Landlording Tips

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denovo
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Landlording Tips

Post by denovo »

Fellow Bogleheads, I wanted to share some practices that I've used in renting out properties that have worked for me, and am interested in advice that other landlords can offer.

(1) I love advertising using Postlets. It comes out a great Boglehead price ($0) and posts your ad on Zillow, Trulia, Hotmaps, and a whole host of other sites. Unfortunately, they don't post on craigslist, but they auto-generate an html that you can use on Craigslist. I've gotten plenty of leads using these services. I don't use signage anymore, but ymmv.

(2) I've started to use mysmartmove.com a service of Experian Transunion to run checks. It's slightly on the expensive side ($35 per applicant), but it has a credit, criminal, and eviction search. The reason I like it is because you just provide the tenant's e-mail address and they provide the information directly to Experian and pay them directly. It saves the time and paperwork of handling money for the application.

(3). Instead of scheduling appointments to view the unit individually, which I think is an inefficient use of time, I post on the advertisement two open house dates within a 7 day time period, 3 hour blocks. I schedule these during the last 30 days of my tenant's lease, which is a good opportunity to look around the place and see what needs to be repaired or replaced. I've found that this minimizes turnover since I get plenty of leads, during the last 3 vacancies, the gap between tenancies has always been less than 7 days.

(4) Pricing: I like to price the units at $100 below what I think is market value. I realize I may be leaving "money on the table" but I rather get a fair number of applications and minimize vacancies. More importantly, I want to get my pick of the tenant pool. I rather have a great tenant at slightly discounted rent than great rent with someone who gives me chest pains. Despite the discounted rent, I usually ask for at least 1.5-2 months security deposit, to weed out people with cash flow problems.
Last edited by denovo on Tue Jun 23, 2015 8:03 am, edited 1 time in total.
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magneto
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Re: Landlording Tips

Post by magneto »

denovo wrote: (4) Pricing: I like to price the units at $100 below what I think is market value. I realize I may be leaving "money on the table" but I rather get a fair number of applications and minimize vacancies. More importantly, I want to get my pick of the tenant pool. I rather have a great tenant at slightly discounted rent than great rent with someone who gives me chest pains. Despite the discounted rent, I usually ask for at least 1.5-2 months security deposit, to weed out people with cash flow problems.
Yes we think much the same on this one. In fact we almost never raise the rent to encourage the tenants to stay as long as possible, since the change of tenant involves time and expense.

Would also add the following to overcome the hassle factor problem so many (would be)/ landlords) here on Bogleheads complain about with residential real estate :-

(5) Prepare an information folder containing all the information the tenant will ever need, with contacts for plumbers, electricians, etc, on whom the tenant is to call for day to day problems, with the reminder that all invoices are to be forwarded direct to the landlord for payment. Only for anything major / unusual is the landlord to be contacted.
Then the only ongoing tasks for the landlords will most likely be just settling the invoices.

Might also add :-

(6) Always keep a plentiful cash reserve ready for unexpected expenses.
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fishmonger
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Re: Landlording Tips

Post by fishmonger »

A great tip I was told early on applied to college kids or those with little rental history. When they show up to view the place, meet them outside and take a peek into their car. People who keep their car reasonably clean and damage free, are likely to show the same respect to their abode.

Cannot agree more with keeping the rent 5-10% below market. We owned a two family and in 6 years only had one move-in/move-out (due to marriage). Turnover is EXPENSIVE
WhyNotUs
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Re: Landlording Tips

Post by WhyNotUs »

+1 for Smartmove (I think it is Transunion rather than Experian). It protects an applicants privacy while getting usable info.
Tenant screening is #1 for me.

Encourage tenants to report problems as soon as they begin.

As noted, need a good pool of tenants so that you can find a good fit. The OP noted marketing and pricing as two ways to get there but there are other strategies as well- networking, charging full rate and paying for professional management, location selection for properties, etc. There was a story on "This American Life" this week about how landlording can make you not trust people. Good tenants limit the impact on one's psyche and vice versa.
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Topic Author
denovo
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Re: Landlording Tips

Post by denovo »

WhyNotUs wrote:+1 for Smartmove (I think it is Transunion rather than Experian). It protects an applicants privacy while getting usable info.
Tenant screening is #1 for me.
Correct, fixed my post.

As noted, need a good pool of tenants so that you can find a good fit. charging full rate and paying for professional management.
I don't see how using a professional management is going to get you a better pool of tenants. They use the same advertising forums for the property, Zillow etc. Moreover, most managers I know of collect 10 percent of gross rent plus a month or two of rent for finding new tenants. With the margins on landlording, it seems like a bad bet to use property managers.
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patriciamgr2
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Re: Landlording Tips

Post by patriciamgr2 »

I no longer have rental properties, but I agree that professional management is overrated. Picking the correct tenants & then retaining them is the key to success--I think a motivated owner is able to do this best.

In response to another poster's comment, I would want to keep control of decisions on how to handle any repairs--I encouraged tenants to contact my approved providers to describe a problem & co-ordinate timing of the home visit--but I had to approve repairs in advance (unless it was an emergency & I was traveling).

I used the open house idea to avoid multiple showings, but I think denovo's idea of holding these while the tenant is still in residence is a brilliant way to minimize vacancies. Denovo: was it necessary to offer an incentive (eg free meal/small cash payment?) to the existing tenant to ensure the house was showable?
Carefreeap
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Re: Landlording Tips

Post by Carefreeap »

patriciamgr2 wrote:I no longer have rental properties, but I agree that professional management is overrated. Picking the correct tenants & then retaining them is the key to success--I think a motivated owner is able to do this best.

In response to another poster's comment, I would want to keep control of decisions on how to handle any repairs--I encouraged tenants to contact my approved providers to describe a problem & co-ordinate timing of the home visit--but I had to approve repairs in advance (unless it was an emergency & I was traveling).

I used the open house idea to avoid multiple showings, but I think denovo's idea of holding these while the tenant is still in residence is a brilliant way to minimize vacancies. Denovo: was it necessary to offer an incentive (eg free meal/small cash payment?) to the existing tenant to ensure the house was showable?
Agreed on the management comment. I've found that PMs do not care about your property as much as you do.

I want to know about problems as well. Small problems can often lead to bigger ones.

I like about a two week gap between tenants to get repairs done and do painting. My ideal tenancy is between 3-5 years. Less than that is $$$ in turnover. More than that leads to differed maintenance issues which you don't find until they leave. I do inspect at least every year but I still miss things if they don't complain. Knock on my wooden head I've had very little purposeful damage. Most of what I have found is just ignorance and/or inexperience. And we're not talking college kids either! :annoyed
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DVMResident
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Re: Landlording Tips

Post by DVMResident »

(7) Know your local laws. NOLO is a great resources.

(8) Know the tax laws. NOLO, again, is a great resource.

(9) Have a rock solid lease that requires renter's insurance and no additional tenants including short term sublets like Airbnb. Spell out specific consequences for each violation of the lease, e.g. $100 extra rent per month for each undocumented tenant over 14 consecutive days. If you do not have consequences, there is little incentive follow the lease.

(10) No news, is not good news. Check your properties.

(11) Stay in contact with neighbors -- especially the gossipy ones. They are your eyes and ears when your not there.

(12) Require a large deposit.

-----

The 5% below market rent is really important. Getting good tenants is critical and a good deal expands your tenant pool.
Northern Flicker
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Fair Housing Laws

Post by Northern Flicker »

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DVMResident
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Re: Fair Housing Laws

Post by DVMResident »

jalbert wrote:Be advised that holding open house dates and picking your preferred tenant from a pool of tenants you met at the open house greatly increases the chance that you will violate and/or be accused of violating Fair Housing Laws.
Do LL actually get in trouble for selecting tenants from an open house meeting?

When I hold open houses, it can easily be 30+ people and I typically end up with a ~dozen applications (23 applications was my record). Scheduling individual appointments would be a nightmare and would greatly decrease my applicant pool.

Seems far fetched someone would sue me for not giving them the place (let alone prove discrimination in the face of the fact another 11 applicants also were declined).
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Sandi_k
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Re: Landlording Tips

Post by Sandi_k »

Does SmartMove also screen for Megan's Law issues? A friend who is a landlord makes sure to screen for that, as well as past lawsuits, evictions, credit history...
Northern Flicker
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Re: Landlording Tips

Post by Northern Flicker »

Prospective tenants don't have to sue. In many states, there are state agencies where they can file a complaint online, and the agency will investigate.

Open houses, and selecting from a pool of applications you collect is risky, in my view, and you may even unconsciously illegally discriminate, which I would never want to do, consequences aside.

For instance, suppose you have two applications in your pool for a 3-BR unit: 1) a childless professional couple with high incomes who each want a bedroom for their personal office plus a bedroom to use as a bedroom; 2) a family of 6 with 2 kids per bedroom plus parents in the master BR. Suppose that the parents have income and credit scores meeting your rental criteria, great references, and no criminal background, and clearly contacted you before the childless couple.

If, after meeting them all, you decide you prefer to rent to the childless couple, you may well have illegally discriminated against the family of 6.
Last edited by Northern Flicker on Mon Feb 17, 2020 11:11 pm, edited 1 time in total.
Northern Flicker
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Re: Landlording Tips

Post by Northern Flicker »

I also think scheduling an open house while existing tenants are still living in the property is disrespectful of the tenants, but that's my opinion.

We also only do month-to-month occupancies as we find people stay longer that way.
Last edited by Northern Flicker on Mon Feb 17, 2020 11:11 pm, edited 1 time in total.
FlamingoTime
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Re: Landlording Tips

Post by FlamingoTime »

Someone mentioned checking the property regularly. We will be new landlords. If we do a 6 month or 1 year lease, how would you propose getting in to inspect the home during that time? And how often?
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Re: Landlording Tips

Post by Carefreeap »

CassieInVa wrote:Someone mentioned checking the property regularly. We will be new landlords. If we do a 6 month or 1 year lease, how would you propose getting in to inspect the home during that time? And how often?
Make an appt. with at least 24 hours notice (check your state's LL-tenant website). CA is 24 hours I think AZ is 48 hours.

How far away are you? I'm 500+ miles away from my properties (4). DH just did an inspection at the 4 month mark. We try to do a first inspection within a few months of move-in. If the tenants are paying and reporting things on a regular basis I'm inspecting every year.

One thing I haven't read is to have a very thorough walk-through. I use my state's association of realtor's form which is 5 pages long. It has saved me more than once from tenants who have attempted to claim habitability issues e.g. pests, property conditions. If you saw my property you would laugh (as I did) when they tried that.
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Re: Landlording Tips

Post by Carefreeap »

jalbert wrote:Prospective tenants don't have to sue. In many states, there are state agencies where they can file a complaint online, and the agency will investigate.

Open houses, and selecting from a pool of applications you collect is risky, in my view, and you may even unconsciously illegally discriminate, which I would never want to do, consequences aside.

For instance, suppose you have two applications in your pool for a 3-BR unit: 1) a childless professional couple with high incomes who each want a bedroom for their personal office plus a bedroom to use as a bedroom; 2) a family of 6 with 2 kids per bedroom plus parents in the master BR. Suppose that the parents have income and credit scores meeting your rental criteria, great references, and no criminal background, and clearly contacted you before the childless couple.

If, after meeting them all, you decide you prefer to rent to the childless couple, you may well have illegally discriminated against the family of 6.

-jalbert
I don't agree with you. I think you CAN discriminate based on the number of occupants due to wear and tear. What you couldn't do is pick a group of six adults vs a family of two parents and four kids, everything being equal.

I'm not a big fan of doing the open house thing but it's possible I might in the future. Around here they handle it just like a sale. Open house is X date. Application is due X days later. Most qualified tenant wins.

I have larger units and therefore I prefer families. My biggest challenge is the roommate situation especially for the condo near UCSD. I do not want 6 students in my condo. Therefore I write in my ad that all applicants must have an excellent credit history of at least five years and no roommate situations. I still get a couple. I've always been tempted to ask them how they got accepted into college since their reading comprehension is so poor but I haven't...yet! :twisted:
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cherijoh
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Re: Landlording Tips

Post by cherijoh »

DVMResident wrote:(7) Know your local laws. NOLO is a great resources.

(8) Know the tax laws. NOLO, again, is a great resource.

(9) Have a rock solid lease that requires renter's insurance and no additional tenants including short term sublets like Airbnb. Spell out specific consequences for each violation of the lease, e.g. $100 extra rent per month for each undocumented tenant over 14 consecutive days. If you do not have consequences, there is little incentive follow the lease.

(10) No news, is not good news. Check your properties.

(11) Stay in contact with neighbors -- especially the gossipy ones. They are your eyes and ears when your not there.

(12) Require a large deposit.

-----

The 5% below market rent is really important. Getting good tenants is critical and a good deal expands your tenant pool.
WRT consequences, be sure and include a late fee for late payment of rent. I had a tenant lose a job while living in my condo when it was rented and the rent check went from prompt to not showing up late.

+1 for staying in contact with neighbors. I got the heads up from former neighbors about another one of my tenants.
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Re: Landlording Tips

Post by Northern Flicker »

I did take a class that spent a fair bit of time covering fair housing rules. They do vary with where you live, since there are federal rules as well as fair housing laws and ordinances in some states and cities. For instance, being LGBT-identified is not a federal protected class, but is in a number of states and some cities.

But federal rules prohibit discrimination on the basis of family status, and if you want to be able to decline to rent to a family with children because they will generate more wear and tear than a childless couple, for instance, I would suggest getting legal advice on how to manage the situation fairly and legally. Certainly you can charge more to cover greater use of utilities you may be paying, commensurate with a reasonable estimate of increased use. Where I live (not sure if it is a state or city rule) you can decline if there will be more than 2 people per bedroom living in the unit.

When I've been a renter in the past, if my landlord scheduled open houses to show the apartment while I was still living there, I would have been investigating taking him or her to small claims court for violating the clause of the agreement providing me full use and enjoyment of the apartment.

While it is tempting to manage a property for one's maximum financial benefit, tenants and prospective tenants do have rights too.
Last edited by Northern Flicker on Mon Feb 17, 2020 11:11 pm, edited 1 time in total.
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denovo
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Re: Landlording Tips

Post by denovo »

jalbert wrote:
When I've been a renter in the past, if my landlord scheduled open houses to show the apartment while I was still living there, I would have been investigating taking him or her to small claims court for violating the clause of the agreement providing me full use and enjoyment of the apartmentI like.


-jalbert
I am sure I wouldn't have rented to someone like you :D No offense, but this is why I like to have a broad tenant pool and judge prospective renters.I like reasonable people, and I can spot people who want to be a pain in the neck a mile away. By the way, jalbert this is the second time you brought up a potential lawsuit over something that others find reasonable (showing a property, the other was on open houses) Do you have any experience with being a party to lawsuit or counsel on behalf of a party in such a scenario? What's your basis for this commentary?
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denovo
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Re: Landlording Tips

Post by denovo »

patriciamgr2 wrote:
I used the open house idea to avoid multiple showings, but I think denovo's idea of holding these while the tenant is still in residence is a brilliant way to minimize vacancies. Denovo: was it necessary to offer an incentive (eg free meal/small cash payment?) to the existing tenant to ensure the house was showable?
I've never had to do that. I think most people as courtesy and habit clean up when they think someone is coming by. I remember tidying up the place whenever the landlord would come to repair something I requested. I think most people have common sense to understand when you're showing a property with a current tenant that stuff will be cleaned and the carpet will be cleaned or replaced depending on the circumstances.
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Re: Landlording Tips

Post by 4nursebee »

Denovo, what is your ROI?
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denovo
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Re: Landlording Tips

Post by denovo »

4nursebee wrote:Denovo, what is your ROI?
Want a cap rate?
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Re: Landlording Tips

Post by steadyeddy »

For what it's worth, my units in large apartment complexes were always shown in the final month I was still in the unit. I think it is customary to do so in my part of the country.

I don't own a rental, but I imagine I might someday. I don't know of many other legitimate ways make money part-time while holding a more lucrative full-time job.
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Re: Landlording Tips

Post by itstoomuch »

Bookmarked.
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Re: Landlording Tips

Post by Carefreeap »

itstoomuch wrote:Bookmarked.
We will be inheriting some money for just compensation for caring for a relative. Thinking hard about buying a Seattle rental near DS, as a diversifier and maintain purchasing power.
You should start a new thread about what to look for in a rental property.
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Re: Landlording Tips

Post by Northern Flicker »

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Barefootgirl
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Re: Landlording Tips

Post by Barefootgirl »

There have been cases in this area where landlords have held open houses, taken multiple applications and deposits, chosen a tenant, then kept all deposits - even from people they did not seriously consider.

It was in the paper, was a public spectacle.

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denovo
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Re: Landlording Tips

Post by denovo »

Barefootgirl wrote:There have been cases in this area where landlords have held open houses, taken multiple applications and deposits, chosen a tenant, then kept all deposits - even from people they did not seriously consider.

It was in the paper, was a public spectacle.

BFG

Do you have a link? This sounds awful and very brazen. I don't even understand how you could accept a deposit before accepting an application as standard practice. After application approval , I ask for a deposit within 24-48 hours with a signed contract, I've never seen it flipped on its head and don't understand why a tenant would agree to this.
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Re: Landlording Tips

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (landlording).
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Re: Landlording Tips

Post by 4nursebee »

cap rate? you can if you want.
I want ROI, return on investment.
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Re: Landlording Tips

Post by Northern Flicker »

http://fairhousing.com is a great resource. A consultation with an attorney with expertise in landlord-tenant law is a cheap way to be sure one's policies and procedures don't run afoul of landlord-tenant law in your state, and also stay on the right side of any fair housing grey areas.
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Re: Landlording Tips

Post by Carefreeap »

denovo wrote:
Barefootgirl wrote:There have been cases in this area where landlords have held open houses, taken multiple applications and deposits, chosen a tenant, then kept all deposits - even from people they did not seriously consider.

It was in the paper, was a public spectacle.

BFG

Do you have a link? This sounds awful and very brazen. I don't even understand how you could accept a deposit before accepting an application as standard practice. After application approval , I ask for a deposit within 24-48 hours with a signed contract, I've never seen it flipped on its head and don't understand why a tenant would agree to this.
I could see this happening in a hot rental market with very little inventory. People are desperate and the LL doesn't want to waste time with someone who can't qualify with a "put up or shut up" approach. But I can't see cashing somebody's deposit check until the lease is signed.

Unfortunately there are some bad people out there that take advantage of the desperate. :(
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Re: Landlording Tips

Post by Barefootgirl »

I cannot provide a link since I already stated in my previous post that it was local and I'd prefer not to state the name of my town.

That said, you can search for these cases, they appear in the media - for any details.
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Re: Landlording Tips

Post by denovo »

4nursebee wrote:cap rate? you can if you want.
I want ROI, return on investment.
11 percent over two decades, I wanted to give you cap rate since 11 percent used leverage and the debt is gone. Cap rate is now about 4.5 percent (i.e. current rental income over value of properties)and expect another 4.5 percent on price returns (so 9 percent investment returns forward-looking)
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