I find that most new real estate investors are too soft on rent collection.  Unless you have training or experience in collecting debt, this is not a natural process for you.  Many people don’t like confrontation and rent collection is about putting someone (the tenant) on the spot.

Here are a couple quick tips when you are “dialing for dollars” to make it easier to collect rent:

1. Be consistent about calling immediately upon the rent being late.  If the tenants sense that you are not concerned about the rent, they won’t be either.
2. If you can’t get them on the phone, drive over there.  There is nothing more important to you and intimidating to them to have the landlord standing at the door at 8pm at night.
3. Impose the late fee every time.
4. Mail statements to everyone that owes anything over $5.  Make sure to get them in the mail or hand delivered immediately upon the rent being late.
5. If you get a partial rent payment, immediately call and find out when the rest of the rent is going to be paid.  Send another statement with the updated balance.
6. When you are talking to the tenant about paying the balance or when they are going to pay, push a little to pay more or sooner.  Most people (the tenant) will give in to authority when asked.
7. If the tenant does not live up to their commitment, start eviction immediately.  It is better to evict early than let it drag on and having them owe you more money.  Most tenants can not recover from being a full month behind.
8. If your tenants tells you they are paying you next Friday, call them a day or two before and remind them that you are expecting rent and how much your are expecting.  Again, if they believe you won’t call or check in, they may/will blow you off.

We own investment properties not because we have nothing better to do, but to make a profit (either short or long term).  Rent collection is the key to being a successful landlord.  You need this rent/income to keep your business solvent.

Ryan O’Neill, from the Minnesota Real Estate Team, is our guest writer today.

Here in the Minneapolis real estate market, agents on our team have seen a number of real estate investors over the years who have purchased condos or lofts as investment properties. Though there is no “one size fits all” approach to buying investment property, I wanted to briefly touch on some of the benefits to you as the buyer with this type of property.

First of all, a loft or a condo generally speaking has a much lower level of maintenance. My wife and I have owned a number of single family homes in Bloomington since 2001. Though I am certainly not displeased with this type of investment property choice on our part, I have had to spend a sizable amount of capital on roofs, siding, and windows over the years. As an investor in today’s market, I certainly do not discourage investors from a single family home. However, if you do buy a single family home, it will definitely save you money long term by buying homes that do not require these sorts of updates.

Secondly, a loft or a condo does not require the normal sort of lawn and snow care maintenance that a single family home does require. Last week I received a call that one of my tenants was moving out of his rental home here in Bloomington. And course we received about a foot of snow since he has left. As the owner of the home, it is my responsibility now to remove the snow myself or hire a company to do so. Again, if this tenant was renting a loft or condo, there would be no such maintenance on my part as the owner.

Obviously, a condo will have a monthly association fee that will affect your monthly cash flow. However, with the current state of the market here in the Twin Cities, even condos and lofts cash flow after the association fees. And there are a ton of them for sale on the MLS.

Lastly, our team is excited to have put together a collection of the various Minneapolis condos for sale. We spent a lot of time putting together this loft and condo guide for all of our investors and owner occupied buyers alike. It is full of pictures of the myriad projects available here in our Minneapolis real estate market.

Incidentally, I wanted to congratulate Scott Ficek for being voted The 2008 Agent of The Year for The Minnesota Real Estate Team! Scott won award through the votes of his peers, our team of 40 real estate agents. Congratulations and thank you for providing such an awesome blog for Minnesota real estate investors!

Happy Real Estate Investing to all of you in 2009!

The weather has really been rough here in Minnesota lately.  If it is not snowing, the temp is below zero!  It makes it rough on showing houses.  The cold weather also takes its toll on foreclosed vacant houses, especially ones that were not winterized.

Here is one frantic message I just received from another agent on our team:

I need a referral to someone who will go to Saint Michael to unthaw and clean up freeze damage. I need it done ASAP.

The unfortunate situation is that the last Realtor to show this vacant listing, left both the front door and door to the garage open. This was an upper end home that my clients had vacated. The heat was on, but set to 40 degrees. Of course, with both doors open and sub-zero temps the pipes froze. What a mess!

In the last week, I have seen some very interesting sites.  I thought I would share a couple with you.

Stay warm!

Back in June, I wrote that REO banks will typically only consider offers that are 90% of the list price on foreclosed properties.  They often never even reply to low ball offers on foreclosures.  In the last couple weeks, I have seen a dramatic change in many of the bank’s responses to lower than average offers.  They seem to be having Christmas sales or something because offers that my customers submitted, but I never figured would be even considered, are getting accepted.

Here is an example:

47XX Bryant Ave N, Minneapolis

• Listing  price=$43,159
• 3 bedrooms, 2 bath, on market 260 days, rehab costs around $50k
• My customer’s offer=$22,600, cash, close before December 31
• Bank’s counter offer=$35,000

My customer refused to budge from their initial offer price.  I expected the say “thank you for the offer, but we are not going to accept an offer at less than 50% of list”.  Surprisingly, 2 days later they came back and accepted the offer.  No counter or changes.  Just accepted this very low offer on this North Minneapolis foreclosure.

This is just one example, but I have seen this scenario playing out on other deals also.  I believe the banks are motivated to get properties off their books or at least marked as pending before January 1.

So if you have been sitting on the fence, now is the time!

I often get questions from new investors about how many properties they can buy now with the new mortgage regulations and restrictions.  Rob Bonahoom over at InvestmentMortgageGuy.com wrote a great piece on to buy 3 investment properties with virtually no money down.  Go over and read his Investment Property Mortgage post.

Roommates add a special twist in that each one is typically contributing toward the rent.  This is good and bad.  You have multiple sources of income, but you also have competing priorities and motivations.  Roommates are frequently my most frustrating rental units.  Often this is what I experience (let’s assume the rent is $999 per month).

• Roommate 1 always pays her $333 rent on time.
• Roommate 2 has some issues paying on time, but always calls and usually pays everything by the 10th.
• Roommate 3 is always late on her rent and often short pays.  It is now the 15th of the month and after repeated calls you finally get $200.  She already owed you $150 from the month before for a total now of $350.

What do you do?

You can’t evict just roommate 3 as all of them are typically on the lease.  Do you want to spend the money to file an eviction?  Can you force the other 2 to make up the difference?

Here are some idea on how to handle this situation (preferrably before it happens):

• I got this idea from Ryan O’Neill over at Minneapolis Lofts.  He has all the roommatees sign the lease, but makes one of the roommates responsible for collecting the rent and cutting one check to him.  If they want to swap roommates or one is having issues, that one is responsible.  Love it!  This expectation needs to be set up in advance.
• When one roommate get’s behind, call a house meeting and sit them all down and explain that the other roommates need to pick up the slack.
• Send all the tenants a Cure or Quit notice.  Although it is not required, it may be enough to get their attention.
• Start an eviction or go to mediation.  This is a more drastic measure, but if the balance is high enough it may be worth it.
• Make sure that all the tenants receive a statement every month.  They should see that roommate 3 is not paying.

Managing this multi-dimensional situation can be challenging.  You just need to get out in front of the problem and stay there!

Let our experience get you started!

Our next Investment Property 101 Seminar is being held on December 16 at 6:30 pm in Burnsville. I look forward to seeing you there.

Register for the seminar by filling out this quick registration form or call 612-281-5419 for more information.