I wrote at the beginning of the month about an apartment in NE Minneapolis that I am showing.  I have had many calls and probably 10 different groups through this 3 bedroom apartment.  The bedrooms are large, but the living area (kitchen and family room) are very small.  Most of the previous tenants that lived there were roommates that preferred to spend the majority of their time in their own rooms.  I moved the rent down from $950 in the past to $850, as I figured that someone would overlook the size for a cheaper apartment.

Unfortunately, despite all the people that have been through the property, no takers after almost 30 days of trying.  I have rented a couple other places during that same time, so I know it is not the market.  Plus, as I wrote previously, vacancy rates are down according to the experts.

Yesterday, as I stood there waiting for an appointment, I took an honest look at this place.  The paint is in good shape, but needs to be touched up prior to the new tenant.  The hardwood floors are nice, but could be waxed.  There are some cobwebs here and there.  The bathroom and kitchen need a heavier cleaning.  There are a couple switch plate covers that need to be replaced.  These are all items that I would typically get done prior to a tenant moving in.  Unfortunately, most tenants have no or little ability to see past these minor items.  This is probably driven by experiences with landlords that don’t repair items or say they are going to do something and never do.  I need to get those items done and off the punch list prior to showing this apartment again.

I also decided that although the floor in the kitchen and bath are fine, they are not very impressive.  The current tiles are worn or chipped in places and just don’t help these rooms.  Maybe upgrading the flooring will make the rooms feel bigger and help the place rent faster.

I am going to take the time and money to update them. I have great success with a commercial grade vinyl tile from Armstrong called VCT.  I have put it in every house I own (including my personal houses).  You can purchase it at Home Depot in large boxes (they carry 3-4 basic colors).  It is installed by applying a very sticky epoxy to the floor and then setting the tiles onto the glue.  I typically do a checkerboard design, which really looks great (see finished picture).  I also love the fact that I can install this myself in about an afternoon with a minimum of tools and frustration.

While I am not suggesting that you need to stage your apartment with furniture and paintings on the walls, maybe you need to take an honest assessment of the property and make some necessary cosmetic improvements to help you rent it faster.

I am in the middle of showing a duplex that I have in NE Minneapolis.  It has hardwood floors, 3 bedrooms and because it is kinda small, I am asking $850.  It is available immediately (if you know anyone, send them my way!).  I have had several interesting experiences in this round of advertising and showing to prospective tenants.

First, I decided that I was only going to take responses and questions via email.  In the past, I would give out my phone number on the Craig’s List ad and my phone would ring like crazy.  I found it was too difficult to take those calls.  I could be driving down the road, get a call, talk to the person, book an appointment and forget to put it in my calendar.  Other times, I would get the ODC tenant that would call me 18 times every 2 minutes until I finally answered.  I would get lots of voicemails where I could not understand the person leaving the message or would attempt multiple times to call them back with no success.  I figured email is a slower pace and I can reply when it is convenient to me.

I started to notice that many of the prospective tenants wanted me to call them.  Instead of calling, I simply cut and pasted a note that said “I am showing the apartment on Tuesday at 5:30pm, come by if you are interested”.  I was getting almost zero replies from my response.  Strange.  Why would almost 10 people write me, I reply and then never get back to me to say “Yes I will be there or no that doesn’t work, can I schedule a different time”.  I did eventually have a couple people show up on Tuesday.  Here is what one said to me….(I am paraphrasing):  ”I only came to this appointment because when you replied you had your phone number in your signature line in the email.  I called you and you answered.  You appeared to be legit, so I showed up.”

We talked about what they were seeing in the market and I guess there are so many scam artists going around showing an apartment, collecting rent, and then never actually owning the property.  Another interesting one was a “landlord” shows up at the property to meet a tenant, he “forgets” his keys, they talk, the prospective tenants take an application, he calls them the next day and says that he has to go out of the country to South Africa and they should mail him the money now and he will send the keys.  This sounds strangely like the “you are the long lost heir to a $15.3 Million estate” spam emails I get!

Moral of the story is that as a landlord, tenant applicants are leery, handle with kid gloves.

Second, this is a repeat, but I want to be sure you hear this tip:  The next week I took what I learned and started to call people or at least craft personal emails to show I was real.  I received emails from probably 15 interested parties for my apartment.  I had positive confirmations from maybe 10 parties that were going to show up (this time on Thursday at 7:30pm).  I booked all of them at the same time, because history has taught me that many will no-show.  I had 5 parties that showed (one that was 45 minutes late-I happen to be waiting for someone to fill out an application, otherwise I would have been gone).  50% no show.  What if I had booked each one of those on a different day or time?

Moral of the story is that to save time and be more efficient, book all your appointments at the same time or worst case space them out by a couple minutes on the same trip.

There is no silver bullet when showing your units.  You just have to listen to what is going on the rental market and adjust your strategy to make the best of it.

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.

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!

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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Maybe this isn’t the right title for these letters, but if you are a landlord for any length of time, you will get one.  They are similar in concept to the “Dear John” letter that soldiers used to receive.

This tenant love notes is slightly different, it is usually sent with the rent check folded up in it.  Typically it is used to explain why rent is late, but more often it is to explain why they have short paid their rent this month.  Here is an example of one:

If you read the letter it starts off by saying:  “I am sending you five hundred dollars [when the rent due is $800] and I will pay the rest of Oct rent on the 31st of Oct.”

At this point, you need to make a decision whether you are going to wait for the remainder of the rent ($300) or not.  I believe the decision is going to depend upon their previous pay history, the condition of the apartment, time of year, and your motivation.

If I am not willing to wait, I can start the eviction in Minneapolis.  Most likely, they will be out by Mid-November (assuming they don’t pay).  I would then have to clean and prep the apartment for showings for a December 1 move-in.  Although leasing apartments in December is possible (and has actually gotten easier with the low vacancy rate), it is not my favorite.

I have decided that I am going to wait and see if they follow through on their commitment.  If they don’t, the next day, I am at court.