Common Tenant Issues

Each of us encounter problems every day. Sometimes we enounter the same problems every single day. For example, a landlord may have to deal with the same issues over and over again. As a landlord, you would love to have the best tenants to occupy your properties: tenants who pay rent on time, keep the area clean and pleasant, treat their neighbors right, and so on. But, more often than not, no matter how well you maintain your properties and how much you care for the welfare of your tenants, some problems will arise and, if you are unfortunate enough, these problems may bug you every day.

Rental Payment Issues

One of the main issues causing disputes between tenants and landlords is delayed payments or withheld rents because of countless reasons: temporary unemployment, health issues, cash flow shortages, repair or maintenance refunds, and a lot more. Whatever the reasons are, cases like these can’t happen all the time. What landlords and tenants can agree upon to solve issues like these are: transfer to smaller and cheaper units, an improved payment arrangement, and adding penalties for late payments. It is up to you on how you will react and solve this issue.

Maintenance and Pest Problems

To avoid high turnover in properties, it is the landlord’s duty to maintain the property in the same condition as it was on day one. On the other hand, it is the tenants right to have a surrounding that is well-maintained and conducive for living. Pest problems can easily be solved with the help of exterminators and a clean environment. Both parties are in-charge of maintaining the areas in the property that are within their scope of liability. Responsibilities such as maintenance, repair and redecoration may also depend on their lease agreement.

Neighbors

If you’re a tenant who lives in a building with other neighbors, you may find it both a good and a bad thing. It may be good to have others to talk to, spend time with and enjoy the pleasure of belonging to and living in a community. On the other hand, others may find it bad because sometimes your neighbors may give you headaches and things to worry about like excessive noise, dirty or smelly surroundings, security issues and more.

Knowing the troubles that can come from tenants can help you ready yourself for being a landlord.

The Importance of Rental Market Prices to Purchases Prices

If we are going to decide between renting a house or flipping one, we only make the right decision when we consider the appropriate guidelines. These guidelines include the aspect of home prices, mortgage rates and rental rates. By considering the above aspects, you will be able to understand if it’s more sensible to flip or rent a house on a long-term basis, economically.

We are dealing with prices, which automatically means doing math. And it is very important that you do the math correctly to avoid financial waste in the end. This is where the rent ratio comes in. A certain property will always have a fundamental price, and that fundamental price will be divided by the rental price. The product is the rental ratio. And according to experts, the tipping point of rent ratio is 15-20. The higher the ratio, the more it would require a spike in housing prices in the coming years to justify the price you are paying today. For example, in a market where a 2-bedroom house costs $250,000 and the annual rent for a similar home is $12,000 ($1,000 per month), then the ratio is about 21. It would make sense to consider flipping the property.

One more thing that should also be taken into consideration is our current financial stand. Buying a home always comes with a financial impact, especially when we are talking about mortgage rates, property taxes and homeowner’s association fees. If you are compromising future plans when buying a home, then it’s best to set aside rental ownership for the time being.

We will never know when high levels of economic uncertainty hit us. It is just prudent to make lifestyle changes that would suit your financial status. Be knowledgeable about the proper guidelines when deciding whether to rent a house or flip it. The financial income that comes with renting is always assured if you know how to calculate certain elements together with rental market prices and purchase prices.

Why Hire a Property Manager

Having a competent property manager on your power team can add substantial value to your investment. I would recommend investors who are planning on doing a buy and hold strategy to get a good property manager to work with them. They can save you time, money and legal issues from tenants. I will outline eight reasons you should hire a property manager.

Screening Tenants: PM’s (Property Managers) have a lot of experience in screening for the right tenants for you. They know how to quickly analyze a good tenant from a bad one, saving you hassle in the long run.

Tenant Retention: It will be important for you to have long term tenants and one way to insure the tenants are happy is to have a good PM taking care of the tenants needs. A good PM will have general business practices that will ensure good tenant retention, so be sure to ask them what programs they have in place.

Rent Collection: Too often when investors try to manage properties themselves they let tenants walk all over them. A good PM will be your barrier between yourself and your tenants. PM’s are doing a job and will follow the terms of the lease and tenants know they don’t make the final decision, you do, and they don’t have access to you. Therefore, this process keeps you out of the light and lets the PM do their job.

Maintenance Cost: Knowing who to call to fix problems with your property is huge. Most PM’s know experienced contractors who have already been vetted by them, who can also give you price discounts on repairs. Keeping the properties in good condition will save you on costly repairs and keeps your tenants happy.

Vacancy: Shorter vacancy time is better for your revenue. A good PM can help improve and prepare the property for rent to maximize profits. They can determine proper rental rates to maximize the units. Lastly they can effectively market your properties to potential renters via many advertising mediums.

Legal Problems: Seasoned investors can tell you that a troublesome tenant can cause enormous legal problems. That’s why a good property manager is important to have because they will have knowledge of the most current landlord-tenant laws and can save you from any potential law suits.

Taxes: Most PM’s can help you understand what tax advantage you can claim. They can also help organize all your paperwork to give to your accountants.

Owners Benefits: A good PM will keep your stress level low because they will handle all the day to day activities on your properties. They have a network of people they will utilize so you don’t have to go searching around. They can free up your time so you can focus on other aspects of your business.

It will take time to find the ideal PM, so use this outline to find the right one for you. They can help protect your assets and keep your cash flow coming in. Make sure to interview several to get an idea on whom to go with.

Buying a Rent Ready Property

When looking for properties to purchase as rentals, many investors prefer to focus on “rent-ready properties”.

The first and most important part of buying a rental property should be to learn about the current market conditions of the area. Always keep in mind that this is a rental, not a high end home. However, the way that your property stacks up to the direct competition in the area determines your rental amount and occupancy rate. You should make an effort to learn about what type of rental properties you’ll be competing for renters with, to make sure that you’re buying a property that’s in a comparable condition. This should of course be done before you even make an offer on the property to begin with.

 

Always keep in mind that this is will be your own property even though you are not going to live in it yourself. Make sure that the outer shell of the property is sound and in good condition and that all necessary improvements are completed. If the exterior of your building is compromised in any way, then the inside will be at risk as well.

Also decide what appliances you are going to provide by learning what other rental properties in the area are providing. As you evaluate a prospective property, look for possible liability risks more than minor blemishes. If you can’t physically visit the property yourself make sure that you get a copy of an inspection report.

 

Here are some issues to look for

  • Are all of the electrical plates present and in good repair?
  • Are there enough smoke detectors and are they placed properly?
  • Are there any issues with lead paint, mold or asbestos?
  • Check the handrails for a good tight fit.
  • Assure that the there are no plumbing leaks.
  • Pay particular attention to the big replacement cost items such as:
  • the Heating system – boiler, furnace, heat pump, etc.
  • air conditioning/cooling system
  • water heater
  • dish washer
  • garbage disposal

 

Make sure that the house you’re buying looks good so that you can retain the best tenants but you shouldn’t expect custom cabinets and granite countertops in a rental. High end fixtures are typically not required. Just make sure that it looks nice and clean. It’s ok to buy a lower grade home to use as a rental but make sure that it is actually livable.

 

Remember, if you agree to buy a property in “as-is condition” then you will need to make any necessary repairs that are needed. If you don’t want to do that, you should negotiate with the seller to fix things before closing.

 

Once you’ve owned the house for a while you may need to replace or repair some things. When you need to replace something in the house, try not to be too cheap. Some investors will take the attitude of “It’s a rental, we’ll just put in the cheapest products that they make and call it good. After all, renters typically are not as careful with houses as they would be if they owned the place.” Unfortunately for you, plastic faucets and cheap door locks break easily and can cost you more in the long run. If while your renter calls you to say that the faucet is leaking, or a locked door handle won’t turn, {because they’re cheap}, you have to fix it. Consider putting in just a bit higher quality than the absolute cheapest, especially if it doesn’t cost a whole lot more.

Selective Tenanting Through Marketing and Promotion

Tenants have a “Shelf-Life,” because they need to be replaced from time to time. They move on or you move them out. Show me a cash-flow investor with a two-year track record of making money and paying the bills and I will show you someone who bankers want to take to lunch and discuss low interest mortgages. There are plenty of rental properties where the numbers can work. The key is having quality tenants who take care of the property and pay their rent on time.

All the promotion you may need for a rental unit that caters to University students might be a giant big screen TV and computer with high speed Wi-Fi. A property on a busy street may only need a simple sign in the front yard. But, in most cases, to rent for top dollar and select the highest quality tenants you want to reach a lot of people in a hurry.

Response
Selective Tenanting Strategies

Anyone can throw money at the problem with lots of expensive ads. Here are some things you can do on a ZERO or near ZERO-dollar budget:

  1. Zillow.com/Rental-Manager – Here you can place a complete ad with lots of pictures and full disclosure information. You will get a link to your own page that you can even email to people while you’re visiting with them on the phone. Zillow may be the biggest name in real estate. I have never run an ad here that didn’t get my phone to ring.
  2. CraigsList.org – The secret is in timing. Place your ads at 11:45 AM and/or 6:30 PM so you can stay “above the fold” during peak view times. “Above the fold” means your ad can be see without scrolling. People click they don’t scroll. Do not repeat the same ad or anything close to the same ad before the required 48 hr. wait time. They tend to not post ads till they are “below the fold” for people who abuse their system.
  3. Print flyers that present not just your rental unit but puff up the neighborhood as well. The back of your flyer can include Elementary, Jr. High, and High School Principals or Vice-Principals contact information. Do the same for Churches, Boy Scouts, Girl Scouts, Town Hall Meetings, Health Clubs, Little League, Police, Fire, etc.
  4. Be creative in where you place your flyers. Got a washer and dryer included? Hit the laundromat bulletin boards. Got the big screen TV? Hit the University bulletin boards.
  5. Visit other rentals especially where your property appeals to a different kind of renter than they cater too. They could send you leads. Visit the Section 8 Housing Department. They will give you the lay of the land on how to work with them so you can have half or more of your top dollar rent put in your checking account on the first of each month.

 

Regardless of how you market or promote for tenants, your future depends on getting good tenants who take care of your property and pay you on time. History repeats itself so here is what you can do to protect yourself:

  1. Have prospective tenants fill out and sign an application allowing a credit report.
  2. Run a credit report. Anyone under 600 probably has late rent pays.
  3. Walk out to their car with them and see how they take care of their car.

Section 8 Vouchers

A Section 8 Voucher, also known as Housing Choice Voucher is a program set up by the federal government to assist low income, elderly and disabled Americans to rent properties at a reduced rate by subsidizing a portion of the monthly rental fee. This program is available in every major housing market within the country and is administered by local public housing agencies. Those who qualify for this assistance can find housing available almost anywhere in the city, not just in subsidized housing projects.

Pros

  • Landlords like the program because they don’t have to hassle with collecting monthly rent, following up on late payments or dealing with excuses about why tenants can’t pay.
  • Renters that have financial hardships, like a job loss or illness, that cause them to have unpaid absences from their work, don’t need to be evicted. Instead, the Section 8 Voucher program will pick up 100% of the monthly cost, until the tenant is able to work and pay again.
  • The Section 8 Voucher program matches prospective tenants with 1, 2 or 3 bedroom properties. The rent is pre-set by the local public housing agencies and tends to be higher than non-Section 8 rental properties.
  • In order to qualify for this program, tenants must consent to annual property inspections. These inspections are performed by a third party at no cost to the property owners. Although these inspections will turn up repairs that are needed, they also help spot damage done by tenants and will assist the landlord in getting rid of the abusive tenants.
  • With over 3 million low income households participating in this program, there is no shortage of possible renters. Many areas have huge waiting lists for Section 8 Housing, so vacancy time is virtually non-existent.
  • Some states provide websites that can be used to advertise properties at a substantially lower cost than other marketing methods.

Cons

  • Section 8 Voucher programs, like any other program managed by the government, has its share of regulations and paperwork.
  • Each property is required to be inspected before a tenant moves in and annually thereafter. The inspection criteria are stringent and sometimes can be costly.
  • Depending on the area that the rental property is located, the Section 8 housing rental caps may be less than the going rate for renting the same property in the normal market. In this case, it may not be financial feasible to go with Section 8.

The Section 8 Voucher program is a win-win situation for by landlords and tenants. It ensures the tenants are getting move-in ready properties and the landlord is guaranteed rent.

Buy and Hold Strategy

The Buy and Hold strategy, as it applies to real estate, is a more passive strategy which requires a little faith in the market and time.

What is Buy and Hold Strategy?

It is basically a long-term investment approach. A buyer will purchase a property when it is priced low, and then wait for a number of years until the value of the property has gone up. When the buyer is happy with the price increase, they sell the property and make a profit.

Why Does it Work?

The key to using this strategy is understanding the long term life cycles of the housing market. Three telltale facts that make it likely that investors will get their money back are as follows:

  • First, the long-term population is growing, so homes are in need continuously.
  • Second, costs of construction rise, which ensure an increase in housing costs.
  • Supply and Demand rules apply and all markets normally move this way. Although politics can affect this, so investors must keep an ear to the governmental changes.

 

Benefits

The buy and hold strategy presents a relatively low risk investment, assuming that all trends follow their normal path. When buying a property low, it is most probable that over time, the value will increase.

The buy and hold strategy can be very valuable, although there is a considerable amount of research to perform before jumping in. If the time and price is right, and you have extra income you can invest for a set number of years, the buy and hold strategy may be the investment option for you.

Here are 3 Reasons Why you Need a Property Manager

As you invest in real estate, there may be times where you find it difficult to manage your property. Hiring a property manager can help you better manage your time. Here are 3 reasons why you need to consider hiring one.

-Experience Matters

You need to keep in mind that as a landlord you will need a distinct set of skills to aid your cause. It is entirely possible that you may not have the skills or the experience to deal with most matters. Things like repair and maintenance, marketing and even book keeping are complicated and require your utmost attention at all times. However, if all of this is new to you, it is high time you consider hiring a property manager immediately. Property managers have the necessary skills and experience to overcome any obstacle they may face primarily because they have been dealing with these tasks on a daily basis.

-They Are Willing To Deal with Stress

Regardless of what you may have heard, dealing with tenants can be an excruciating endeavor. It takes a special kind of person to deal with the needs and requirements of the tenants, all the while being patient and understanding at the same time. Even though you might see yourself as a calm and tolerant individual, you need to be rational and ask yourself whether you could deal with scenarios where you have to deal with a tenant damaging your property.

-They Can Effectively Manage Different Properties At The Same Time

If you own more than one real estate, you are in for the ride of your life. The larger the number of real estate properties, the more difficult it is going to be for you to manage all of them. But if you are not willing enough to spend the required time managing your real estate investments, then there is no harm in hiring a property manager to do it for you.

Now that you know the importance of a property manager, you will come to realize that they are worth the price. Not only will they be able to deal with all of your problems effectively, but they have the necessary experience required to ensure your real estate investment actually pays off for you in the long term.

Here is How You Can Make a Great Real Estate Investment

Seeing success in real estate depends primarily on the choices and decisions you choose to make. In order to make it work for you, you will need to make the right choices and know where best to spend your time in maintaining your newly acquired property. Here are some things to keep in mind when investing in real estate.

-Look for Real Estate Properties with a Decent Return on Investment

When you choose to invest in a real estate property, you are actually tying up money from your liquid assets into something that is illiquid. Your financial assets allow you to earn a rate of return but this is not necessarily going to be the case with your real estate property. However, you need to do whatever it takes to get a decent return on investment from your property, which is possible by renting it out.

-Lower Real Estate Risks

Like other investment strategies, real estate carries with it risk. That being said, it is possible for you to know how to navigate those risks so that you are able to work the markets to see the positive returns you’re looking for. Obtaining a quality real estate education from professional and experienced trainers, using proven real estate strategies, better enables you to go forward and see success in your investments. Many of those who get involved with real estate and don’t end up seeing success are those who did not take the time to get educated to further their financial success.

-Use Time Effectively

You will come across a lot of properties that are affordable. However, these properties demand a lot of your time and attention before you can convert them into a smart investment. Some examples include, low quality properties or vacation rentals. Finding the properties that are not just right as far as price, but right as far as the time expected before you see a return on your investment, is an important factor to consider when getting involved with real estate.