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Why Thinking Like A Tenant Pays Off

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Landlord thinkingAs a landlord you often have to think carefully about your property. There are monthly costs to consider, maintenance issues to budget for and mortgages to cover just to start with.

Throw on dealing with tenants, potentially property managers, keeping neighbors happy and the list gets longer and longer. You simply think differently when you’re a landlord and the property is a huge investment you need to manage, maintain and care for.

Yet one aspect we often overlook is thinking like a tenant at times, rather than constantly wearing our owner’s hat.

What Would Your Tenant Think?

As an owner your costs seem to continue to grow. Taxes increase, utility costs increase, legal fees increase, everything seems to be increasing, all at your expense.

One way to combat this is to pass these costs onto your tenants by raising rents. Now, I covered how to go about this in a previous article (Raising Your Rents Without raising The Roof), but the important part about it that I didn’t talk enough about is to think like your tenant!

If you just show up minutes before the cut off of when you can legally raise the rent and throw a rent increase notice in your tenants face you could be setting yourself up for trouble. Just imagine how you feel when you suddenly see a huge increase in fees from your bank or a large jump in your taxes.

It’s the same for the tenants. All they see is a money grubbing landlord looking out for themselves and jacking up there rent for no fair reason. They don’t see the three years prior where you couldn’t or didn’t raise the rents, they don’t see the vacant months that you covered right out of your pocket, they simply see a big fat increase that affects them.

In the previous article, I talked about positioning and explaining why you’re increasing the rents to help soften the blow. But part of the explanation I didn’t cover was planning further ahead.

Don’t React, Lead The Market

Landlord leadershipYou’re running your landlording like a business. You know that costs increase over time and you know that your tenants rent will be going up, even if it’s just $25 or $50, in six months, so why not let them know there will be an increase way in advance?

You don’t have to specify how much, just that you’ve been reviewing some of the costs and local rents and expect there will be a small increase in the future. Again, you value them as tenants, so you’re going to do something that is fair to both of you, so make sure they are aware.

Now, rather than reacting last minute you are leading them and you can make a decision that works for potentially both of you. If you see that your costs haven’t really increased and the tenants are fabulous, you may come back to them in another couple of months and let them know upon re-examination you’re going to hold off on any increase this year.

Or you may simply go in with a small $25 increase to cover minor increases that you’re having to cover for anything from taxes, to bank fees to insurance. Or, if the market has skyrocketed you may need to consider increasing rents by much more so as to not miss out.

However it plays out, you’ve forewarned the tenants in advance so they aren’t completely blindsided.  Now, rather than being upset, they typically appreciate the advance warning and can make plans to either move on, allowing you to put people in at the higher rate, or to prepare to absorb the additional costs.

Expanding on this you can also start including tenants on longer range plans.

Preparing For The Future.

Sometimes you know you have work coming up in the future on your property, so why not include the tenants in the updates?

Whether it’s a new roof, a new driveway or even a new fence, let the tenants know the proposed plan. If you’ve started to plan to get the roof done in the spring or the rotting deck upgraded before summer, give the tenants advance warning and let them know so they can prepare.

Once you talk with them who know what else you can discover. Maybe they are going to be away on vacation for a week and you can coordinate your project to take place while they are gone?

Now it’s very little inconvenience for them and they are rewarded with a new roof ,deck or some property improvement that makes their enjoyment of the property better upon their return.

If you start working with your tenants and thinking about what makes them happy and perhaps a little more prepared for you, it starts getting easier to keep them longer all while keeping them happy.

It’s a win win for everyone! Are you already thinking like a tenant? Or do you simply leave your landlord cap on and push forward upsetting tenants and replacing them every year? Tell me how you prepare for the future!

 

Like Minded Landlords

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Landlord businessWhat’s the first reaction you get when you tell new friends that you’re a landlord? Something along the lines of “Oh I could never do that because I don’t want to fix a toilet at three in the morning”?

Sure, some times people will be interested, but really they just want to hear your horror stories. People love living through others miseries. I know I write a lot of miserable stories 8′]

And they get read much more than the helpful happy stories!!!

But what happens when you run into another landlord?

Suddenly you have a new friend, a new resource (much like this site) someone you are usually a bit more comfortable with.

Napoleon Hill

Think and Grow Rich by Napoleon Hill was one of the first books I read when I first started switching from an employee mindset to more of a what can I do to succeed mind set. It is quite old now as it was originally released in the late 1930’s, but it still contains some nuggets.

Also since it’s quite old, it is available for free in many places (although I have two paperback copies that I regularly re-read). I have found it for free in iTunes and I’ve provided a link below for a PDF version I found on line if you’d like to read it that way.

Think and Grow Rich PDF

Other people have borrowed quite a few of the tidbits in it to create their own books and thoughts that can be traced almost directly back to this book. The biggest example most likely being “The Secret”.

Now personally I think the concept of The Secret was rather weak as just focusing on something does not cause those results, but it was perfectly in line at the time with the mindset of people who felt entitled and there are far to many people like that out there.

Sorry if it feels like I’ve gone off on a bit of a tangent here, but I was trying to point something out that Napoleon Hill pointed out to me years ago.

Part of it was surrounding yourself with like minded people.

Crabs In a Barrel

Or a big platePerhaps you’ve heard this before. You become most like the five people you spend the most time with. If you look around your main circle of friends, you find that they are all very similar in wealth, income and social status with you.

Sure there are peaks and valleys, but for the most part you all fall in line with similar goals, dreams or a lack of both. This can be both a good thing and bad thing depending on your goals (and your friends…).

One story I have heard illustrating this the best is the story of crabs in a barrel. If you put a bunch of crabs in a barrel and watch them for a while invariably one of them starts climbing out of the barrel. It manages to get on top of the other crabs, maybe hook it’s pincher onto something and suddenly it can sense freedom.

Now I don’t know if it’s something internal or maybe the other crabs think they can simply ride along, but they invariably grab that crab that is so close to freedom and drag it right back into the barrel. Now they are all back on the same level and it’s status quo. This imitates our lives.

When I first started out investing in Real Estate, that’s how I often felt when I explained to people what I was doing. The people around me didn’t want me to escape, they wanted me to hang around with them and stay where they were.

I’d mention tenants and properties and I’d hear the story about their uncle’s friend’s brother’s tenant who was a nightmare or how their sister’s friends co-worker lost all his money on a rental property.

I’d talk about renovations and hear stories about their former co-worker’s buddies neighbor who was ripped off by contractors.

I’d talk about long term security by owning property and they’d bring up the housing crash from 15 years ago (now they can just bring up the one from 2007, but I don’t hang with those people anymore).

After a while it seems like it’s just easier to go with the crowd and give up on our ideas about getting ahead. But if you’re still reading this or have been reading my other articles I have a feeling you aren’t paying that much attention to that crowd.

You already understand you can walk to the beat of your own drummer or are already surrounding yourself with people who can help elevate you. So for that I applaud you, and I thank you because you’re still reading.

Mastermind Groups

surround yourself with like minded peopleSurrounding yourself with like minded people can go two ways. One you can stay in that barrel with the other crabs, or two you can find a better group of crabs to hang with. Ones that want you to escape.

This is where mastermind groups or local real estate networking groups can really pay dividends for you.

I was a member of a local Real Estate group for years and created some great friendships there. The group met once a month, but several of us always ended up talking multiple times a month or getting together to discuss Real Estate or Real Estate strategies.  We were our own little mastermind group.

It kept us on our toes and it kept us hungry and excited. Many of us had dreams of owning dozens of properties and many of us met those dreams, because that’s what like minded people can help you achieve.

Now a word of caution, not all Real Estate groups are equal. Some just want you to join so they can make money off your membership, so they can sell you products and services and so they can grow whether you do or not.

The same goes for many of the individuals who join these groups. They’re looking for the  short cuts, the quick way to make money in Real Estate. They are usually not the people you want to end up with as short cuts can come back to bite you.

You want to be around like minded individuals who have similar goals.

If you’re not currently networking with other landlords, you really need to, especially other local landlords. By talking with other people in your area you can be more aware of changes to local laws that directly affect you.

You can share resources like contractors and repair people.

You can compare rents easier and form a better idea of what the market is doing.

All of these bonuses and more can be created just by hanging out with people who are like you!

And all it takes is just a few people. It might just be two of you bouncing stories and experiences back and forth, but ideally if there is five or six of you there is more experiences, more help and more ideas that can float around.

Bottom line you really need to find some like minded people if you really want to thrive in the landlord business!

I have some more thoughts on this I’ll share with you in some upcoming posts, but in the meantime, are any of you currently in a mastermind group or a Real Estate group you’re finding beneficial? If so, I’d love to hear about it, so leave me a comment or send me an email and tell me more.

Renting Out A Storage Garage To Increase Cash Flow

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Why Are People Renting Out A Storage Garage?

Renting Garages At Your Rental PropertyIf you do a little research in your area, you might be surprised to find out you could be renting out your garage for extra cash flow. Garage rentals are pretty well known to experienced landlords, but if you’re just starting out or haven’t been exposed to this before it can be quite an eye opener.

All over the world you’re finding rental storage places popping up. It’s become so popular there are now dedicated “reality shows” that walk through the lives of people who buy storage lockers and sell the items that are left behind for profit.

More and more people just need a place to put stuff and that’s why the popularity of these places has grown. We are a society of collectors and we seem to need more and more doodads to keep up with the Jones’s. That stuff needs to go somewhere and a nearby garage may be the solution.

People pay for convenience and if you have an empty garage they can rent that’s just around the corner or even the next neighborhood over, it’s far more convenient than tracking down one of these storage places that may not be as handy. And when you compare square footage, they can be a huge bargain.

But that’s not the only reason people are interested in renting garages.

People also have hobbies. Hobbies that take up a lot of space.

Woodworkers have drills, presses, lathes, saws and more. Mechanics and weekend mechanics have tools and compressors and vehicles and parts and they too need places to leave them.

Small business owners like plumbers, repair people and handy men all need to store supplies, tools and more somewhere and retail space is crazy expensive while commercial space requires huge commitments and also huge expenses.

These are just a few of the types of people that require space. Space that you can rent out for a tidy little additional revenue stream if you just happen to have a detached garage at your rental property.

When Renting Out a Storage Garage, Detached Is The Key

When you are renting out your garage, detached is the key word here. This is not something you want to do with an attached garage as trying that can open up a whole world of problems.

From noise to security issues to safety issues, it’s just not a road you typically want to travel down and it’s why I like older rental neighborhoods as they tend to have detached garages which are perfect for my rental property wish lists.

What Does A Storage Garage Rent For?

Rental garageThe amount you can charge for garage space can vary depending on many factors ranging from size to access to heating to having manual or powered doors to where it’s located.

I’ve rented single car dirt floors garages for as little as $125 per month and I have oversized two car garages that are heated that I’ve been able to get $350 per month for and on the very simple end I’ve even rented dirt or concrete parking pads (no roof or any structure, just the parking space) just for someone to store a vehicle on for $25-$50 a month.

With the low end parking space only that is still an additional $300 income a year that I didn’t have before and for the big garage at $350 per month that ends up being over $4,000 in additional income every year!!

There is no guarantee you will see these same rates in your area, they could be lower, but they may also be higher and of course there is a chance it may not even be done in your area, but if you could, wouldn’t an extra few dollars in your pocket help?

Renting Out Your Storage Garage – Is It Legal?

This might be your most important consideration.

Just because I can rent out a garage here, doesn’t necessarily mean it’s legal where your property is located. So you need to do some homework. And the easiest way to start is to check local ads to see if anyone in the area is renting garages.

You can use Craigslist, Kijiji or the local online sites to start. There are usually local Penny Saver magazines or daily papers that you can also look through to see if you find ads for storage spaces or garages in.

If you find them, it’s a good sign, but your work isn’t done yet, if you don’t it may not mean it’s not possible, it may just not be common practice.

What you really want to learn as you do your research is what laws cover the renting of a garage or storage space. They typically fall outside the jurisdiction of Landlord and Tenant laws, but you need to verify that. Locally for us, renting a garage is the equivalent of renting a warehouse space and the rules are very much in my favor when it comes to payment issues or other problems.

Determining the full legality of it may start with your local Landlord and Tenant services hotline, but it may require you contacting a lawyer who understands local Real Estate law to get the real answers and access to proper leases allowing you to rent your garage out safely and legally.

Heated Garages – Who Pays Utilities

This seems to be one of the big questions that pop up when renting out a garage to someone, especially when the utilities are paid by the tenants renting the house.

Fortunately garages typically don’t use up a ton of utilities. You can typically appease the tenants renting the property by telling them up front when they first are considering renting your property that they are getting a discount on the rent of $XX to cover the utilities used by the garage tenant.

I would typically position this in the $25 to $50 range and if you’re in warmer climates where heating isn’t an issue and electricity is the only consideration it may be less, considerably less to the point it may not even be an issue.

Which brings me to the other common question.

Doesn’t The Tenant Renting The House Get The Garage Automatically?

To put it succinctly, NO!

Now I have had tenants rent the garage from me as well as their suite, but it’s not my preferred way to rent it out. the issue being if the tenant leaves I lose two streams of income at the same time, Now if it’s a $25 parking space it may not be that bad, but if it’s a $350 monthly garage payment plus a $1,000 rent payment, that can hurt a bit more.

So you need to be clear and up front with the tenants who are looking at the rental space to live in that the garage is not included.

Professional Landlord Tip About A Storage Garage

My storage GarageSo here’s a little tip for you if you start collecting many properties with garages. After a while, to run your landlord business you start finding your garage starts to fill up with parts and pieces to run your properties.

From light bulbs you purchase in bulk to furnace filters, they all start taking up space. At a certain point that space may start compromising the space you have for storage at home. So why not rent one of the garage spaces to yourself? (check with your accountant to see what you can and cannot get away with in your area as this may be a free rental or you could use it as a potential tax deduction in some cases).

I personally have a two car heated garage at one of my rental properties that is filled with shelves and all kinds of parts ( too many parts actually), tools and general landlord pieces that I need on a weekly, monthly or annual Organized storage garagebasis. We store extra furniture there (for our furnished weekly rental properties), renovation materials, and just about everything my wife doesn’t want in “her” garage at our home.

So there’s your primer on garage rentals. So my question for you, is it something you can start applying to your landlord business in the future, or are you already doing it? It’s not going to work everywhere, but if you can make it work it can definitely help you increase cash flow, so I’d love to hear your thoughts in the comments below.

If you enjoyed this article about garages, you might want to check out my Ask the Landlord Article – Marketing Your Rental Garage for ideas on where and how to find tenants – Bill

Five Lessons From My First Tenant Eviction

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

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

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

Tenant Eviction Lesson One

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

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

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

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

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

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

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

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

Don’t learn the hard way like I did!

Eviction Lesson Two

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

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

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

Eviction Lesson Three

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

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

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

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

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

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

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

Eviction Lesson Four

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

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

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

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

So where do you get this knowledge?

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

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

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

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

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

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

Eviction Lesson Five

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

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

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

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

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

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

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

Anything Else?

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

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

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

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

 

Another Satisfied Tenant – NOT – Dealing With Bad Tenants

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You Can’t Win Them All

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

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

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

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

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

But today’s another day….

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

Today’s Another Day

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

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

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

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

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

Bad Tenant, But Big Picture

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

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

Furnished Rental living room

Clean Up Day

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

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

And it was also where the lessons started showing up.

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

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

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

Good tenants are the lifeblood of our business

and bad tenants suck the life out of our business.

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

We Need To Focus More On The Awesome

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

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

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

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

Raising Your Rents, Without Raising the Roof

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Increasing Your Rent Without The Ruckus

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

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

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

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

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

It’s All About Positioning

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

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

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

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

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

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

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

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

Sample Letter of Rent Increase

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

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

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

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

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

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

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

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

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

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

Guarantees and Rules

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

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

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

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

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

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

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

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

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

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

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

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

Why Are Landlords So Stupid?

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Why Landlords Don’t Think Properly

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

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

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

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

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

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

Why Won’t We Raise Rents?

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

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

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

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

Landlords Action Steps

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

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

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

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

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

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

Final Thought

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

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

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