How to Get the Best Tenants into Your Rental Property

When you have a vacant rental, you will inevitable have to advertise and fill it. Unless you are extremely lucky, you will not rent to the first person who inquires on your rental — or at least the first person will not likely be qualified to live in it.  You want to get the best tenants you can possibly attract to your rental.

Like it or not, you will be at some point showing your property to tenants that do not want to rent from you, or you do not want to rent to.

At some point, you will need to decline a rental applicant. This is one of the main problems landlords have: being unable to decline a tenant.

See the rest of the story here

 

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November – December 2014 Rental Cash Flow

cash FlowThe rental cash flow for the month was as expected and according to plan.  All rents for December 2014 were in hand by Friday, 12/5/14.  That is 24 for 24.  All units were full, with the exception of my one vacancy that I have been working on for a few months.

I generally have ~10 to 15% of the rents in prior to the first, 50% in by the first, 75 to 90% of the rents in by the seconds of the month, and 100% by the fifth of the month.

I started a repair log that should help both readers and I understand the maintenance that is being performed.  Just as when you have kids, you do not always think about the time spent doing the ‘kid’ things, I often do not think about the time spent maintaining the rentals.

I had some expenses that were not unexpected, but were unexpected that day.  Things like changing water heaters and fixing furnaces.

Rental Cash Flow Definition

My incoming cash is always on the first week of the month.  The expenses are throughout the month and year.  I try to remember and log most items, but the recent rent collections are easier to remember than a month+ ago.

Expenses like taxes, insurance, utility bills, mortgages, vacancy, management, etc. are all paid or accounted for, and not necessarily reflected in these cash flow reports.  Since I manage and mostly maintain my own properties, I do not spend as much on other labor.  This helps as I can maintain my properties better than many landlords.  I can also purchase the tools I need to do a proper job on the maintenance.

Water Heater Replacement

The water heater started leaking, and very old.  It was a water heater that I wanted to replace when I purchased the building in 2009, but I decided to do other higher priority projects instead.  It lasted another 5+ years, so it was worth it to wait.  If I was going to be away for an extended period, I may have changed it sooner.

The water heater started to leak on the cement floor, which then mostly drained slightly away from the floor drain.  It was a slow leak, but any water leak is a bad one.  In this building, the individual water heaters are in the basement.  After being notified by the tenant, I changed the water heater the next day.  They are easy to change, and other than being a bit heavy, only take a couple of hours to change.  I left the old heater on the curb and called a scrapper to pick it up.

I spent about $300 on the water heater, and saved about $300 on the water heater install.  That’s cash money in my pocket, rather than someone else’s pocket.  It’s actually money not spent, but it’s the same.

Furnace Repair

The furnace repair was a bit more work.  The furnace was running a bit intermittent.  When I stopped over the first time, I was able to clean the burners and wire connections and get the furnace working again.  It worked for a day or two.  I stopped back over and replaced a ground wire that was suspect, and saw that the new ground wire did not fix the furnace.  So I ordered a pilot hood and a used computer control board.  The control board was $49, about $200 cheaper than a new one.  The pilot hood was $25.  I changed the control board when it can in, and it fixed the furnace.  I did not need the pilot hood assembly, so I now have a spare.

The furnace now appears to be working fine.  It took three trips, but sometimes that is necessary to diagnose and repair an issue.  A ‘real’ furnace guy would have had the part in his truck, and advised to change out the furnace or spend $500 to fix the old one.

Those two repairs, the water heater and furnace, saved me at least $600 – $700.

Tax Planning Expenses

I am now starting to spend money on future items that I know I will need done for 2015.  Any expense in 2014 will be fewer taxes for 2014.  I prepaid all my insurance that is due in January 2015, a few weeks early.  I purchased some supplies that I know I will need for future projects.  It’s not a lot or prepaid expenses, maybe $3000 – $4,000 or so.  By spending on those expenses now, it will save me about a third of that money in taxes.  I do not like to buy too many supplies ahead of time, as I may change my mind on how I am going to do the project, or the parts could get broken or temporarily lost.

Retirement Countdown

The retirement countdown is still getting closer.  I have some aggressive saving goals for 2015, and that should bring down the amount needed to retire.  I should save what I saved this year, plus any principal and interest payments that I made last year, on mortgage that I paid off.  I also had a one-time expense of $29K last year that I will not have for 2015.  That should help bring me closer to my ‘magic’ retirement number.

So, in 2015, my 401K deductions start again, and I pay less income tax withholding for the first few months of the year.  I am looking forward to the last full calendar year of working.

Previous Cash Flow

October 2014 Cash Flow

September 2014 Cash Flow

August 2014 Cash Flow

July 2014 Cash Flow

June 2014 Cash Flow

May 2014 Cash Flow

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Tenant Credit Score is Easily the Best Indicator of Tenant Quality: Here’s Why

tenant credit scoreI know many landlords, and despite my success at screening and selecting tenants, they often think somehow their property is different from mine. They do not think they can use the tenant credit score as a reliable indicator. They are ignoring tenant credit score to their own peril.

The fact is, tenant credit score is the most reliable indicator of tenant success that there is, bar none. You need to make sure that the tenant can afford the unit with an income of 3.5x the rent, but the tenant credit score will weed out the people that have behavioral issues and have no problem cheating anyone that they owe money to.

If you are a landlord, you know you need to do a background check. A critical piece is getting a credit report, complete with a credit score. The credit score is a summation of everything that goes on a credit report. It is calculated the same every time, with no bias to any discriminatory practices. It is colorblind and not subject to any fair housing issues.

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What do you think of using tenant credit score to predict tenant payments and behaviors?

 

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Best Home Improvements to Increase the Value of Your Home

It’s the question that nearly every landlord wants the answer to: What are the best home improvements to make that increase the value of my home?

Ultimately, you aren’t just embarking on your improvement project to increase your standard of living, you’d hope that there would be some return on your investment as well in terms of an appreciation in the value of your home.

Unfortunately, the question of which are the best home improvements is one where there is no one size fits all answer, and it would be foolish for us to assume that. It will depend on many factors such as the location of your home, preferences of the local market, the state of the economy, interest rates, and you could probably come up with a list the size of the Empire State Building listing numerous other examples!

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Month to Month vs Annual Lease: Which Protects Landlords?

decision makingWhat are the advantages of a Month to Month vs Annual Lease?

When renting out property, many landlords want to lock in a new tenant as soon as possible, and they want to lock them in for as long as possible. It makes sense — until you begin to look at all of the commitments that you are making and how little of a commitment the tenant is making.

As soon as you know you are going to have a vacancy, you want to begin marketing. If your existing tenant is a slob, a hoarder, or being evicted, it is extremely difficult to attempt any turnover until you have a vacant unit. If it was a long term tenant, you just need to factor in a bit of vacancy time to clean up and repair, as well as some down time until you find a tenant.

If it was a one year (or less) tenant and you have to wait for the tenant to move out to show it, you can look in the mirror for your issue. You should have bypassed this tenant.

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What experiences have you had with short vs. long term leases? Have you ever known anyone who took a long time to get a tenant out?

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October – November 2014 Rental Cash Flow

cash FlowThe rent collections were stellar as always, and the rental cash flow is solid.  All 24 of 24 rents were in the bank by 11/3, which was the first Monday in November.  If you look back at my previous reports, you will see this is typical for me.  I can attribute it to having the ability to screen tenants and use credit score to my advantage.  I have solid units, and they are priced right.  Landlords that do not use credit score as a screening tool, and do not understand the significance of it, are fooling themselves.  They are either working too hard, or not making as money.

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Smoking in a Rental Property

no smokingAre you aware of the expenses associated with allowing a smoking in a rental property?  If not, you need to understand that a smoker will cost you at least 10% of your profits due to increased turnover costs and additional vacancy. That is an unscientific number, and I may venture to guess it may be much higher.

Smoking in a rental property will cost you plenty in term of lost profitability.

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September – October 2014 Rental Cash Flow

rentIt’s time for another report on the rental property cash flow.  The month of September was extremely busy.  I had a brief trip to Florida, where I looked at several areas to potentially invest in.  While no properties actually excited me that much, it was a great trip.  I did realize another thing.  While Florida might be a great place to spend during the Minnesota winters, it is a bit humid during the summers.  Even in the morning.

So here is how the cash flow evolved for the moth.

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Expert Landlord Advice and Landlord Interview

How-to-get-Higher-Rents-the-Hard-WayI was featured in an article involving interviews of 26 landlord and property investors.  All the landlords were asked questions and for them to give some landlord advice.  I was honored to be in that elite group with some other very great property investors.

They asked me, along with 26 other landlords, what is my number one tip for newbie property investors.  The answers were broken down into four categories.  Each investor was asked for advice, and each investors advice put into the following categories.

Buy Smart

Plan Well

Tenant Management

Team Building

If you have been reading this blog for any length of time, you know I added advice about Tenant Management.

Read all the advice, including my own here

 

 

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Your Complete Guide to Effectively Handling Tenant Evictions

evictionIf you have been a landlord for any length of time at all, the topic of tenant evictions is on your mind on a continual basis. If you have been doing the right things with your tenant screening, tenant evictions are  on your mind a lot less. If you need the rent to pay the mortgage on the rental or you will lose it, you are praying every week it doesn’t ever come to that.

No matter how well you screen tenants, no matter how great your tenants are, you will at some point be in the position where you may have to evict. Divorces happen, deaths happen, people get laid off and people have friends that cause a ruckus so large you have to do something.

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