Deposits are tough.  Quite often I get asked this question:  “Can you work with me on the deposit?  Can I give you half of it now and the other half next month?”  I’ve agreed to that proposal many times in the past, years ago.  And I got burned every time.  EVERY time!

So I had to toughen up and decide that no one would move in unless the security deposit was in my pocket.  All of it, up front.  And sometimes that means having your tenant pay the deposit one week, and moving in two weeks later, when they have the rent payment for the month.  And that’s okay.

What I’ve learned is that you can’t trust that people will come up with the rest of the deposit money after they’ve moved in.  It’s sooo frustrating to chase people for money, and it’s not good to start out that way.  I don’t let people move in until they’ve paid their full security deposit and rent.

Also, I let them know that if they pay the deposit and don’t end up moving in, they lose their deposit money.  (This should be in writing, as part of the application.)  After all, I’ve held the house for those people, taken it off the market, counting on them moving in.  If it doesn’t happen, I’m keeping that deposit money for sure!

It took me several years to learn this.  I’m a trusting person, always believing the best in people.  But I learned — the hard way — that the best doesn’t always happen.  So when I agree to rent a place to someone and I take it off the market, I protect myself.  You should too.

Think the best, but protect yourself too . . . Get all of the security deposit up front, and all of the rent before move-in.  And if someone gives you the deposit and bails on you, pocket the money and start over.  Someone more reliable will come along, and you will have the deposit money to make up for the time and effort you spent.

Live and learn, right?

For those who stay in, tenant issues can be a nightmare.  Moving them in, getting them out, again and again.  It can be tedious and frustrating.  We all have a certain number of tenants, however, who are totally delightful people who pay their rent on time, and keep their house and yard clean.  So the question becomes, “How can I attract and keep great tenants?”   Here are a few tips:

ATTRACTING GREAT TENANTS

• Curb appeal — make sure your home looks great from the outside.  Add a couple inexpensive additions like a wreath on the door or a couple pots of flowers on the porch.
• Be pleasant — when you get calls and/or meet an applicant, be friendly and informative.  Leave them thinking they’d love to have you as a landlord.
• Advertise smart — in nearby businesses, churches and other venues you feel might be frequented by desirable applicants.
• Get referrals — use your current fantastic tenants as sources for additional fantastic tenants, and reward them for referrals that work out well.  Gift cards, discounted rent, a perk for their home, i.e. new carpet for a room, or a new appliance are some ideas.

KEEPING GREAT TENANTS

• Rewards – Do a monthly news letter and include, occasionally, a “Tenant of the Month” section.  Praise and recognition are meaningful forms of thanks.
• Gifts — I always give my wonderful tenants a small gift of appreciation at Christmas time with a short note.  Again, they need to know how much I enjoy having them with me.
• Ask for referrals — when I have an empty apartment I always let my great tenants know about it.  Maybe they have a friend or relative who might be interested.

And to keep your stress level at a minimum, always do apartment checks!  Make sure your tenants are maintaining the home in a satisfactory manner … and if they’re not, put it in writing (documentation!) and make sure they correct the problems.

Following the above advice can improve your tenant mix. The ultimate goal is to fill our homes with fantastic tenants who love the way we manage them and our properties.

Onward and upward!  

So whether you’ve been evicted or foreclosed on, your credit is pretty much trashed, and there isn’t a landlord in the city who’ll consider renting to you, right?  Wrong.

Along with those who lost their homes due to an ARM they couldn’t afford when it came time to pay the higher rate, there are many legitimate reasons people lose their homes and apartments:

• Personal or family health problems/related hospital bills
• Being laid off or downsized, loss of job
• High, unplanned-for utility bills resulting in budgeting problems
• Loss of second income that helps to pay rent or mortgage
• Loss of extra income, i.e. child support, SSI, etc.
• Stolen money, cars or other prime essential belongings

These are all legitimate reasons for losing a home and many times, people are able to rebound and get back on their feet after a few months.  As a landlord, I look at the reason behind an eviction or foreclosure, check out the applicant’s current ability to pay rent, and make a decision based on those things.

Bad applicants tend to have a string of evictions, and always have an excellent excuse to accompany each eviction.  I don’t go there.

Here’s the bottom line:  if you rent to lower-income individuals, you’re going to have some applicants who have an eviction on their record.  And in this economy, evictions and foreclosures are plentiful at every socio-economic level.  So if you refuse to look at someone with “a history,” you may be without a tenant for a long time!

Look at the reasons behind the eviction . . . some are understandable, and some will disqualify the applicant.  You decide . . . go with the facts, and go with your gut.

There’s nothing in our housing laws that makes it illegal to rent to someone who is here illegally!  Some jurisdictions have tried to make it a crime but have failed thus far.  Anyone who is here — legal or not — has basic rights.  And if you deny tenancy because of national origin, it is YOU who are breaking the law, regardless of whether that person is here legally.

I always screen my applicants and have them provide a recent paycheck stub, driver’s license, social security card or other valid ID.  In the case of immigrants, this is often a work visa or Individual Taxpayer ID Number (ITIN).  For other suggestions on verifying identity/background, go to the site below.  It’s from the Fair Housing Council in Oregon and it’s quite good:

FHCO.org/pdfs/SuggestedAltDocs.pdf

And of course, if anyone falsifies ANYTHING on an application, you have the right to deny them tenancy on those grounds.

Renting to illegal immigrants is not against the law, and refusing to rent to them because they’re here illegally puts you, as a landlord, at risk.  They are to be treated no differently than people from Asia, Pakistan, Ireland or Australia.  Fair housing laws demand that we not discriminate against applicants because of their national origin.  Period.

So regardless of your personal opinion, be aware of the law and make sure you don’t discriminate.  You could end up in jail instead of the illegal immigrant!  Hmmm . . .

According to the Wall Street Journal, multi-family construction starts in November increased by over 25%, while single family starts limped along at just over 2%. Here’s the link to the article: http://online.wsj.com/article/SB10001424052970204791104577110204041040514.html:

We’re still not seeing healthy growth in the housing market, as foreclosure looms over thousands of homeowners and job security is an issue throughout the country.  Economists aren’t predicting an upswing in the housing market until mid-2013.  (Yikes!)

Even so, the Commerce Department states that compared to a year ago, housing starts rose in three out of four regions in the US, led by the Northeast.  Only one region had a decline in starts — the Midwest.  Well, Indianapolis is right in the middle of it (sigh) so I guess the good news for us investors is that rental demand/occupancy is up and this situation is likely to continue for some time.

As I’ve said many times, now is the time to buy rental property . . . single family, duplex, small apartment building . . . there’s a lot of opportunity out there for the smart investor.  And the time is now!  

I’d just been in his side of the duplex last month and these walls were the normal creamy off-white I always use.  I don’t know what possessed him to do this but I discovered it after I evicted him.

The white part on the left is where I’ve used Kilz to prime the walls before repainting.  The horizontal patch is his work . . . a half-assed attempt at repairing a hole in the wall.  (Sigh . . .)  Fortunately, the priming didn’t take long.  He only painted half the room black, so it was a quick fix.

What I’ve learned through the years is that you can have an excellent, airtight lease but that doesn’t necessarily mean people will follow it!  That’s why it’s important to do apartment checks from time to time.  (Although a check would’ve discovered this mess after the fact.)

The bottom line?  Some frustrations are unavoidable.  You do the best you can, take good care of your homes and tenants, have a great lease and hope they adhere to it.  And when they don’t, you threaten them or evict them, and move on.

This apartment will be ready to go in a couple days.  It’s in a nice area, so a “For Rent” sign in the yard may attract a friend or relative of someone who already lives on the street. I’m hopeful . . . onward and upward!  

The Friday after Thanksgiving, at 11:30 PM, I got a call from a tenant in one of my duplexes, saying shots had been fired in the area, and there were police at the other side of the duplex.  Wonderful.  I didn’t get a call from the other tenants.  Hmmmm ….

I went down there the next day and of course, the tenants said it must have been a “drive by” because they don’t have any enemies, etc.  (Again, hmmmm…..)  The bullets went right through the two-inch thick wood front door and were embedded in the paneling in the living room.  Well, I’d had complaints and suspicions about these tenants previously re: drug activity and had the narcotics division check it out (to no avail), so I wasn’t buying their story.  I strongly suggested they move out and they acquiesced.

Here’s the bottom line:  if you suspect drug activity at one of your rentals, call the police and have them do surveillance.  And more importantly, put a clause in your lease to protect yourself, which I’ve done since this incident.  I’ve added a clause that states, “Police visits will not be tolerated.”  Enough said!  You need to be able to file eviction if there is police activity at one of your rentals, even if it’s domestic disturbance.  Putting that clause in your lease gives you the option to evict if you feel it is necessary.

We landlords can’t be at our rentals 24/7, and the best we can do is have an airtight lease to protect ourselves from tenants who are conducting illegal activity or creating disturbances on site.

When in doubt, get ‘em out!

• Get your financing in line first.  How’s your credit?  Trim down on that extra (unnecessary) spending and start planning for your first purchase!  Figure out what you can spend and how you’ll pay for the property.
• Find your target neighborhood.  Before I bought my first rental property I drove several neighborhoods, none of which were further than 30 minutes from my house.  Drive through at all hours of the day, talk to homeowners . . . they will give you precious details about the area/residents.
• Talk to other, seasoned investors who’ve been there, done that.  Join a landlord association.  Read books.  (Mine is a good one. Lol . . . but seriously, it offers tools, tips, techniques, forms, products and advice to simplify the process.)  In other words, don’t go into this blind.
• Decide on multi- or single-family rental properties.  Multi-family will bring in more money but is more labor intensive.
• Look at your personality, work life and home life — do you have the time, etc. to manage your own properties?  Not everyone is equipped to do this work.  Some people have time constraints that prevent them from doing it, others have personality constraints that make it difficult.
• If you’re not going to do much of the work yourself, find honest, reliable subs before you buy.  You’ll want to hit the ground running as soon as you close on a property, so you’ll need to have your workers all lined up and ready to go.

There’s so much involved in buying rental properties, especially as a first time buyer.  But it’s fantastic for income and long term investment, and now is an excellent time to consider jumping in . . .

So prepare well, trust yourself, and go for it!

Most people think that month-to-month leases pose yet another challenge in the already difficult job of landlording.  They feel that tenants are more likely to move out if they have a monthly lease.  But I haven’t found this to be the case.  I have monthly payers who’ve been with me for three or four years.  And seriously, with the economy the way it is, it makes sense to do monthly leases . . . people’s lives can change for the worse in an instant.  They get laid off, lose their jobs, get transferred out of state, etc.  So they appreciate being on a monthly lease instead of a long-term commitment.

And here’s the beauty — for us landlords — of the month-to-month lease.  If you have a tenant who’s been nothing but trouble, or has been unreasonably demanding, or otherwise undesirable, you can take back your rental unit with 30 days’ written notice.  Tell them you intend to do some renovations to the unit — whatever.  But you can have them move with that 30 days’ notice.  (Actually, you can even evict them for the above issues as long as there’s no discrimination or illegal retaliation involved on your part.  I’ll cover that in another blog post.)

So don’t be afraid to go with a month-to-month lease.  It can help your tenant, who may be willing to pay a bit more rent for this privilege, and it can also help you, if you decide the tenancy isn’t going the way you’d like!

Onward and upward . . .