Rent Collection Advice: Part 2

Last week, we went over some important aspects of rent collection.Today, we will go over three common situations we see regarding late paying tenants. We will also give you some strategies that you can take when faced with these situations.

Situation #1 - The tenant constantly pays late and won't change their behavior.

We mainly see this happen when we acquire a property and the owner's existing lease has low late penalties.

We have actually had tenants tell us that a $50 late fee is no big deal and they continue to pay late every month until they are required to sign a new lease.

The simple solution to avoid this problem is to set stiff late fees in the lease. We suggest 5% of the rent after it is deemed late and $20 per day each day after that. This step will eliminate most chronic late rent payers. Those that still miss the on time window because they are disorganized or can't remember will pay you a hefty late fee.

Situation #2 - A continually late paying tenant has not paid the current month's rent. This is the situation that is usually the worst for the owner. 

The solution here is as follows: make sure you communicate with these tenants immediately. If they don't answer at home or on the cell, call their work, references and stay on it. You can also call from a blocked number or your friends number so they will not dodge you.

The goal is to assess the situation and determine whether they have the funds or not. Interestingly, we have found that if the tenants do have the funds they will engage with us in with angry demeanor and give us a date when they will be in to pay.

If you determine that the tenants do not have the funds and have no chance of getting them, the goal is to get them out of the house as quickly as possible. We find that when the tenants fully understand the negative implications that an eviction will have on them, they will be cooperative about just turning the keys in and moving their stuff out.

As a landlord, if you can avoid going to eviction, you will save yourself a good deal of money, lessen your aggravation, and get your property back into the rental market sooner.

We have actually found that if the above situation is handled correctly, some tenants can be very agreeable. We have had tenants move out fast and when they got back on their feet, paid back the rent the landlord lost while the property was vacant.

Situation #3 - A routinely prompt paying tenant suddenly does not pay the rent.

Again, the key here is to talk with these tenants immediately. We have found that this situation is not as bad as situation #2. This situation usually happens because of a sudden job loss or other unusual financial issue.

In the past, we have had success with tenants in these situations by explaining ways they can get the money until they can find work again. We make suggestions to the tenants like taking a cash loan with their car as collateral or getting city assistance or asking for help from their family.   

In summary, when a tenant pays late, the main thing is to reach out quickly. When you make contact, get to the root of the problem and come up with a resolution that minimizes negative consequences for both parties.

Rent Collection Advice: Part 1

Last week, we went over some of the situations that occur during the first month of tenancy. Today, we will review a few aspects of rent collection. This is another part of the tenant cycle that a property owner should have a decent grasp on.

If every one of your tenants paid on time every month, there wouldn't be much to review. However, even when this occurs, we still see many landlords that will accept cash or personal checks.

Taking cash from a tenant that consistently pays on time seems innocent enough. However, if the tenant can’t pay and taking cash has been the precedent during the lease, this innocent procedure will really cloud up facts during court proceedings to evict the tenants.

We have seen instances where the tenants say they gave the owner cash (never did) to buy themselves more time at the property when they can’t pay.  The worst thing is that some of the courts will side with the tenants in this situation even though they can’t come up with a receipt.

Accepting personal checks is a bad idea.  Also, surprisingly, most bank's online auto pays are not guaranteed.

As an owner, it is best to insist on a money order or cashier’s check. Yes, it will put the tenants out a bit but this type of required payment is a condition of a lease that a good tenant will completely understand.

Another thing that is a critical regarding rent collection is to have a clearly defined process regarding late payments and when the rent is due.

If you have a grace period of a couple days, make sure during the lease signing that the tenants know that this is a grace period and not when the rent is due. We hear the following all the time on the 5^th (when the rent is due on the 1^st with a three day grace period): “I’m only one day late, what’s the deal with the late charge??” If you cover this, you can gently remind them with a “remember at the lease signing we said…….”

Also, stick to your policies regarding late fees. Waiving late fees is a bad precedent to set to the late paying tenants and it is not fair to other tenants you have (with the same policies) that do pay on time.

Next week, we will review rent collection a bit more and feature situational advice and knowledge from RPM’s West Valley’s tenant relations guru. 

Important Notes About First Month of Tenancy

Last week we went over some key points regarding the move in procedure. At this point in the tenant rental cycle, you have completed several elements. You have screened the tenants, showed them the property, ran the background and credit, conducted the lease signing and moved the tenants in.

Now it is time to kick back and collect the rent. Well, not exactly. After the move in, while most of the heavy lifting is done regarding this tenant cycle, we have found that the first month of tenancy is sometimes disappointing for the owner.

The main reason for this disappointment is that the first month of tenancy usually is the month that has the highest tenant maintenance costs.

One reason for this is that the home has been vacant since the last tenant moved out. Vacancy sometimes has a negative effect on household systems that are not used while the property is vacant. An example of this would be the seals or flappers going bad on a toilet that had no problem before.

Another thing we observe regarding maintenance in the first month of tenancy is that items that may have been ignored or not called in by a previous tenant are now noticed and reported by the new tenant. Items like a toilet running, garbage disposal not working or windows not locking.  

It is important to adhere to items 2 & 3 on our tenant retention  post. It might be frustrating to use some of the first month's rent on maintenance items but the tenants will notice how you respond since this is also the first month you will be their landlord.

This is a good time to make sure the tenants use common sense regarding simple fixes and for you to draw the line on what a needed fix is and what is petty. The tenants also need to be advised that if they are causing items to break, they will be held responsible.

As an owner, you should be responsive to needed fixes at the property but shouldn't have to be called constantly regarding trivial matters. Also, keep in mind that monthly maintenance costs are normally much lower after the first month.






  

Pro Tips for Successful Move Ins At Your Rental Properties

Last week, we reviewed three items regarding the lease signing. The next step in the tenant rental cycle is the move in.

At RPM West Valley, we have a detailed, logical, formal and consistent move in procedure. This relates to all of the elements of our move in including our policies, process and documents.

A consistent and effective move in process is key for a rental property owner. If you conduct each move in the exact same way, you will record accurate and reliable details of your properties condition at the time of the move in. You will also avoid most uncertainty regarding security deposit issues at move out.

Here are a few important items regarding the move in that will help. 

1) Develop a specific checklist that includes each item of concern in every room. For example, for the living room would have a line item for the floor. On this item you would include a line where you can write down issues as well as three checkboxes. On the line you can detail if there is a condition problem such as a scratch or ding. On the three check boxes you can have N for New, S for Satisfactory, and O for Old.

2) Make sure that the tenant understands that this formal move-in is an important process of their tenancy and any items of concern are their responsibility to note, not yours.

The move in day will be a hectic for them. The new tenants will be primed at a high cadence and will be mainly concerned with trying to get their things unloaded and set up in the house.

However, they need to be fully aware that the move in documents will be what you will referencing to at move out. If they miss something, it might cost them when it comes to the deposit disposition is calculated down the line.

3)  Have the tenant sign off on all key sets and remotes.

4)  Write down a list of maintenance items that can be quickly fixed by using common sense. Make sure that the tenants know that if you have to send a guy out to fix something, and the “fix” is simply a common sense issue, they will be charged for his service call. For example, items “like flipping a fuse or turning the water heater temperature button up”.

5) Take as many pictures as necessary to fully show the property's condition. We highly recommend getting a 14-16 megapixel camera.

Take a picture of at least every room. Also, take a picture of the outside of the house, landscape and roof. If there is an item of concern that is noted, make sure you capture it at a couple of different angles.

For additional assistance regarding the move in, you can check out our RPM West Valley move in video tutorial.

3 Quick Tips Regarding Your Lease

Last week, we went over how to review the application and three most important details in making a decision on qualifying the tenant. The next step  is a formal offer to rent and (assuming acceptance)the lease signing. Today, we will give you three tips regarding the lease signing.

To go over everything an owner needs to include on the actual lease would be a long and extensive article. In fact, we would have to detail the whole lease and all required addenda.  

We can tell you that it is a poor idea to buy a generic lease at Office Depot and use that form. At RPM West Valley, we have a proprietary lease agreement that provides the owner more protection than a standard lease. All required addenda is included and all lease documents are constantly updated.

Here are three tips regarding the lease signing that will help. 

1) Conduct the actual lease signing. Sit down with the tenant and go over the lease rather than e-mailing it. This will clear up any ambiguity and you will have the opportunity to go over all expectations with them.

2)  Have the tenant pay the full security deposit and first months rent at the signing. If the tenant is trying to negotiate a payment plan on the deposit right off the bat, this is a bad sign. If they can't afford the deposit, it is much better to part ways than to proceed.

3) Get all contact information and payment references as possible. If the tenants can't pay down the line, this will help you get a hold of them. Get cell, home and work phone numbers of all occupants and as many references as you can. We have found that if friends and family know the tenants are late on the rent, the chances are better that we will receive it.

Reviewing a rental Application

Last week, we went over how to have a productive showing and what information regarding the prospective tenant is essential to get on the application. Today, we will point out how to review the application and three most important details in making a decision on qualifying the tenant.

Earlier in the year, we went over the high 5 of tenant screening http://bit.ly/1mUOJhB. This is a quick over view of tenant qualifications and summarizes 5 of the important factors in this process. Today we will drill down a bit further. Here are three of the most important elements we think are critical in tenant qualification along with some links to detailed videos we have produced on these topics.

1. Housing History - It is extremely valuable to get positive feedback from another property management company or a company that rents apartments. A good reference from a private party may have no relevance. This is because many people will use their friends or family members to fake a good reference. http://bit.ly/1wwgboj

2. Credit Screening for evictions - This is an important step to take. At RPM West Valley, we pay an additional fee to our reporting agency to get this information. For further details regarding credit analysis you can review this http://bit.ly/1vJEGiP .Also, check out this little trick in analyzing the credit report we go over on our podcast http://bit.ly/1vJEGiP

3. Income Verification - http://bit.ly/1oRMGxx This is a good resource that goes over what to look for in regards to income. Once this that is important is job history. In our experience, the most reliable tenants are the ones that have a good length of time on their job. Make sure you get two full years of employment and be leery of job hoppers. Follow @rpmwvphoenix

Good Ideas for Property Showings

Last week, we detailed some elements of first component of the tenant rental cycle, tenant qualification. This week we will continue with this component. Today's blog will focus on how to show your property correctly and detail what the right information is to get from the tenant at the showing for qualifying purposes.

After the initial call, if the tenants pre-qualify and they are still interested in the property,it is now time to schedule a showing.

Before you do this, it is important that you disclose any significant, obvious and relevant information regarding the property that may be different from normal. This is because unusual circumstances could deter some prospects from renting your property. However, it is smart to disclose potential issues up front to save your time.

A common example of smart disclosure would be letting a prospect know if the rental property does not include a refrigerator. This could be a deal breaker to a prospective tenant. However, if you disclose this up front, at least you know it’s a no go before you waste time driving out to the property and waiting there while the people look at it.

If you have more than one group interested in seeing your property (or anticipate enough interest that you will be showing to a multiple groups), we have found that it is much better to schedule group showings. Group showings will not only save you time but it will also show the prospects that this is a hot property and if they snooze, they may lose out on it.

It is also a great idea to e-mail an application over to the prospect(s) for them to fill out prior to the showing and let them know if they need to have cash or a money order for the application fee (if applicable) and appropriate income documents. There is no point in waiting at the showing for people to slowly fill out the application or for them to go to the bank to get the application fee.

Make sure that the person you schedule the showing with has your phone number in case they need to cancel. Also inform them that you will be calling one hour to confirm the showing and it is important that they confirm. Let them know that and if they do not answer your call or give you a call back of your message within 10 minutes that you will not be showing up. Arrive at the property 10-15 minutes prior to the showing.

Once you arrive at the property, make sure the temperature is acceptable. In the summer in Phoenix, there is nothing worse than driving in 110 degree heat to see a property where the a/c is not running or set to an uncomfortable setting. As a rule, keep the property 85 degrees while vacant and kick the a/c down a bit for the showing. If you want to keep the temperature at the property higher while vacant, you’ll have to arrive much earlier to get it to an acceptable show temperature.

It is a good idea to open the blinds and turn on the lights. If they property has any kind of an off smell, open the windows (if weather permits) and spray some air neutralizer. We have found that being pleasant without being over-bearing is the right approach. It is important that the prospect feels comfortable and knows they can ask you questions.

If the prospects don’t like the property or appear disinterested, you are not out of line to ask them what they don’t like about the property or why they don’t want to move forward. They may not want to apply simply because of personal preference but they may point out something that could be valuable to get the property rented to another party.

If the prospect likes the property, they can now give you the application, employment documents and application fee. It is important that the application is completely filled out and signed by all prospective tenants over 18. Make sure you have the following information on the application:

1- Applicant Information- Name, cell #, e-mail, SS#, Driver’s License#
2- Employment History- Current employer and previous employer if first employment is less than 2 years.
3- Residential History- Last two years landlords, rent amount and phone numbers.
4- Bank Account #
5- Ask on app whether they have ever been evicted or didn’t pay rent
6- Ask on app if ever asked to move out by landlord or broken a lease.
7- Signature to obtain credit report and rental history.

The other documents that you will need are last two period pay stubs if they are W-2 employees and bank statement (2 months) and tax returns (2 years) for self-employed people. It is up to you if you will accept a check for the application fee. We won’t. We only take cash or money orders.

An application fee is a good idea as it helps you recoup the cost of running the app. It also helps ensure the people are serious about being a potential renter. Once you get the required information it is important to communicate when you will get back to the tenant with an answer and what the next step will be if they qualify.