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Five Signs You Might Be a Bad Landlord

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Are you a bad landlord?
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We can’t all be the perfect landlord (I know I’m not as much as I try!), but there are definitely a few sign that could indicate  you could be heading down the path of becoming a bad landlord.

If you recognize one of these signs, you should be ok. Just correct the problem and you should be able to ditch that bad landlord stigma.

If you recognize two or three of these signs in how you’re running your landlording you’re going to have to make a decision about where you’re heading. You can continue down the pathway towards being a bad landlord, or you can do a bit of a course correction and straighten yourself out.

Finally, if you see four or five of these traits showing up continually with your rentals, it’s time to sell. You’re giving the good landlords a bad name and it’s time for you to move on!

Are you ready to find out about these signs?

Sign #1 You Might Be a Bad Landlord

No Written Leases

Listen, you need a written lease and you need it signed by all the tenants residing in your property.

If you don’t have a written lease you’re leaving yourself open to misunderstandings, potential problems and a ton of ambiguity.

Your written lease should address potential issues before they become issues such as rules regarding smoking, pets and even subletting (where allowed, some areas the “rules” don’t let you dictate what is always allowed or not allowed).

It should break down responsibilities for snow removal, grass cutting and property maintenance where applicable. And it should include what the repercussions for transgressing those rules specifically are.

It should cover all those details that could be rather vague, unless they are pointed out and it needs to protect you as much as possible within the local laws that govern landlord and tenant rules.

By not having your lease signed it’s just as good as not having one and the big problem is situations without written leases become a situation of he said/she said. This ends up being a situation where there is no proof you originally told them it was non-smoking, or that they couldn’t start a rabbit breeding factory in the spare bedroom (no pet policy).

So if you’re serious about being a landlord and you don’t have leases in place, go find some.

It may involve spending a bit of money with a lawyer or it may involve buying them from a local landlord association. Whatever you spend will pay for itself time after time and year after year going forward by reducing problems, headaches and even evictions when things do go bad.

Sign #2 You Might Be a Bad Landlord

You Haven’t Inspected Your Property In Over A Year

visit your rentals every six monthsIdeally you’re visiting your property and doing at least a quick inspection every three to six months, but worst case you need to at least get in there yearly, even if they seem like great tenants!

A lot can go wrong in a year, heck a lot can go wrong in three months!

That beautifully renovated property with the new carpet and high end hardwood may need to be replaced if you find out your tenant has been rebuilding his leaking motorbike on it over the winter months.

The little leak underneath the kitchen sink that the tenant didn’t catch could require completely gutting the kitchen and replacing everything. And these are the obvious things you’ll notice just by visiting and taking a peek!

With quarterly or every six month visits you can replace furnace filters which will extend the life of your furnace, you can replace smoke detector batteries which could save lives and your property and you can even notice potential problems that could grow into huge problems if left un repaired.

If you haven’t visited a rental property of yours in the last six months stop reading now and start scheduling a visit before continue on! Don’t be a bad landlord or a landlord who suddenly has to deal with a very expensive repair in the near future!

Sign #3 You Might Be A Bad Landlord

You Refer To Your Property as “It’s Only A Rental”

If you’re referring to your rental property, your expensive investment, as “it’s only a rental property” you’re setting yourself up for failure.

If you’re creating a mental environment where you’re not thinking of your property as someone’s home, where you’re potentially allowing sub standard work, lower grade finishes and even ramshackle repairs to be done, you’re setting yourself up for failure. And that’s what happens if your property is just a rental.

When you start referring to your property as only a rental you’ve already established you don’t care about it and it’s not long before it starts to become neglected (refer to Sign #2).

It’s too much work to go inspect it, it’s too much expense to do proper repairs (after all it’s just a rental) and in no time flat you start seeing your tenant turnover sky rocket and your vacant periods increase.

Then after a year or two of losing money you become another one of those landlords who say Real Estate doesn’t work and sell off your potential asset.

It’s not just a rental it’s a long term investment that can reward you handsomely over time and with proper care and attention. Remember that, or save yourself time and start planning to get out now.

Sign #4 You Might Be a Bad Landlord

You Ignore Your Tenants

return tenant calls promptlyThere’s nothing as annoying as getting interrupted when you’re out having a nice evening out with a spouse or girlfriend or even your family. It’s worse when it’s your tenant calling about a problem with the furnace, in minus 20 degree weather.

At least until you realize that because you have that rental property you’re able to have a nice evening out, or that you have a few extra creature comforts, like heat, because you’re setting yourself up for long term success.

It’s freezing out and they don’t have heat so you need to get on that and not ignore it!

OK, that’s one of the worst case scenarios, but even if it’s something simple like a broken dishwasher, clogged sink or slow drain in the bath tub, they shouldn’t be ignored.

How you handle situations with your tenant can directly affect how long your tenant stays with you and if you keep them happy by dealing with issues in a timely manner they will stay much much longer!

If you can reduce tenant turnover to once every few years it will make a direct impact on your bottom line.

Tenant turnover leads to vacant months with no rental income, extra time spent on advertising and meeting prospective tenants and money flowing out of your pocket as you cover expenses related to the property like water, heat, insurance, taxes and mortgage payments with money out of your bank account.

Even if you don’t have an answer, don’t leave your tenants hanging. I currently have a tenant in a property about two hours from me with plumbing issues (not a water leak, but a shortage of hot water, probably a tank that simply needs flushing).
I don’t have an answer right now, but I’ve replied back to her that I should have an update later this afternoon. I’m keeping her in the loop, I’m acknowledging there is an issue and I’m addressing it and she knows I’m not ignoring her!

So don’t ignore your tenants. If you keep them happy and keep them satisfied you’re a good landlord, not a bad landlord who can’t be reached, you’ll be rewarded with longer term tenants and more cash flowing into your bank accounts!

Sign #5 You Might Be a Bad Landlord

You Don’t Treat It Like a Business

I bring this up a lot, mostly because it’s important, but also because failing to treat your landlording like a business can lead to you failing. And failing with property can be an expensive lesson.

The more you treat the entire rental business as exactly a business the more you’ll do to set up the proper practices to help you succeed.

This can involve moving from using a simple spreadsheet to track your income and expenses to moving to dedicated software of customized accounting systems that allow you to track and control much more of your business.

It involves moving from picking a tenant cause they seem nice to having a proper system in place to screen tenants, places to acquire credit and criminal reports as necessary and understanding the local laws regarding rentals and how they apply.

If you treat it haphazardly you make mistakes, or take shortcuts and those mistakes and shortcuts cost you dearly. I’ve seen landlords use free leases they found online that were invalid because they didn’t refer to local laws.

I had a landlord try and evict a tenant using an eviction form from the incorrect state (it gave the tenant another free month of rent as he had to resubmit the correct form after the fact).

These are the shortcuts that backfire on you and are another reason that can cause you to quit the rental business.

Set yourself up for success.

Don’t Take Shortcuts

Shortcuts are attractive because they may get you started in the direction you’re heading faster, but shortcuts don’t always provide the results long term you’re looking for.

If you’re serious about being a successful landlord,  become an educated landlord, learn to manage your properties as if it is a business and it will all become easier and simpler to either carry on as is, or to expand later. If you’re doing it right it gets easier.

And if you’re dropping a ton of money into Real Estate already what’s another little bit to make sure you’re doing it right.

Money spent on having the proper leases, money spent on getting the software to make your job as a landlord/property manager easier and time spent making sure you have systems in place all come back to reward you as you move along your rental property ownership path.

Lining up accountants and lawyers familiar with Real Estate make your life simpler and more controlled long term. These are all parts of your long  cut to long term financial wealth so try not to stray.

Is there any other additions I should have on this list that bit you in the butt as a landlord? I’d love to hear your feedback, leave me a comment below!

 

 

 

 

 

 

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!

Interview With a Landlord

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Can you believe it’s fall already? Time has absolutely flown by and I apologize for the extended layoff with videos and posts. I think putting that Screening Course together in August threw me off further than I thought.

On the positive side, I have more information started that I want to get out to everyone and it starts with an interview I did last week with a landlord I’ve been mentoring for the last four years. I’d known Tim before he started in the landlord business and since he knew what I did, he reached out to find out more about being a Real Estate investor.

I think I gave him enough to get started as it wasn’t too much longer before he picked up his first rental property and now he’s got several in his portfolio and isn’t done yet. With an eye for analyzing potential properties he’s done well in picking some properties with great potential, but he’s also had some hiccups along the way.

In this 8 minute interview Tim sits down with me and goes over some of what he has discovered along the way and shares a bit of his story, I hope you enjoy it.

If you did enjoy this and feel your story would be interesting and informative to others I’d love to set up an interview with you. Since our readers are scattered all over the country I can do interviews via Skype if that works or I can even set up an online meeting to record our conversation.

To get started, email me at info@TheEducatedLandlord.com and let’s help make you famous!

 

Bill

Accounting For Your Rental Property

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You Need Accurate Accounting

It’s tedious, it can be downright ugly at times and it is rarely fun, but you need to make sure you stay on top of your accounting when it comes to your rental property.

Accurate and up to date accounting can be the difference between getting a mortgage renewed at a great rate or an average rate and it can also make a huge difference in how much tax you pay.

Filing Receipts & Paperwork

My wife is the expert when it comes to filing and she has created a great system for us. Part of the system we learned through our membership with a Real Estate group and part of it we evolved to make sure it worked best for us.

The base part of the system is to create a three folder system for each property you have. It’s easiest if you make each a separate colour as well.

Designate one as tenant and put all of your tenant paperwork in here such as leases, applications, and any correspondence with tenants etc. This keeps all the tenant information together.

Designate a second file as legal. In this one keep purchase documents for the property, mortgage information and any legal documents regarding the property.

Designate a third folder as the all encompassing miscellaneous. This is where everything that doesn’t fit into the other categories falls. We keep extra manuals for appliances for the property here, quotes for repairs and general maintenance information here.

The next extended part is to create 12 folders for each of the months of the year. This is where all your bills and receipts go. If you only have one rental property and never plan on going past there, you can simply put all of this into the miscellaneous folder, but if you have two or more properties, monthly folders makes your life easier.

The rational for this is that if you buy a case of lightbulbs for your properties, they don’t go to one property, two bulbs go here, one there etc, so it can be hard if it gets bundled into one property. By separating all the bills into months it allows you to track back much easier for smaller items.

How Do I Allocate Expenses?

You can probably already tell I am not an accountant, nor do I play one on TV, so you may want to confirm with your own accountant that this works for you. Consider this my disclaimer.

We use Quickbooks Pro to track all of this. We actually are using Quickbooks 2010 still, but our bookkeeper has informed us 2012 will be worth the upgrade for us.

It allows us to go back via each property to track what has been allocated where and since we have multiple properties, when we do buy in bulk (which can be a huge cost saver!) we don’t have to worry about over expensing one property.

There are other options and while the priority is to be sure you are using something computer based to track all of this, we are pretty happy with Quickbooks versus the other products out there. So if you haven’t started computerizing your accounting yet, you may want to jump into it sooner than later.