding the local economics can give you an unfair advantage over those that don’t. This advantage doesn’t necessarily translate directly to success, but it does make it easier.

Some of the factors I refer to as economic are items like unemployment rates, new businesses coming to the area and even the general age of the local population.

If you look at historical unemployment rates for the area you are considering you’ll find a mountain of potential information. Ideally, you’ll be looking at an area where people are moving to for work and unemployment has been quite stable (low and stable) or has been exhibiting a trend of dropping over the years.

Right off the bat, this makes Detroit a bad choice. Sure you can get into rental properties very cheap, but with extremely high unemployment and not to bright of a future it doesn’t bode well for getting paid rent on time and potential increase in values in the near future.

If you know of new businesses coming into an area, this too can be a benefit. The biggest example currently of this is throughout the Dakotas where the oil and gas industry are working like crazy. While many of the workers will end up being transient and not necessarily sticking around the area, the huge growth in these industries also trickles down to new restaurants, stores and businesses that serve these workers. These businesses have employees who will stick around and will be getting paid.

Another area to look at is the general age of the population. If you have a relatively older population in the area, does that mean a sell off is in the near future as they retire? Will this form a glut of properties on the market affecting rents and values?

On the other hand if the population is relatively young, will they be transitioning to purchasing in five years from renting? Will this put extra pressure on home values going up and lending itself to more growth in the home building industry?

These are the types of questions serious investors look at when purchasing in areas and if you’re serious about being successful, they should be part of your process as well.

I know dozens of investors, very successful investors, who don’t even buy in the same region they live in. they have hand picked cities and towns hundreds and thousands of miles from where they live. it might be daunting, but it also reduces much of the risk.

The Curse of Knowledge

November 22, 2013 By Landlord Education

Are You Smarter Than Your Tenants?

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

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

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

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

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

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

You Really Just Have Different Knowledge

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

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

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

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

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

So How Do We Educate Our Tenants?

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

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

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

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

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

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

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

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

The P.S.

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

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

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

What’s Your Plan? Or Do You Have one?

November 1, 2013 By Landlord Education

Your Landlord Plan

It’s amazing how often a landlords plan it to invest in a rental property and rent it out. There done, that’s my plan. But is it a plan or is it a part of a plan.

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

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

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

Landlord Plans Update

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

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

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

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

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

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

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

Renting Out Rooms – Running A Rooming House

October 28, 2013 By Landlord Education

Running A Rooming House As A Rental Option

The longer I’ve been in Real Estate, the more ways I’ve seen to make money with Real Estate.

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

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

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

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

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

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

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

Our First Rooming House

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

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

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

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

My First Negative Experience

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

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

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

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

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

Don’t Try This At Home Folks

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

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

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

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

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

Click to get more info about rooming or boarding houses

That Was Then

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

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

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

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

Would I recommend it to everyone?

Not really.

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

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

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

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

Rooming House Examples

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

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

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

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

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

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

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

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

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

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

Rooming House Tips

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

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

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

The Basics Of Running A Rooming House

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Increasing Your Rent Without The Ruckus

It’s All About Positioning

Sample Letter of Rent Increase

Guarantees and Rules

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Why Landlords Don’t Think Properly

Why Won’t We Raise Rents?

Landlords Action Steps

Final Thought

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Location, Location, Location

The Pain

People Just Think Differently

The TakeAways

Why take a chance?

The BottomLine

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Is It a Good Or Bad Rental Investment?

Economic Factors

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Are You Smarter Than Your Tenants?

You Really Just Have Different Knowledge

So How Do We Educate Our Tenants?

The P.S.

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Your Landlord Plan

Landlord Plans Update

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Running A Rooming House As A Rental Option

Our First Rooming House

My First Negative Experience

Don’t Try This At Home Folks

That Was Then

Rooming House Examples

The Basics Of Running A Rooming House

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