The Involuntary Landlord

Sticking to What You're Good At! Monday Minute 3_21_11

 

I know you think you are good at everything - let's re evaluate!

Termites! Yuck! Thursday tip for 3-17-11

 

Termites happen! Don't get caught with all your termite eggs laid in the basket of your rental home. Get a bond and maintain it!

6 Mistakes that cost Involuntary Landlords Thousands of Dollars

I talk to people every day that have rental property they wish they could sell. Unfortunately they have joined the realm of “involuntary landlords.” Managing rental property seems very simple, but like any business venture, there are lots of things to know and the learning curve is steeper than it looks. I have helped clean up a lot of messes for these fine people and here is a list of some common mistakes. If you are making these same mistakes, maybe you could use my help.

 

1. Not performing routine maintenance on their home – Owning a home is an expensive proposition. Maintaining a home properly can cost a lot of money. Failing to do so is guaranteed to cost a lot of money. A properly maintained heating and air conditioning system can last three times as long as a neglected one. Ignoring a small water leak can lead to a mold problem and you don't even want to investigate the cost of a big mold problem. A tiny crack in your basement wall can be a sign that the foundation walls are in danger – do you really want to ignore them? You may have a tenant, but you really need to look after your own home.

2. Not visiting the home – One of the first homes I ever managed was outside of Atlanta in Lawrenceville and was owned and self managed by a lady in Virginia. When I saw the house for the first time, she had not been there in over two years. To this day it is the shining example to me of what a bad tenant can do to a house. Broken windows, holes in drywall, fixtures ripped from their mountings, dirt and debris everywhere – if you can imagine it, this home had it. Just a semi-annual visit would have stopped this issue in its tracks and saved her thousands of dollars. If you live too far away to visit your tenants 2 or 3 times a year, you really need some help with your property.

3. Allowing rent to be paid late consistently – Late rent happens. If you have tenants long enough, you are going to accept some late rent. When it becomes a habit, however, you need to be proactive and find out why. Late rent is usually a symptom of some other malady and left unchecked can quickly turn into “unpaid” rent. Landlords and managers should have a system for dealing with late rent and follow the system. Enforce late fees, send written demands, make phone calls – whatever you have decided to do. Show the tenant that you take late rent very seriously and you will move to the top of the list of who to pay first. Let it slide and you will find yourself on the bottom.

4. Having a rigid “No Pets Allowed” policy – 80% of renters have or want a pet. Do you really want to market your home to only 1 of 5 potential tenants? Stop thinking of your home as “your home” and start thinking of it as an investment. Every day your home sits unoccupied costs you money. Even two weeks of vacancy time will cost you more than the average “bad” pet will cost you and most pets are pretty good. Accept pets with a pet deposit and see your home rent much faster.

5. Asking for an above market rent – This is incredibly common and very costly. Determining market rent is simple. Find out what homes like yours have rented for recently in your area. That's the market rent. It doesn't matter how much your mortgage is or how much you spent on repairs, paint and carpet. Your home isn't that much nicer than your neighbor's. I know you think it is, but you're wrong. Don't be confused by what people are asking for their homes, either. All that matters is what people have actually paid. If you can't find the information, don't guess. Call an expert. If you price your home too high it will sit empty and you can't afford that.

6. Leasing without a written agreement – This is just stupid. I know hundreds of people and about four are welcome to live in my property without a lease. I don't care who it is, put your agreement in writing. A standard lease is available in any office supply store or online for a few dollars. Not having a written lease can cause you thousands of dollars, not to mention the stress!

 

This list is far from complete. The landlord game really seems simple until it isn't. Don't get fooled. Read some books, get some advice, do your homework or just break down and hire a professional. It's very likely that if you own rental property your time is worth more than you would pay your property manager.

 

In Atlanta, call the Best Atlanta Property Management Company – Absolutely Affordable Property Management. Find us online at www.absolutelyaffordablepropertymanagement.com or call us at 770-682-7735. We keep more money in our client's pockets every day.

 

For tips and advice, visit www.InvoluntaryLandlord.com. We post vlogs every Thursday and Monday, so visit often.

 

Monday Minute - Save thousands and get inside your home!

 

In this version of the monday minute we talk about HVAC systems and how you can save thousands of dollars over the lifetime of yours. Brought to you by the BEST Atlanta Property management Company, www.absolutelyaffordablepropertymanagement.com. 

Thursday Night Tip forLandlords

 

Pets - Gotta Love 'em!

Holiday Tasks for Landlords

The holiday season is upon us. This is a great opportunity for Involuntary Landlords, investor landlords and property managers to take a look at your property and build on your relationship with your tenant at the same time.

As you can see from this earlier post, It is very important for you to have occasional access to the inside of your rental home. While most tenants will take good care of your property, it is a big deal to find out earlier than later that you have one of the "bad seeds." The only way to get this information is to go inside.

Your lease probably contains a provision that says you can go inside and inspect in certain situations. Maybe you have to provide 24 hours notice and do it during office hours on a weekday. You should definitely be using that provision. I recommend a minimum of two visits each year and lean towards three in the first year. Not only do you get the peace of mind that putting your eyeballs on a well maintained home provides, you let the tenant know that you care about the manner in which they maintain the home. This knowledge will make a difference to most tenants and the property will be in better shape for it.

It is also very important to have a good relationship with your tenants. Every time you have to find a new tenant you are going to spend money, usually more than a thousand dollars. If you are an Involuntary Landlord, you are probably not in position to throw away that kind of money. A much better strategy is to invest fifteen dollars. Let me tell you how.

At the beginning of December, I emailed all of my tenants and let them know that I intended to visit them during the second week of December to "take a look around the house and bring you your holiday gift." I asked them to let me know when they were available and I offered them a choice of gifts. You can find dozens of nice gifts for twelve dollars. I bring turkeys, red wine or white wine. If they don't want any of the above, I bring a gift card. This visit gets a great response. Everyone likes a gift. Just like women appreciate a man bringing flowers, our tenants appreciate a gift as well.

My visits last just a few minutes. I take a quick walk around the house, deliver the gift and a card, and take some time to ask my tenants if they are happy with their home. I don't ask these questions to appease the tenants, I ask because I want them to LOVE their homes. I write down their comments and discuss them with the homeowner. If we can improve things in a cost effective way, we generally do.

These visits are enjoyable for all of us. It is always fun to give to others and the holidays are a time where most conversations are light and happy.

If you aren't making holiday visits as a landlord, I strongly urge you to try it out this month. We will continue to add new information for landlords here. Come back often and make sure to sign up for the free newsletter.  Until then, if you have any questions concerning property management, landlord/tenant issues, general real estate concerns or just need the best possible team managing your North Georgia Property, call me personally at 770-682-7735.

Should I Invest in a Home Warranty for my Rental Home?

One of the most frequently asked questions by my new property management clients concerns home warranties. A home warranty is an insurance policy purchased to cover repairs to various systems and appliances throughout the home. Costs and coverage vary, but for the purposes of this discussion, we will assume an average sized home with a warranty cost of $400 annually.

Should I Invest in a Home Warranty for my Rental Home?

Purchasing a home warranty is a financial decision. The homeowner needs to weigh the costs and benefits in order to determine whether or no to make the purchase. In this case, the cost side is easy. The cost of the policy in our example is $400 per year.

The benefit side is another story, and this is where the problem can become tricky. If I were a warranty salesman, I would tell you that a new furnace or air conditioning unit could easily cost you $4000 dollars - TEN TIMES the cost of the warranty. I would tell you that if your water heater breaks it will almost certainly need to be replaced and that replacing a water heater is a thousand dollar job. I would ask you if you have shopped refrigerators or dishwashers lately and caution you against gambling that a tenant will take care of your appliances. And then, when I had you thinking about all the horrible things that could happen in your home, I would pull out my sales contract and say "sign here."

Since I am not really a warranty salesman, let's take an honest look at the benfits of owning a home warranty. We will start by answering some questions. In the last five years, how many times have you had an appliance serviced? Think back to what the problem was and how much it cost to repair. I can tell you that in my own homes, I have only had two problems. The first was with the auto igniters on a gas range. They would not ignite the gas. The second was last year when my oven stopped working. The computer chip that ran the oven failed. The igniter problem was solved by disassembling the igniters, cleaning and adjusting them, and putting them back together. The total cost for the visit and service was $150. The oven control problem was more expensive. The part was $350 and the labor was $100. So using me as an example, my benefit over the last 5 years would have been $600 or $120 per year. When you add the trip charge that most warranties require (usually about $50 per repair), my benefit would have been $500 and my cost would have been $2000 (5 years @ $400 per year).

Right now I am managing 16 rental homes. They all have problems from time to time. This year I have replaced 2 dishwashers, an oven, and a water heater. If all 16 homes had a warranty, the total cost of the warranties would be $6400. The 2 dishwashers cost $700 total. The oven was $500 and the water heater was $1000 (all including labor). The total benefit to the owners would have been $2000 with a $6400 cost.

Most systems and appliances in your home are built to last. The oven we replaced was twenty years old. Dishwashers last ten or more years in most cases. Water heaters average eight years or more. Furnaces and air conditioners can last thirty years if properly maintained. Take care of your appliances and when the time comes to replace them, you will know you got your money's worth.

I suppose it is conceivable that an owner could have thousands of dollars in covered repairs in a year, but I think it would be like hitting the lottery. Most of the time, insurance should only be purchased in situations where not having insurance could be ruinous. If you drive a car without insurance and total another person's Rolls Royce, you could be liable for hundreds of thousands of dollars. If you don't have health insurance and get hit by a bus, you could quickly be bankrupted by medical bills. If your water heater blows you will be inconvenienced and annoyed, but probably not ruined.

My advice is don't purchase a home warranty. Instead, have your furnace and air conditioning units professionally serviced once a year ($79), replace your filters 4 times a year ($12), and put aside the other $309 for repairs that will certainly come up from time to time. In the long run, I think you will be pleased with the decision.

On the other hand, if you are the sort of person who is more comfortable with a fixed annual cost and a more limited risk, I would be happy to put you in contact with a reliable warranty company.

Its not always easy to find an honest answer to questions like this one. Most of the folks with the answers are too busy trying to sell you the product to help you decide if it is right for you. Remember, if you have any questions concerning property management, landlord/tenant issues, general real estate concerns or just need the best possible team managing your North Georgia Property, call me personally at 770-682-7735.