Renter’s Insurance……………………..

This section of my lease states that the tenant must obtain renters insurance for their personal property and provide a copy to the landlord/owner. For more information on managing rental properties go to my website www.managementofrentals.com and follow my blog free of charge. 

 INSURANCE: Tenant agrees to provide renter’s insurance coverage for a minimum amount of $_______________ for their personal contents of this property and also a minimum liability amount of $________________ with the owner to be named as an additional insured. Tenant will provide to owner a copy of a binder of insurance at time of possession, and a copy of policy within 30 days of possession.

Risks Of Buying Rental Property

Before you buy rental property, consider the following risks: 1.Your property may sit empty between renters, lowering your overall return. 2. You could incur legal expenses if you need to evict a bad tenant. 3. You could incur excess repair costs if a bad tenant cause damage to the property.

Tax time again…………………….

Unfortunately it is getting to be tax time again and that can be a disastrous time if you have not been diligent in maintaining a good accounting system. We use a version of Quick Books for all of or accounting needs. We start using that system over 15 years ago as we felt that was the best accounting software at the time for small businesses. Now there are numerous accounting software programs that are specifically for rental property management which may be more user friendly but we are accustom to our program and it works for us. Our accounting software which can run most all of our reports for our accountant, however we also use our own customized spreadsheets for our rental income and expenses, and checking account. Other than that we still use a simply monthly filing system for all our receipts. If you just take a few minutes each day to maintain your records it will save you immense amounts of time in the long run. Trying to figure out a year later what the receipts are for or where they are all it can be extremely frustrating. So my whole point here is start from Day 1 on operating your rental business with a good accounting system in place.

Selling your rental property to your tenant…………..

 If you ever decide that you may want to sell your rental property, before you place it on the market or list with a real estate brokerage, ask the existing tenant if they would be interested in owning it. In my real estate training that was one of the first things we were taught in our sales training. If you list a property that has a tenant in it, ask them if they want to purchase the house. It is amazing what you may find out, first the tenant most of the time didn’t even know the landlord was going to put in on the market, second they don’t want to move as they like the property. So as a landlord do yourself a favor and ask the tenant before you list the property if they would be interested in buying it. It could save you time and thousands of dollars in real estate expenses. For more tips on how to manage your rental and investment properties go to my website at www.managementofrentals.com

Shovel your roof………………

Shovel your roof……………… As harsh as this winter has been for the Midwest and East Coast areas of the country for those of you who have rentals in that part of the country, you may need to shovel the snow off of the roof of any building you have that has a flat or minimum pitched roof. I know how unpleasant that sounds but with some areas in the country having 3-4 feet of snow accumulating over the past few weeks the weight of that snow is extremely hazardous to flat roof buildings. It can cause major damage and as a worst case scenario collapse a roof. I have a few large multi unit buildings that have sections of roofs that are flat and it is a major concern to get the snow removed from them. This can be an even bigger issue once the snow starts melting and if the roof drains are blocked or still frozen, the building could sustain major damage as that water has to go somewhere. Most flat roofs are designed to handle a significant amount of accumulating snow but with the record snow fall totals we have had this year most of them will have trouble handle this much snow. So put of your snow boots, grab a shovel, get on your roof or ladder and start shoveling…………………in the long run you will be glad you did, just be extremely careful when you are doing this. Just FYI – this can also apply to any other parts of your building such as decks, canopies, or covered patio that may need to be cleared as well. For more tips on how to manage your rental and investment properties go to my website at www.managementofrentals.com

Managing rentals properties…………………….

Managing rentals properties……………………. Over the 30 years that I have owned and managed rental properties the current economic environment is the most challenging I have ever encountered during that period. With the evaporation of good paying jobs and severe job losses overall, exorbitantly increased property tax increases, increased utility costs, increased maintenance costs, and……………………………………………….stagnant or decreased rents compounded by high vacancies and delinquencies rates, it is making it extremely difficult to make a profit much less a living owning and managing your rental properties. In years past I have made as much as 35% annual ROI (return on investment) without really trying all that hard. However, in the past 2-3 years I am making “MAYBE” 5% ROI and quite honestly have been trading dollars and breaking even most of the last year or two. I am fortunate as I have paid down most of my mortgages and have low debt service (mortgage) costs. I have great concern for new landlords that have just started their business in the past few years as the rental property values have plummeted in my area and in most parts of the country, I would guess even more so than single family residential property has and we all know how much homes values have dropped in the last 3-4 years. I would guess that most new landlords are really struggling with vacancy issues, delinquencies issues, high utility costs with the harsh winter we have had so far, and probably upside down in their property value meaning they owe more than the property is worth or would sell for if they are forced to liquidate. Another big issue in the rental market is that a lot of first time investors purchase rentals on land contracts because they didn’t have the required 20-25% down payment lenders required to secure financing. Most of these land contracts have a balloon payment due at a future date, meaning the entire balance of the contract balance would be due and payable. Many of these payments would be due in a 3-5 year time period from the start of the contract. This allowed a 3-5 year period for the contract buyers to pay down the land contract balance, and hopefully the property would appreciate during that period enough to have the required 20-25% equity in the property lenders were looking for in order to finance and secure a new mortgage and payoff the contract holder. This worked for years and years and quite honestly was how I started in 1980 when I bought my first rental property for $14,000 on a land contract with a $1,000 down payment and a 5 year balloon. However in the current market with rental property values declining and lenders tightening up their lending policies on rental properties it is extremely hard to finance a rental property in the current market. And that would be the case for a strong borrower – meaning someone with an excellent credit score and net worth. Honestly a weak borrower has no chance securing financing in the current market. This had lead to numerous contract defaults and forfeitures and foreclosures in the rental property market nationwide. For more information on managing rentals go to my website at www.managementofrentals.com

Winterize your vacant buildings……………………

This advice may be a little bit too late for this winter but if you have any vacant buildings that you either have shut down for the winter or were empty when you purchased them make sure you take caution and winterize them before you have your first sub freezing temperatures for the winter. Even if you keep the utilities on and have heat in the building, a sudden power outage or winter storm could cause your property to lose power and that could cause catastrophic damage to your property. The minimal cost to winterize a building is insignificant to the costs you would have if power went out and your plumbing froze up, you will have Niagara Falls in your property when it thaws out. Take the time and spend the money to winterize your vacant buildings, in the long term you will be much better off and be able to sleep at night when and if your power goes out and you don’t have to worry about your rental properties.

Lawn care for your rentals…………………………..

I know this may be jumping the gun but I am so tired of winter already I am looking forward to spring.  Once you start to acquire several rentals lawn maintenance will start to become a time factor in the summer time. However I suggest you do not allow tenants to make deals to mow the lawn in lieu of a reduction in rent. Then you won’t have to worry about getting notices from your city or county for possible weeds liens being attached to your property taxes for not maintaining the lawn, in which I had several violation notices when the tenants were suppose to be maintaining the lawn. Believe me the tenant will always pay you the reduced monthly rent payments – they will just not maintain the lawn. I know this is a broad statement and while a few tenants would maintain the lawn in a timely and satisfactory manner, they would be the very few exceptions to the rule. After years of constantly hounding my tenants to maintain the lawn in accordance with our agreement – I final just gave up and maintain the lawns myself. It is more work but much less headaches.

Maintenance tips for furnaces…………………

An easy maintenance tip for furnaces is to regularly change the furnace filter, it is amazing the difference your heat bills will be if you do that easy maintenance item. I would change filters at least twice a year and for the small cost of changing the filters you will save yourself multiples of that amount in heating costs. Another maintenance tip is to check your heat exchanger while changing filters for cracks or defects. Once you develop cracks in the heat exchanger it is a good idea to replace your furnace at that point as the furnace is much more inefficient, expensive, and potentially dangerous to operate at that point.

Rental applications…………………………………..

There are numerous applications that you can buy at your local office supply store or off of the internet. My suggestion is beware of some of these as they are very generic and not specific in the areas you may need. I would look at several types of these applications before I settled on one for your business. I have both short and long form rental application on my website at www.managementofrentals.com as well as forms for both individual landlords and rental companies. It is extremely important to have all of your potential tenants complete an application prior to tenancy. Do not get lazy and start skipping this step in the tenant process. If you every have a discrimination suit filed against you and you have been selective in completing this process the court will not look favorably at this. This should be part of your policies and procedures in the renting process and should be completed every time, no exceptions!