for the Week Ending May 11, 2008
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We got these ideas and comments from last week's tip about getting the rent on time. I've enjoyed this discussion on tips to get paid rent on time more than most, and feel this is probably one of mine and other landlord's primary concerns. I wanted to address the comment about some ideas being extreme or money grubbing and the comment about not doing proper tenant screening. I believe you need to keep in mind that this forum has landlords from all different parts of the country. The type of tenants vary from one area to another. I live in a small rural town. For the most part, my tenants are blue collar workers with limited educations. If you are in a large city or college town, your tenant selection is going to be different. You may have more professionals, office workers, etc... I used to be a lot more forgiving and talk to my tenants about the problem and try to work with them, but I found in my area you cannot afford to do that. Tenants would choose to pay me late because there was no negative consequence to them. I do tenant screening, but my choices are more limited by the type of tenants in my town. In my town, anyone who has a decent job and credit buys a home. I think you need to keep in mind that what works in your area, may not work in other areas because the type of tenants are different. Also, I and I am sure others out there, only have a few units. When someone doesn't pay me, I don't have 100 more units to carry the load. I don't feel it is money grubbing to want my tenants to pay me on time so I can pay my bills and mortgage payments. Also, I feel I deserve the extra money of late fees for the extra stress the tenant is putting me through. I would rather have rent on time than have the extra money I get in late fees each month. Robert P. Young
Young Holdings LLC Paragould, AR 72450
I only have 26 properties, but I have been doing landlording for over 30 years. My rents are due by 5 p.m. on the 1st day of the month. If they have not paid by the second I send a 5 day notice to move by registered mail and post one to the front door folded in half so the neighbors can't read it because that is opening you up to a lawsuit I was told a long time ago. After the 7th I file with the court for eviction. Just wanted to share my experience. Rex P. in Oklahoma
My residents are my customers, they know when they are being treated with respect or gouged by way of fee. My market would never tolerate a gouger. Return customers and referrals save us tons of headache and advertising. Yes, when residents abuse the system we get firm, but the rules are fair and printed in the lease for all to see. Rent is delivered to secure mailbox at The UPS Store, not our home. “Late” is not determined by my watch. When the manager at the drop point locks his door, they are closed. If the tenant has a complaint, he can complain to the UPS Store, not me. Our late fee is $5 per day, starting the second of the month. This is fair to the guy who is late but hustles to get the rent on the next paycheck. Several years ago, we eliminated the 5 day grace period. Ask the electric company if you may have a grace period. Out of our 100+ single family homes, not a single resident complained then (10 years ago) and not now when we sign new leases. Our local judge recently informed us the state court considers a grace period a “standard of expectation” so…when the judge says “out by the 25th,” he will also allow them a “grace period” of 5 more days because that is the “standard of expectation.” Ouch! “Your rent is my paycheck” – I do NOT recommend this line to ANY tenant. It is an invitation to get shot. They already think we just put their rent into our wallet and think about it, they really don’t care if we get paid. In fact, they are happy if we don’t get paid! I am the “manager,” never the owner. Owners are hated. Managers are liked because they “ask the boss for special favors.” We’ve been at this 29 years. Lately we have been shifting to less talk and more form letters. We don’t call. They know they’re late! Just send the letter and start the process. Nothing personal, just need the rent. Just like the cable TV company. If we are on top of our business, we will have sent a late notice BEFORE they call to say “can you work with me.” Also, we do EFT in house. All very legitimate. I bought an inexpensive program that prints on blank checks. We have them sign a permission slip at move in, then just write “their rent check” and deposit it on the appropriate day. No fees. We literally “print our own money.” We like PayDay Plans – matching rent payments to their pay periods for a slight additional fee (about $10 per period). The job places their income straight into their checking account and we do a draft on that day, before they even get home from work and can spend the money! Brad My wife and I have been reading the LL Tips for about 4 years now. Some of them have been very useful. As new LL, like many of you, we've had to take our lumps on a steep learning curve. One of the most useful tips to ensure the rent arrives on time is to focus on the beginning tenant orientation and screening process. This occurs in conjunction with the credit check and application procedure. As tenants are taking the credit application I explain what I will see on the credit report and explain that their qualification to rent from me will depend in part on a credit report. Then I ask how they think their report will turn out? If they feel their report would be less than favorable, I follow with the idea they should consider whether the $25.00 application fee would be worthwhile. At this point prospective tenants with real credit problems usually screen themselves out of my process. As the conversation advances, I usually find out their employment history and what kind of cash flow they currently have. If the tenant offers that their may be some past credit problems but they are over now, I may offer them the the idea that there are two possible ways to proceed if they feel their credit report would be less than favorable. The first is to pay for the rent a year in advance thereby establishing a good credit history with me. The second option may be a temporary (1 year) increase in the security deposit. The main idea behind my application process is to ask open-ended questions in such a way that the tenant volunteers information and in so doing screens or qualifies him / herself. When I need to cover strict rules of my contract, I sometimes to refer to my wife who plays the role of "bad cop" and that she is a stickler on this particular rule. For what its worth, my tenants have adjusted nicely to their rent being due on the 1st of the month. There is no grace period. In two years I've had two individuals pay me the rent a year in advance (with a 2% discount.) Two tenants use electronic bill paying, which I like and the remaining 8 tenants pay their rent on time.
I do most of the maintenance myself and try and maintain contact with my tenants so as to keep a pulse on the T LL relationship. Good luck to all and keep the TIPS coming.
Jim Carlisle PA
Thanks Recently an apartment complex underwent an extensive renovation. Six months of sub-metering, window replacement and insulation work took place. At Christmas time each tenant came home to find a red ice scraper tied to their doorknob with a red ribbon. Attached to each ice scraper was a thank you letter from the apartment management. Everyone came home from work to this surprise and seemed to genuinely appreciate the gesture. The words shared a clear message from management and expressed sincere appreciation for the tenants' tolerance of the inconvenience. That massive a renovation is certainly inconvenience enough to make most tenants hesitant to stay in the complex. Yet when rents were increased 38 percent in the next 18 months, there were no negative effects on occupancy. Tenants are the customers of our business. They are the ones who pay the mortgage and taxes and put some money in our pockets. Certainly, there are tenants we would rather not have as customers, but we have dealt with them in other issues. Each landlord probably has tenants he or she wants to keep. Every time one of them moves out it is our loss. Here are a few ideas for keeping tenants from moving elsewhere. Plan it out and write it downThe first thing to do is figure out what you are going to do. Work out a plan that is thoughtful, written down and with goals and objectives. While you are at it, write down what makes your property more desireable than your competition's property. If you can't think of any reasons, possibly that should be the first thing to work on in your tenant retention plan. For a ten-unit apartment house or ten single-family houses, the goal or objective might be to keep all your tenants for two years, and to raise the rents 10 percent each year. Such a plan need not cost much money, but a budget for tenant retention is important nonetheless. That will keep you from spending too much or too little. Either one could be a bad business decision. Make them heardPeople who feel that their voice is important feel they have a stake in where they live. If the landlord listens to tenant complaints and does his or her best to correct any problems or complaints the tenants have, the tenants will feel that they are wanted. Regular inspectionsTenants want to believe they are getting their money's worth. Random calls and surveys are effective. Just ask the tenant if there is anything you can help with, or any problem you can correct. Set up a regular inspection schedule, as well. This does two things: protects your investment and makes the tenants feel they are being served. If a rent increase is imminent, on the regular inspection find some small thing to repair, such as recaulking the tub, tightening a door knob, or replacing a faulty ballast, without a request from the tenant. Such a service will often allay, or at least modify tenant objections to the increase. Renewal incentivesWhen the lease is up, you might think of things to do to thank the tenant for being a good tenant and renting from you. One apartment complex installed a $39 "brass" chandelier in the unit (which added value to the property) and sent a note to the tenant saying how much he was appreciated. Give the tenant a "floating" coupon good for a partial or full month's rent any time he or she chooses, such as Christmas or tax time. Return the security deposit to an excellent tenant after three years. When the tenant moves in leave a bottle of chilled champagne in the refrigerator. Send the tenant a gift basket or flowers at renewal. Making it easier on the tenantIf you have extensive renovation or repairs to make, try to do them when the tenant or the tenant's children will be gone. It is less disruptive and easier to get the work done if there are fewer people around. If you have requests of the tenants, you might express them in words such as, "It would be appreciated..." rather than "DO NOT...." Know all of the tenants' names, the tenants' children's and the tenants' pets' names. It is amazing what a personal approach will do to make people feel wanted and appreciated. Then you also know who belongs there and who doesn't. Preventive Marketing All these are things which might be called "preventive marketing." You may spend hundreds of dollars advertising for new tenants, when it would cost you just a few dollars to keep the good ones you have. Letting good tenants move is just bad business. Secure Shopping Cart |
