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Things landlords can do today to prepare for winter
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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.

Do You Have The Right Type Of Insurance?

There are important steps that investors must take to ensure the success of their rental property; one of the most critical is that of procuring the right property insurance.

As your property management company, we cannot advise you specifically on what insurance policy to purchase. The purpose of this article is simply to make you aware of common insurance facts and questions that are important to ask your insurance provider. Failing to know what coverage you have could lead to major financial loss in the future.

Does my property have the right insurance for an investment/rental property? This is THE key question to ask. Many people do not realize that a normal homeowner’s insurance policy is generally invalid within 30 days after vacating the property and converting it to a rental property. A different policy should be put in place as soon as possible.

In addition, the best insurance for a rental policy will give you additional coverages, such as loss of rent. The type of insurance coverage for landlords generally falls under the umbrella term “property and casualty insurance.”

What type or types of insurance do I currently have on my rental property? Building coverage, hazard and fire Insurance, as well as liability insurance, are always needed for the physical property. However, there are additional insurances that can be carried, depending on the location of the property, age of the property, and other extenuating factors. Other insurances to investigate are flood insurance if you are in a flood plain, sewer backup insurance, workman’s compensation, terrorism insurance, and loss of income insurance. Question your agent on your current insurance and what other policies are available that would be appropriate for your investment and worth the cost.

A big key to obtaining the right insurance is to provide your agent with ALL the facts – age of the property, condition, area problems, special use, etc. It is very important to be specific on what “type” of investment property you have (for example, horse property, condominium, single-family, apartment etc.). Most landlord insurances are for 1-4 units and multiple units above this number are handled on a different basis.

I have outbuildings on my rental property, are they covered? Most policies generally do not include additional structures, unless specified. This is another reason why you need to disclose all the information to your insurance agent and obtain quotes.

Is my property covered for loss of rent? Covering rental loss, under the right circumstance (such as a building fire), is one of the pressing reasons for obtaining a good landlord/rental policy. There is no coverage for tenants giving a standard notice to quit and vacating the premises. However, it may cover vandalism during an eviction or vacancy – but you need to ask. Have your agent discuss in detail the paragraphs in your insurance paperwork which pertain to vacancies / income loss and what is your actual coverage.

Is my property covered for disasters such as fire, tornado, hurricane, tsunami, flood, and more? Normally, most natural disasters are not covered. However, the insurance company may make a determination that many damages are covered. For example, although a flood isn’t covered, there may be coverage for “water damage.” Another example, a house fire is usually covered for damage as long as the landlord has not shown neglect which caused the fire. The insurance company will have a list of criteria for what is and what is not covered for extreme conditions under the existing policy. Again, find out the facts, ask questions.

How can I reduce the cost of my landlord policy? Landlord insurance is more expensive than a homeowner policy and the main reason for the increased cost is that a landlord doesn’t have any control over a tenant’s actions, implying additional elements of risk. In spite of the higher cost, landlord insurance can be made more affordable through discounts for having security alarms, especially monitored ones, burglar alarms, deadbolt locks, and fire extinguishers. Ask your agent for recommendations on cost-saving items you can do. Remember, landlord insurance is worth the cost.

It is of utmost importance and your responsibility to consult your insurance provider regarding your coverage. It is also part of your contract with us that you provide our company with proof of insurance.

There are many insurance companies and plans available and it pays to compare coverage. If your agent cannot spare you the time to answer your questions, seriously think about shopping for another agent and/or company. Review your policies at least once a year, require that your agent provide you with the facts, and take out the best possible policy for your specific investment property 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.

Renting to the Handicapped

Fair Housing is simple – do not discriminate. While this may be a basic principle, it is often not “easy” to follow, particularly in the area of handicapped or disabled persons. Many landlords often do not know or understand the legal requirements when it comes to renting to handicapped tenants, which can lead to costly lawsuits. Courts do not tolerate ignorance of Fair Housing laws and penalties can be extremely steep regarding discrimination against the disabled.

There are many Fair Housing Acts as well as Presidential Orders. The following acts are particularly important in the rental housing industry and disabilities.

Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability)

The 1988 Fair Housing Amendments Act recognized the need to define and protect the rights of the disabled throughout American society.

Title II of the American Disability Act (ADA) of 1990 prohibits discrimination based on disability in programs, services, and activities provided or made available by public entities. Housing and Urban Development (HUD) enforces Title II when it relates to state and local public housing, housing assistance, and housing referrals.

Fair Housing defines “handicap” as:

A physical or mental impairment which substantially limits one or more of a person’s major life activities
A record of having such an impairment
Being regarded as having such an impairment

Property owners cannot refuse to rent to a handicapped person if they are qualified to rent the property. Under ADA, owners may not inquire if a person has a disability, or ask questions concerning the nature or severity of a disability. However, they can make the following inquiries if they ask them of all applicants:

Inquire into applicant’s ability to meet requirements of tenancy
Inquire whether an applicant is qualified for a dwelling available only to persons with handicaps or a particular type of handicap

There are several areas regarding the disabled that can lead to trouble – one is that of assistance animals. These animals are not “pets” under Fair Housing laws and owners cannot charge “pet deposits” or increased deposits for a handicapped/disabled person who needs an assistant animal. While they cannot refuse the animal, owners can require the proper paperwork from disabled tenants or applicants before allowing the animal in the residence.

Property owners also cannot refuse to rent to handicapped tenants who require modifications to a dwelling. The 1988 Amendments Act requires that landlords allow persons with disabilities to make reasonable modification necessary at their own expense. Examples of this are widening doorways, installing grab bars, and lowering kitchen cabinets. In rentals, landlords may require, when reasonable, that the tenant restore the original condition when vacating the premises.

The 1988 Fair Housing Amendment also set up new requirements for new housing and HUD publishes technical assistance to builders, developers, and others regarding new construction.

There is, of course, so much more to the Fair Housing acts that govern the disabled that we cannot cover in this article space. To obtain more information go to the following HUD and Justice Department websites.

http://www.usdoj.gov/crt/ada/adahom1.htm

http://www.hud.gov/offices/fheo/FHLaws/index.cfm

As your property management company, we understand the importance of following all Fair Housing laws to protect you and your investment. Following Fair Housing is sound property management practice that reduces 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.

What If The Tenant Quits?

It is the first of the month and the rent is due. The rent does not come in and a notice to pay rent or quit is served. The majority of tenants pay the rent. But what if the tenant decides to “quit,” by vacating the property?

The first reaction is usually anger and outrage on this unfair turn of events because the owner will not have the rent and there is a high probability there will be damage. When the initial emotion passes, it is more productive to take a different perspective.

It is better to have a sudden vacancy than go through the strain of waiting to see if they are going to pay, working through the excuses and behavior of a tenant stalling for time, and then having them vacate anyway.
The property manager and owner now do not have to make the agonizing decision to start formal eviction proceedings or spend time waiting for the rent.
Bypassing an eviction means avoiding more expenditures and time to remove the tenant.
If the current tenant is not going to pay the rent, it is better to have the property back so a paying tenant can be procured and the tenancy can be improved.
The security deposit can be applied to damages and loss of rent.

Can you take possession?

Yes, if a tenant abandons the property, you can take possession. If they have left personal property in the residence, then consideration has to be given to the value of what is left behind and how to dispose of it. It is important that a property owner does not rush into selling off the personal items of a tenant to regain what the tenant owes them.

Do they still owe the rent?

If they are on a lease, the tenant will still owe the rent until the property is re-rented or the ending date of the lease, whichever comes first. If they are on a month-to-month tenancy, the rent is normally due for what is specified in the rental contract regarding the amount of notice required.
Do you still have to send a statement on a security deposit?

Yes, even if it is to the property address with a “please forward and/or address correction required.” This way, the property manager and/or owner are covered for itemizing the monies deducted against the amount of the deposit. It is good business to itemize security deposit damages whether the tenant vacates suddenly or follows the terms of the contract.

Can you report them to a credit reporting agency?

Yes, as long as there is written documentation, attempt at notification, and if the rental agreement and/or notice to quit contains important wording notifying the tenant that the landlord has the right to report them to a credit reporting agency. This is required under Federal Credit Reporting Act law.
Can you still seek damages?

Yes, you can always seek damages in any situation if a tenant owes rent or damages. The first step is to obtain a judgment in small claims or report the loss to a credit reporting agency.
How can you collect damages?

The best solution is to use a collection agency since they have the tools and expertise to track people who owe money. Although the agency does collect a fee, it is better to receive some remuneration rather than nothing at all.

How do you avoid this situation?

As your property management company, our solution is to prevent this by obtaining a qualified tenant. However, there are no guarantees this will work. People often encounter difficult situations, such as divorce, drugs, loss of employment, high medical bills, and more that often lead to poor judgment in handling their personal situation.

However, if the tenant quits, it is better to take the most productive course of action and move on to a better tenancy for your investment and your peace of mind.

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