August numbers show that the Twin Cities housing market is slowly becoming more balanced, a realtor group said Tuesday. But it’s not there yet — Twin Cities home prices dropped again in August.  Read the full article at the Mpls/St. Paul Business Journal.

I have had two different customers call me in the last 6 months saying that their tenants have found bedbugs in their units.  Unfortunately, both of these calls were from customers that owned 4-plexes.  It turns out that bedbugs have become an increasing problem in the last couple years.  More international travel and the bedbugs increasing resistance to long-used pesticides is causing an increase in reports.

It has become so bad that some municipalities across the US have put new regulations in place.  In Maine, landlords must inspect a unit within 5 days or being notified of a possible infestation and contact an pest control specialist within 10 days.  Additionally, affected units can not be rented until treated.  Most often, though bedbugs are treated just like mice and other pests in state and local statute and regulations.  Even in Minnesota with the cold, we are not immune to bedbugs.  In fact, there is now a bedbug registry that anyone can post reports on.

Whatever the regulations, I recommend that you spare no expense to treat these bugs.  You need to act quickly and bring in professionals to get rid of them.  If you have them in one unit of a multi-family building, you don’t want to run the risk or infecting more units (and increasing the ultimate cost).  Proper extermination of this problem and elusive bug can be complicated so taking shortcuts by doing it yourself increases the chances the problem will continue to get worse.

Because the extermination can cost as much as $1500 per unit, my customers were obviously trying to figure out where the bugs came from.  Unfortunately, it is often difficult to find the source of bedbugs and even harder to prove it, especially in a multi-family building.  One way to at least try and minimize your risk for infestation up front is to add lease clauses such as:  ”Tenants will not bring any furniture that is found outside or or from unknown source into property”.  In this case, you may not be able to prove the tenant brought in the bedbugs, but you may be able to evict them based upon the lease violation of bringing in the furniture.  Also, bed bug infestations are not limited to beds and mattresses, and they can be found on tables, drawers, and even electronics if these items were located in a bedroom or other place that could support an infestation.

Once infected, I recommend that you document your actions carefully including pictures of units before, during and after infestation.  If a court case happens, you want to have that documentation, which may help you proof that either the tenants were at fault or that you acted as quickly as possible to resolve the issue (minimizing your liability, but not eliminating it).

By the way, these little bugs creep me out too much, so I chose NOT to post a picture of one!

I am not sure where this came from or who starting teaching it.  I have heard many old-school landlords say that they use a PO Box for their rent checks.  I guess the theory was that you don’t want your tenants to know where you live.  I suppose in case of a zombie apocalypse that would be a problem or if you are a real jerk landlord I can see why you want to hide.  Now days, using a PO Box to hide your location really doesn’t work.  Using the Internet and Google, you can find out a lot about a person.  Plus, the county typically has your address on your tax statements and those are on-line also.  You would have to go to great lengths and expense to be invisible from Google and your tenants.

A more recent example is one that Kevin Stevensen from The Cleanout People.  I always knew this rule, but never found anyone that missed it and got caught by it.  Kevin sent this message:

Scott

Here is a good fyi to pass on to other landlords, we took a tenant to housing court for non payment of rent. Well she got legal aid and they found that on our lease we have a PO box for the mailing address for rent.  Well I guess as a landlord we cant do that we need a physical address.  

Minnesota state law requires that you have a physical address for you or your rental company on your leases.

504B.181 LANDLORD OR AGENT DISCLOSURE.

Subdivision 1.

Disclosure to tenant. There shall be disclosed to the residential tenant either in the rental agreement or otherwise in writing prior to commencement of the tenancy the name and address of:
(1) the person authorized to manage the premises; and

(2) the landlord of the premises or an agent authorized by the landlord to accept service of process and receive and give receipt for notices and demands.

I am 90% sure that you can still have the checks mailed to a PO box (which can be useful if you have an accountant or business partner doing the books), but you need to list a physical address per the above statute.

Here is how I handle this.  As I mentioned previously, I buy my leases from the Minnesota Multi-Housing Association.  While they cost me about $2 per lease (they are 2 part carbon), they have been approved by the Minnesota Attorney General and all Section 8 programs.  This tells me that I should not get myself into any hot water over anything in that lease.  They have a provision in the lease that handles the above law.

Here is a snapshot of that section of my lease:

I am not an attorney, but the 2nd section speaks to accepting service of process, which can never be done to a PO Box (they need to serve a person).  I am uncertain if I could put a PO box in the first section.  Probably to be safe, I would put a physical address in there and then in the Notes section of this lease write:  Mail all rental payments to:  PO Box 123, Minneapolis.

If you have only listed a PO Box on your leases, you may quickly want to post a physical address at the property and/or send a letter to all your tenants to get into compliance with this Minnesota statute.

For as long as I have owned properties in Minneapolis, I have always been confused by the occupancy limits per unit.  The official language of the housing rules and standards for occupancy is:

The maximum occupancy for a dwelling unit located in in these zoning districts [R1, R1A, R2, R2B, R3] is one (1) family plus up to two (2) unrelated persons living together as a permanent household, provided the family plus unrelated persons shall not exceed a total of five (5) persons.

Ok.  Seems straight forward enough.  So what does this mean?

• Family is defined as:  An individual or two (2) or more related by blood, marriage or adoption, including foster children and domestic staff employed on a full-time basis.
• 6 guys living in a 6 bedroom house do NOT qualify under this ordinance.
• 12 family members living in a 6 bedroom house DO qualify.
• 3 family members and 3 couch sleeping friends, do NOT qualify.

Have you always thought about buying an investment property?  Are you watching your friends or family feast on these cheap foreclosure homes?  Have you been watching the market and want to understand more about how you can purchase a $39,000 single family home, rehab it, rent it out and make $300-400 per month in cash flow?

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

If you were a landlord and lived through the mid-2000′s, you saw market rents fall as many better tenants were buying houses and vacancy rates were climbing. I had to make major upgrades to many of my rental units AND take 10-20% drops in monthly rental amounts to get or keep some places rented. This is not a great way to make money! I suspect that in a long term view, this is why we have some of the foreclosure mess that we have today in the investment property side. Landlords were not consistently making enough money over the years to off-set expenses.

Well, that seems to be changing. I reported in January that 2010 was a record year for vacancies. We saw a drop from 7.3% vacancy rate in 2009 to a 3.8% rate at the end of 2010. The study also predicted that we will see a 3-4% rent increase.

Fast forward 7 months and the numbers keep getting better. According to a recent Minneapolis/St. Paul Business Journal article, market rents inched up from an average of $902 a year ago to $921 at the end of second quarter.  While $228 per year doesn’t sound like much, it should help some landlords get back in the black and more than anything, keep up with increases in rental licensing, gas prices, and it seems like everything else getting more expensive.  Some areas like downtown and Uptown Minneapolis experiences up to a 6.9% jump in average rent since last year.

Vacancy rates are also at almost historic lows dropping to 3.1% in the first quarter and then again to 2.4% in the second quarter.  This is again compared to over 7% in 2009.  Some highly desirable areas have even lower rates such as Uptown which is at 1.9%.  I would argue that we almost at a true 0% vacancy.  Much like the unemployment number that never falls below 2.x% because there is always a baseline of rental units in transition between tenants and such.

While it is not time to celebrate, these are wonderful numbers that we as landlords can all enjoy.