I found these very interesting housing articles recently published.

BofA developing foreclosure rental programs to deal with distressed properties-BOA, Fannie and Freddie are trying to figure out how to move some of these non-performing mortgages or worse these REO properties that they own.  Banks have an estimated $50 billion worth of REOs on the books right now.  The thought is that banks may rent the house back to the people that lost it to foreclosure.  They would do a short sale on them to an investor and rent it back to the previously owner.  Interesting, but I think some of these people need to downsize and move out.  Plus the emotional attachment to the house has to be severed.  As a landlord, you can’t have someone remodeling their bathroom because they still regard this house as theirs.

Residential Housing Ready to Awaken-As we have seen over the last 5 years, you get 50% of the “experts” saying we are in a recovery and 50% of the other “experts” saying we have time to go.  This article suggests that some of the important pieces are falling into place for a 2012 slow, but steady recovery.

How Can Renters Solve the Housing Crisis-This article perfectly articulates what my customers have been seeing over the last 5 years.  The market is going to recover, put your money in rental properties, and you will see a gain.  The mindset of people has shifted.  It is OK to be a renter and not a homeowner.

**Update:  See the below comment from EG, who tried these locks.  In retrospect, I was wrong on this article.  Paying more for locks is the smart thing to do, because I have found that the front doors on my rentals take a lot of abuse.  A cheap lock is going to just result in many services calls.**

So even after being an investor for this many years, I still learn something occasionally.  It can either happen because the world has changed or maybe my view of the world has changed.  This is a small one, but it was definitely a Homer Simpson “Duh” moment with the traditional slapping of the forehead.

As I bought all my rental properties years ago, I made a point of changing all the lock sets. I standardized on a Quickset deadbolt and then I would always remove the locking knob (so that no one could lock themselves out-requiring me to come over with a key).  I bought the locks from a little locksmith in NE Minneapolis on Central. They were very helpful and as I was a newbie landlord, I had not been in the trenches very long.  I had all the locks keyed with a master figuring that it would be easier to open and change them out if all I needed was one key.  Unfortunately, this locks and the master key system cost me about $55 per deadbolt.  To me this seemed like the right way to do it.

Yesterday I was working on a new listing and realized my inventory of lock boxes was at zero.  I had heard of REO agents getting cheap lock boxes on-line for 50% the price that you pay at Home Depot.  I found the site and while I found the cheap lock boxes, I had that paradigm, “DUH” moment.  Here are deadbolts that I see on every foreclosure home that I go into.  They cost $3.

I could have purchased 14 of these for every one of those expensive deadbolts.  Frankly, I have paid more than $3 for just new keys in the past!  This paradigm shift could have allowed me to have boxes of locks with keys and very easily (and less expensively) changed them out simply.  I always try to run my rentals better than most landlords, but here is a situation where I was wasting money.

I guess the moral of the story is to stick your head up occasionally, look around and see if there is a better/cheaper/faster way to manage your properties.

Fall is a great time of year.  The grass slows down growing, I can open the windows and not have to run the A/C.  Kids are back in school.  I am realizing I like fall because of all the things that I don’t have to do or take care of!  Oh well.

This is also a great time of the year to get in and take a look at your rental properties.  If nothing else, it is an excuse to tell the tenant that you need to do your bi-yearly inspection so you can go in and take a look around at how they are treating your property.  Here are some other items that are worth doing as a preventative maintenance to potentially prevent emergency calls later:

• Turn on the furnace!  I can’t tell you how many calls I get once we have a cold spell from tenants that say their heat is not working.  Often, those calls are at 9pm at night once the temp drops.  Frequently, it is simply someone turned off the electrical switch next to the furnace, not knowing what it was.  Fire up that furnace now, make sure it runs, and more importantly, make sure the tenant knows it runs.
• Change the furnace filter and leave a box of 6-8 more filters for the tenants to change out every 30 days.  While I am pretty realistic that most tenants won’t change out the filters, at least the correct sized filters are next to the furnace.  Then if I ever need to go in for any other service calls, I can simply grab one and throw it in.  You will find that older home and homes that have smokers tend to have full filters much more often.
• Turn off the outside water spicket and drain it.  You do not want that to freeze and potentially flood the basement!  In fact, in many of my multi-family rentals, I simple remove these outside faucets.  There is nothing that a typical tenant needs that outside water for.
• Double check the operation of the front door locks and the garage door.  While this is not a cold winter item, these parts of the building take a lot of abuse.  Make sure they are lubricated and the screws are tight.
• Pour some drain opener down the drains.  Even if there is not a problem, this is an excellent preventative process.  I had to go over to a tenant’s property on Thanksgiving day once to unclog a kitchen sink.  She called me all in a panic because her sink was clogged and company was coming in 4 hours!
• Change the batteries in all the smoke detectors and carbon monoxide detectors.  I can’t tell you how many times I have seen tenants take the smoke detectors down and put them in a drawer because they were either beeping because they burned a pizza or because they were low on batteries.  This way, you insure they have them mounted and insure they will not beep.
• If you are responsible for supplying a shovel and/or sidewalk salt, make sure both are ready to go.  Fill up the salt container or leave another bag.  Better to do this now than when it snows at the end of October and you are running around!
• Winterize the lawn mower by at the very least putting some fuel stabilizers in the tank.  If possible, drain the oil, change the spark plug and air filter and sharpen the blades.

While all of these items may not be necessary for every property you own, getting into your units twice per year (once in the fall and once in the spring), can help you head off other maintenance calls and keep an eye on how your tenants are treating your investment property.

I was thinking about using some cliche’ to start this post off with like:  “You can’t teach old dogs new tricks” or “you are never too old to learn”, but I just couldn’t bring myself to do it!  I was invited to a training course about a month ago that was sold as landlord training.  The cost was $45 but the speaker wanted me to attend to see if it was something that I could recommend to my investors and blog readers.

I attended this seminar last week.  I was very skeptical that this wasn’t going to be much more than a very basic landlord class.  Boy was I wrong!  This class was informative and interesting, even for me (a guy that has owned lots of rental properties and helps investors get started as landlords almost daily).  This class is actually taught by an attorney from the Home Line Tenant Hotline.  They provide free legal advices to tenants and will even help them in court in certain situations.

The speaker was one of the attorneys from Home Line.  He was engaging and interesting, but what I found fascinating was how he and his peers looked at different situations that we as landlords encounter every day.  He was able to show how they defend the tenants by using the landlord’s ignorance of the laws and statutes.  A couple quick examples were:

• They are often able to have leases invalidated because the landlord has a PO Box as the mailing address (when the state statute requires a physical address).  I realized that I was taught as a landlord to use a PO Box to get your checks.  I am sure there are many other landlords out there that are breaking this rule.
• If your lease converts to a month to month lease for a tenant, you legally must send them a written notification 75-90 days prior to the expiration of the lease telling them about the automatic renewal. This notification can only be sent during that 75-90 window and must be sent via certified mail or personal service.  How many landlords do you think actually do all those steps?
• If you have  tenant that stays on past the end of the lease, they are a hold-over tenant.  If you accept money from them, you have entered into a new oral lease and you can not evict them.
• We also discussed many other legal issues such as fair housing and discrimination.

These and many more gaps/problems in landlord procedures were pointed out to us in class.  I was writing furiously because I could see places that I needed to shore up my processes to keep myself protected.  Not only could this information help you be a better landlord, it may help you stay out of court!  I recommend that every landlord take this class.  It was invaluable.

When it comes to being a first time landlord, there are plenty of things that need to be considered aside from purchasing flats to rent. Being a landlord is a great way to bring in some extra money and even make a living; this, however, is not to say that it is easy or stress-free. Dealing with tenants can be rather difficult, and ensuring that they pay on time and do not cross you can be plain impossible. Fortunately, proper planning will ensure that you can make a prosperous career out of being a landlord.

That said, here are a few tips for first time landlords.

1.) Purchase the Right Properties
Buying the right flats to rent is one of the most important things that any landlord can do, and is usually the first step in the process of becoming a successful business person. You may also want to purchase a house, as many people would prefer to live in a house over a flat. Once you have purchased at least one property, you can begin fine-tuning your business.

2.) Choose Your Tenants Wisely
Choosing the tenants that you will rent to is one of the most important decisions you can make as a landlord. Remember that the majority of the money (most all of it, actually) in this business will come from your tenants, so you will want to be sure that they are good for it from the very beginning. Doing a credit check and holding a lengthy interview is the best way to ensure that a potential tenant is worth renting to. It is highly ill-advised that any landlord rents to a random tenant.

3.) Be Firm
One of the most common mistakes that first-time landlords make is that they let their tenants take advantage of them by allowing them to pay late (or not at all) for their rent. This is terrible practice, and can set you up for disaster in the future. Always be firm when it comes to rent.

Despite being a landlord for over 6 years, I swear I learn something new in this business every month.  Have you ever leased your property to a tenant (Section 8 or not) for less than you were really trying to get?  Most of us have.  Maybe it is a slow rental time of the year, maybe you just haven’t had many calls on the apartment, maybe it is 2 weeks before the first of the month and you just want to get the place filled.  I bet every landlord has done this at one point.

So then, how do you get the rent back up to where you want it to be without upsetting anyone?  With non-Section 8 tenants, I tread lightly.  I would rather sacrifice $50 per month than have them decide to start looking and move out.  Each turnover costs me $1000-$2000 in painting and property repairs, even when they leave the place perfect.  Plus, that is assuming that I will NOT have any vacancy time.  In my book, that $600 that I am losing per year is cheaper than a turnover.

A friend of mine that does property management for about 250 units (60% of them get some rental subsidy like Section 8), told me something I never knew.  You can raise the rent on a Section 8 tenant dramatically in one year or every year and Section 8 will approve it.  This is even if it goes over the maximum rent amount for that unit. Me and another landlord just sat there with out mouths open, about to cry over all the money we had left on the table over the years!

Here is an example of how it works:

• You have a duplex with two 3 bedroom units.  Both units are identical.
• You typically rent each unit for $1200 per month.
• The previous tenant moves out in December and you are having a tough time finding a tenant.
• A prospective tenant calls you about the apartment and says they have a Section 8 voucher that will only pay $1095.
• In a pinch and desperate you decide to take them, despite getting $105 less per month that you normally get (after running the typical tenant screening process).
• You sign a lease at $1095.
• At month 10 (60 days before the expiration of the lease), you contact the tenant to see if they want to stay.
• If so, you draw up a new lease for $1200 and have them sign it.
• You submit the new leaseand documentation of the rent for at least three other comparable 3 bedroom units in duplexes with the same amenities, in the same neighborhood, to justify your rent increase.
  • The other comps must be NON-Section 8 tenants.  You are trying to show what the market rent is for that property.
  • One small wrinkle is getting comps.  You can definitely use the other unit in this duplex in this example, but then you may need to figure out a way to provide proof of other units in the immediate area renting for the same amount.  Hopefully you either have other buildings nearby or maybe you can ask a neighbor landlord to give you a copy of his/her leases for this.
• There is no guarantee that Section 8 will approve this, but if you have a decent case with good comps, my friend said he has raised the rent $200 one year to get the property to the correct amount.

One question that got asked was, why would the tenant agree to a large increase.  The answer is that they may not feel the increase as Section 8 may simply pay the difference.  While you can’t guarantee this, it is worth mentioning.  Alternatively, I do know that Section 8 will mostly ignore smaller yearly increases of $25-50.  These just fly under the radar.

So…..Watch for your lease renewals on your Section 8 properties and bring your rent up to market standards.