I get asked this all the time by tenants ” There are some thing I believe need to be done in this house, I’m a contractor and I can fix it myself if you can discount the rent?” The answer I give every person is the same “NO” Absolutely not should you allow a tenant to do this and here are the reasons why.
My first encounter with this situation I was a new landlord and I bought a house that needed a lot more work than I thought. I had tenants go by and which point I told them how everything would be by the time they moved in. They suggested that they would be happy to do all the work in exchange for the first month rent and security deposit. Based off my calculations that was a great deal for me seeing the quotes I had previously received were significantly higher so silly me decided to go for it. I gave them a 1 month deadline and when the second month rolled around no work was even started an in fact they didn’t even pay their rent. To make a long story short I ended up having to evict them lost all that money I could have got in rent and could have had the house completed. Lesson learned so I thought
The next time this question came around I decided “no way” but the situation was a bit different so I took the chance. The tenant was already living there and was regularly paying rent on time and had a small issue which they assured me they could fix no problem and the cost would have been the same if I had to call someone in so I went for it. Everything went fine they fixed it no problem and sent me the receipt for parts and I deducted it from the rent. The following month they had called with another issue, again it was small but a bit bigger than the last one, since everything went well the first time I agreed they again sent me the receipt for parts and I deducted it from rent. The next month came around and I got the same call? Now Im like whats going on here, there were never any issues for the first 6 moths now 3 months in a row and ironically this happens every time rent is due? I decided this time “no” I’m going to send my people in to look at this now third issue in a row. According to the plumber the toilet looked like the part had been tampered with. This is when I realized because I let them get away with it the one time this had been an on going issue they had been trying to create to get a deduction in rent. This was the last time under any circumstance when I let a tenant repair anything for exchange in rent. Now I just say “NO”
Written by Scott Esmail
When it comes to ac units, it is important to be able to calculate the size of the unit required on your own. Generally HVAC contractors measure and decide the size of the unit, however you can’t just go by what they say they may try to get your business by offering th cheapest quote and under sizing the unit in order to be the best price, so I also like to do the calculation myself. I have had several houses that I have managed where the HVAC contractor took improper calculations based on sq ft size for example there was an addition added and wasn’t recorded on city records, or a HVAC contract just outright installed the wrong sized unit.
Why is this important ? Well to start if the unit is undersized then it may not be able to keep the house cool enough especially in the hot months of July and August. The a/c may be running constantly but not be able to get the house cool enough to a reasonable level. This can cause two problems for your tenants, the first major issue his the house is too hot and won’t reach a temperature that they set on the thermostat, and second the a/c constantly running may have their electric bill gets high.
Why should you care? It’s simple if there good tenant either one of these issue or both may cause the tenant to leave after their lease is done. You may think ” I’ll just will get someone else in who’s just as good and replace them”. The problem with that is the new tenants will no doubt have the same issues and this can lead to a high turnover and never-ending complaints.
What do it suggest? First when getting the a/c installed, calculate the square footage yourself, look at each room to see if that room is has central air vents to correctly get the square footage, if there is no vents like most garages, there is no need to include that in your calculations. Additions to houses can vary sometime they have the vents and others don’t.
Rule of thumb, for every 500 sq ft of vented area requires 1 tun unit, for example if you have 2000 sq ft of vented area you will require a 4 tun unit. What I personally like to do is have an extra half ton installed, just so that I am sure the cooling will be done extra well to avoid any future issues with the house not cooling well. Usually it’s just an extra $100-$200 in price and the labor price stays the same.
Written by Scott Esmail
When buying a rental property this is what I tend to look at when doing my walk through of a potential rental to gauge what it may cost me to get the house rent ready. These are some major costs your should consider when purchasing a new rental. First if you see that the property only has cosmetic items like paint, light fixtures, a major cleaning and other minor repairs that are not too costly, this is ideally what you want. The major cost come in when you’re looking at some of the following, the roof replacement, furnace and ac unit replacement, windows replacement, flooring replacement and foundation/structural.
Most of the items are going to cost a minimum of $3000 or more. An example is the cost for a new ac inside and outdoor ac unit for a 1200 sq ft house is approx $3000 plus taxes installed. The smaller the house the more inexpensive, the larger the more it will cost because there is more square footage. Also the cost can depend on the type of finishes or quality of materials you install. Personally I don’t like to install the cheapest product available, I tend to go up 1-2 levels from the lowest quality, the cost for the labor will be the same and sometime the difference in material cost isn’t that much for a nicer product and usually the materials will last longer. Not to mention you might be able to get a bit better quality of tenant. I also don’t go for the top finishes mostly because tenants seem to be hard on rentals. For example you can do your best to qualify a tenant but once they move in they might sneak in 3 dogs that can do a number on your floors. It’s happened to me a few times already and by the time you notice the damage has been done. My suggestion is once you’re in contract on a property hire a licensed home inspector who can identify the life left on this stuf, also many of them can give a rough estimate on the cost to replace. I have found that they tend to be a bit low on their costs and its usually about 20-30 percent more on top of their rough estimate. If the house is vacant the inspector will request that you have the utilities activated so that he can check everything.
After factoring the total costs for everything, if the property still looks like a good deal and your going to buy it, I would put aside an addition couple thousand just incase something come up or I go over budget which can often happen.
Written by Scott Esmail Professional Property Manager
When a tenant doesn’t pay their rent it could be very stressful for the landlord.Of course as a landlord we always want our tenants to pay rent every month on time but this isn’t always the case. Often enough when approaching the first of the month or shortly after you get those phone calls or messages from tenants saying their rent is going to be late this month because their job switched their pay schedule, cut their hours or whatever the reason be. A lot of landlords are left with the “what should I do” feeling, you want to trust your tenants word but at the same time don’t know if you should risk it. Here is often the best approach I find in dealing with such circumstances.
Issue a 3 day notice regardless of the fact if you agreed with the tenants arrangement date or not .You should always do this to protect yourself incase the tenant doesn’t end up paying. The 3 day notice will allow you to immediately file the eviction if this is the route you are going to take if they don’t come through on their word. Often times landlords are not in the area to post these so you need to add the allowable mailing time on top of the 3 days which at the end will save you that much time. I would say always try to work it out the best you can within reason of course. Its going to cost a lot more if you have a vacancy and have to rehab the house at all before another tenant moves in so I would definitely allow them the opportunity to try to make payment. However if the time arising and the rent is not paid I would most definitely go ahead with filing the eviction to get them out as quick as possible if you don’t this could potentially go on to long costing you more money and time.
Written by Scott Esmail
Yes! believe it or not, there are houses with 4 walls that are livable for 30k. The biggest question you should ask is after finding a property in that price range that may not need a huge amount of work, is what is the neighbourhood like? The neighbourhood plays a vital role in the type of tenant you are going to attract. Is that important, YES! tenants are the one paying you the rent, so there ability to pay and pay onetime is important. H houses can always be improved with money and time, but you won’t be able to move the house to nicer street once done. There are many factors that play role in a tenants decisions when comparing properties to rent 2 big ones are condition of the house and the neighbourhood.
Here’s a tip if your thinking about buying a 30 k property. Never buy it online without seeing the property, even if the realtor says it’s fine. Some houses in decent area’s can be bought without being seen, for example if your realtor saw it and you have gotten a property inspection report from a home inspector and you think it’s in a B area or above. The same does not apply in a neighbourhood that is in lets say a C to D class area, this is the type of property you should see for yourself. Not so much the house but the area and more important the street it is on. What I like to do is before anything else is take a walk down that street during the day. I say day because it is safer if you don’t know the neighbourhood yet. If you think it is okay during the day, go again at night and see, things can often be a lot different at night.
Generally but not alway you will attract the same type of tenant as the neighbours. Questions to ask yourself, when looking at other residents on the street, is this the type of person who I feel okay to deal with ? Is this the type of person who I think can pay rent each month and on time ? Do I like the pride of ownership on this street or is it really run down? Would I feel safe coming down here at night to collect rent? Would I feel okay sending my staff down to collect rent at night? If most of your answers or all are “No” then run the other way. Save your money for another deal.
I have found with many investors who many not be so experienced is that they will buy a house fix it up but not be able to get a tenant who is qualified to pay rent, they end up settling for a tenant who hasn’t met the requirements. The process after that usually goes like this. They then fail to pay rent, you have to evict, rehab the house again and start the process all over. Also the investor is out of more money because the costs is much more than they got in rent. Don’t forget the other important thing the time and stress that an unpaying tenant can cause.
So you ask, what do you suggest? I suggest looking for a nicer neighbour lets say B class blue-collar working neighbourhood, with a decent schools. Yes, it will cost more, yes you may have to borrow more or save longer. At least with this type of property you should be able to collect the rent if you qualified right. Also tenant after the first year of completing a lease will tend to want to stay longer in a nicer neighbourhood then a bad one, and yes lets not forget that means no rehab costs, each time a tenant leaves to get it rent ready.
The bottom line is you can’t manage your way out of a bad neighbourhood, and just because the ROI looks great on paper doesn’t make it reality. Buyers beware of the attractive MLS listings/Zillow on-line 30k money pit.
I’m sure many of you have been in the position where you have rented a space to someone thinking they seem like they are going to be great tenant(s) with little issues but you were sadly mistaken. Qualifying a tenant can be very difficult and challenging. You don’t want the property sitting vacant for to long but on the other hand you want someone who is going to pay their rent in a timely manner without causing you too much grey hairs along the way. In my experience of course you want to get someone in your vacant space as quickly as possible but even more so you want that person(s) to last a significant amount of time because as we all know the turn over costs could be painful if it doesn’t work out. For example if that person(s) only lasts two months and lets say you collected $1600 of rent in that time but now they destroyed you house causing you to file an eviction, not getting rent until that goes through, then on top of that once you finally get rid of them you have to change carpets, getting rid of excess amounts of trash etc. This mistake can be very costly and often you lose more than you gain.
Here are the ways I qualify my tenants and ever since I started this strategy I’ve seen a significant decrease in my turnovers and found that I get more quality tenants who stay a lot longer. I use a program called APPFOLIO, it has honestly been a life saver. I will do a blog solely on this program but in a nut shell here is what you can do, have your potential tenants simply apply on this site it screens their criminal background, credit history, rental history, employment etc, this information is key in choosing a good tenant. On top of this I always request them to show my proof of rental payments from where they are living now. If they can do this I’ve found that you will get a much better tenant because chances are if they’ve paid rent to their past landlord they will pay it to you. When people tell me they can’t prove anything and paid cash I usually run the other way. Of course there are always some exceptions, if everything else checked out ok in their background search then I will usually request a strong co-signer in addition. Generally the minimum requirements I use is 1 year of employment and rental history to qualify. Combining all these factors together you are surely to get a more qualified tenant.
Written by Scott Esmail