Leasing

Terminating a Lease Early

The holiday’s have kept me away from posting much.  John Gall shot over this question the other day and I want to respond with an answer:
I have technically three tenants in a SFH [single family house]. Two singles and one married couple. The lease goes until 5/31 and the tenants can’t stand to [...]

The holiday’s have kept me away from posting much.  John Gall shot over this question the other day and I want to respond with an answer:

I have technically three tenants in a SFH [single family house]. Two singles and one married couple. The lease goes until 5/31 and the tenants can’t stand to live together anymore. The two singles want to move out 4/1 and I’m guessing the married couple will also if given the chance. The set of tenants are mixed. Good on taking care of the property but mixed on rent collection paying late most months but always up to date by months end. I’d actually like to get rid of them and get a new tenant in place.

My strategy is to have them sign an early least termination agreement contingent upon my obtaining a new tenant for 4/1 with a signed lease. If I cannot secure a new tenant for a 4/1 move in and their stuff is not out then the original 5/31 lease date stands. My hope is to 1: get rid of the deadbeats and make them happy. 2: They now have an incentive to make things show worthy and make the property available to prospective tenants.

John, I think you are headed down the right path.  I am have zero patience or time for playing mother to bad tenants. I would prefer to just let them go and find someone else.

The positive is that they gave you plenty of notice to figure out a solution and re-rent the property.  I would remind them to keep the place clean and picked up as to help you rent it out by 4/1 (which also is to their benefit to get out early).  Most tenants will be fine with this.  If the property needs any upgrades, you may want to tackle these now (again using your leverage to get them out early to do it).

Unfortunately, I think you are going to have to pick a move out date now.  I would be concerned that if you found a tenant on 3/15, would the existing tenants then have enough time to find something and move out by 4/1?  If one or more of them couldn’t find a place to live, it could get dicey as the new tenant needs to move in and the remaining one(s) now need to be evicted as a hold-over tenant.  This could lead to some sleepless nights and could take 1-2 weeks to resolve.

My other option would be to talk to the married couple seperately (I assume they like living together!).  See if they want to stay and would start a new lease.  I assume since the had roommates, they can’t afford the extra rent, but it is worth a try.  Also, if you have any other vacant units, move one or more tenants over to that one.

I suspect that if you start advertising your rental now, especially in Craig’s list, you will have no trouble getting it filled by 4/1.  Good luck!

When Do You Start Leasing?

John dropped me a quick note asking me:
I have a tenant whose lease ends 5/31/09 for a SFH [single family house]…When would you start showing the house in order to have it rented for a 6/1 move in? Would you recommend striking a deal with the tenants on keeping the place in show condition or [...]

John dropped me a quick note asking me:

I have a tenant whose lease ends 5/31/09 for a SFH [single family house]…When would you start showing the house in order to have it rented for a 6/1 move in? Would you recommend striking a deal with the tenants on keeping the place in show condition or is that usually not a problem?

I try to start as early as possible, but 60 days is about the max that people are looking.  Here are some of my experiences, depending upon the neighborhood:

• The “typical” tenant in some areas will be looking 60+ days in advance.  I see this in South Minneapolis around the lakes.  I also experience this when renting houses   These same tenants will generally arrive at the apartment showing as planned.
• Other neighborhoods seem to thrive on procrastination.  I will get calls less than 30 days in advance, in fact, I will get calls 1 week before they are looking to move in.  I experience this often in both North and NE Minneapolis.  I will book 5 people to look at an apartment and maybe 1 will show up.

As for “striking a deal” with the tenants to keep it clean, I just expect that they keep the place in order.  Also, I work hard to show their place no more than 2-3 times per week to limit them being frustrated.  I book everyone at the same time, just like an open house.

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How to Write a BAD Craigslist For Rent Ad!

In the old days, landlords would use yard signs and the major newspaper to advertise rental properties. Now we all use Craigslist to find tenants. It is fast, easy and free. What a blessing!
Clark with the Bourke Group (Keller Williams) in Asheville, NC wrote a fantastic post on How NOT to write [...]

In the old days, landlords would use yard signs and the major newspaper to advertise rental properties. Now we all use Craigslist to find tenants. It is fast, easy and free. What a blessing!

Clark with the Bourke Group (Keller Williams) in Asheville, NC wrote a fantastic post on How NOT to write a Craigslist For Rent Ad. It is insightful and very well thought through. Every landlord needs to read this!

Tenant Application-Red Flags Example #2

I try to ask lots of questions when I meet a prospective tenant.  This will usually allow me to ferret out any problem tenants or issues.
There are so many examples of interesting tenant screening discussions that I have on a monthly basis.  I thought this one was worthy of posting, not because it was funny, [...]

I try to ask lots of questions when I meet a prospective tenant.  This will usually allow me to ferret out any problem tenants or issues.

There are so many examples of interesting tenant screening discussions that I have on a monthly basis.  I thought this one was worthy of posting, not because it was funny, but for some of the subtle red flags, that I was hearing while talking to this prospective tenant.

This prospect called about a 2 bedroom apartment in an investment property in Crystal, that I own.  It was recently renovated and is priced at a below market rent of $765.

Me:
So where do you live now?

Prospect:
I live just down the block in Crystal.

Me:
Great, why are you moving?

Prospect:
The landlord is going into foreclosure and he won’t fix anything and we can get in touch with him.

Me:
How about sending him a letter with your rent?

Prospect:
Oh, we haven’t been paying rent there since March (8 months).

Me:
Really! And no one has contacted you about that.

Prospect:
Nope.

Me:
[Joking] So you should have all kinds of money saved up for the damage deposit and first month’s rent on my apartment, right.

Prospect:
No, I am going to need to get my damage deposit and probably my first month’s rent from emergency assistance.

Me:
OK…………[explained my screening process] Do you have anything on record that I should be concerned with?

Prospect:
Well, I have an eviction from 2 years ago and my credit is bad.

[Thinking to myself-I saw that one coming!]

Informal tenant screening is nothing more than carrying on a conversation with some subtle questioning.  I was just asking questions to understand more about where she lived and worked and such.  As I heard a red flag, I steered the conversation that direction.  While I did this in person, it is a great way to weed out bad tenants on the phone, saving yourself a trip to the property.
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Scott Ficek is a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Minnesota Investment Property. He owns and manages almost 30 investment property units from single family to multi-family. Subscribe to his monthly real estate newsletter. Register for the newsletter here.

Screening Your Section 8 Tenants

As a landlord, if you have not worked with Section 8 before, it can seem a little overwhelming.  There really isn’t anyone that can walk you through the process and no good information exists on-line (except maybe the Section 8 posts here).  And to top it off, the Section 8 tenants don’t know much more [...]

As a landlord, if you have not worked with Section 8 before, it can seem a little overwhelming.  There really isn’t anyone that can walk you through the process and no good information exists on-line (except maybe the Section 8 posts here).  And to top it off, the Section 8 tenants don’t know much more about the program than you do.

A common question is “How do I screen Section 8 Tenants”.  That is pretty simple.  You screen Section 8 tenants just like screen tenants that do not have subsidized rent, with a couple changes:

• Most Minnesota Section 8 tenants have to pay a small percentage of their rent (10-25%).  Very few have their entire rent paid by the government.  Consequently, the tenant needs to have some other source of income.  Where are they going to get the $100-250 per month that they have to pay out of their pocket?  Plus, how are they going to pay for utilities, if they are not included in the rent?  Weigh your decision heavily on the fact that a large portion of the rent is guaranteed from the government, but be concerned about the remainder.
• Call their Section 8 coordinator to confirm they are able to rent your apartment for the proposed rent.  Confirm they are able to move from their current residence.  You don’t want to make the same tenant screening mistake I made.
• If their credit is bad or non-existent, confirm that they have income to pay their portion of the rent and then consider waiving that requirement of your rental criteria.
• Confirm they are able to pay the damage deposit upon move-in.  They may need to go to emergency assistance to get the deposit, so have them get a letter to confirm the subsidy.

Screening Section 8 tenants is just like screening anyone else with a few additional steps.  There is no need to over think the process.

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Tenant Application-Red Flags Example

Here is an example of a recent email exchange that I had with someone interested in my 2 bedroom plus loft, new construction townhouse in Forest Lake, MN. I was using Craig’s List to rent this property. I decided to post the exchange so you can notice the interesting way they are trying [...]

Here is an example of a recent email exchange that I had with someone interested in my 2 bedroom plus loft, new construction townhouse in Forest Lake, MN. I was using Craig’s List to rent this property. I decided to post the exchange so you can notice the interesting way they are trying to avoid having to complete a rental application and why red flags were going off everywhere [note the grammar and spelling errors are from the original text]:

Prospect:

Hi. Me and my fiance’ are very intrested in your town home. When will it be available for renting? We just had our first child and need the space asap. Let me know, also quick note we would be willing to pay a few months up front if you’d take 1100 a month plus we got a dog. But we like what we saw so please let us know.

Me:
Thanks. It is available on June 1. I can take the dog (depending upon size and type), but I can’t take $1100. I would be willing to go to $1150 if you paid in advance. [rent is advertised as $1175]

Prospect:
OK we could do 1150 a month. Dog is a pointer terrier and about 45 pounds, does that work? Also were not looking to fill out application that why we’d paid a few months up front, does that work for you, you can also call or landlord now, would that work?

Me:
What is in your background that you prefer not to fill out an application?

I am OK with bad credit as long as you have good income (paying in advance will cover that also).
How long have you been at your current apartment?

Prospect:
We were on the market for buying and had our credit run to much, so we perfer to do what our current landlord did and meet us face to face and we liked each other. Wrote the check and have lived here for over a couple of years. It just tough because alot of people scam people so anyone that is interested in the face to face way is what were looking for. And that is why we want to pay a little extra up front to show that the trust can build. So what do you think?

Me:
I would be happy to rent to you, but it is simply my policy to run a credit, criminal, and rental check on every adult in every one of my properties.

A single credit check run for a rental application is going to do nothing to your credit. Even if it was run 10 times, your credit recovers quickly from those type of checks. Plus, unless you are planning to open new credit line in near future, it doesn’t matter anyway.

Attached is a copy of my rental policies for your review.

Prospect:
Yeah see were trying to by pass all that because were trying to not mark anything.

Me:
Thanks for your inquiry, but I can’t lease to you without a full rental application which includes credit, criminal and rental background checks and verifications.

Clearly this person is trying to hide something. Why else would they not want to fill out a rental application for an apartment they claim they are interested in? Plus, why not simply tell me what the problem is (felony, evictions, collections). I will not be renting to this person!

Scott Ficek owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email. He is also a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Minneapolis Investment Property.