Rental Property Myths

When people ask me about owning and managing my Indianapolis rental properties, I get the same questions/comments again and again. Here are the most frequent  myths I respond to:

  • “I’ll bet you’re always getting calls in the middle of the night!”  No, in my 21+ years of doing this, it’s rarely happened. Yes, I’ve received calls on the weekend and/or in the evening, if someone has an emergency, like if a furnace goes out. But fortunately, I have my trusted contractors to call, and they can take it from there. I’m not making trips to my rentals on those calls. And if it’s something minor (which it sometimes is) I have them wait until the next working day.
  • “Don’t you get tired of your tenants totally trashing the places?”  Well, I’ve had tenants leave trash behind after a move-out, for sure. When I’ve evicted a person, sometimes they take what they need, and leave the rest. This happens more often in the lower economic demographic. But as far as vandalizing/destroying the apartment, out of anger or resentment, no. If you treat your tenants with respect, this doesn’t occur.
  • “I’ll bet you’re making a ton of money!”   Uh, no … When you buy rental properties, you’re buying for income, yes, but also for long-term investment. It’s not a “get rich quick” proposition. If you’re buying with a loan, you want to make sure your rent will cover more than your loan payment and other expenses (i.e. taxes, insurance, utilities, etc.). You can make a “ton of money” if you buy a ton of rentals, for sure. But the commercials you see on TV are totally exaggerated! Don’t buy into that crap!
  • “You’re a slave to those properties…you don’t have a life of your own!”  That depends on a couple things: if you fix them up well in the first place, you shouldn’t have many major repair issues going forward. And also, you have the option of hiring out the management if you don’t have the desire, personality or time to do it yourself. The cost per month is usually 8-10%/monthly rent, plus a percent of the first month’s rent. But beware — good, honest property management is hard to find.

So there you have the comments/questions I get most often — all myths. This business is intricate, demanding, frustrating, and very rewarding. I don’t regret beginning my journey all those years ago, and I do my best to educate others before they jump in. It isn’t for everyone, but for many, it can be part of a smart, long-term investment strategy.

Onward and upward!  :-))

 

Be a Happier (Business) Person

The National Association of Realtors publishes a pretty cool magazine, and I get weekly emails from them, with featured articles of interest to Realtors. This one struck me, because it applied not just to business, but to everyday life as well. The article cited six tips to being happier in general. Here it is:

1) Stay positive.

“Bad things happen to everyone, including happy people,” writes Travis Bradberry, co-writer of “Emotional Intelligence 2.0” and co-founder of TalentSmart. “Instead of complaining about how things could have been or should have been, happy people reflect on everything they’re grateful for.” Happy people tend to find the best solution to a problem and then move on, refusing to dwell on negative events.

2) Surround yourself with the right people.

You’ll build confidence and stimulate creativity by surrounding yourself with other upbeat people. Negative people, on the other hand, can zap away your energy.

3) Exercise more.

Even moving for as little as 10 minutes can help release a neurotransmitter that helps soothe your brain and keep you in control over your impulses. Schedule regular exercise into your daily life.

4) Slow down.

Don’t be so caught up in a routine that you forget to appreciate the little things in life. Enjoy a conversation or take a step outside to enjoy a fresh breath of air.

5) Have deep conversations.

Avoid gossip, small talk, and judging others. Have meaningful interactions by engaging with others on a deeper level and seek to build an emotional connection, Bradberry writes.

6) Help others.

Employees who helped others were 10 times more likely to be focused at work and 40 percent more likely to get a promotion, according to a study conducted by Harvard University. Those helping employees also were more likely to be happy during stressful times. “As long as you make certain that you aren’t overcommitting yourself, helping others is sure to have a positive influence on your mood,”

Sound advice … onward and upward!  :-))

Another Great Tool

 

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One of my contractors showed me this recent addition to his “bag of tricks” and I immediately ordered one for myself, after checking reviews. When I list a home for sale, I often measure the rooms using a bulky 25′ steel tape measure. It’s accurate but rather time-consuming.

This Bosch digital device is lightweight and super easy to use. All you do is butt the back of it up to one wall, and press the arrow toward the opposite wall. When the red laser beam appears, the readout on the device gives you an exact measurement (i.e. 12’10”). It even gives you fractions of inches where needed. Then, take it to the other wall, without clearing out the first number, and press the arrow again, and you’ll have your total room size, i.e. 12’10” x 14’11 7/8″. It measures to 32nds, and up to 120 ft. So quick, so easy. Takes the hassle out of measurements of all kinds, including ceiling height, volume and area.

I bought mine on Amazon for about $79…money well spent!

 

Best Landlord Practices

It’s a competitive market out there. How do you attract and — more importantly — keep great tenants? For me, there’s a simple answer: show them you care about them and the home they’re renting. Here are some things I try to do on a regular basis:

  • Make sure every unit is clean and in great, working condition before showing to prospective tenants. I always supply shower curtains, toilet paper, and entry rugs for “starters.”
  • Maintain the exterior of the home. Trim bushes, pull weeds, paint when necessary. When your tenants see you taking care of the outside, they’ll be more likely to take care of the inside!
  • Tell your new tenants about the positive points of the neighborhood — locations of parks, schools, grocery stores, etc.
  • Review all points in the lease and make sure they understand and agree with how you run your business.
  • Be available to the tenants. I respond quickly to every call and text during my waking hours. This sets me apart from other landlords or management companies who are lax about returning calls.
  • Take care of repair issues promptly. Again, I try to get someone on the repair the same day if at all possible, which shows my tenants I care about them.
  • Let them know you appreciate them! Every year at Christmas, I deliver a small (food) treat to each of my tenants, and wish them a wonderful holiday season.

Some of my tenants have been with me for years, and I love it when my good tenants refer other good tenants to me. When you treat people fairly and with kindness (not leniency — there’s a difference!) they often return that favor. The Golden Rule lives on ……

Renting to Friends and Family

As a landlord, how do you feel about keeping your business separate from your personal life? Would you rent your property to a friend or relative? On the surface, it seems like a fantastic idea … you know and like each other, so it makes sense, right? You get to help  someone you care about, and fill a vacancy as well. Perfect, right?

Not so fast! Yes, there are upsides to the situation but let’s think about the possible downsides:

  • What if they feel entitled to special “perks” because of their relationship with you? Asking for upgrades you hadn’t planned on?
  • What if they end up being total slobs who don’t keep the home up to the standards you normally expect and demand of your other tenants?
  • What if they get behind in the rent and expect you’ll “let them slide” indefinitely?
  • A friendship/relationship can end up in ruins over situations like these. Are you willing to chance it?

These are just a few issues that can arise when you rent to friends or relatives. This hasn’t come up in my experience but if it does, I’ll have an honest conversation with them before moving ahead with the tenancy, for sure!

Four Best Rental Upgrades

As finances allow, I try to improve my rental units, adding value where I can. Here are the four best places to put your money, if you’re looking to “up your game:”

  1. Flooring: if you’ve done carpet in your main traffic areas, upgrade to ceramic tile or a sturdy laminate. I prefer ceramic because it’s more durable, if it’s installed correctly. Most of my tenants still prefer carpet in bedrooms (it’s warmer), but I like tile in living areas, kitchens and baths.
  2. Kitchens: if your cabinetry is well built, but just dated, prep it and give it a face lift with some semi-gloss white paint and new hardware/drawer pulls. Cheap but effective! Also, the big box stores sell granite look-alike patterns for replacement counter tops. Nice look, easy on the bank account.
  3. Bathrooms: I’ve been replacing my flimsy tub surrounds with porcelain tile. Longer lasting, nicer looking, and easy to clean. And for $250 or less, you can replace your tired-looking bath vanity and counter top.
  4. Exterior: I probably should’ve put this as number one! If the outside of your unit looks like crap, the better applicants may just drive on by. I’ve been working on sprucing up my exteriors. Installing new windows, washing vinyl siding, planting perennials and some shrubs, painting window trim, etc.

If you improve your rental, you can demand higher rent, and you’ll also attract tenants who are looking for those upgrades. So, you’re getting higher rent, tenants are getting a nicely appointed apartment … everybody’s happy!

HUD News ….

Elizabeth Gibson at EZ Landlord Forms contacted me with this somewhat alarming news from HUD, so thought I’d share her article with other landlords who might be impacted by the effects of what’s written/implied in this proposed rule change:

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Every quality rental property owner upholds the fair housing and anti-discrimination guidelines espoused by HUD, and makes those clear to tenants who rent from them. But making discriminatory actions (by tenants) the responsibility of the landlord seems unfair and unrealistic …

Definitely an issue that needs to be followed!

 

Best Little Utility Knife Ever

Struggling with my Stanley utility knife, trying to cut through the stubborn plastic surrounding a new Kwikset door lock set — you’d think they were worth thousands of dollars! — I decided I just needed a new blade in it. Got the screwdriver out, fumbled around and installed the new one … annoying.

Anyway, the next time I was at my local big box store, I asked an employee which knife  he’d recommend, and he immediately pulled his out of his pocket and gave me a demo on the spot. I was instantly impressed. Of course, I had to get the red one — it was nicer looking than the black one.  🙂  Here it is:

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It’s ergonomic and lightweight, but strong enough to cut through thick plastic and other materials. And best of all, when the blade gets a little dull, you just press a little button on the handle, and it releases the current blade. You can turn it around and use the other end, or insert a new one, in seconds. No wasted time! And it was about $8.00. Money well spent, for sure.

Another great tool to add to my list of must-haves. Buy a Husky utility knife for your own tool collection, you won’t regret the purchase!

 

Enforcing the Lease

When I mentor new investors, I encourage them to create an airtight lease. This is of prime importance, for landlords everywhere. The lease doesn’t have to be 10 pages long, contrary to popular belief. Many of those lengthy contracts contain what I call “legal schmegal” language, and the tenant’s eyes gloss over half way through the first page. It’s ridiculous.

I combined and condensed a couple leases and changed the language into laymen’s terms, and I’m really happy with the results. Of course, I had my real estate attorney take a look, to make sure I’d covered all the necessary bases. He was impressed with the brevity of it, and gave me a thumbs up.  🙂

So, great, right? Well, yeah, but what good is it if I don’t enforce it? When I started out in rental properties two decades ago, I wanted to think the best in everyone. I allowed people to slide on their rent, thinking they’d get it caught up as promised. My trusting attitude and naivete came back to bite me … big time. I was losing money faster than I was collecting it. Terrible!

A lease is a meaningless piece of paper if you don’t follow it. I had an excellent lease but it wasn’t helping me! I had to have a serious talk with myself and get on a better track, or I was going to go under. Now, if a tenant falls behind, we make a plan (in writing) to get caught up quickly. If it doesn’t happen, the tenant is moving or evicted.

And, this isn’t just about late rent. It has to do with every single clause in your lease. Noise violations, police visits, not keeping the apartment/yard clean, etc. Plan your lease carefully, and make sure you’re willing to follow every item in that document. It’s the basis of your rental life — your “burnout prevention plan” is built around that lease and your willingness to be the enforcer!

Surprising Trend

When everything collapsed in the housing market here in 2008, US investors took advantage, knowing the situation wouldn’t last forever. But foreign investors also took note and jumped in.

The surprising player was China, however. Prior to 2010, investment from there was negligible but between 2010 and 2015, Chinese buyers spent around $93 billion on homes, condos and other investment properties! And finally, in 2015, those buyers surpassed Canadians as the predominant purchasers of investment properties here. I was astounded by this fact. (Springer, R. (2016, Sept-Oct.) Staying Power, Think Realty, pp. 12-14).

Interestingly, they tend to buy in our more expensive markets like New York City and California, although Texas and Florida are also high on the radar. And the trend is expected to continue. Why China?

  • I didn’t realize this, but the government there doesn’t allow their people to own homes — they can only “lease” them from the government. (Ugh!)
  • People there with extra monies see our dollar as more stable than their yuan, and also see our social and political landscape as much more stable than theirs.
  • They like the rebound our real estate market has made in the past few years and expect that to continue.

China now has the highest number of billionaires in the world, and is second only to the US in the number of millionaires. They’re sending their children to universities here because they feel the education is superior, and there’s a federal program available (EB-5 Program) whereby a number foreign investors  can immigrate here if they’ve bought real estate. Some of them purchase homes and have their children live in them while attending school.

So, it all makes sense on a number of levels. If you’re a Chinese national, have the extra cash and want to improve your investment portfolio … the US market holds a lot of opportunity.

(P.S. This isn’t a commentary on immigration! I don’t do political stuff on this blog, just real estate related content. Politics drives me crazy, especially right now … )