Some of you may have heard about this before, but I thought it was worth repeating to get the word out.  I suppose it is like that old saying:  that if I save one person from this scam it was worth it!

Here is how it goes:  you are advertising your rental on-line, such as on Craig’s List.  You get a response from someone interested in your apartment.  They probably use incorrect grammar, but you overlook it.  The email is not spam as they will respond to any messages you send them.  They ask for pictures and some other details to make their requests seem credible and build your excitement. 

Eventually, they will tell you that they are located out of state or out of the country and that they will take the apartment site unseen as they trust you (again a ploy to make you feel good).  They offer to pay the first month’s rent and deposit (possibly first two months up-front).  The scam artist will tell you that they are going to send you a cashier’s check for several thousand dollars more is needed and for you to wire the money back to them.

If you were to take the bait, you would receive a cashier’s check that looks official.  You deposit the check in your bank account and wire the difference to some distant place.  Two weeks later your bank calls and tells you that the cashier’s check you deposited was fake.  You are now out the money you wired to them!

Craig’s list has posted some samples of the common scam letters.  See it here.  Remember to screen your tenants and trust your instincts. 

Even though I own a lot of investment real estate, I had never put much thought into when my leases expire. I focused on not having multiple leases in the same building expire at the same time and, whenever possible, never expiring a lease between November and February. With these safeguards in place, I thought I could cut down on multiple vacancies at the same time. What I found out was that I still have to worry about advertising, showings and my upcoming vacancies almost every month.

The old saying is true – you really do learn something new every day. This week I met two longtime investors who have most or all of their leases expire May 31st. They had some very good reasons:

1. You only need to work on leasing at one concentrated time per year.
2. Your advertising dollars go further, as you can place general ads in the newspaper. Because you have multiple units to show, you can accommodate almost any prospective tenant.
3. By setting your lease renewal dates in the spring (preferably June 1), you’re targeting the strongest time of the year to lease your properties.
4. Your existing tenants may have more options if they wish to move to another apartment in one of your other properties.

To begin the lease consolidation process, change the expiration dates to line up with May 31st as your renewals come up. There is no law that all leases must be 12 months long (with the possible exception of Section 8 tenants), so why not a 17 month lease? Longer is better for both you and your tenants. All the tenants I talk to don’t really care how long the lease is when you tell them it is locking their rent for the term!

The process to move your leases to June 1st start dates may take a year or more, which works out fine for me because I can’t physically work on all my properties at the same time. In the event that more than a few existing tenants do not renew, I plan to make some of my leases expire in May, some in June and some in July, which allows me time to work on each unit.

When I tell people that I own and manage 28 rental units in 15 different buildings across the Twin Cities (MN), they are surprised.  Actually, prior to becoming a Minnesota Realtor, I managed all those units, was Sr. Director of Information Systems for a Minnesota coffee company where I managed 18 people, and had 3 children all under the age of 5 at home. I don’t tell you these things to make me out to be a hero, it is just to demonstrate that everything is possible if you have systems, procedures, and a team in place.  Here are some examples of how I manage everything:

Systems:

• Set up your accounting systems on Quickbooks. I have used everything: spreadsheets, databases, and quicken. Although Quickbooks costs about $300 and can be intimidating at first, the organization and eventual efficiencies it can bring to your world is invaluable.
• Use a tenant screening service. Many landlords try to save the $17 and do all the screening manually by going to the MN Department of Corrections and pulling credit reports. The prospective tenants are usually expecting to pay an application fee, use it to pay for the service to save you time and be consistent.
• Purchase your leases, security deposit forms, and move-in/out forms with carbons. Instead of printing the forms off your computer, filling them out, and then having to make copies when they are signed for the tenants, just fill them out, sign them, tear off the 2nd page and hand it to the tenant. Done!
• Have as many of your bills paid automatically as possible. Pay all the others via the internet. This will save you countless hours of writing checks and mailing them. It will also insure that you are never late on your payments.

Procedures:

• Show your apartments at the same time. The tenants that do show up will see there is competition for the apartment and be motivated to fill out a rental application. (see Eliminating Being Stood up at an Apartment Showing)
• Put together a rent collection time-line and follow it. You will find it will be faster and you will collect more of your rent sooner in the month.
• Pay your bills and do your accounting twice per month. If you have all of your bills paid automatically, you are just simply entering the bills into Quickbooks and confirming payments.
• Use a service to Evict Your Tenants. They often will charge a minimal fee (mine charges $88 above the Hennepin County filing fees). It will save you time and any risks associated with processing it yourself.
• Although maybe not a procedure, I work very hard to keep all of my tenants happy. I find that happy tenants stay longer, treat your building better, refer other tenants to you, and call you less often.
• When my investment property requires repairs, I make sure the fix is permanent. Many real estate investors get by with a cheap or temporary repair. Ultimately that repair will cost you more as you will be making multiple trips to fix a recurring problem or the tenants will get upset at the condition of the unit and move out.

Team:

• A mortgage broker that understands (and owns) investment property is a key member of your team. They will chart a course for you to reach your goals.
• Real Estate agents are paid by the sellers to find you property. Use their expertise and lean on them to find the best deals. They also should own investment property and be willing to teach you how to manage yours.
• Once you purchase your first investment property, your days of doing your own taxes are over. You must use an accountant that understands investment real estate. They will find you the best tax advantages and may keep you out of any IRS audit.
• A handyman can be another trusted advisor. You want someone that is going to look at the problems and property and give you an honest assessment of what to do.

Owning tens or dozens of units is very possible, even with a full-time job and family, if you put the right pieces in place. Following the above methods can get you there without all the learning (ie: mistakes) that I had to go through.

Tenants and Toilets are the two key complaints that most landlords talk about. I believe that having a dependable, thorough, and honest handyman that has good workmanship is an absolute must whether you own 2 or 20 investment properties.

1. Your handyman should be able to fix most items in your properties. Maybe just as important, he should admit when a project is not his specialty and should be outsourced. Build trust where you can rely on his judgement on what needs to be fixed and how it should get done.
2. Find a handyman that lives near your properties. You will be very thankful for this when your tenant calls at 7:00 at night about a plugged toilet or a furnace not running or any other number of issues that require immediate response. It is great to be able to simply call your handyman and ask him to swing over and take care of the problem.
3. Give him enough work that he sees you as his primary customer. This should keep him wanting to please you by taking those 7:00 pm calls to unplug a toilet! Conversely, unless you can sustain him 100% indefinitely, make sure that he does not rely on your work alone as when you slow down, he will be concerned about putting food on the table.
4. If your volume warrants it, negotiate a reduced per hour rate. Discuss eliminating trip and overtime charges.
5. When you go on vacation, consider paying your handyman to be your vacation buddy. You should decide if you will give the handyman the keys to the properties. When I go on vacation, I like to keep all the keys in my garage. In an event that he absolutely needs keys, I will then tell him where they are and give him the combo to my garage door.
6. Find your handyman through referrals with your real estate agent, check the hardware store bulletin boards, and scan Craig’s (or Angie’s) List.

Having a consistent handyman can be a crucial addition to your investment property team. He should free you up from having to do all your maintenance and potentially save you money instead of having to call a trade person (ie: plumber, carpenter) to fix something small.

At the end of October, I wrote a post about how I cut a corner in my tenant screening process and that mistake was probably going to cost me $2000 in lost rent and/or advertising/placement fees. You can read the full article here, but in summary I failed to connect with the prospective tenant’s Section 8 coordinator on the phone. If I had, I would have learned that the prospective tenant’s voucher had been changed from three bedrooms to two bedrooms. Consequently, she could now not afford the apartment and had to move out 3 weeks after she moved in. I was left with 1 week to rent a 3 bedroom apartment for $1000 per month at one of the tougher times of the year (November).

Quickly I put my standard advertising plan into action including posting the apartment on Craig’s List, taking out an ad in the Star Tribune, putting a sign in the yard, and even reverse prospecting on Craig’s List. I then took extra steps including: calling my current tenants and offering them an incentive to refer a new tenant, agreeing to pay a leasing company the first month’s rent to find a tenant, and posting signs at some of my other buildings that are on busy roads.

All this activity did produce some showings and some no shows. I quickly had two roommates ready to sign a lease, but because I had learned my lesson, I quizzed them hard only to find out that they did not have the security deposit and were hoping to get the first month’s rent from emergency assistance. I explained that having both the security deposit and first month’s rent was a requirement to signing the lease and that I would rent the apartment to the first party that had those and an approved application.

A friend of mine (who owns about 60 rental units) called and said he had an extra tenant that he did not have an apartment for. We set up a time to show her the apartment the next day. The prospective tenant arrive early, she walked through the apartment and liked the updates that we recently did. I quizzed her looking for any red flags and she filled out an application on the spot.

I processed her application and signed a lease with her 2 days later, on October 30. She went to emergency assistance with the new lease the next day, the coordinator called when while the tenant was in her office and confirmed they would pay her security deposit and first month’s rent. I met the tenant and gave her the keys on the November 1.

Despite costing me some money to run the ad in the Star Tribune and beating myself up for my mistake, the situation worked out. In fact, I leased the apartment for $50 more per month to this new tenant than the 3 week tenant. It is a happy ending!

Now I am not suggesting that you let the tenants live there for free or pay rent as late as they want, but I think there are 7 simple things you can do that will keep them happy. And happy tenants will treat your property better, pay their rent on time, stay in your building longer, and recommend you to their friends as a good (possibly great) landlord.

1. Be friendly, respectful, and courteous always. Then when you need to be firm, they will know you are serious.
2. Answer your phone when the tenant calls or return their call promptly. Nothing is more frustrating when you have a question or problem and someone will not return or take your calls.
3. Stop by or call to just chat and see how they are doing. This lets them know you care about them as a person. Ask about their work, their kids, or what they enjoy.
4. Repair everything in the unit that the tenant calls about. Even a simple dripping faucet can fester into a frustration in time.
5. If the tenants have lived in the apartment for more than 2 years, touch up the paint in the main areas, paint a room a color that you both agree on, or shampoo the carpet. You are not only keeping them happy, you are maintaining your property.
6. If the tenant always pays on time and they call and tell you the rent is going to be late, forgive the late fee this one time. Even the banks do it!
7. Offer an incentive if they find a new tenant for you. I give my existing tenants $200 if they find a new tenant that signs a lease. It costs the same as a newspaper ad and much cheaper than a vacant unit.

It is cheaper to keep a tenant that to find a new one. These simple (and in many cases free) tips can keep your tenants happy and make your life as a landlord easier.