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Tenant Protection Plan

We work hard to find the best tenants for your property. But sometime despite all the work, tenants hit a rough patch and stop paying rent. We want to protect you if these ever happen at your property. Below is a list of programs we have developed in order to protect you and your property if there is ever an eviction. (more…)

Keeping Investment Records

Keeping complete records of your investments, from the beginning to the end of ownership, is simply good business. A major reason for maintaining accurate records is to calculate your gains or losses when you do sell the property. If you do not have all the documentation to back up your claims to the IRS, and you do have an audit, you could have serious (more…)

What You Do When You Inherit a Tenant

When an investor purchases a property with an existing tenant, the first thoughts are that rent will immediately come in and there will be no vacancy period. This means initially avoiding higher maintenance costs, leasing fees, and advertising costs. Of course, everyone hopes this is the ideal tenant and the rental agreement has all the best terms, but in many cases, inheriting the tenant with the property may not necessarily be an advantage. There are different scenarios that can happen.

Review the Rental Agreement

The first thing we do is determine what the tenant’s rental agreement contains. Is it a lease or a month-to-month tenancy? If it is a lease, then how long a period before the lease ends? What terms are contained in the agreement? Is the rent too low? Does the rental agreement contain the legal requirements to protect the property owner – for example, does the property require a lead based paint addendum? Reviewing the lease first will determine if you can raise the rent, remove the tenant, and/or change any necessary terms.
Reviewing the Tenancy

Next, we take the time to review the overall tenancy. Could it cost more in the long haul to keep this tenant? Whether the tenant is or is not on a lease, determining the quality of the tenancy is important even if you have to wait to give a notice or change of terms.

Does the tenant take care of the property? If the answer is no, keeping this tenant is costly to the investment; the property will only deteriorate over time and maintenance costs will be higher.
Does the tenant pay on time? Poor payment history often leads to legal problems. This may take a few months to determine if the former owner and/or agent have not given the most accurate picture of the tenant’s rental history. When a tenant does not pay on time after receiving timely notices to quit, they rarely change their spots and will continue to be a payment problem. It is better to move on to a better tenant as soon as possible.
Will increasing the rent cause a serious tenant problem or a notice to move?
Does the property need renovations require vacating the tenant to do them properly? Trying to do major maintenance while a tenant lives in a property can be more costly and can create other landlord/tenant issues.

Make a Plan

Once the status of the tenancy is determined, it is time to create a plan of action. If keeping the tenant is not a favorable decision and there is no long-term lease or the lease is shortly coming due, do not procrastinate – it is time to give the tenant a reasonable notice to vacate. The concern here may be that this will create legal problems. If this is a poor tenant, chances are legal problems, property damage, or security deposit dispute will happen anyway. If it has been determined that the lease prevents an immediate notice, then discuss a plan with your manager when to implement this action.

It may be that keeping the tenant is the best course of action, but changing any term of the tenancy, particularly rent, can cause a vacancy. If there is going to be a rent increase, be sure that the property maintenance is current, the increase is reasonable, that proper notice is given, and that all lines of communication are open. Most tenants are already afraid of what will happen when a new owner takes over. It is advisable to have the tenant sign a new lease and this can be awkward if there is to be an increase in rent. Move cautiously if the tenant is worthwhile keeping.

Remember – if you do buy a property with an existing tenant, the property is an investment but this is also the tenant’s current home. The tenant is a key factor to how well your investment performs, but if they are not the right tenant for the property or the terms are not right for the investment, it is important to make necessary changes. Discuss your options with us to develop a plan of action to protect your investment.

If you have a question about this topic or need assistance with anything else, contact a TierOne Real Estate Property Manager at 801-486-6200 or use the form to the right – we are here to help you with your rental/investment property whether you are a current client or one in the making.

Security Deposits

What can a landlord deduct from the tenants security deposit. Collecting a deposit before a new tenant moves in can bring peace of mind to the owner, but when a tenant moves out, what can you actually deduct from the deposit, and what do you need to do?

The general rule is that you can only withhold deposit monies for actual damages, material or financial.

  1. Always fill out a property conditions checklist before a tenant moves in, to compared to when they move out. That way there is no grey area of whether or not damage was present when the tenant moved in.
  2. Provide tenant with itemized receipt before returning the money. You need to show exactly what’s being deducted from the deposit and why. Invoices, etc help with that.

You can not deduct normal wear and tear, but what exactly is normal wear and tear?

  • General rug wear
  • Sun-faded wallpaper or paint
  • Nail holes in wall from picture hanging
  • Dirty blinds

Basically deterioration that results from the intended use of the dwelling.

Have clear cut standards you hold all tenants too. It makes moving tenants in and out a lot easier than having any special agreements or special treatment. Make expectations known. Tell the tenants exactly what they need to do and how they need to leave the property in order to get their deposit back.

Tips to prepare your home for a Rental

Renting out your home can be very lucrative and a great investment. But there are a few things you can do before you start advertising your rental, there are a few things you can do to prepare the home for renters. These items will help you get the most out of your rental and attract premium tenants.

  1. Once the home is empty, thoroughly inspect the property. Repair any major issuses. Leaking roof, leaking faucet or pipes, outlets, burnt out light bulbs. It is also a good idea to inspect the floors for sound.
  2. Tenants want a safe place to live. Make sure you have smoke detectors and CO2 detectors throughout the home and are in good working condition. Also make sure and have the fire extinguishers serviced.
  3. Clean the place! Dirty homes are a turn off, clean everything, the floors, blinds, windows, carpets, and repair and paint the walls, at the very least wash the walls. That will really brighten the room and make the home more appealing.
  4. Cleanliness applies to the appliances. Both inside and out need to be cleaned.
  5. Determine whether you will be doing the management yourself or hire a property manager. There are benefits to both. Truly sit down and think about which option is best for you.
  6. Determine the market value of your rental once the home is ready to rent. When you post your ad, you want to highlight the desirable feature of the property and get the most money out or your rental as possible.

Want a Market Value Report and a few suggestions to get the most out of your rental? Click Here.

Rents – Does It Add Up?

It is natural to want to obtain the highest rent possible when your property is vacant. A long vacancy can cause frustration, anxiety, and anger. However, holding out for more money can be more costly than you think.

When this situation occurs, it is better to use a mathematical approach. Write down the expenditures for your investment and this can indicate to you if it is worth the risk. Consider everything it takes to support the property for one month. It can be mortgage payments, taxes, homeowner association dues, insurance, repairs, gardening, and any other expense required to maintain the unit. Even if the mortgage is low or non-existent, can it really pay for a rental price that is not attracting a tenant? If the property is in a negative position, the picture can be worse.
Example of expenditures for an investment property, determine the rent
Mortgage $845
Taxes & Insurance $145
Management Cost $70
Landscape $50
Repairs $50
Total $1,160

The above property has been on the market while occupied for thirty days and now vacant for two weeks. The asking rent is $1200, the property is in good condition, and it is in a good neighborhood but there are no applications. The Property Manager calls and requests the owner approve a rent reduction of $100 because of the competition and the slower economy. This property will cost $1160 for a month of vacancy. Already, the two-week vacancy has a loss of $580. If it is vacant for six weeks, it will be $1740; two months would be $2320

If the price lowers and the property rents within 2 weeks, the loss will only be $1160. Now that you have seen the math on this property, is it worth it to keep the higher rent if the activity is non-existent? There are no guarantees that the right tenant will apply even with the lower rent, but the odds are greater.
Apply a reverse example of this same math

The owner of the above property will not lower the rent and the property remains vacant. The rental now has been vacant for six weeks so there is already a loss of $1740.00. Prospective tenants apply but their rental record and credit is not good. This is a tempting situation but not a good one.

Although there has already been a loss, a destructive tenant can create a greater loss than that of the vacancy. Generally, a poor tenant will not pay the rent. More money is lost if attorney fees are needed to evict the tenant. This is often major damages when tenants default. The impulse is to give in and rent to the unqualified tenant to stop the rental losses. It is NOT worth the price.
The smarter choice

Lower the rent and attract the right tenant. Qualified tenants know the rental market. They will simply ignore those asking too much and rent a comparable property for less. There is still no guarantee that the property will rent but picking the wrong tenant is still the wrong choice.

It cannot hurt to try a higher rent if the market indicates properties are renting quickly. However, if the property is still vacant, it is time to think about doing the math and reducing your liability.

If you have a question about this topic or need assistance with anything else, contact a TierOne Real Estate Property Manager at 801-486-6200 or use the form to the right – we are here to help you with your rental/investment property whether you are a current client or one in the making.

The Unfortunate Notice

Why is the tenant giving notice now! This may be your first reaction if you receive a notice to vacate from a tenant with a holiday season approaching. The first thought is that no one will rent a property in November, much less December – the holiday month. There is the prevailing belief that the property cannot possibly rent until the first of the year or possibly even longer.

While it is true that it can be slower during the months of November and December and the property may be vacant until January, it is also a fact that properties rent every month, including the month of December. There are many reasons that the property can rent, even on the twenty-fourth of December! People receive job transfers, receive a notice from their landlord because the owner is going to sell or the property is in foreclosure, they need a larger home because they are having another child, their lease is up, they want to move to another neighborhood, or they prefer another school district. The many reasons why tenants move is the same list of reasons to move we encounter through the entire year.

People rent properties as dictated by their circumstances or needs and that means it does not necessarily fall on the first of the month or avoid the holiday season. This has been one of the biggest misconceptions about rentals since the beginning of time. When their job transfer comes through, it can be any date. The same follows through for all the different reasons that motivate a tenant to give notice. There are people who plan a nice tidy transition on the first of the month or in the summer, but if you take a poll from property managers around the country, you will find that properties rent all through the month and for many different reasons. There are not just the same numbers of people who move during the holidays as the rest of the year, so it requires a different perspective.
Take the positive approach

Thinking negatively does not help the situation – you need a positive approach for any pending notice to vacate, but especially during the holiday season. Take the time to look at the property objectively to reduce your losses and rent the property as quickly as possible.

What incentives can you offer during the holidays to entice applicants to choose your property? Perhaps you can offer a gift certificate at a local market or shopping center for holiday expenditures.
What maintenance will improve the property while on the rental market? Perhaps a yard cleanup will negate the effects of the winter season. A fresh coat of paint can do wonders and may be less expensive than during the summer months.
What tax benefit will you gain for the current year? If there is any loss of income or maintenance expense, think of it as an additional tax advantage.
Will this improve the tenancy? There are times when a notice can lead to better tenants.

If you do receive a notice to vacate during the holiday season, do not despair. Our company will work as diligently as we do during any other month of the year to rent the property as quickly as possible.

Unless there are extenuating circumstances, we will immediately put the property on the market for rent.
We will employ all available marketing means to rent your property.
We will use any incentives authorized by you to rent the property.
If we do encounter any difficulties with renting the property, we will keep you advised.
We will always seek qualified tenants even though we are trying to eliminate or reduce any vacancy period.

While we recognize that the holiday season can present challenges, as professional Property Managers, we work to overcome them and believe in taking the positive approach.

If you have a question about this topic or need assistance with anything else, contact a TierOne Real Estate Property Manager at 801-486-6200 or use the form to the right – we are here to help you with your rental/investment property whether you are a current client or one in the making.

Licensed with the Utah Division of Real Estate