Renting to Celebrities!

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Have you ever rented to a celebrity? Maybe your tenant became a celebrity after they moved in. On the blog Landlord Shmandlord, the author writes about phenomenon that can only happen in San Francisco! A guy by the name of Justin started wearing a webcam around on his head 7×24 and streaming the video across the Internet. Justin has a cult following. This has lead problems with the other tenants in the building and subsequently the landlord looking to evict Justin!

Read the entire here article at What do you do when your tenants are Internet TV celebrities.

Scott Ficek is a Realtor with Keller Williams Integrity in Minneapolis and helps new and seasoned investors buy and own Minnesota investment real estate. He owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or get his blog via your RSS Feed or in your Email.

Inventory Down, Competition Way Up

I long for the days when you could actually get out and see a property before it was either sold or had 10 offers on it!  For those of you not currently in the market for properties, this short post can serve as a market update.  Since January 1, the market has heated up to 2000-2004 levels where properties are sold before the signs go in the yard.

It is common typical expected nowadays that a property in a decent area at a decent price will have 5 or more offers on it within the first week it comes on the market.  Here is my humble opinion of what is happening:

• The banks took the bailout money last fall and agreed to put a moratorium on foreclosures.  That dip in supply is still with us.
• More investors have moved into the market.  They are taking cash out of other investments to pour it into the fantastic real estate market.
• The Obama $8000 and other government subsidies have pushed first time home buyers into the market to gobble up cheap houses.
• Low interest rates have also stimulated new buyers into the market.

All of this makes for a often frantic and frustrating market condition.  It seems like we are getting 1 offer accepted for every 10 we submit.  This applies to REO properties, cash offers, and even overpriced properties.  Jen at twincitiesrealestategal.com told me that her customer bid $61k Cash for a $40k house last week and still was outbid somehow!

I can’t wait till things stabilize!

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End of the Lease Evictions

I love this old quote:   Insanity: Doing the same thing over and over again and expecting different results. -Albert Einstein.

I have been burned at least twice by this little trick that tenants play:

• Tenant short pays you on the 2nd to last month of the lease or does not pay you on the last month of the lease.
• You call them and either they do not return your calls or they claim they are going to pay you.
• They never do.
• The tenant moves out owing you at least last month’s rent.

Insanity: Doing the same thing over and over again and expecting different results. -Albert Einstein

Often the tenant will owe you more than just last month.  Plus unless the apartment is spotless, they may have some cleaning charges also.  Typically the tenant is using your rent to put money down as a deposit on their new apartment.

Although my new approach can backfire and cost you money (the eviction fees-if the tenant skips town), it will give you some leverage and/or at least satisfaction.  If the tenant has a history of late payments going into the last month of the lease or I have any reason to suspect the property will require significant cleaning/repairs, I will file an eviction on the first day the rent is late.  This gives me the opportunity to possibly jamb up their future plans at their new apartment (satisfaction).  Best case is they pay me what they owe me.

Either way, it is better than getting pushed around or lied to.

How to Avoid and Handle “Hold Over Tenants”

I recently received an email:

Hi Scott, I am looking for a resource for a problem with a current tenant, and I’m hoping you can help.

The lease ran out 5/31 and they asked to sign a month-month lease, which has not been returned. They are still in the property and have not paid the rent for June. They said they’re closing on a house in mid-June (but cannot provide a closing date). My last message to them was that I need to hear from them w/in 48 hrs or I will take further action. No call back yet.

I think it might be important to note that I did receive a 60 day move out notice from them (almost in time) but they said in May (over the telephone) they need a few more weeks. I have said a number of times that they need to sign a new lease for both of our protection.

I hope you can steer me in the right direction on the next step or two. I need time to get into the property and clean up the absolute filthy pig-sty they’ve left for me.

I wrote about this topic back in August 2007.  I thought I would pull out this post, dust it off a bit, see if I have any new ideas, and shoot it back out.  Here is version 2.0 (with my updates in red):

You decide to not renew your tenant’s lease for any number of good reasons (noise complaints, consistently late payments, dirty apartment, excessive calls from the tenant for misc items, etc).  After you notify them of your decision, they stop taking your calls and don’t answer the door when you stop over.  They need to vacate their apartment by the 31st.

Ultimately, you find a new tenant, that you are excited about, to move in on the 1st of that next month and sign a lease.  You show up on the 31st at 5pm and are surprised to see that the outgoing tenant is still there, has not packed a box, and says that they are staying.  Now What!

Well, I have some ideas on “Now What!”, but let’s back up and examine the process from the beginning and let me show you how you can put contingency plans in place to reduce your risk of having a “Now What!”

Prior to telling the tenant you are not renewing their lease:

• Tour the unit (apartment) looking for any work that may need to be done for a new tenant coming in.  Painting the entire unit may be tough, but how about fixing all those other items?  This will speed up the turnover and possibly put the existing tenant in a better mood.
• Chat with the tenant informally about their plans to renew the lease.  See if they are thinking about a larger/smaller place, different neighborhood, and such.  Maybe they just need a little coaxing to move on their own.  Often, they dislike you as much as you dislike them!

How to tell the tenant you are not renewing their lease:

• I suggest that you do this verbally first, as it is easier to quickly explain the situation, it is less formal and more personable.
• Always follow up with something in writing (tell them you are sending it).
• Give 61 days notice.  This should work legally in most states and it is neither too long nor too short.  Be specific in the notice about what date and time they must move out.
• Call them back in a week and see how they are coming on finding a new apartment.  If they are not taking your calls, stop by.  If they won’t answer the door, you should start preparing for the worst.  This is infrequent if you have always been courteous and respectful to them in the past, but it can happen.

Preparing for the “worst”:

• Work hard to get in and speak to them.  Use your best negotiation skills.
• In a multi-unit building, I may ask another tenant if they have seen the problem tenant or if they said anything to them.  Do NOT divulge too much info about the problem as it can get back to the outgoing tenant.
• If you can get them talking and they are telling you directly that they are not going to move, consider giving them an incentive such as all their damage deposit back regardless of the condition of the property (within reason).  Offer to give them $200 toward a U-Haul or moving company of their choice (pay money to movers directly).  I rarely do this, as there is no guarantee they will move, but if the tenant is down on their luck or broke, this may be enough.
• This is going to sound harsh, but consider a preemptive strike:  If they are late or past due on their rent or violating any part of the lease, think about evicting them (or threatening to evict them) early.  Then you already have a legal way to insure they are out on the 31st.
• Do not lease the apartment to anyone needing to move in immediately after the existing tenant is supposed to leave.  This step will cost you at least one month of lost rent, but will prevent the “Now What!” situation above.
• Have your attorney draft a letter simply reasserting the lease ending date and what will happen if they do not move.
• Research how to evict a “Hold Over” tenant so you are prepared if they stay.
• Typically, the lease that is in place will convert to a month to month lease with the same conditions, rules, and requirements.  Some leases will allow the landlord to raise the rent once the lease expires.  Examine your lease and use it as leverage.
• If the tenant receives any public assistance, contact their coordinator and see if they can provide any help or leverage to get the tenant to move on time.  Often the public assistance will stop paying their rent at the end of the lease and therefore they will be liable for the entire amount.

The morning after (they didn’t move out):

• In every state, tenants have rights.  These rights are to protect the tenant from the landlord simply walking in and moving all the tenants furniture to the curb on the morning after.  If you did your research above, you should know what both your rights and the tenant’s rights are.
• If your lease allows you to change the rent amount, notify the tenant of the new rent amount.  Try to use any other provisions in the lease as leverage.
• Put your “Hold Over” tenant eviction plan into motion.  How long this will take varies by location and even time of the year.  In Minnesota, it can take up to 2 weeks lately (and in some cases longer).

Having a tenant refuse to leave once their lease expires can be a stressful event.  There are many unknowns and turns in the road.  By being prepared as early in the process as possible with good contingencies, you should be able to avoid the “What Now!”.

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Craigslist Rental Scams

It is hard enough to know who to trust these days.  Now Craigslist is getting another black eye.  It appears some scam artists are posting houses for rent and sale that they don’t even own.

This actually happened to me.  Someone posted a property I was renting for $4400 on Craigslist for $1500.  They took the pictures off the original ad and then created a fake email address to scottficek@gmail.com (not sure how they found my name).  Nice!  I had a couple calls about the property, from some smart shoppers that found my phone number instead of sending an email.

MaryAlice Short writes about this topic over at her Minnesota Short Sale Blog.