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The Basics of Being A Landlord – The Skills You Need

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So You Want To Be a Landlord?

I seem to get a few emails/calls about being a landlord, so here are some quick thoughts from me on the basics of being a landlord.

This will likely be a multi part series, so this post will focus on what skills do you need to be a landlord?

screwdriversmallHandyman Skills

Well some landlords I know are incredibly handy people, they are great with renovations, they love working on their properties and they are you typical Mr. Fixit’s.

However, I know many landlords who’s only tool they have ever used on their property is pen and paper. Rather than investing their time in a property, they have simply hired someone to get the job done. So while being handy helps, I guess it’s not a needed skill.

People Skills

How about people skills, a good landlord should have people skills! Again I know many landlords that are great people people and having the ability to relate to the tenants and get along with them has helped them tremendously.

But as I think about it, these same people have some challenges because they tend to get buddy buddy with their tenants, which rarely seems to work out well.

I also know many landlords who I would definitely put people skills at the lower end of their abilities, yet they are also tremendously successful. So maybe people skills aren’t quite as essential as it seems to be a successful landlord.

Fierce Negotiator

agreementsmallThis one has to be important because first you need to be able to negotiate the best possible price on the property you’re purchasing as a rental property, then you need to negotiate with contractors to get the best prices, tenants to get the highest rates and everyone in general to get the best deals.

Except this can be a horrible plan for long term success.

The people you buy your property from resent you for being such an aggressive negotiator, the contractors won’t work for you again because they hate getting nickelled and dimed and tenants can’t wait to get out as they never feel comfortable and often feel ripped off.

In my experience it often works out far better when it’s a win/win negotiation. Where both parties get a fair deal whether it is the purchase/sale of the property, the renovation work and even the rental amounts. So maybe you don’t need to be such a fierce negotiator to make your job as a landlord easier.

Now, I’m not saying have some of the above mentioned skills won’t help you, it just appears they may not be as important as people often believe. Many people find success anyways, even if they are lacking in or more of the above areas.

So what skills are valuable to a landlord?

Organization, Patience and Humility

hourglasssmallNow these three skills I do believe are important. Again, they may not be essential, but definitely important.

If you’re organized you can find records, receipts, invoices and more that are required for everything from your taxes to warranties to simply getting your books done correctly. Having systems in place to guide you along the way is one of the best methods to help with this.

If you’re patient and understand your Real Estate is a long term investment it makes being a landlord much easier. With the constantly changing market trying to time your purchases of a rental property and your selling of them can be incredibly stressful.

Rather than following the get rich quick path that so many people promote with Real Estate a longer term approach with an extended time frame (and lots of patience) will guide you through the ups and downs of the inevitable transitions through both buyers and sellers markets.

Finally humility. Have you ever run into a pompous landlord who knows everything about Real Estate? I’m willing to bet many of you have and apparently one ex-subscriber felt that way about me.

You need humility so you can go to others when you have questions or are unsure of the answers. It’s why you need a Real Estate agent who understands investment property when you’re buying. It’s why you need an accountant familiar with Real Estate if you are a landlord so you are aware of the correct deductions you can apply for and the correct processes for setting up your accounts.

It’s why you need to call plumbers, drywallers, painters and other contractors when something is beyond your scope or when it makes sense to bring a pro in to get the job right. Doing all of this takes a bit of humility at times as we often believe we can do it all.

And perhaps we can, but if we do, then we lose focus on what the property is. An investment that should be run as a business.

What do you think?

Learning To Landlord By Trial And Error

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Learning to landlord by trial and errorSounds scary doesn’t it? Making a mistake as a landlord can cost thousands of dollars in lost rent, due to damages and in some cases even lead to foreclosure. But I run into landlords every week who got into the business with minimal to zero knowledge of even the basics of being a landlord.

Learning to landlord on the job can turn into a very expensive education and that’s where I come in. Hopefully.

With dozens and dozens of articles and videos on the site providing the basics already, I’m planning on adding even more so I can help others avoid the trial and error path.

Now, if you’ve already registered to receive emails on my site you know one of the first things I ask you is what challenges you face as a landlord. I’ve had some great responses from people and hopefully I’ve provided some answers to help you with those challenges in my replies to you.

The question I have for you in this article though is what was your most expensive mistake?

My Expensive Landlord Mistake

costly landlord lessonsPersonally, my biggest mistake when I started was not following my screening process and skipping steps along the way. During this learning curve I let in some of the wrong people because I went with my gut, rather than following my process.

This brilliant decision making cost me most of my Christmas vacation as I had to spend it fixing walls, repainting a property I had just painted less than six months earlier, cleaning and doing general fixes so I could have it ready to go for January 1st and not lose anymore incoming rent money due to vacancies or deadbeats.

It’s part of the reason why one of the first courses I put together on the site was my tenant screening course, which I give away for free because it’s so important to a landlord’s success! Since I started following the procedures I laid out I’ve only had to evict one tenant out of my regular fixed term rental properties in the last seven years.

Of course, if I had followed my rules that one eviction would have never come to an eviction which was another lesson. That particular situation involved a young couple who split up and rather than  allowing/forcing them to break the lease and both move on, I allowed the boyfriend to stay and to have his brother move in to help cover the rent. Ooops.

So maybe that didn’t fit specifically into the screening category, but it did fit into my screening system which I strayed from as I didn’t due my proper due diligence with brother number two.

Your Turn

Your Landlord LessonMy list of other expensive lessons could go on. From not doing enough due diligence one early properties  we bought to initially trying to do all the work ourselves rather than farming work out to contractors. But what about YOU?

What have some of your expensive lessons been? If you can take a few moments to leave a comment to help other landlords that would be great. By sharing some of our experiences we can make it easier for others to learn from our lessons and to help avoid some expensive pain.

Plus it may point me in the direction of my next course which hopefully helps everyone.

So leave me a comment below and let’s see who we can help with it!

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.

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

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Negotiating A Rental Purchase

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

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

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

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

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

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

It Pays To Pay Attention

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

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

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

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

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

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

Ramblin’ On

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

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

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

Buying a rental property

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

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

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

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

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

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

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

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

And The Winner Is?

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

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

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

And The Lesson Is?

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

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

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

As for the car?

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

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

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

Raising Your Rents, Without Raising the Roof

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Increasing Your Rent Without The Ruckus

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

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

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

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

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

It’s All About Positioning

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

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

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

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

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

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

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

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

Sample Letter of Rent Increase

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

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

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

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

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

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

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

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

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

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

Guarantees and Rules

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

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

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

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

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

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

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

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

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

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

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

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

Why Are Landlords So Stupid?

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Why Landlords Don’t Think Properly

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

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

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

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

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

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

Why Won’t We Raise Rents?

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

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

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

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

Landlords Action Steps

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

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

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

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

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

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

Final Thought

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

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

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