Setting the Tone With Tenants

The first contact with your tenant actually sets the tone for your entire relationship. It occurs when you show them the house … they loved the ad they saw on Zillow or elsewhere, loved the pictures, and the price fit their parameters. When I meet with potential renters, I let all of them know what’s expected of our tenants, mainly:

  • We expect you to pay rent in a timely manner
  • We strictly enforce late fees and file eviction for lease violations
  • We expect you to treat this home with loving care

With those things in mind, if someone moves in and is late with rent, they know we aren’t going to let that slide. Early on, I tended to let things go, and accept late rent with no late fee attached. Tenants caught on to this quickly, of course! Why the urgency to pay on time if there’s no penalty for paying late? I learned the hard way, of course ….

Now, I stick by my lease, which demands a 10% fee if I don’t have the rent by the 6th day of the month. If someone has to pay that late fee one time, they make sure it doesn’t happen again. Those fees can be hefty, especially on higher end rentals.

Moral of the story? Be kind, but be firm and stick to your lease terms. At the end of the day, it’ll create a calmer environment for you AND your tenants!

Renters and Social Media

Many employers today turn to Facebook, Instagram. LinkedIn, and Twitter to get the “inside scoop” on applicants. Those social media sites provide a broader view of a person than the bare facts of job history/performance.

Property managers also go to those sites to learn more about potential renters. Facebook, for example, can verify some of the info contained on the rental application. These sites also can provide insight into they type of renter the applicant might be: are there pets not reported on the application? Is the person into throwing wild parties? Are there other lifestyle concerns?

It’s important to know that if you choose to use these sites to help you in your tenant selection, you must use them equally with all applicants, so that you’re not in violation of Fair Housing laws. And another thought — can you be fair about your opinions after you’ve checked out someone on FB or Instagram? It’s very possible their taste/opinions/political or religious beliefs may be drastically different than yours. That doesn’t mean they wouldn’t be fantastic tenants. You have to remain neutral if you decide to use these extra means of screening. If you can’t, maybe just stick with the written application!

I’m pretty open-minded, so I’m going to start using social media as an additional screening tool, if the applicants’ accounts are public. Better screening can help me find better tenants, and I’m all for that!

Onward and upward …¬†ūüėĆ

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. ¬†ūüôā

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!

Attracting/Keeping Good Tenants

Over the past 20 years as a landlord in Indianapolis, I’ve learned a lot by trial and error … a lot of trial and a lot of error! And one thing I know for sure is that the secret to happy land lording is to attract and keep good tenants. And it all starts with:

  • Curb Appeal — I assume my prospective tenant will do a drive by before meeting me or pursuing an application process. With that in mind, I do as much low-cost/high return sprucing up as possible. (Fresh paint, at least on window trim and front door, minimal landscaping like some perennial flowers or shrubs, mulch, window washing, a door wreath, new lighting, a pot of flowers or hanging flowers on the front porch.) This mini-facelift can make the difference between someone driving on by, or pursuing your rental as their next home.
  • Good Screening — As I’ve mentioned before, I use National Tenant Network as my screening tool. They’re quick and efficient, and after filling in the tenant’s personal and work info, I get a qualification score back immediately through the website. A basic screening costs anywhere from $20-$36, depending on how detailed you want to get. (I go basic.)
  • Quality Workmanship — Your unit must be in good working order and immaculate throughout. Would YOU live there? I always make sure there are no leaks/repairs needed, the entire unit is clean and paint is fresh.
  • Be Attentive — Once your wonderful tenants have signed the lease and moved in, don’t abandon them! Stop by (give them notice, of course) and say hello occasionally. This will also give you the opportunity to see they are taking good care of the place. If repairs come up, take care of them immediately!
  • Reward Good Behavior — When you come across those tenants who are just downright spectacular in every way, i.e. they pay rent in a timely manner, keep the home/yard clean and are a great addition to the neighborhood, give them perks as evidence of your appreciation! A gift certificate to a local restaurant or grocery store, a “coupon” for a dollar amount off their next month of rent, etc. Be creative, and always put a personal note with it expressing your gratitude.

I have people who’ve been with me for years, and I do appreciate them. I try to keep rent prices reasonable, while making a decent living for myself.

The nice side effect of attracting good tenants is that good news travels. Those great tenants (who also appreciate your excellent land lording) tend to spread the word to their friends and relatives, thus bringing more quality people into your rental world. Your good tenants will network on your behalf. Nice (free) perk for you, right?

Onward and upward! ¬†ūüôā


Applicants With No Credit

If you’re a landlord and your properties are mid- to high-end, you probable run credit checks on your applicants, as you should!

With my lower income properties, I don’t normally do this, as many of my tenants have never established a credit history … they pay cash for everything. This is unbelievable to many, but makes a lot of sense to some people. They’ve decided they’ll never buy anything until they have the money to purchase! What a novel idea, right? And not a bad one, at that!¬†Others who have had credit in the past have totally trashed it … unpaid bills and credit cards, etc.

But that scenario isn’t limited to lower income folks, believe me. And so we get back to the issue of credit checks on the mid- to higher-income applicants. When you run someone’s credit (I use National Tenant Network — they’re excellent) and it comes back as non-existent, you’ll need to check on a few issues:

  1. Did they record their Social Security number correctly on the app? Have them¬†repeat it back to you for verification. If that can’t be done, raise the red flag!
  2. Maybe they really don’t have ANY credit that’s been established. This is certainly possible, especially with young people who have not used credit cards or had utility bills in their names.
  3. That person may not be included in that reporting bureau’s files. There are three major bureaus — Trans Union, Experian and Equifax. Make sure you recheck that.
  4. Did they mention any credit cards on the application? If so, and there’s no report that comes back, they’re lying. If you have¬†a credit card, you have a credit history.¬†¬†Recheck the driver’s license, SS number, etc. Something’s not right … get ready to raise that red flag.

Many people present well, and aren’t what they appear. That’s why the application process is another tool we use to help determine qualifications.

On the other hand, I’ve rented places to people with no credit trail, and¬†I’m not afraid to do that. I talk with the employer, verify income, talk with the previous landlord, do a drive-by of the previous residence to check the neighborhood and condition of the property, and assess the applicant personally. And from there, if there are no other parameters to lean on,¬†I go with¬†my gut.

Happy screening!



Making Deals With Tenants

Early in my career, new tenants often asked me to “work with them on the deposit.”¬† In other words, they couldn’t quite pay both the rent and deposit required to move in.¬† Being a trusting soul, I usually agreed, and we’d make a plan for them to pay it up within a month or so.¬† What I quickly learned was that something else always seemed to pop up, and the deposit they owed me never quite found its way to the top of their priority list!

So, I stopped allowing that.¬† But then I got people who wanted to “work off” the deposit.¬† They were willing to paint, clean, etc.¬† Thank God, I was smart enough to say no to that proposition!¬† Here’s why:

I had made the mistake of letting one of my good, long-term¬†tenants paint a couple of rooms at his place, with disastrous results.¬† He told me he used to work for a paint contractor, so I gave him the go ahead.¬† He really botched it up — terribly — and I learned my lesson.¬† I don’t ever allow any of my tenants to do work on my properties.¬† There’s too much risk involved, not to mention liability issues.¬† (What if they get hurt while doing work for you?¬† Not good.)

Here’s the bottom line:¬† if your applicant doesn’t have the full rent and full deposit, don’t let them move in.¬† PERIOD.¬† No exceptions!

Also, if they’re responsible for any of the utilities, make sure they put them in their name prior to moving in.¬† Don’t just blindly trust they’ll get it done.¬† Ask them if they’ve made the calls to transfer service and if they say “yes,” call and check.¬† (Yes, I’ve gotten burned on this as well, by trusting it got done, and then receiving a gas bill a month later.¬† Totally my fault.¬† Learning the hard way, once again!)

Between my book and this blog, I’m hoping to save other landlords from making some of the mistakes I made early in my career.¬† Although I did a lot of reading and networking, there are so many things¬†I had¬†to learn through experience.

After being in this business for over 18 years, you’d think I’ve gotten it totally perfected by now, right?¬† Unfortunately, not …

Onward and upward!

Protect Your Investment!

When you own a property, your hope is that it will increase in value over the years.¬† This is true whether you live in it or use it as a rental.¬† It’s easier to maintain your own residence because you’re there every day and tend to notice the items that need attention, like a leaky sink or roof, a cracked window, peeling paint, etc.

But when that home is a rental, you have to make a concerted effort to get inside and take a look … for maintenance issues, and tenant cleanliness issues as well.

For my Indianapolis rental properties, I try to do apartment checks after we’ve had a good soaking rain.¬† Here are some things I always check:

  • Smoke alarms
  • Furnace filters (they should be changed every three months)
  • Ceilings (for leaks)
  • Under every sink (again, for leaks)
  • Floors around toilets and tubs (are they soft? If so,¬†there’s a water leak somewhere)
  • All rooms for cleanliness

I do the same for all of the rentals I manage for other people.¬† It’s important that your tenants see your face from time to time.¬† When they know you care, they’re more likely to care!¬† And of course, there’s a clause in my lease allowing me to evict if they don’t maintain the property.

At some point down the road, whether it’s your own home or a rental, you’ll want to sell.¬† If you protect that investment now, your efforts will be rewarded in the end, when you plan your exit strategy.

Happy investing!¬†¬† ūüôā

Credit and Background Checks

I have quite a mix of tenants.¬† Some fall into the low-income category, others are in the middle or upper-middle category¬†… so, is it worth doing credit and background checks on all of them when they apply?¬† Definitely not.

Many of my lower-end tenants have shaky credit or no credit.¬† Doing credit checks would be a waste of time and money.¬† ¬†And actually, no credit isn’t necessarily a bad thing!¬†¬†Some have little or no¬†debt, no credit cards, and buy things only when they have the cash.¬† My application is detailed, and I check on their current and past employment, the current living situation, references, and make a decision based on those items.

Now, for higher-end applicants, credit checks may help in the decision-making.¬† People who have a lot of debt and outstanding bills may struggle to pay the rent.¬† Third party companies like National Tenant Network are available to those who want to check criminal records, credit scores, past rental history, and even terrorist activity.¬† I’ve used them several times and it’s essential to have the person’s birth date, full name, SS number and current address.¬† Each full report costs about $20.

Within seconds, your report comes back.  Easy!  So if you need additional help in finding and keeping great tenants, use background checks as an additional tool to help you in the process.

Onward and upward …. ūüôā

Illegal Entry?

I own and manage 27 rental property units in Indianapolis, and also manage homes for other owners.  I love my work and have gotten fairly adept at it over the years.  When I consult with people who are considering getting into the business, their greatest concern it that tenants will totally trash the rental unit.

Well, yes, that can happen, but there’s an easy fix for that.¬† Do occasional walk-throughs, and make that privilege part of your lease agreement.¬† My lease states, “Tenant will allow landlord to show, make repairs or inspect apartment when necessary.”¬† I explain that the home is in excellent condition and I hope they’ll maintain it.¬† I’ll be coming in — with proper notice, of course — every once in a while, to do a walk-through.

The key word here is “proper notice.”¬† Tenants have rights to the property.¬† Don’t ever think that, just because you own the rental, you can go over there unannounced and gain entry, even to the back yard or garage.¬† Your tenant (if so inclined) could order you off the property and be correct in doing so!¬† If you refused, he/she could call the police and have you arrested and hauled off.

By all means, do put a clause in your lease that allows you access to your property.¬† It’s your asset and you must protect it.¬† But make sure you give your tenant notice, usually 24 hours, before you come.¬† It’s common courtesy, but it’s also the law!

Fire! Fire!

A few years ago, I was sitting on my couch having a glass of wine with my friend Jan.¬† My phone rang and it was one of my tenants.¬† I could barely hear her over the sirens in the background.¬† “Barb!¬† Barb!¬† Your house is on fire!¬† They have the whole street blocked off!¬† You need to come down here!”

I hung up and said, “Jan, I gotta go …. one of my rentals is on fire,” and off I went.¬† I got there in about 25 minutes and yes, the street was blocked off, and although they’d put out the fire, one half of the duplex was totally destroyed.¬† My tenant, whom I’d just evicted, had left a rickety space heater on, and left the house.¬† It was overturned,¬†and the fire ensued.

Of course, I had good insurance on the building.  It covered the entrie renovation of the burned-out unit.

This incident prompted me to encourage my tenants to purchase renters’ insurance.¬† It’s cheap — around $150-200/year, depending on how much coverage you get — and in the event of a fire like I had, they would be reimbursed for everything they lost and¬†would¬†be given supplemental living expenses to help pay for an alternative living situation.¬† Renters’ insurance also protects the tenant from claims against them by guests who might be injured on the premises.

Sadly, only about 43% of renters have policies.¬† As a rental property owner, you may put a clause in your lease requiring your tenant to purchase renters’ insurance.¬† But you’ll need to follow up on this, and have them send or email a copy of it as proof.¬† You may want to have them add you as “additional insured”.¬† It won’t cost the tenant any more money, but¬†the company will contact you should your tenant allow the policy to lapse.

Many tenants see this type of insurance as just another expense, but as in the case of fire, tornados, or frenemies, etc., it’s better safe than sorry!